Document:

Exhibit 4.2

 

Execution
Version

 

SECOND LIEN CREDIT
AGREEMENT

 

DATED AS OF DECEMBER 23,
2009

 

AMONG

 

PANOLAM INDUSTRIES
INTERNATIONAL, INC.,

 

PANOLAM HOLDINGS CO.,

 

THE LENDERS LISTED HEREIN,

as Lenders,

 

and

 

APOLLO LAMINATES AGENT,
LLC,

as Administrative Agent

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Accounting Terms; Utilization of GAAP for Purposes of Calculations
  Under Agreement

  	
  27

  
	
   

  	
   

  	
   

  
	
  1.3

  	
  Other Definitional Provisions and Rules of Construction

  	
  28

  
	
   

  	
   

  	
   

  
	
  1.4

  	
  Rounding

  	
  28

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  AMOUNTS AND TERMS OF LOANS

  	
  29

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Loans; Optional Notes

  	
  29

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Interest on the Loans

  	
  30

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Fees

  	
  31

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Repayments and Prepayments of Loans; General Provisions Regarding
  Payments; Application of Proceeds of Collateral and Payments Under Second
  Lien Guaranties

  	
  31

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  [Reserved]

  	
  36

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  [Reserved]

  	
  36

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Taxes

  	
  36

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Statement of Lenders; Obligation of Lenders to Mitigate

  	
  40

  
	
   

  	
   

  	
   

  
	
  2.9

  	
  [Reserved]

  	
  40

  
	
   

  	
   

  	
   

  
	
  2.10

  	
  Replacement of a Lender

  	
  40

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  [RESERVED]

  	
  41

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  CONDITIONS TO LOANS

  	
  41

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  COMPANY’S REPRESENTATIONS AND WARRANTIES

  	
  46

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Organization, Powers, Qualification, Good Standing, Business and
  Subsidiaries

  	
  46

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Authorization of Borrowing, etc.

  	
  47

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Financial Condition

  	
  48

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  No Material Adverse Change

  	
  48

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Title to Properties; Liens; Real Property; Intellectual Property

  	
  48

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Litigation; Adverse Facts

  	
  49

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Payment of Taxes

  	
  49

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Governmental Regulation

  	
  50

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Securities Activities

  	
  50

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Employee Benefit Plans

  	
  50

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  Certain Fees

  	
  51

  
	
   

  	
   

  	
   

  
	
  5.12

  	
  Environmental Protection

  	
  51

  
	
   

  	
   

  	
   

  
	
  5.13

  	
  Employee Matters

  	
  51

  
	
   

  	
   

  	
   

  
	
  5.14

  	
  Solvency

  	
  51

  
	
   

  	
   

  	
   

  
	
  5.15

  	
  Matters Relating to Collateral

  	
  51

  
	
   

  	
   

  	
   

  
	
  5.16

  	
  Disclosure

  	
  52

  
	
   

  	
   

  	
   

  
	
  5.17

  	
  Deposit Accounts and Securities Accounts

  	
  52

  
	
   

  	
   

  	
   

  
	
  5.18

  	
  Insurance

  	
  52

  
	
   

  	
   

  	
   

  
	
  5.19

  	
  First Lien Credit Agreement

  	
  53

  
	
   

  	
   

  	
   

  
	
  5.20

  	
  Sanctioned Persons

  	
  53

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  AFFIRMATIVE COVENANTS

  	
  53

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Financial Statements and Other Reports

  	
  53

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Existence, etc.

  	
  58

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Payment of Taxes and Claims; Tax

  	
  58

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Maintenance of Properties; Insurance

  	
  58

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Inspection Rights

  	
  59

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Compliance with Laws, etc.

  	
  59

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Environmental Matters

  	
  59

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Execution of Subsidiary Guaranty and Personal Property Collateral
  Documents After the Closing Date

  	
  62

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Matters Relating to Additional Real Property Collateral

  	
  63

  
	
   

  	
   

  	
   

  
	
  6.10

  	
  Merger

  	
  63

  
	
   

  	
   

  	
   

  
	
  6.11

  	
  Ratings

  	
  63

  
	
   

  	
   

  	
   

  
	
  6.12

  	
  Recorded Leasehold Interests

  	
  63

  
	
   

  	
   

  	
   

  
	
  6.13

  	
  Further Assurances

  	
  63

  
	
   

  	
   

  	
   

  
	
  6.14

  	
  Deposit Accounts and Securities Accounts

  	
  64

  
	
   

  	
   

  	
   

  
	
  6.15

  	
  Post-Closing Items

  	
  64

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  NEGATIVE COVENANTS

  	
  64

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Indebtedness

  	
  64

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Liens and Related Matters

  	
  66

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Investments; Acquisitions

  	
  71

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Contingent Obligations

  	
  73

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Restricted Junior Payments

  	
  75

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  Financial Covenants

  	
  77

  
	
   

  	
   

  	
   

  
	
  7.7

  	
  Restriction on Fundamental Changes; Asset Sales; Issuance of Capital
  Stock

  	
  78

  
	
   

  	
   

  	
   

  
	
  7.8

  	
  Consolidated Capital Expenditures

  	
  81

  
	
   

  	
   

  	
   

  
	
  7.9

  	
  Transactions with Shareholders and Affiliates

  	
  82

  
	
   

  	
   

  	
   

  
	
  7.10

  	
  Conduct of Business By Holdings

  	
  82

  
	
   

  	
   

  	
   

  
	
  7.11

  	
  Conduct of Business by Company

  	
  83

  
	
   

  	
   

  	
   

  
	
  7.12

  	
  Amendments to Organizational Documents; Amendments of Documents
  Relating to Subordinated Indebtedness

  	
  83

  
	
   

  	
   

  	
   

  
	
  7.13

  	
  Fiscal Year

  	
  83

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  EVENTS OF DEFAULT

  	
  84

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Failure to Make Payments When Due

  	
  84

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Default in Other Agreements

  	
  84

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Breach of Certain Covenants

  	
  85

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Breach of Warranty

  	
  85

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Other Defaults Under Loan Documents

  	
  85

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Involuntary Bankruptcy; Appointment of Receiver, etc.

  	
  86

  
	
   

  	
   

  	
   

  
	
  8.7

  	
  Voluntary Bankruptcy; Appointment of Receiver, etc.

  	
  86

  
	
   

  	
   

  	
   

  
	
  8.8

  	
  Judgments and Attachments

  	
  86

  
	
   

  	
   

  	
   

  
	
  8.9

  	
  Dissolution

  	
  87

  
	
   

  	
   

  	
   

  
	
  8.10

  	
  Employee Benefit Plans

  	
  87

  
	
   

  	
   

  	
   

  
	
  8.11

  	
  Change in Control

  	
  87

  
	
   

  	
   

  	
   

  
	
  8.12

  	
  Invalidity of Loan Documents; Failure of Security; Repudiation of
  Obligations

  	
  87

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  ADMINISTRATIVE AGENT

  	
  88

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Appointment

  	
  88

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Powers and Duties; General Immunity

  	
  89

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Independent Investigation by Lenders; No Responsibility For Appraisal
  of Creditworthiness

  	
  91

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Right to Indemnity

  	
  91

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Resignation of Administrative Agent; Successor Administrative Agent

  	
  92

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Collateral Documents and Second Lien Guaranties

  	
  92

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Duties of Other Agents

  	
  93

  
	
   

  	
   

  	
   

  
	
  9.8

  	
  Administrative Agent May File Proofs of Claim

  	
  93

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  MISCELLANEOUS

  	
  94

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Successors and Permitted Assigns; Assignments and Participations in
  Loans

  	
  94

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Expenses

  	
  98

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Indemnity

  	
  99

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Set-Off

  	
  100

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Ratable Sharing

  	
  100

  
	
   

  	
   

  	
   

  
	
  10.6

  	
  Amendments and Waivers

  	
  101

  
	
   

  	
   

  	
   

  
	
  10.7

  	
  Notices; Effectiveness of Signatures

  	
  102

  
	
   

  	
   

  	
   

  
	
  10.8

  	
  Survival of Representations, Warranties and Agreements

  	
  104

  
	
   

  	
   

  	
   

  
	
  10.9

  	
  Failure or Indulgence Not Waiver; Remedies Cumulative

  	
  105

  
	
   

  	
   

  	
   

  
	
  10.10

  	
  Marshalling; Payments Set Aside

  	
  105

  
	
   

  	
   

  	
   

  
	
  10.11

  	
  Severability

  	
  105

  
	
   

  	
   

  	
   

  
	
  10.12

  	
  Obligations Several; Independent Nature of Lenders’ Rights; Damage
  Waiver

  	
  105

  
	
   

  	
   

  	
   

  
	
  10.13

  	
  Release of Security Interest or Second Lien Guaranty

  	
  106

  
	
   

  	
   

  	
   

  
	
  10.14

  	
  Applicable Law

  	
  106

  
	
   

  	
   

  	
   

  
	
  10.15

  	
  Construction of Agreement; Nature of Relationship

  	
  107

  
	
   

  	
   

  	
   

  
	
  10.16

  	
  Consent to Jurisdiction and Service of Process

  	
  107

  
	
   

  	
   

  	
   

  
	
  10.17

  	
  Waiver of Jury Trial

  	
  108

  
	
   

  	
   

  	
   

  
	
  10.18

  	
  Confidentiality

  	
  109

  
	
   

  	
   

  	
   

  
	
  10.19

  	
  Counterparts; Effectiveness

  	
  109

  
	
   

  	
   

  	
   

  
	
  10.20

  	
  USA Patriot Act

  	
  110

  

 

iv

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  10.21

  	
  Entire Agreement; No Third Party Beneficiaries

  	
  110

  
	
   

  	
   

  	
   

  
	
  10.22

  	
  Intercreditor Agreement

  	
  110

  
	
   

  	
   

  	
   

  
	
  10.23

  	
  Legend

  	
  110

  

 

v

 

EXHIBITS

 

	
  I

  	
  FORM OF NOTE

  
	
   

  	
   

  
	
  II

  	
  FORM OF ACCOUNT CONTROL AGREEMENT

  
	
   

  	
   

  
	
  III

  	
  FORM OF COMPLIANCE CERTIFICATE

  
	
   

  	
   

  
	
  IV

  	
  FORM OF OPINION OF COMPANY COUNSEL

  
	
   

  	
   

  
	
  V

  	
  FORM OF ASSIGNMENT AGREEMENT

  
	
   

  	
   

  
	
  VI

  	
  FORM OF SOLVENCY CERTIFICATE

  
	
   

  	
   

  
	
  VII

  	
  FORM OF SUBSIDIARY GUARANTY

  
	
   

  	
   

  
	
  VIII

  	
  FORM OF SECOND LIEN SECURITY AGREEMENT

  
	
   

  	
   

  
	
  IX

  	
  FORM OF HOLDINGS GUARANTY

  
	
   

  	
   

  
	
  X

  	
  FORM OF
  NOTICE OF PREPAYMENT

  

 

1

 

SCHEDULES

 

	
  2.1A

  	
  EXISTING LOANS

  
	
   

  	
   

  
	
  4.1H

  	
  CLOSING DATE MORTGAGES; CLOSING DATE MORTGAGED PROPERTIES; CLOSING
  DATE MORTGAGE POLICIES

  
	
   

  	
   

  
	
  5.1A

  	
  JURISDICTIONS OF ORGANIZATION

  
	
   

  	
   

  
	
  5.1C

  	
  SUBSIDIARIES

  
	
   

  	
   

  
	
  5.4

  	
  MATERIAL ADVERSE CHANGE

  
	
   

  	
   

  
	
  5.5B

  	
  REAL PROPERTY

  
	
   

  	
   

  
	
  5.5C

  	
  INTELLECTUAL PROPERTY

  
	
   

  	
   

  
	
  5.6

  	
  LITIGATION

  
	
   

  	
   

  
	
  5.12

  	
  ENVIRONMENTAL MATTERS

  
	
   

  	
   

  
	
  5.17

  	
  DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS

  
	
   

  	
   

  
	
  5.18

  	
  INSURANCE

  
	
   

  	
   

  
	
  6.15

  	
  POST-CLOSING ITEMS

  
	
   

  	
   

  
	
  7.1

  	
  CERTAIN EXISTING INDEBTEDNESS

  
	
   

  	
   

  
	
  7.2

  	
  CERTAIN EXISTING LIENS

  
	
   

  	
   

  
	
  7.3

  	
  CERTAIN EXISTING INVESTMENTS

  
	
   

  	
   

  
	
  7.4

  	
  CERTAIN EXISTING CONTINGENT OBLIGATIONS

  
	
   

  	
   

  
	
  7.9

  	
  PERMITTED AGREEMENTS WITH AFFILIATES

  

 

2

 

SECOND LIEN CREDIT AGREEMENT

 

This SECOND LIEN  CREDIT AGREEMENT is dated as of December 23, 2009 (as
amended, restated, amended and restated, supplemented or otherwise modified
from time to time, this “Agreement”) and
entered into by and among PANOLAM INDUSTRIES
INTERNATIONAL, INC., a Delaware corporation (“Company”),
PANOLAM HOLDINGS CO., a Delaware
corporation (“Holdings”), THE
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a “Lender” and
collectively as “Lenders”), and APOLLO
LAMINATES AGENT, LLC (“Apollo Agent”),
as administrative agent for Lenders (in such capacity, “Administrative
Agent”).

 

R E C I
T A L S

 

WHEREAS, Company, Panolam Holdings II Co., Existing First
Lien Lenders and Existing First Lien Administrative Agent are parties to, inter alia, that certain Credit Agreement, dated as of September 30,
2005 (as amended by that certain First Amendment to Credit Agreement and Waiver
dated as of February 27, 2006, as further amended by that certain Second
Amendment to Credit Agreement dated as of March 1, 2006, as further
amended by that certain Third Amendment to Credit Agreement and Limited Waiver
dated as of March 30, 2007 and as further amended by that certain Fourth
Amendment to Credit Agreement, dated as of September 14, 2009, and as may
have been further amended, restated, amended and restated, supplemented or
otherwise modified immediately prior to the date hereof, the “Existing First Lien Credit Agreement”).

 

WHEREAS, on November 4, 2009, Company, Holdings and
the Domestic Subsidiaries (collectively, the “Debtors”)
commenced Chapter 11 Case Nos. 09-13889 (MFW), 09-13893 (MFW), 09-13894 (MFW),
09-13896 (MFW), 09-13892 (MFW), 09-13895 (MFW), 09-13890 (MFW), and 09-13891
(MFW), as administratively consolidated as Chapter 11 Case No 09-13889 (MFW)
(collectively, the “Bankruptcy Case”)
by filing voluntary petitions for reorganization under Chapter 11 of Title 11
of the United States Code, 11 U.S.C. §§ 101-1532 (as now and hereafter in
effect, or any successor statute, the “Bankruptcy Code”)
with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

 

WHEREAS, as part of the comprehensive financial
restructuring (the “Restructuring”)
to be implemented by the Debtors’ Chapter 11 plan of reorganization (the “Plan”) that was confirmed by the Bankruptcy Court on December 10,
2009, Company, Holdings certain of the Existing First Lien Lenders and
Administrative Agent have agreed to enter into this Agreement to, among other things,
re-evidence, ratify and reaffirm certain Obligations (as such term is defined
in the Existing First Lien Credit Agreement as in effect prior to the date
hereof) that shall be repayable hereafter in accordance with the respective
terms and provisions hereof;

 

WHEREAS, Company desires to secure all of the Obligations
hereunder and under the other Loan Documents by its grant to Administrative
Agent, on behalf of Lenders, of a Second Priority Lien on substantially all of
its real, personal and mixed property, all of the 

 

1

 

Capital Stock of its
Domestic Subsidiaries and 100% of the non-voting Capital Stock (if any) and 65%
of the Capital Stock of its first-tier Foreign Subsidiaries;

 

WHEREAS, Holdings and Subsidiary Guarantors have guaranteed
the Obligations hereunder and under the other Loan Documents and desire to
secure their guaranties by granting to Administrative Agent, on behalf of
Lenders, a Second Priority Lien on substantially all of their real, personal
and mixed property, all of the Capital Stock of their respective Domestic
Subsidiaries and 100% of the non-voting Capital Stock (if any) and 65% of the
Capital Stock of their respective first-tier Foreign Subsidiaries; and

 

WHEREAS, these Recitals shall be construed as part of this
Agreement.

 

NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Holdings,
Lenders and Administrative Agent agree as follows:

 

Section 1.                                          DEFINITIONS

 

1.1          Definitions.

 

The following terms used in this Agreement shall have the following
meanings:

 

“Account Control Agreement” shall mean, as applicable (a) a
control agreement with respect to Deposit Accounts of each Loan Party (but not
including any Trust Fund Accounts or De Minimis Accounts), among such Loan
Party, the bank at which such Deposit Accounts are held, the First Lien Agent
and the Administrative Agent, substantially in the form annexed as Exhibit II
hereto or otherwise in form and substance satisfactory to the Administrative
Agent, or (b) a control agreement with respect to Securities Accounts of
each Loan Party, among such Loan Party, the securities intermediary with which
such Securities Accounts are held, the First Lien Agent and the Administrative
Agent in form and substance satisfactory to the Administrative Agent.

 

“Additional Mortgaged Property” has the meaning assigned to
that term in subsection 6.9.

 

“Additional Mortgages” has the meaning assigned to
that term in subsection 6.9.

 

“Administrative Agent” has the meaning assigned to
that term in the preamble to this Agreement and also means and includes any
successor Administrative Agent appointed pursuant to subsection 9.5.

 

“Affiliate”, as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, “control” (including,
with correlative meanings, the terms “controlling”, “controlled by” and “under
common control with”), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.

 

2

 

“Aggregate Amounts Due” has the meaning assigned to
that term in subsection 10.5.

 

“Agreement” has the meaning assigned to that term in the
preamble hereto.

 

“Apollo Agent” has the meaning assigned to that term in
the preamble to this Agreement.

 

“Approved Fund” means a Fund that is administered or managed
by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an
entity or an Affiliate of an entity that administers or manages a Lender.

 

“Asset Sale” means the sale by Company or any of its
Subsidiaries to any Person other than Company or any of its wholly owned
Subsidiaries, in any single transaction or a series of transactions, of (i) any
of the Capital Stock of any of Company’s Subsidiaries whether newly issued or
outstanding, (ii) substantially all of the assets of any division or line
of business of Company or any of its Subsidiaries, or (iii) any other
property or assets (whether tangible or intangible) of Company or any of its
Subsidiaries.

 

“Assignment Agreement” means an Assignment and
Assumption in substantially the form of Exhibit V annexed hereto.

 

“Bankruptcy Case”  has the meaning assigned to that term in the recitals
hereto.

 

“Bankruptcy Code” has the meaning assigned to that term in the
recitals hereto.

 

“Bankruptcy Court”  has the meaning assigned to that term in the recitals
hereto.

 

“Board of Governors”
shall mean the Board of Governors of the Federal Reserve System of the United
States.

 

“Borrower Materials” has the meaning assigned to
that term in subsection 10.7C.

 

“Business Day” means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New York or is
a day on which banking institutions located in such state are authorized or
required by law or other governmental action to close.

 

“Canadian Subsidiary” means Panolam Industries,
Ltd. and any wholly-owned Subsidiary of Panolam Industries, Ltd. incorporated
or organized in Canada or any province or territory thereof.

 

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

 

“Capital Stock” means the capital stock of or other equity
interests in a Person.

 

3

 

“Cash” means money, currency or a credit balance in a
Deposit Account.

 

“Cash Equivalents” means, as at any date of
determination, (i) marketable securities (a) issued or directly and
unconditionally guaranteed as to interest and principal by the United States or
Canada or (b) issued by any agency or instrumentality of the United States
or Canada the obligations of which are backed by the full faith and credit of
the United States or Canada, respectively, in each case maturing within one
year after such date; (ii) marketable direct obligations issued by any
state, commonwealth or territory of the United States or any province of Canada
or any political subdivision of any such state, commonwealth, territory or
province, as applicable, or any public instrumentality thereof, in each case
maturing within one year after such date and having, at the time of the
acquisition thereof, one of the two highest ratings obtainable from any of
S&P, Moody’s or DBRS, as applicable; (iii) commercial paper maturing
no more than one year from the date of creation thereof and having, at the time
of the acquisition thereof, a rating of at least A-1 from S&P, at least P-1
from Moody’s or at least R-1 from DBRS, as may be applicable; (iv) certificates
of deposit or bankers’ acceptances maturing within one year after such date and
issued or accepted by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof or the District of Columbia that
(a) is at least “adequately capitalized” (as defined in the regulations of
its primary Federal banking regulator) and (b) has Tier 1 capital (as
defined in such regulations) of not less than $100,000,000; (v) repurchase
agreements entered into by any Person with a bank or trust company (including
any of the Lenders) or recognized securities dealer having capital and surplus
in excess of $250,000,000 for direct obligations issued or fully guaranteed by
the United States; (vi) shares of any money market mutual fund that (a) has
at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i), (ii), (iii), (iv) and (v) above, and (b) has
capital of not less than $500,000,000; and (vii) solely with respect to
Foreign Subsidiaries, non-Dollar denominated (a) certificates of deposit
of, bankers acceptances of, or time deposits with, any commercial bank which is
organized and existing under the laws of the country in which such Foreign
Subsidiary maintains its chief executive office and principal place of
business, provided such country is a member of the Organization for
Economic Cooperation and Development, and whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from Moody’s
is at least P-1 or the equivalent thereof (any such bank being an “Approved Foreign Bank”) and maturing within one year of the
date of acquisition and (b) equivalents of demand deposit accounts which
are maintained with an Approved Foreign Bank.

 

“Change in Control” means any of the
following:  (i) at any time, any “person”
or “group” (as such terms are used in sections 13(d) and 14(d) of the
Exchange Act, but excluding any employee benefit plan of such person and its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan), excluding the Equity
Holders, shall become the beneficial owner, directly or indirectly, of a
percentage of the Capital Stock of Company in excess of the greater of (a) the
percentage of Company’s Capital Stock (on a fully diluted basis) owned
beneficially by the Equity Holders at such time, or (b) 35% of the Capital
Stock (on a fully diluted basis), or (ii) during any period of twelve (12)
consecutive months, the Governing Body of Company shall not consist of a
majority of the Continuing Members; (iii) at any time prior to the
consummation of a Qualifying IPO of the Capital Stock of Company, the failure
at any time of Holdings to legally and beneficially own and control 100% of the
issued and outstanding shares of Capital Stock of Company or the 

 

4

 

failure at any time of
Holdings to have the ability to elect all of the Governing Body of Company; or (iv) the
occurrence of any “Change in Control” as defined in the First Lien Credit
Agreement.  As used herein, the term “beneficially
own” or “beneficial ownership” shall have the meaning set forth in the Exchange
Act and the rules and regulations promulgated thereunder.

 

“Change in Law” means the occurrence, after the date of this
Agreement, of any of the following:  (i) the
adoption or taking effect of any law, rule, regulation, treaty or order, (ii) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Government Authority, (iii) any
determination of a court or other Government Authority or (iv) the making
or issuance of any request, guideline or directive (whether or not having the
force of law) by any Government Authority.

 

“Closing Date” means December 23, 2009.

 

“Closing Date Mortgage Policies” has the meaning set forth
in subsection 4.1H.

 

“Closing Date Mortgaged Properties” has the meaning set forth
in subsection 4.1H.

 

“Closing Date Mortgages” has the meaning set forth
in subsection 4.1H.

 

“Collateral” means, collectively, all of the property in which
Liens are purported to be granted pursuant to the Collateral Documents as
security for the Obligations.

 

“Collateral Account” has the meaning assigned to
that term in the Security Agreement.

 

“Collateral Documents” means the Security
Agreement, the Mortgages, all Account Control Agreements and all other
instruments or documents delivered by any Loan Party pursuant to this Agreement
or any of the other Loan Documents in order to grant to Administrative Agent,
on behalf of Lenders, a Lien on any property of that Loan Party as security for
the Obligations.

 

“Communications” has the meaning assigned to that term in
subsection 10.7B.

 

“Company” has the meaning assigned to that term in the
preamble to this Agreement.

 

“Compliance Certificate” means a certificate
substantially in the form of Exhibit III annexed hereto.

 

“Consolidated Capital Expenditures” means, for any period, the
sum of the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Company and
its Subsidiaries) by Company and its Subsidiaries during that period that, in
conformity with GAAP, are included in “additions to property, plant or
equipment” or comparable items reflected in the consolidated statement of cash
flows of Company and its Subsidiaries. 
For purposes of this definition, the purchase price of any asset 

 

5

 

that is purchased
substantially simultaneously with the exchange of existing assets or with Net
Insurance/Condemnation Proceeds shall be included in Consolidated Capital Expenditures
only to the extent of the gross amount of such purchase price less the credit
granted by the seller for the assets being exchanged at such time or the amount
of such Net Insurance/Condemnation Proceeds, as the case may be.

 

“Consolidated Cash Interest Expense” means, for any period,
Consolidated Interest Expense for such period excluding, however,
any interest expense not payable in Cash (including amortization of discount
and amortization of debt issuance costs); provided, however, the
parties agree that the Consolidated Cash Interest Expense for the third Fiscal
Quarter of 2009 shall equal $3,201,624 and the Consolidated Cash Interest
Expense for the fourth Fiscal Quarter of 2009 shall equal $3,201,624.

 

“Consolidated Current Assets” means, as at any date of
determination, the total assets of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current assets in
conformity with GAAP, excluding Cash and Cash Equivalents.

 

“Consolidated Current Liabilities” means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, excluding the current portions of long-term
Indebtedness and Capital Leases.

 

“Consolidated EBITDA” means, for any period, the
sum, without duplication, of the amounts for such period of:

 

(i)                                     Consolidated Net Income,

 

(ii)                                  Consolidated Interest
Expense,

 

(iii)                               provisions for taxes based
on income or profits and franchise or similar taxes,

 

(iv)                              total depreciation expense,

 

(v)                                 total amortization expense,

 

(vi)                              actual and documented
customary fees, costs and expenses incurred in connection with any equity or
debt offering, Investment, recapitalization or Indebtedness (in each case, as
permitted by this Agreement) or in connection with the consummation of
Permitted Acquisitions,

 

(vii)                           restructuring charges or
reserves (including, without limitation, retention, severance, systems
establishment cost, excess pension charges, contract termination costs
including future lease commitments, and costs to consolidate facilities and
relocate employees), which cash restructuring charges and reserves shall not
exceed $2,000,000 in any four (4) consecutive Fiscal Quarters.

 

6

 

(viii)                        net after-tax gains or
losses (less all fees and expenses or charges relating thereto) attributable to
the early extinguishment of Indebtedness,

 

(ix)                                net gain or loss under any
Hedge Agreement permitted by this Agreement,

 

(x)                                   other non-cash items
(including, without limitation, any impairment charges, the impact of purchase
accounting including, without limitation, the amortization of inventory step-up
and stock based compensation plans but excluding any such non-cash item to the
extent it represents an accrual of or reserve for cash expenditures in any
future period),

 

(xi)                                to the extent actually
reimbursed (and to the extent such reimbursement is not otherwise included in
Consolidated Net Income), expenses incurred to the extent covered by
indemnification provisions in any agreement in connection with a Permitted
Acquisition,

 

(xii)                             to the extent covered by
insurance (and to the extent the proceeds of such insurance are not otherwise
included in Consolidated Net Income) under which the insurer has been properly
notified and has not denied or contested coverage, charges and expenses with
respect to liability or casualty events, business interruption or product
recalls,

 

(xiii)                          letter of credit fees, and

 

(xiv)                         Transaction Costs,

 

but only, in the case of
clauses (ii)-(xiv), to the extent deducted in the calculation of Consolidated
Net Income, less non-cash items added in the calculation of Consolidated
Net Income (other than any such non-cash item to the extent it will result in
the receipt of cash payments in any future period), all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries and in
conformity with GAAP.

 

“Consolidated Excess Cash Flow” means, for any period, an
amount (if positive) equal to (i) the sum, without duplication, of the
amounts for such period of (a) Consolidated EBITDA and (b) the
Consolidated Working Capital Adjustment minus (ii) the sum, without
duplication, of the amounts for such period of (a) voluntary and scheduled
repayments of Consolidated Total Debt (excluding voluntary repayments of Term
Loans (as defined in the First Lien Credit Agreement) and repayments of
Revolving Loans (as defined in the First Lien Credit Agreement) except to the
extent the Revolving Loan Commitment Amount (as defined in the First Lien
Credit Agreement) is permanently reduced in connection with such repayments
and, after the Discharge of First Lien Obligations, voluntary repayments of
Loans), (b) Consolidated Capital Expenditures solely to the extent
permitted under subsection 7.8 (net of any proceeds of any related financings
classified as long-term Indebtedness with respect to such expenditures), (c) Consolidated
Cash Interest Expense (but including all amounts in respect of items in clauses
(i) and (ii) of the definition of “Consolidated Interest Expense”), (d) current
taxes based on income or profits and franchise or similar taxes of Company and
its Subsidiaries and paid or payable in cash with respect to such period, (e) fees,
costs and expenses paid in cash in connection with any equity or debt offering,
Investment, recapitalization or Indebtedness 

 

7

 

permitted by this Agreement
or in connection with any Permitted Acquisition, to the extent added to
Consolidated EBITDA pursuant to clause (vi) of the definition thereof, (f) the
portion of the purchase price of Permitted Acquisitions funded with cash and
not constituting long-term Indebtedness, (g) restructuring charges or reserves
paid in cash with respect to such period, to the extent added to Consolidated
EBITDA pursuant to clause (vii) of the definition thereof, and (h) amounts
added to Consolidated EBITDA pursuant to clauses (viii), (ix), (xi), (xii),
(xiii) and (xiv) of the definition thereof.

 

“Consolidated Interest Expense” means, for any period,
total interest expense (including that portion attributable to Capital Leases
in accordance with GAAP and capitalized interest) of Company and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Company and its Subsidiaries, net of interest income, including
amortization of all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing, net payments
under Interest Rate Agreements and amounts referred to in subsection 2.3
payable to Administrative Agent and Lenders that are considered interest
expense in accordance with GAAP, but excluding, however (i) the fees paid
to Existing First Lien Administrative Agent (in its capacity as Administrative
Agent under the Existing First Lien Credit Agreement), Noteholders and Senior
Lender Group on the Closing Date in connection with the Restructuring, in an
aggregate amount not to exceed $3,500,000 and (ii) fees and expenses
associated with an Investment permitted by subsection 7.3 and issuances of
Capital Stock of Company or its Subsidiaries.

 

“Consolidated Net Income” means, for any period, the
net income (or loss) of Company and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with GAAP; provided that there shall be excluded (i) the income (or
loss) of any Person (other than a Subsidiary of Company) in which any other
Person (other than Company or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to Company or any of its Subsidiaries by such Person during such period, (ii) any
after-tax gains or losses attributable to asset sales, (iii) the net
income (but not loss) of any Subsidiary of Company (other than a Loan Party) to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by a contract, operation
of law or otherwise, (iv) the income (or loss) attributable to
discontinued operations (including, without limitation, operations disposed of
during such period, whether or not such operations were classified as
discontinued), (v) any gains realized on, or because of, the purchase or
other acquisition by Company or any of its Subsidiaries of any securities of
such Person or any of its Subsidiaries, (vi) the amount equivalent to the
cumulative effect of a change in accounting principles of Company or any of its
Subsidiaries, and (vii) (to the extent not included in clauses (i) through
(vi) above) any net extraordinary gains or net extraordinary losses.

 

“Consolidated Senior Debt” means, as at any date of
determination, the aggregate stated balance sheet amount of the Indebtedness of
Company and its Subsidiaries, set forth in the “Liabilities” section of the
balance sheet, in respect of the Indebtedness arising pursuant to the First
Lien Credit Agreement, determined on a consolidated basis in accordance with
GAAP, net of unrestricted Cash and Cash Equivalents and Cash and Cash
Equivalents restricted only in favor of (i) Administrative Agent, the
Lenders or the other “Secured Parties” 

 

8

 

pursuant to the Loan
Documents and (ii) the First Lien Agent, the First Lien Lenders or the
other “Secured Parties” pursuant to the First Lien Credit Documents.

 

“Consolidated Senior Leverage Ratio” means, as of the last day
of any Fiscal Quarter, the ratio of (i) Consolidated Senior Debt as at
such day to (ii) Consolidated EBITDA for the consecutive four Fiscal
Quarters ending on such day, calculated on a Pro Forma Basis.

 

“Consolidated Total Debt” means, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, net of unrestricted Cash and Cash Equivalents and Cash or Cash
Equivalents restricted only in favor of (i) Administrative Agent, the
Lenders or the other “Secured Parties” pursuant to the Loan Documents and (ii) the
First Lien Agent, the First Lien Lenders or the other “Secured Parties”
pursuant to the First Lien Credit Documents.

 

“Consolidated Total Leverage Ratio” means, as of the last day
of any Fiscal Quarter, the ratio of (i) Consolidated Total Debt as at such
day to (ii) Consolidated EBITDA for the consecutive four Fiscal Quarters
ending on such day, calculated on a Pro Forma Basis.

 

“Consolidated Working Capital” means, as at any date of
determination, the excess (or deficit) of Consolidated Current Assets over
Consolidated Current Liabilities.

 

“Consolidated Working Capital Adjustment” means, for any
period on a consolidated basis, the amount (which may be a negative number) by
which Consolidated Working Capital as of the beginning of such period exceeds
(or is less than) Consolidated Working Capital as of the end of such period.

 

“Contingent Obligation”, as applied to any Person,
means any direct or indirect liability, contingent or otherwise, of that Person
(i) with respect to any Indebtedness, lease, dividend or other payment
obligation of another if the primary purpose or intent thereof by the Person
incurring the Contingent Obligation is to provide assurance to the obligee of
such obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof, (ii) with respect to any letter of credit
issued for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings, or (iii) under Hedge
Agreements.  Contingent Obligations shall
include (a) the direct or indirect guaranty or endorsement (other than for
collection or deposit in the ordinary course of business) by such Person of the
payment obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party
or parties to an agreement, and (c) any liability of such Person for the
obligation of another through any agreement (contingent or otherwise) (1) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (2) to maintain the solvency or any balance sheet item,
level of income or financial condition of another if, in the case of any
agreement described under subclauses (1) or (2) of this sentence, the
primary purpose or intent thereof is as described in clause (i) of the
preceding sentence.  The amount of any
Contingent Obligation shall be equal to 

 

9

 

the amount of the obligation
so guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.

 

“Continuing Member” means, as of any date of
determination any member of the Governing Body of the Qualifying IPO Issuer who
(i) was a member of such Governing Body on the Closing Date or (ii) was
nominated for election or elected to such Governing Body with the affirmative
vote of a majority of the members who were either members of such Governing
Body on the Closing Date or whose nomination or election was previously so
approved or received the vote of the Equity Holders in his or her election by
the stockholders of the Qualifying IPO Issuer.

 

“Contractual Obligation”, as applied to any Person,
means any provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.

 

“DBRS” means Dominion Bond Rating Service.

 

“Debtors” has the meaning assigned to that term in the
recitals hereto.

 

“De Minimis Account” has the meaning assigned to
that term in subsection 5.17.

 

“Deposit Account” means a demand, time, savings, passbook or
similar account maintained with a Person engaged in the business of banking,
including a savings bank, savings and loan association, credit union or trust
company.

 

“Discharge of First Lien Obligations” has the meaning assigned to
that term in the Intercreditor Agreement.

 

“Disclosure Statement” means the Disclosure
Statement Relating to the Debtors’ Joint Prepackaged Plan of Reorganization
under Chapter 11 of the Bankruptcy Code of Panolam Holdings Co., Panolam
Holdings II Co., Panolam Industries International, Inc., Panolam
Industries, Inc., Pioneer Plastics Corporation, Nevamar Holdings Corp.,
Nevamar Holdco, LLC and Nevamar Company, LLC, Docket No. 5.

 

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

 

“Domestic Subsidiary” means any Subsidiary of
Company that is incorporated or organized under the laws of the United States,
any state thereof or in the District of Columbia other than a Subsidiary (x) which
is a disregarded entity for U.S. federal income tax purposes and (y) substantially
all of the assets of which are equity interests in Foreign Subsidiaries.

 

“Eligible Assignee” means (i) any Lender,
any Affiliate of any Lender or any Approved Fund of any Lender; and (ii) any
other Person (other than a natural person) approved by the Administrative
Agent; provided that neither Company, nor any of its Affiliates (other
than the Equity Holders and their Permitted Successors) shall be an Eligible
Assignee; provided, further that any Lender may convert its Loans
to Capital Stock of Holdings or its direct or

 

10

 

indirect parent and may
contribute its Loans to Company or any of its Affiliates via an Assignment
Agreement in order to effectuate such conversion.

 

“Employee Benefit Plan” means any “employee benefit
plan” as defined in Section 3(3) of ERISA (i) which is currently
maintained or contributed to by Company, its Subsidiaries or any of their ERISA
Affiliates, (ii) which was at any time during the last six years
maintained, contributed to or terminated by Company, its Subsidiaries or any of
their ERISA Affiliates, including any Person which was at such time an ERISA
Affiliate of Company, or (iii) with respect to which there is any
potential or outstanding liability of Company.

 

“Environmental Claim” means any investigation,
notice, notice of violation, claim, action, suit, proceeding, demand, abatement
order or other order or directive (conditional or otherwise), by any Government
Authority or any other Person, arising (i) pursuant to or in connection
with any actual or alleged violation of any Environmental Law, (ii) in
connection with any Hazardous Materials or any Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or
harm to natural resources or the environment.

 

“Environmental Laws” means any and all current
or future applicable statutes, ordinances, orders, rules, regulations,
judgments, Governmental Authorizations, or any other requirements of any
Government Authority relating to (i) environmental matters, including
those relating to any Hazardous Materials Activity or (ii) the generation,
use, storage, transportation or disposal of Hazardous Materials in any manner
applicable to Company or any of its Subsidiaries or any Facility.

 

“Equity Holders” means, collectively, the Persons receiving “New
Capital Stock” under, and as defined in the Plan, and/or, their respective
Affiliates (including, as applicable, related funds, general partners thereof
and limited partners thereof) and, except for purposes of the definitions of “Change
in Control” and “Eligible Assignee,” the Management Shareholders.

 

“ERISA” means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor thereto.

 

“ERISA Affiliate”, as applied to any Person, means (i) any
corporation that is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that
Person is a member; (ii) any trade or business (whether or not
incorporated) that is a member of a group of trades or businesses under common
control within the meaning of Section 414(c) of the Internal Revenue
Code of which that Person is a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of
the Internal Revenue Code of which that Person, any corporation described in
clause (i) above or any trade or business described in clause (ii) above
is a member.

 

“ERISA Event” means (i) a “reportable event” within
the meaning of Section 4043 of ERISA and the regulations issued thereunder
with respect to any Pension Plan (excluding those for which the provision for
30-day notice to the PBGC has been waived by regulation); (ii) the failure
to meet the minimum funding standard of Section 412 of the Internal
Revenue Code with respect to any Pension Plan (whether or not waived in
accordance with 

 

11

 

Section 412(d) of
the Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any
Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of
intent to terminate such plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of
their respective ERISA Affiliates from any Pension Plan with two or more
contributing sponsors or the termination of any such Pension Plan resulting in
liability pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which might constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of liability on Company, any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or
4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of
their respective ERISA Affiliates in a complete or partial withdrawal (within
the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if
there is any potential liability therefor, or the receipt by Company, any of
its Subsidiaries or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241
or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A
or 4042 of ERISA; (viii) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan; (ix) receipt from the Internal Revenue Service of
notice of the failure of any Pension Plan (or any other Employee Benefit Plan
intended to be qualified under Section 401(a) of the Internal Revenue
Code) to qualify under Section 401(a) of the Internal Revenue Code,
or the failure of any trust forming part of any Pension Plan to qualify for
exemption from taxation under Section 501(a) of the Internal Revenue
Code; or (x) the imposition of a Lien pursuant to Section 401(a)(29)
or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect
to any Pension Plan.

 

“Event of Default” means each of the events
set forth in Section 8.

 

“Exchange Act” means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.

 

“Excluded Taxes” means, with respect to Administrative Agent,
any Lender, or any other recipient of any payment to be made by or on account
of any obligation of Company hereunder (i) taxes that are imposed on the
overall net income and franchise taxes imposed in lieu thereof (a) by the
United States, (b) by any other Government Authority under the laws of
which such Lender is organized, has its principal office or maintains its
applicable lending office, or (c) by any Government Authority solely as a
result of a present or former connection between such recipient and the
jurisdiction of such Government Authority (other than any such connection
arising solely from such recipient having executed, delivered or performed its
obligations or received a payment under, or enforced, any of the Loan
Documents), (ii) gross receipts taxes imposed in lieu of net income taxes
by the jurisdiction under the laws of which such Lender is organized, has its
principal office or maintains its applicable lending office, (iii) any
branch profits taxes imposed by the United States or any similar tax imposed by
any other 

 

12

 

jurisdiction in which
Company is located, (iv) in the case of a Foreign Lender (other than an
assignee pursuant to a request of Company under subsection 2.10), any United
States withholding tax that (x) is imposed on amounts payable to such
Foreign Lender at the time it becomes a party hereto (or designates a new
lending office), (y) is attributable to such Foreign Lender’s failure or
inability (except as a result of a Change in Law other than a Change in Law
described in subsection 2.7B(iv)(g)) to comply with its obligations under
subsection 2.7B(iv), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from Company with respect
to such withholding tax pursuant to subsection 2.7B, or (z) is required to
be deducted under applicable law from any payment hereunder on the basis of the
information provided by such Foreign Lender pursuant to clause (d) of
subsection 2.7B(iv), and (v) all liabilities, penalties and interest with
respect to any of the foregoing excluded taxes.

 

“Existing First Lien Administrative Agent” means the
administrative agent under the Existing First Lien Credit Agreement.

 

“Existing First Lien Credit Agreement” has the meaning assigned to
that term in the recitals hereto.

 

“Existing First Lien Lenders” means the lenders from time
to time party to the Existing First Lien Credit Agreement.

 

“Existing Loans”
has the meaning assigned to that term in subsection 2.1A.

 

“Facilities” means any and all real property (including all
buildings, fixtures or other improvements located thereon) owned, leased,
operated or used by Company or any of its Subsidiaries.

 

“Financial Officer” means an Officer who is the
chief executive officer, chief financial officer or a vice president of
finance, or any other Officer who serves in a similar capacity to any of the
foregoing.

 

“Financial Plan” has the meaning assigned to that term in
subsection 6.1L(ii).

 

“First Lien Agent” means the administrative agent for the
First Lien Lenders under the First Lien Credit Agreement.

 

“First Lien Collateral Documents” means the Collateral
Documents (as defined in the First Lien Credit Agreement).

 

“First Lien Credit Agreement” means the Amended and
Restated Credit Agreement, dated as of December 23, 2009, by and among
Company, Holdings, the First Lien Lenders and First Lien Agent.

 

“First Lien Credit Documents” means the First Lien Credit
Agreement and all of the Loan Documents (as defined in the First Lien Credit
Agreement).

 

13

 

“First Lien Holdings Guaranty” means the Amended and
Restated Holdings First Lien Guaranty executed and delivered by
Holdings in connection with the First Lien Credit Agreement.

 

“First Lien Lenders” means the lenders from
time to time party to the First Lien Credit Agreement.

 

“First Priority” means, with respect to any Lien purported to
be created in any Collateral pursuant to any First Lien Collateral Document,
that such Lien is perfected and has priority over any other Lien on such
Collateral (other than Liens permitted pursuant to clauses (i)-(xvi),
(xviii)-(xx) or (xxii) of subsection 7.2A of the First Lien Credit Agreement).

 

“Fiscal Month” means a fiscal month of any Fiscal Year.

 

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

 

“Fiscal Year” means the fiscal year of Company and its
Subsidiaries ending on December 31 of each calendar year.  For purposes of this Agreement, any
particular Fiscal Year shall be designated by reference to the calendar year in
which such Fiscal Year ends.

 

“Flood Hazard Property” means a Closing Date
Mortgaged Property or an Additional Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood
or mud slide hazards.

 

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

 

“Foreign Plan” means any employee benefit plan maintained
by Company or any of its Subsidiaries that is mandated or governed by any law, rule or
regulation of any Government Authority other than the United States, any state
thereof or any other political subdivision thereof.

 

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

 

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

 

“Funding and Payment Account” means the account specified
in the payment instructions appearing below Administrative Agent’s signature
herein or at the account designated as such in any other written notice
delivered by Administrative Agent to Company and each Lender.

 

“Funding and Payment Office” means the office of Administrative
Agent located at 9 West 57th Street, New York, New York, 100019 or such other
office of 

 

14

 

Administrative Agent as may
from time to time hereafter be designated as such in a written notice delivered
by Administrative Agent to Company and each Lender.

 

“GAAP” means generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination, subject to subsection 1.2.

 

“Governing Body” means the board of directors or other body
having the power to direct or cause the direction of the management and
policies of a Person that is a corporation, partnership, trust or limited
liability company.

 

“Government Authority” means the government of the
United States or any other nation, or any state, regional or local political
subdivision or department thereof, and any other governmental or regulatory
agency, authority, body, commission, central bank, board, bureau, court,
instrumentality or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government, in each case whether federal, state, local or foreign (including
supra-national bodies such as the European Union or the European Central Bank).

 

“Governmental Authorization” means any permit, license,
registration or other authorization of or from, or notice to, any Government
Authority.

 

“Granting Lender” has the meaning assigned to
that term in subsection 10.1B(iii).

 

“Hazardous Materials” means (i) any
chemical, material or substance at any time defined as or included in the
definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”,
“extremely hazardous waste”, “acutely hazardous waste”, “radioactive waste”, “biohazardous
waste”, “pollutant”, “toxic pollutant”, “contaminant”, “restricted hazardous
waste”, “infectious waste”, “toxic substances”, or any other term or expression
intended to define, list or classify substances by reason of properties harmful
to the environment (including harmful properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “TCLP
toxicity” or “EP toxicity” or words of similar import under any applicable
Environmental Laws); (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters
and other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) any
asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing polychlorinated
biphenyls; (ix) pesticides; and (x) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Government Authority having jurisdiction over the foregoing.

 

15

 

“Hazardous Materials Activity” means any activity, event
or occurrence involving any Hazardous Materials, including the use,
manufacture, possession, storage, holding, presence, existence, location,
Release, placement, generation, transportation, processing, construction,
treatment, abatement, removal, remediation, disposition or handling of any
Hazardous Materials, and any corrective action or response action with respect
to any of the foregoing.

 

“Hedge Agreement” means an Interest Rate Agreement or any
exchange contract, swap agreement, futures contract, option contract, synthetic
cap or collar or other similar agreement or arrangement to which Company or any
of its Subsidiaries is a party.

 

“Holdings” has the meaning assigned to that term in the
preamble to this Agreement.

 

“Holdings Guaranty” means the Holdings Guaranty
executed and delivered by Holdings on the Closing Date, substantially in the
form of Exhibit IX annexed hereto.

 

“Indebtedness”, as applied to any Person, means, without
duplication, (i) all indebtedness for borrowed money, (ii) that
portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet in conformity with GAAP, (iii) notes
payable and similar instruments representing extensions of credit whether or
not representing obligations for borrowed money, (iv) any obligation owed
for all or any part of the deferred purchase price of property or services,
which purchase price is (a) due more than six months from the date of
incurrence of the obligation in respect thereof or (b) evidenced by a note
or similar written instrument excluding, in each case (x) any such
obligations incurred under ERISA, (y) trade payables in the ordinary
course of business and (z) any earn out obligation until such obligation
appears in the liability section of the balance sheet of such Person, and (v) all
indebtedness secured by any Lien on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.

 

“Indemnified Liabilities” has the meaning assigned to
that term in subsection 10.3.

 

“Indemnified Taxes” means Taxes other than
Excluded Taxes.

 

“Indemnitee” has the meaning assigned to that term in subsection
10.3.

 

“Intellectual Property” means all patents,
trademarks, tradenames, copyrights, technology, software, know-how and
processes used in or necessary for the conduct of the business of Company and
its Subsidiaries.

 

“Intercreditor Agreement” has the meaning assigned to
that term in subsection 10.23.

 

“Interest Payment Date” means, with respect to the
Loans, the 20th day of each February, May, August and November of
each year, commencing on February 20, 2010.

 

16

 

“Interest Rate Agreement” means any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.

 

“Internal Revenue Code” means the Internal Revenue
Code of 1986, as amended to the date hereof and from time to time hereafter,
and any successor statute.

 

“Investment” means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company) or any acquisition, by purchase or otherwise, of all or substantially
all the business, property or fixed assets of any Person, or any division or
line of business of any Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of
Company from any Person other than Company or any of its Subsidiaries, of any
equity Securities of such Subsidiary or (iii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Company or any of its Subsidiaries to any
other Person, including all indebtedness and accounts receivable from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business. The amount of any Investment
shall be the original cost of such Investment plus the cost of all
additions thereto, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment (other
than adjustments for the repayment of, or the refund of capital with respect
to, the original principal amount of any such Investment).

 

“IP Collateral” means, collectively, the Intellectual
Property that constitutes Collateral under the Security Agreement.

 

“IP Filing Office” means the United States
Patent and Trademark Office, the United States Copyright Office or any
successor or substitute office in which filings are necessary or, in the
reasonable discretion of Administrative Agent, desirable in order to create or
perfect Liens on, or evidence the interest of Administrative Agent and Lenders
in, any IP Collateral.

 

“Joint Venture” means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form.

 

“Leasehold Property” means any material
leasehold interest of any Loan Party (other than a Foreign Subsidiary) as
lessee under any lease of real property used for manufacturing, other than any
such leasehold interest designated from time to time by Administrative Agent in
its reasonable discretion as not being required to be included in the
Collateral, which designation may be made based upon a determination by
Administrative Agent in its reasonable discretion that the costs of obtaining a
security interest in such leasehold interest are unreasonably excessive in
relation to the benefit to Lenders of the security afforded thereby.

 

“Lender” and “Lenders” means
the Persons identified as “Lenders” and listed on the signature pages of
this Agreement, together with their successors and permitted assigns pursuant
to subsection 10.1.

 

17

 

“Lien” means any lien, mortgage, pledge, assignment,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest) and any option, trust or other
preferential arrangement in the nature of security.

 

“Liquidity”
means the sum of (i) Company’s Cash and Cash Equivalents plus (ii) the
difference between (a) the Revolving Loan Commitment Amount (as defined in
the First Lien Credit Agreement in effect as of the date hereof as such amount
may be increased or reduced pursuant to the terms of the First Lien Credit
Agreement) and (b) the Total Utilization of Revolving Loan Commitments (as
defined in the First Lien Credit Agreement), in each case as of the date of
determination.

 

“Loan” or “Loans” means
one or more of the term loans continued pursuant to subsection 2.1.

 

“Loan Documents” means this Agreement, the Notes, the Second
Lien Guaranties and the Collateral Documents. 
In the event of any conflict between this Agreement and any other Loan
Document, this Agreement shall govern and control.

 

“Loan Exposure”,
with respect to any Lender, means, as of the date of determination, the
outstanding principal amount of the Loans of that Lender.

 

“Loan Party” means each of Holdings, Company and any of Company’s
Domestic Subsidiaries from time to time executing a Loan Document, and “Loan Parties” means all such Persons, collectively.

 

“Management Shareholders” means Robert J. Muller, Jr.
and other members of management of Company and its Subsidiaries, who own
Capital Stock of Company as of the Closing Date.

 

“Margin Stock” has the meaning assigned to that term in
Regulation U of the Board of Governors as in effect from time to time.

 

“Material Adverse Effect” means a material adverse
effect upon (i) the business, results of operations or condition
(financial or otherwise) of Holdings, Company and their respective Subsidiaries
taken as a whole or (ii) the impairment of the ability of (a) Company
or the Loan Parties (taken as a whole) to perform their respective obligations
under the Loan Documents to which they are a party, or (b) Administrative
Agent or Lenders to enforce their rights and remedies in respect of the
Obligations.

 

“Maturity Date” means June 30, 2014.

 

“Maximum Consolidated Capital Expenditures Amount” has the
meaning assigned to that term in subsection 7.8.

 

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

 

18

 

“Mortgage” means (i) a security instrument (whether
designated as a deed of trust or a mortgage or by any similar title) executed
and delivered by any Loan Party, in such form as may be approved by
Administrative Agent in its reasonable discretion, in each case with such
changes thereto as may be recommended by Administrative Agent’s local counsel
based on local laws or customary local mortgage or deed of trust practices, or (ii) at
Administrative Agent’s option, in the case of an Additional Mortgaged Property,
an amendment to an existing Mortgage, in form reasonably satisfactory to
Administrative Agent, adding such Additional Mortgaged Property to the Real
Property Assets encumbered by such existing Mortgage.  “Mortgages”
means all such instruments, including the Closing Date Mortgages and any
Additional Mortgages, collectively.

 

“Multiemployer Plan” means any Employee Benefit
Plan that is a “multiemployer plan” as defined in Section 3(37) of ERISA.

 

“Net Asset Sale Proceeds”, with respect to any Asset
Sale pursuant to subsections 7.7B(vi), (xiii) or (xvii) means Cash payments
(including any Cash received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of any bona fide direct costs
incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually payable as a result of any gain recognized
in connection with such Asset Sale, (ii) payment of the outstanding
principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets in question and that is repaid under the terms thereof as a result of
such Asset Sale, (iii) the out-of-pocket expenses (including,
without limitation, attorneys’ fees, investment banking fees, survey costs,
title insurance premiums, and related search and recording charges, transfer
taxes, deed or mortgage recording taxes, other customary expenses and
brokerage, consultant and other customary fees) incurred in connection with
such Asset Sale, and (iv) for so long as such reserve is maintained, any
reserve for adjustment in respect of (a) the sale price of such asset or
assets established in accordance with GAAP and (b) any liabilities
associated with such asset or assets and retained after such sale or other
disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations
associated with such transaction; provided, however,
that Net Asset Sale Proceeds shall not include any cash payments received from
any Asset Sale by a Foreign Subsidiary unless such proceeds may be repatriated
(by reason of a repayment of an intercompany note or otherwise) to the United
States without (in the reasonable judgment of Company) resulting in a material
Tax liability to Company.

 

“Net Insurance/Condemnation Proceeds” means any Cash payments or
proceeds received by Holdings or any of its Domestic Subsidiaries (i) under
any casualty insurance policy in respect of a covered loss thereunder or (ii) as
a result of the taking of any assets of Holdings, Company or any of their
respective Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case, net of
any actual and reasonable documented costs incurred by Holdings, Company or any
of their respective Subsidiaries, as applicable, in connection with the
adjustment or settlement of any claims of Holdings, Company or such Subsidiary
in respect thereof including, without limitation, (1) income taxes
reasonably estimated to be actually payable as a result of any gain recognized
in 

 

19

 

connection with such event, (2) payment
of the outstanding principal amount of, premium or penalty, if any, and
interest on any Indebtedness (other than the Loans) that is secured by a Lien
on the stock or assets in question and that is repaid under the terms thereof
as a result of such event, (3) the out-of-pocket expenses
(including, without limitation, attorneys’ fees, investment banking fees,
survey costs, title insurance premiums, and related search and recording
charges, transfer taxes, deed or mortgage recording taxes, other customary
expenses and brokerage, consultant and other customary fees) incurred in
connection with such event, and (4) for so long as such reserve is
maintained, any reasonable reserve calculated in good faith for adjustment in
respect of (a) the sale price of such asset or assets established in
accordance with GAAP and (b) any liabilities associated with such asset or
assets and retained after such sale or other disposition thereof, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any
indemnification obligations associated with such transaction; provided,
however, that Net Insurance/Condemnation Proceeds shall not include any cash
payments received by a Foreign Subsidiary unless such proceeds may be
repatriated (by reason of a repayment of an intercompany note or otherwise) to
the United States without (in the reasonable judgment of Company) resulting in
a material Tax liability to Company.

 

“Net Securities Proceeds” means the cash proceeds
(net of (i) underwriting discounts and commissions and other reasonable
out-of-pocket expenses associated therewith, including reasonable attorneys
fees, investment banking fees, other customary expenses and brokerage,
consultant and other customary fees, and (ii) taxes) from the issuance of
Capital Stock of or incurrence of Indebtedness by Holdings, Company or any of
their respective Subsidiaries.

 

“Non-Consenting Lender” has the meaning assigned to
that term in subsection 2.10.

 

“Noteholders” means the holders of Senior Subordinated Note
Claims (as defined in the Plan).

 

“Notes” means those promissory notes of Company that may be
issued to evidence the Loans of any Lenders pursuant to the terms hereof,
substantially in the form of Exhibit I annexed hereto.

 

“Notice of Prepayment” means a notice
substantially in the form of Exhibit X annexed hereto.

 

“Obligations” means all obligations of every nature of
each Loan Party from time to time owed to Administrative Agent, Lenders or any
of them under the Loan Documents, whether for principal, interest, fees,
expenses, indemnification or otherwise.

 

“OFAC” has the
meaning assigned to that term in subsection 5.20.

 

“Officer” means the president, chief executive officer, any
vice president, chief financial officer, treasurer, general partner (if an
individual), managing member (if an individual) or other individual appointed
by the Governing Body or the Organizational Documents of a corporation,
partnership, trust or limited liability company to serve in a similar capacity
as the foregoing.

 

20

 

“Officer’s Certificate”, as applied to any Person
that is a corporation, partnership, trust or limited liability company, means a
certificate executed on behalf of such Person by one or more Officers of such
Person or one or more Officers of a general partner or a managing member if
such general partner or managing member is a corporation, partnership, trust or
limited liability company.

 

“Operating Lease”, as applied to any Person, means any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.

 

“Organizational Documents” means the documents
(including bylaws, if applicable) pursuant to which a Person that is a
corporation, partnership, trust or limited liability company is organized.

 

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

 

“Outstanding Tax Refunds”
means such portion of a Loan Party’s United States federal income Tax refunds,
and Canadian Tax refunds for the Fiscal Year ended December 31, 2008 that
is not received prior to the Closing Date.

 

“Participant” means a purchaser of a participation in the
rights and obligations under this Agreement pursuant to subsection 10.1C.

 

“Participant Register” has the meaning assigned to
that term in subsection 10.1C.

 

“Patriot Act” means the Uniting And Strengthening America
By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism Act
of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26,
2001)).

 

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

 

“Pension Plan” means any Employee Benefit Plan, other than
a Multiemployer Plan, that is subject to Section 412 of the Internal
Revenue Code or Section 302 of ERISA, and for purposes of subsection 8.10,
any Foreign Plan.

 

“Permitted Acquisition” means the acquisition of
all or substantially all of a business, its assets, or the Capital Stock of any
Person, which acquisition is permitted pursuant to clause (xv) of subsection
7.3.

 

“Permitted Cure Issuance” has the meaning assigned to
that term in subsection 8.3.

 

21

 

“Permitted Holders” means (i) the Equity Holders
or (ii) any of the Permitted Transferees of any Person in clause (i) hereof.

 

“Permitted Refinancing” means, with respect to any
Person, any modification, refinancing, refunding, renewal or extension of any
Indebtedness of such Person; provided that (a) the principal amount
(or accreted value, if applicable) thereof does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so modified, refinanced,
refunded, renewed or extended (the “Refinanced Indebtedness”)
except by an amount equal to unpaid accrued interest and premium, if any,
thereon plus other reasonable amounts paid, and fees and expenses reasonably
incurred, in connection with such modification, refinancing, refunding, renewal
or extension and by any amount equal to any existing commitments unutilized
thereunder or as otherwise permitted pursuant to subsection 7.1, (b) such
modification, refinancing, refunding, renewal or extension has a final maturity
date equal to or later than the final maturity date of the Refinanced
Indebtedness, (c) if the Refinanced Indebtedness is subordinated in right
of payment to the Obligations, such modification, refinancing, refunding,
renewal or extension is subordinated in right of payment to the Obligations on
terms at least as favorable to the Lenders as those contained in the
documentation governing the Refinanced Indebtedness, taken as a whole, (d) any
Lien provided in connection with such modification, refinancing, refunding,
renewal or extension does not extend to any additional property beyond the
property subject to a Lien in favor of the Refinanced Indebtedness, other than (1) after-acquired
property that is affixed or incorporated into the property covered by such Lien
or financed by Indebtedness permitted under subsection 7.1, (2) proceeds
and products thereof and (3) property serving as collateral for a
financing which is cross-collateralized to the financing secured by such Lien
provided by the same Person or its Affiliate, (e) the direct or any
contingent obligor with respect to the Refinanced Indebtedness is not changed
in any respect, and (f) at the time thereof, no Event of Default shall
have occurred and be continuing.

 

“Permitted Successors”
means, with respect to any Equity Holder, (i) the legal successor to such
Equity Holder or (ii) its Affiliates.

 

“Permitted Transferees” means, with respect to any
Person, (i) any Affiliate of such Person, (ii) the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any such
Person or (iii) a trust, the beneficiaries of which, or a corporation or
partnership, the stockholders, or general and limited partners, of which, or a
limited liability company, the members of which, include only such Person or
his or her spouse or lineal descendants, in each case to whom such Person has
transferred the beneficial ownership of any Securities of Holdings (or any
direct or indirect parent company).

 

“Person” means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies,
limited liability partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and Government
Authorities.

 

“Pioneer Plastics Maine Guaranty” means that certain
guaranty, dated June 15, 2005, by Panolam Industries Holdings, Inc.
and Pioneer Plastics Corporation for the benefit of the Superintendent of the
Bureau of Insurance of Maine.

 

22

 

“Plan”  has the meaning assigned to that term in the recitals
hereto.

 

“Platform” has the meaning assigned to that term in subsection
10.7C.

 

“Potential Event of Default” means a condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default.

 

“Preliminary Financial Plan”
has the meaning assigned to that term in subsection 6.1L(i)

 

“Proceedings” means any action, suit, proceeding (whether
administrative, judicial or otherwise) or arbitration.

 

“Pro Forma Basis” means, with respect to compliance with any
test or covenant hereunder, compliance with such test or covenant after giving
effect to (i) any Permitted Acquisition, (ii) any Asset Sale of a
Subsidiary or operating entity or (iii) any incurrence of Indebtedness
being given pro forma effect or any incurrence of
Indebtedness in connection with any Permitted Acquisition being given pro forma effect (including (a) pro forma adjustments
arising out of events which are directly attributable to the proposed Permitted
Acquisition, Asset Sale or incurrence of Indebtedness, are factually
supportable and are expected to have a continuing impact, in each case as
determined on a basis consistent with Article 11 of Regulation S-X of the
Securities Act, as interpreted by the Staff of the Securities and Exchange
Commission, (b) pro forma adjustments reasonably acceptable to
Administrative Agent arising out of operating expense reductions attributable
to such transaction being given pro forma
effect that (1) have been implemented or (2) will be implemented
following such transaction and are supportable and quantifiable and, in each
case, including, but not limited to, (A) reduction in personnel expenses, (B) reduction
of costs related to administrative functions, (C) reductions of costs
related to leased or owned properties and (D) reductions from the
consolidation of operations and streamlining of corporate overhead and (c) such
other adjustments as are reasonably satisfactory to Administrative Agent, in
each case as certified by a Financial Officer of Company) using, for purposes
of determining such compliance, the historical financial statements of all
entities or assets so acquired or sold and the consolidated financial
statements of Company and its Subsidiaries, which shall be reformulated as if
such Permitted Acquisition or Asset Sale, and all other Permitted Acquisitions
or Asset Sales that have been consummated during the period, and any
Indebtedness or other liabilities repaid in connection therewith had been
consummated and incurred or repaid at the beginning of such period (and
assuming that such Indebtedness to be incurred bears interest during any
portion of the applicable measurement period prior to the relevant acquisition
at the interest rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination).

 

“Pro Forma Compliance” means, at any date of
determination, that Company shall be in pro forma compliance with any or all of
the covenants set forth in subsections 7.6A and 7.6B, as applicable, as of the
date of such determination or the last day of the most recently completed
Fiscal Quarter, as the case may be (computed on the basis of (i) balance
sheet amounts as of such date and (ii) income statement amounts for the
most recently completed period of four consecutive Fiscal Quarters for which
financial statements shall have been 

 

23

 

delivered to Administrative
Agent and calculated on a Pro Forma Basis in respect of the event giving rise
to such determination).

 

“Proposed Act”
has the meaning assigned to that term in subsection 2.7B(iv)(g).

 

“Pro Rata Share” means with respect to all payments,
computations and other matters relating to the Loan of any Lender, the
percentage obtained by dividing (a) the Loan Exposure of that
Lender by (b) the aggregate Loan Exposure of all Lenders.

 

“Public Lender” has the meaning assigned to that term in
subsection 10.7C.

 

“Qualifying IPO” means the issuance by the Qualifying IPO
Issuer of its common Capital Stock in an underwritten primary public offering
(other than a public offering pursuant to a registration statement on Form S-8)
pursuant to an effective registration statement filed with the Securities and
Exchange Commission in accordance with the Securities Act of 1933 (whether
alone or in connection with a secondary public offering).

 

“Qualifying IPO Issuer” means Holdings, Company or
a corporation or other legal entity which owns, directly or indirectly, one
hundred percent (100%) of the outstanding equity interests of Holdings.

 

“Real Property Asset” means, at any time of
determination, any interest then owned by any Loan Party (other than any
Foreign Subsidiary) in any real property.

 

“Recorded Leasehold Interest” means a Leasehold Property
with respect to which a Record Document (as hereinafter defined) has been
recorded in all places necessary or desirable, in Administrative Agent’s
reasonable judgment, to give constructive notice of such Leasehold Property to
third-party purchasers and encumbrancers of the affected real property.  For purposes of this definition, the term “Record Document” means, with respect to any Leasehold
Property, (a) the lease evidencing such Leasehold Property or a memorandum
thereof, executed and acknowledged by the owner of the affected real property,
as lessor, or (b) if such Leasehold Property was acquired or subleased
from the holder of a Recorded Leasehold Interest, the applicable assignment or
sublease document, executed and acknowledged by such holder.

 

“Register” has the meaning assigned to that term in subsection
2.1F.

 

“Registered Loan” has the meaning assigned to
that term in subsection 2.1F.

 

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

 

“Release” means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the environment,
including the movement of any Hazardous Materials through the air, soil,
surface water or groundwater.

 

24

 

“Requisite Lenders” means Lenders having or
holding more than 50% of the aggregate Loan Exposure of all Lenders.

 

“Restricted Junior Payment” means (i) any dividend
or other distribution, direct or indirect, on account of any shares of any
class of Capital Stock of Company now or hereafter outstanding, except a
dividend payable solely in Capital Stock, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of Capital Stock of Company now
or hereafter outstanding, (iii) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of Company now or hereafter outstanding,
and (iv) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, any Subordinated Indebtedness.

 

“Restructuring” has the meaning assigned to that term in the recitals
hereto.

 

“S&P” means Standard & Poor’s Ratings Group.

 

“SEC” means the Securities and Exchange Commission.

 

“Second Lien Guaranty” means the Holdings
Guaranty and the Subsidiary Guaranty.

 

“Second Priority” means, with respect to any Lien purported to
be created in any Collateral pursuant to any Collateral Document, that such
Lien is perfected and has priority over any other Lien on such Collateral
(other than First Priority Liens and other Liens permitted pursuant to clauses
(i)-(xvi), (xviii)-(xx) or (xxii) of subsection 7.2A).

 

“Securities” means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated, certificated or uncertificated, or otherwise, or in general any
instruments commonly known as “securities.”

 

“Securities Account” has the meaning set forth in
Article 8 of the UCC.

 

“Securities Act” means the Securities Act of 1933, as amended
from time to time, and any successor statute.

 

“Security Agreement” means the Second Lien
Security Agreement executed and delivered on the Closing Date, substantially in
the form of Exhibit VIII annexed hereto.

 

“Senior Lender Group” means the holders of Senior
Lender Credit Agreement Claims (as defined in the Plan).

 

“Solvent”, with respect to any Person, means that as of the
date of determination (i) the then fair saleable value of the property of
such Person is (a) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (b) not less than the amount
that 

 

25

 

will be required to pay the
probable liabilities on such Person’s then existing debts as they become
absolute and due considering all financing alternatives and potential asset
sales reasonably available to such Person; (ii) such Person’s capital is
not unreasonably small in relation to its business or any contemplated or
undertaken transaction; and (iii) such Person does not intend to incur, or
believe (nor should it reasonably believe) that it will incur, debts beyond its
ability to pay such debts as they become due. 
For purposes of this definition, the amount of any contingent liability
at any time shall be computed as the amount that, in light of all of the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

 

“SPC” has the meaning assigned to that term in subsection
10.1B(iii).

 

“Subject Lender” has the meaning assigned to that term in
subsection 2.10.

 

“Subordinated Indebtedness” means any Indebtedness of
Company incurred from time to time and subordinated in right of payment to the
Obligations.

 

“Subsidiary”, with respect to any Person, means any corporation,
partnership, trust, limited liability company, association, Joint Venture or
other business entity of which more than 50% of the total ordinary voting power
of shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the members of the
Governing Body is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.

 

“Subsidiary Guarantor” means any Domestic
Subsidiary of Company that executes and delivers a counterpart of the
Subsidiary Guaranty on the Closing Date or from time to time thereafter
pursuant to subsection 6.8.

 

“Subsidiary Guaranty” means the Subsidiary
Guaranty executed and delivered by existing Domestic Subsidiaries of Company on
the Closing Date and to be executed and delivered by additional Domestic
Subsidiaries of Company from time to time thereafter in accordance with
subsection 6.8, substantially in the form of Exhibit VII annexed
hereto.

 

“Supplemental Collateral Agent” has the meaning assigned to
that term in subsection 9.1B.

 

“Taking” means a
taking or voluntary conveyance during the term hereof of all or part of any
Closing Date Mortgaged Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any condemnation
or other eminent domain proceeding by any Governmental Authority affecting such
Closing Date Mortgaged Property or any portion thereof whether or not the same
shall have actually been commenced.

 

“Tax” or “Taxes” means
any and all present or future tax, levy, impost, duty, fee, assessment,
deduction, withholding or other similar charge imposed by a Government
Authority, including interest, penalties, additions to tax and any similar
liabilities with respect thereto.

 

“Title Company” means one or more title insurance companies
reasonably satisfactory to Administrative Agent.

 

26

 

“Transaction Costs” means the reasonable,
documented and out of pocket fees, costs and expenses payable by Company in
connection with the transactions contemplated by the Plan, the Restructuring
and the Loan Documents.

 

“Trust Funds” shall mean any Cash and Cash Equivalents
constituting (i) accrued and unpaid compensation of Company’s or any of
its Subsidiaries’ employees  (including
salaries, wages and benefits arising under any “employee benefit plan” (as such
term is defined in Section 3(3) of ERISA) that is currently
maintained or contributed to by Company or any of its Subsidiaries), (ii) all
taxes required to be collected or withheld and paid over to a taxing authority
(including, without limitation, payroll taxes and federal and state withholding
taxes (including the employer’s share thereof)) and (iii) other trust or
fiduciary funds, in all cases for which Company or any of its Subsidiaries, or
any of their respective directors, officers or employees would have or would
reasonably be expected to have,  criminal
or personal liability for the failure to pay or remit such amounts to the
appropriate recipient.

 

“Trust Fund Accounts” means all Deposit Accounts
and/or Securities Accounts of any Loan Party containing only Trust Funds.

 

“UCC” means the Uniform Commercial Code as in effect in
any applicable jurisdiction.

 

“Unasserted Obligations” means, at any time,
Obligations for taxes, costs, indemnifications, reimbursements, damages and
other liabilities (except for the principal of and interest on, and fees
relating to, the Indebtedness evidenced by this Agreement) in respect of which
no claim or demand for payment has been made (or, in the case of Obligations
for indemnification, no notice for indemnification has been issued by the
Indemnitee) at such time.

 

“United States” means the United States of America.

 

1.2                               Accounting
Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.

 

A.                                   Except as
otherwise expressly provided in this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to them in conformity
with GAAP.  Financial statements and
other information required to be delivered by Company to Lenders pursuant to
this Agreement and calculations in connection with the definitions, covenants
and other provisions of this Agreement shall be prepared in accordance with
GAAP or the application thereof as in effect at the time of such
preparation.  If at any time any change
in GAAP or the application thereof  would
affect the computation of any financial ratio set forth in any Loan Document,
and Company or Requisite Lenders shall so request, Administrative Agent and
Company shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP or the
application thereof  (subject to the
approval of Requisite Lenders), provided that, until so amended, such ratio or
requirement shall continue to be computed in accordance with GAAP or the
application thereof  prior to such change
therein and Company shall provide to Administrative Agent and Lenders
reconciliation statements provided for in subsection 6.1G.

 

27

 

B.                                     Notwithstanding
anything to the contrary contained herein, financial ratios and other financial
calculations pursuant to this Agreement (other than pursuant to subsection 7.8)
shall, following any Permitted Acquisition or any Asset Sale of a Subsidiary or
operating entity, be calculated on a Pro Forma Basis until the completion of
four full Fiscal Quarters following such transaction (or, in the case of pro
forma adjustments arising out of prospective annual operating expense
reductions attributable to a Permitted Acquisition, such longer period as is
acceptable to the Administrative Agent).

 

C.                                     Notwithstanding
the foregoing, the parties hereto acknowledge and agree that for purposes of
calculating any financial covenant or similar ratio under this Agreement,
Indebtedness shall be valued at par (or par plus accrued Indebtedness, as
appropriate).

 

1.3                               Other
Definitional Provisions and Rules of Construction.

 

A.                                   Any of the
terms defined herein may, unless the context otherwise requires, be used in the
singular or the plural, depending on the reference.

 

B.                                     References to “Sections”
and “subsections” shall be to Sections and subsections of, and the words “herein,”
“hereof,” “hereto” and “hereunder” and words of similar import, respectively,
shall be references to, this Agreement unless otherwise specifically
provided.  Section and subsection
headings in any Loan Document are included herein for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose or
be given any substantive effect.

 

C.                                     The use in any
of the Loan Documents of the word “include” or “including”, when following any
general statement, term or matter, shall not be construed to limit such
statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as “without limitation” or “but not limited to” or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.

 

D.                                    Unless
otherwise expressly provided herein, (a) references to Organizational
Documents, agreements (including the Loan Documents) and other contractual
instruments shall be deemed to include all subsequent amendments, restatements,
extensions, supplements and other modifications thereto; and (b) references
to any law shall include all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting such law.

 

1.4                               Rounding.

 

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

 

28

 

Section 2.                                          AMOUNTS AND
TERMS OF LOANS

 

2.1          Loans; Optional
Notes.

 

A.                                   Loans.  Each of Holdings, Company,
each Existing First Lien Lender party to this Agreement on the date hereof and
Administrative Agent hereby confirms and acknowledges that each such Lender (or
an Affiliate of such Lender) has heretofore made term loans under the Existing
First Lien Credit Agreement in the principal amounts set forth next to such
Lender’s name on Schedule 2.1A annexed hereto (collectively, “Existing Loans”), the aggregate outstanding principal amount
of which is $25,000,000.  Company agrees,
ratifies and confirms that the Existing Loans, together with all accrued and
unpaid interest thereon, are due and owing to Lenders and are not subject to
any offset, counterclaims or defenses of any kind or nature.

 

B.                                     Term
Loans Following the Restructuring.  As of the
Closing Date and after giving effect to the Plan, the Existing Loans shall
constitute “Loans” under this Agreement. 
Loan amounts repaid or prepaid may not be reborrowed.

 

C.                                     [Reserved].

 

D.                                    [Reserved].

 

E.                                      [Reserved].

 

F.                                      The
Register. 
Administrative Agent, acting for these purposes solely as a non-fiduciary
agent of Company (it being acknowledged that Administrative Agent, in such
capacity, and its Related Parties shall constitute Indemnitees under subsection
10.3), shall maintain (and make available for inspection by Company and any
Lender (solely in respect of its own entries and not that of any other Lender)
upon reasonable prior notice) at its address referred to in subsection 10.7 a
register for the recordation of, and shall record, the names and addresses of
Lenders and the respective amounts of the Loans (including principal and
interest) of each Lender from time to time (the “Register” and
each such Loan recorded thereon, a “Registered Loan”).  Company, Administrative Agent and Lenders
shall, absent manifest error, deem and treat the Persons listed as Lenders in
the Register as the holders and owners of the corresponding Loans listed
therein for all purposes hereof; all amounts owed with respect to any Loan
shall be owed to the Lender listed in the Register as the owner thereof; and
any request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is listed in the Register as a
Lender shall be conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Loans. 
Each Lender shall record on its internal records the amount of its Loans
and each payment in respect hereof, and any such recordation shall be
conclusive and binding on Company, absent manifest error, subject to the
entries in the Register, which shall, absent manifest error, govern in the
event of any inconsistency with any Lender’s records.  Failure to make any recordation in the
Register or in any Lender’s records, or any error in such recordation, shall
not affect any Loans or any Obligations in respect of any Loans.

 

G.                                     Optional
Notes.  If so requested by any Lender
by written notice to Company (with a copy to Administrative Agent) at least two
Business Days prior to the Closing

 

29

 

Date or at any time thereafter, Company shall
execute and deliver to such Lender (and/or, if applicable and if so specified
in such notice, to any Person who is an assignee of such Lender pursuant to
subsection 10.1) on the Closing Date (or, if such notice is delivered after the
Closing Date, promptly after Company’s receipt of such notice) a promissory
note or promissory notes to evidence such Lender’s Loans, substantially in the
form of Exhibit I annexed hereto with appropriate insertions.

 

2.2                               Interest
on the Loans.

 

A.                                   Rate of
Interest.  Subject to
the provisions of subsection 2.7, each Loan shall bear interest on the unpaid
principal amount thereof from the Closing Date through maturity (whether by
acceleration or otherwise) at the rate of 2.0% per annum, which shall be
payable in cash, plus the rate of 10.0% per annum, which shall be
payable in kind by adding to the principal amount of Loans outstanding as of
the applicable Interest Payment Date; provided that, at the Company’s
option, if (i) the Consolidated Senior Leverage Ratio, as of the most
recently ended Fiscal Quarter for which financial statements are available, is
less than 4.00:1.00 (to be calculated after giving effect to the payment of
cash interest) and (ii) at the time of payment, Liquidity is greater than
$7,500,000 (to be calculated after giving effect to the payment of cash
interest) each Loan shall bear interest on the unpaid principal amount thereof
at an aggregate rate of 10.0% per annum, which shall be payable in cash.  Any such amount of interest not paid in cash
and added to principal shall be considered a Loan for all purposes under this
Agreement and shall bear interest on and after the Interest Payment Date on
which such interest is added to principal.

 

B.                                     [Reserved].

 

C.                                     Interest
Payments.  Subject to
the provisions of subsection 2.2E, interest on each Loan shall be payable in
arrears on and to each Interest Payment Date, (after Discharge of First Lien
Obligations) upon any prepayment of that Loan (to the extent accrued on the
amount being prepaid) and at maturity (including final maturity).

 

D.                                    [Reserved].

 

E.                                      Default
Rate.  Upon the occurrence and during
the continuation of any Event of Default all amounts outstanding under this
Agreement and the other Loan Documents shall bear interest (after as well as
before judgment) payable on demand by Administrative Agent, to the extent
permitted by law, at a rate that is 2.0% per annum in excess of the interest
rate otherwise payable under this Agreement , which additional interest shall
be payable in kind by adding to the principal amount of Loans
outstanding on such date.  Any such amount of interest not paid in
cash and added to principal shall be considered a Loan for all purposes under
this Agreement and shall bear interest on and after the Interest Payment Date
on which such interest is added to principal. 
Payment or acceptance of the increased rates of interest provided for in
this subsection 2.2E is not a permitted alternative to timely payment and shall
not constitute a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of Administrative Agent or any Lender.

 

30

 

F.                                      Computation
of Interest.  Interest on
the Loans shall be computed on the basis of a 365-day or 366-day year, as the
case may be, for the actual number of days elapsed in the period during which
it accrues.

 

G.                                     Maximum
Rate.  Notwithstanding the foregoing
provisions of this subsection 2.2, in no event shall the rate of interest
payable by Company with respect to any Loan exceed the maximum rate of interest
permitted to be charged under applicable law.

 

2.3                               Fees.

 

A.                                   [Reserved].

 

B.                                     Other
Fees.  Company agrees to pay to
Administrative Agent and Lenders such fees in the amounts and at the times
separately agreed upon among Company, Lenders and Administrative Agent.

 

2.4                               Repayments
and Prepayments of Loans; General Provisions Regarding Payments; Application of
Proceeds of Collateral and Payments Under Second Lien Guaranties.

 

A.                                   Repayments
of Loans.  Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the principal amount of the Loans of such Lender on the Maturity
Date, together with accrued and unpaid interest on the principal amount to be
paid to but excluding the date of payment and all other amounts owed hereunder
with respect to the Loans.

 

B.                                     Prepayments
and Reductions in Loans.

 

(i)                                     Voluntary
Prepayments.  Subject to
the provisions of the Intercreditor Agreement and following the Discharge of
First Lien Obligations, Company may, upon not less than one Business Day’s
prior written or telephonic notice given to Administrative Agent by 1:00 P.M.
(New York City time) on the date required and, if given by telephone, promptly
confirmed in writing to Administrative Agent, who will promptly notify each
Lender whose Loans are to be prepaid of such prepayment, at any time and from
time to time prepay, without premium or penalty, any Loans on any Business Day
in whole or in part in an aggregate minimum amount of $1,000,000 and multiples
of $100,000 in excess of that amount. 
All written notices delivered pursuant to this subsection 2.4B(i) shall
be in the form of a Notice of Prepayment and all notices whether written or
telephonic delivered pursuant to this subsection 2.4B(i) shall be
irrevocable, and once given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the prepayment date
specified therein; provided, however, that notwithstanding
anything to the contrary contained in this Agreement, Company may rescind a
Notice of Prepayment under this subsection 2.4B(i) if such prepayment
would have resulted from a refinancing of Loans outstanding hereunder, which
refinancing shall not be consummated or shall otherwise be delayed.  Any such voluntary prepayment shall be
applied as specified in subsection 2.4B(iv).

 

(ii)                                  [Reserved].

 

31

 

(iii)                               Mandatory
Prepayments.  Subject to
the provisions of the Intercreditor Agreement and following the Discharge of
First Lien Obligations, the Loans shall be prepaid in the amounts and under the
circumstances (including the giving of the Notice of Prepayment and Officer’s
Certificate required by subsection 2.4B(iii)(g)), set forth below, all such
prepayments to be applied as provided in subsection 2.4B(iv) or as more
specifically provided in subsection 2.4D:

 

(a)                                  Prepayments
from Net Asset Sale Proceeds.  No later than the date which is ten (10) Business
Days after the date of receipt by Company or any Subsidiary Guarantor of any
Net Asset Sale Proceeds, Company shall either (1) prepay the Loans in an
aggregate amount equal to such Net Asset Sale Proceeds or (2) with respect
to any Asset Sale pursuant to subsection 7.7B(vi), so long as no Event of
Default shall have occurred and be continuing, deliver to Administrative Agent
an Officer’s Certificate setting forth (x) that portion of such Net Asset
Sale Proceeds that Holdings, Company or such Subsidiary intends to reinvest or
cause to be reinvested in the business of Company or a Subsidiary Guarantor
within 360 days of such date of receipt and (y) such other information
with respect to such reinvestment as Administrative Agent may reasonably
request.  Company shall, no later than
360 days after receipt of such Net Asset Sale Proceeds that have not
theretofore been applied to the Obligations or that have not been so reinvested
as provided above, make a prepayment of the Loans in the full amount of all
such Net Asset Sale Proceeds.

 

(b)                                 Prepayments
from Net Insurance/Condemnation Proceeds.  No later than the date which is ten (10) Business
Days after the date of receipt by Company or any Subsidiary Guarantor of any
Net Insurance/Condemnation Proceeds, Company shall either (1) prepay the
Loans in an aggregate amount equal to such Net Insurance/Condemnation Proceeds
or (2), so long as no Event of Default shall have occurred and be continuing,
deliver to Administrative Agent an Officer’s Certificate setting forth (x) that
portion of such Net Insurance/Condemnation Proceeds that Holdings, Company or
such Subsidiary intends to reinvest or cause to be reinvested in the business
of Company or a Subsidiary Guarantor within 360 days of such date of receipt
and (y) such other information with respect to such reinvestment as
Administrative Agent may reasonably request. 
Company shall, no later than 360 days after receipt of such Net
Insurance/Condemnation Proceeds that have not theretofore been applied to the
Obligations or that have not been so reinvested as provided above, make a
prepayment of the Loans in the full amount of all such Net
Insurance/Condemnation Proceeds.

 

(c)                                  Prepayments Due
to Issuance of Equity Securities.

 

(1)                                  No later than
the date which is five (5) Business Days after the date of receipt of the
Net Securities Proceeds from the issuance of any Capital Stock of Holdings or
Company (but excluding the Net Securities Proceeds of any issuance of Capital
Stock in connection with (1) the making of any Investment permitted by
subsection 7.3(xv) or

 

32

 

7.3(xvi),
(2) a Permitted Cure Issuance (which Net Securities Proceeds shall be
applied pursuant to clause (2) of this subsection 2.4B(iii)(c)) and (3) issuances
of Capital Stock of Company to Holdings), Company shall prepay the Loans in an
aggregate amount equal to 50% of such Net Securities Proceeds; provided,
however, that if the Consolidated Total Leverage Ratio is less than or
equal to (y) 2.75:1.00 as of the last day of the most recently ended
Fiscal Quarter, then Company shall instead prepay the Loans in an aggregate
amount equal to 25% of such Net Securities Proceeds, and (z) 1.75:1.00 as
of the last day of the most recently ended Fiscal Quarter, then Company shall
not be required to prepay the Loans with any of such Net Securities Proceeds.

 

(2)                                  No later than
the date which is five (5) Business Days after the date of receipt of the
Net Securities Proceeds of any issuance of Capital Stock in connection with a
Permitted Cure Issuance, Company shall prepay the Loans in an aggregate amount
equal to 100% of such Net Securities Proceeds.

 

(d)                                 Prepayments Due
to Issuance of Indebtedness.  No later than the date which is five (5) Business
Days after the date of receipt of (1) the Net Securities Proceeds from the
issuance of any Indebtedness of Company, Holdings or any of its Domestic
Subsidiaries after the Closing Date, other than Indebtedness not prohibited
pursuant to subsection 7.1, or (2) the Net Securities Proceeds from the
issuance of any Indebtedness of a Canadian Subsidiary pursuant to subsection
7.1(xvii), Company shall prepay the Loans in an aggregate amount equal to such
Net Securities Proceeds.

 

(e)                                  Prepayments
from Excess Cash.

 

(1)                                  No later than February 1,
2010 Company shall prepay the Loans in an aggregate amount equal to 100% of the
Cash and Cash Equivalents reflected on Company’s consolidated balance sheet as
at December 31, 2009 (including, without limitation, the amount of any
Outstanding Tax Refunds received on or prior to December 31, 2009) in
excess of $20,000,000 of Liquidity, if any.

 

(2)                                  In the event
that there shall be Consolidated Excess Cash Flow for any Fiscal Year
(commencing with the first Fiscal Year-end following the Discharge of First
Lien Obligations), Company shall, no later than the date which is five (5) Business
Days after the audited financial statements are required to be delivered
pursuant to subsection 6.1D(ii), prepay the Loans in an aggregate amount equal
to 100% of such Consolidated Excess Cash Flow; provided, however,
that if the Consolidated Senior Leverage Ratio is less than or equal to (1) 5.00:1.00
as of the last day of the most recently ended Fiscal Quarter, then Company
shall instead prepay the Loans in an aggregate amount equal to 75% of such
Consolidated Excess Cash Flow, and (2) 4.00:1.00 as of the last day

 

33

 

of
the most recently ended Fiscal Quarter, then Company shall instead prepay the
Loans in an aggregate amount equal to 50% of such Consolidated Excess Cash
Flow; provided, further, that the amount payable under this
subsection 2.4B(iii)(e) with respect to any Fiscal Year shall be reduced
on a dollar-for-dollar basis by the amount of voluntary prepayments of the Term
Loans (as defined in the First Lien Credit Agreement), voluntary reduction of
the Revolving Loan Commitments (as defined in the First Lien Credit Agreement)
and, after Discharge of First Lien Obligations, voluntary repayments of the
Loans made during such Fiscal Year.

 

(f)                                    Prepayments
from Outstanding Tax Refunds.  No later than the date which is five (5) Business
Days after the date of receipt by any Loan Party of any Outstanding Tax Refunds
(if such date of receipt is on or after January 1, 2010), Company shall
prepay the Loans in an aggregate amount equal to 100% of such Outstanding Tax
Refunds received after January 1, 2010.

 

(g)                                 Calculations of
Net Proceeds Amounts; Additional Prepayments Based on Subsequent Calculations.  Company shall provide Administrative Agent
with not less than one Business Day’s prior written notice by delivery of a
Notice of Prepayment or prior telephonic notice promptly confirmed in writing
by the delivery of a Notice of Prepayment, of any prepayment of the Loans
pursuant to subsections 2.4B(iii)(a)-(f). 
Such written or telephonic notice shall be irrevocable and Company shall
be bound to make the mandatory prepayment referenced in such notice on the date
indicated in such notice.  Administrative
Agent shall promptly notify each Lender of such prepayment and of the amount of
the prepayment proposed to be applied to such Lender’s Loans.  Concurrently with any prepayment of the
Loans, Company shall deliver to Administrative Agent an Officer’s Certificate
demonstrating the calculation of the amount of the applicable Net Asset Sale
Proceeds, Net Insurance/Condemnation Proceeds, Net Securities Proceeds, or
Consolidated Excess Cash Flow, as the case may be, that gave rise to such
prepayment.  In the event that Company
shall subsequently determine that the actual amount was greater than the amount
set forth in such Officer’s Certificate, Company shall promptly make an
additional prepayment of the Loans in an amount equal to the amount of such
excess, and Company shall concurrently therewith deliver to Administrative
Agent an Officer’s Certificate demonstrating the derivation of the additional
amount resulting in such excess.

 

(iv)                              Application of
Prepayments of  Loans.  Any prepayments pursuant to subsection 2.4B
shall be applied to prepay all outstanding Loans proportionately to each Lender’s
Pro Rata Share.

 

C.                                     General
Provisions Regarding Payments.

 

(i)                                     Manner and Time
of Payment.  All
payments by Company of principal, interest, fees and other Obligations shall be
made in Dollars in same day funds,

 

34

 

without
defense, setoff or counterclaim, free of any restriction or condition, and
delivered to Administrative Agent not later than 3:00 P.M. (New York City
time) on the date due at the Funding and Payment Account for the account of
Lenders; funds received by Administrative Agent after that time on such due
date shall be deemed to have been paid by Company on the next succeeding
Business Day.

 

(ii)                                  Application of
Payments to Principal and Interest.  Except as provided in subsection 2.2C, all
payments in respect of the principal amount of any Loan shall include payment
of accrued interest on the principal amount being repaid or prepaid, and all
such payments shall be applied to the payment of interest before application to
principal.

 

(iii)                               [Reserved].

 

(iv)                              Payments and
Performance on Business Days.  Whenever any payment or performance to be
made hereunder shall be stated to be due on a day that is not a Business Day,
such payment or performance shall be made on the next succeeding Business Day.

 

(v)                                 Notation of
Payment.  Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments previously made thereon and
of the date to which interest thereon has been paid; provided that the
failure to make (or any error in the making of) a notation of any Loan made
under such Note shall not limit or otherwise affect the obligations of Company
hereunder or under such Note with respect to any Loan or any payments of
principal or interest on such Note.

 

D.                                    Application
of Proceeds of Collateral and Payments after Event of Default.  Subject to the Intercreditor Agreement, upon
the occurrence and during the continuation of an Event of Default, if requested
by Requisite Lenders, or upon acceleration of the Obligations pursuant to Section 8,
(a) all payments received by Administrative Agent, whether from Company,
Holdings or any Subsidiary Guarantor or otherwise, and (b) following the
Discharge of First Lien Obligations, all proceeds received by Administrative
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral under any Collateral Document may, in the
discretion of Administrative Agent, be held by Administrative Agent as
Collateral for, and/or (then or at any time thereafter) applied in full or in
part by Administrative Agent, in each case in the following order of priority:

 

(i)                                     to the payment
of all costs and expenses of such sale, collection or other realization, all
other expenses, liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which Administrative Agent
is entitled to compensation (including the fees described in subsection 2.3),
reimbursement and indemnification under any Loan Document and all advances made
by Administrative Agent thereunder for the account of the applicable Loan
Party, and to the payment of all costs and expenses paid or incurred by
Administrative Agent in

 

35

 

connection
with the Loan Documents, all in accordance with subsections 9.4, 10.2 and 10.3
and the other terms of this Agreement and the Loan Documents;

 

(ii)                                  thereafter, to
the payment of all other Obligations (subject to the provisions of subsection
2.4C(ii) hereof); and

 

(iii)                               thereafter, to
the payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct.

 

2.5                               [Reserved].

 

2.6                               [Reserved]  .

 

2.7                               Taxes.

 

A.                                   [Reserved].

 

B.                                     Taxes.

 

(i)                                     Payments to Be
Free and Clear.  Any and all
payments by or on account of any obligation of Company under this Agreement and
the other Loan Documents shall be made free and clear of, and without any
deduction or withholding on account of, any Indemnified Taxes or Other Taxes
(which Other Taxes Company shall pay to the relevant Government Authority in
accordance with applicable law).

 

(ii)                                  Grossing-up of
Payments.  If Company
or any other Loan Party is required by law to make any deduction or withholding
on account of any Tax from any sum paid or payable by Company to Administrative
Agent or any Lender under any of the Loan Documents:

 

(a)                                  Company or such
Loan Party, as the case may be, shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Company or such
Loan Party, as the case may be, becomes aware of it;

 

(b)                                 Company or such
Loan Party, as the case may be, shall timely pay any such Tax to the relevant
Government Authority when such Tax is due, in accordance with applicable law;

 

(c)                                  unless such Tax
is an Excluded Tax, the sum payable by Company shall be increased to the extent
necessary to ensure that, after making the required deductions (including
deductions applicable to additional sums payable under this subsection
2.7B(ii)), Administrative Agent or such Lender, as the case may be, receives on
the due date a net sum equal to the sum it would have received had no such
deduction been required or made; and

 

36

 

(d)                                 within 30 days
after paying any sum from which it is required by law to make any such
deduction, and within 30 days after the due date of payment of any Tax which it
is required by clause (b) above to pay, Company shall deliver to
Administrative Agent the original or a certified copy of an official receipt or
other document reasonably satisfactory to the Administrative Agent and other
affected parties to evidence the payment and its remittance to the relevant
Government Authority.

 

(iii)                               Indemnification
by Company.  Company
shall indemnify Administrative Agent and each Lender, within 30 days after
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including for the full amount of any Indemnified Taxes or Other Taxes imposed
or asserted on or attributable to amounts payable under this subsection
2.7B(iii)) paid by Administrative Agent or such Lender, as the case may be, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Government
Authority.  A certificate as to the
amount of such payment or liability delivered to Company by a Lender (with a
copy to Administrative Agent), or by Administrative Agent on its own behalf or
on behalf of a Lender, shall be conclusive absent manifest error.

 

(iv)                              Tax Status of
Lenders.  Unless not legally entitled to
do so:

 

(a)                                  any Lender, if
requested by Company or Administrative Agent, shall deliver such forms or other
documentation prescribed by applicable law or reasonably requested by Company
or Administrative Agent as will enable Company or Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements;

 

(b)                                 any Foreign
Lender that is entitled to an exemption from or reduction of any Tax with
respect to payments hereunder or under any other Loan Document shall deliver to
Company and Administrative Agent, on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter,
as may be necessary in the determination of Company or Administrative Agent,
each in the reasonable exercise of its discretion), such properly completed and
duly executed forms or other documentation prescribed by applicable law as will
permit such payments to be made without withholding or at a reduced rate of
withholding;

 

(c)                                  without
limiting the generality of the foregoing, in the event that Company is resident
for tax purposes in the United States, any Foreign Lender shall deliver to
Company and Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter,
as may be necessary in the determination of Company or Administrative Agent,
each in the reasonable exercise of its discretion), whichever of the following
is applicable:

 

37

 

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

 

(2)                                  properly
completed and duly executed copies of Internal Revenue Service Form W-8ECI,

 

(3)                                  in the case of
a Foreign Lender claiming the benefits of the “portfolio interest” exemption
under Section 881(c) of the Internal Revenue Code, (A) a duly
executed certificate to the effect that such Foreign Lender is not (i) a “bank”
within the meaning of Section 881(c)(3)(A) of the Internal Revenue
Code, (ii) a ten-percent shareholder (within the meaning of Section 881(c)(3)(B) of
the Internal Revenue Code) of Company or Holdings or (iii) a controlled
foreign corporation described in Section 881(c)(3)(C) of the Internal
Revenue Code and (B) properly completed and duly executed copies of
Internal Revenue Service Form W-8BEN,

 

(4)                                  properly
completed and duly executed copies of any other form prescribed by applicable
law as a basis for claiming exemption from or a reduction in any Tax,

 

in each case together with
such supplementary documentation as may be prescribed by applicable law to
permit Company and Administrative Agent to determine the withholding or
deduction required to be made, if any;

 

(d)                                 without
limiting the generality of the foregoing, in the event that Company is resident
for tax purposes in the United States, any Foreign Lender that does not act or
ceases to act for its own account with respect to any portion of any sums paid
or payable to such Lender under any of the Loan Documents (for example, in the
case of a typical participation by such Lender) shall deliver to Administrative
Agent and Company (in such number of copies as shall be requested by the recipient),
on or prior to the date such Foreign Lender becomes a Lender, or on such later
date when such Foreign Lender ceases to act for its own account with respect to
any portion of any such sums paid or payable, and from time to time thereafter,
as may be necessary in the determination of Company or Administrative Agent
(each in the reasonable exercise of its discretion):

 

(1)                                  duly executed
and properly completed copies of the forms and statements required to be
provided by such Foreign Lender under clause (c) of subsection 2.7B(iv),
to establish the portion of any such sums paid or payable with respect to which
such Lender acts for its own account and may be entitled to an exemption from
or a reduction of the applicable Tax, and

 

(2)                                  duly executed
and properly completed copies of Internal Revenue Service Form W-8IMY (or
any successor forms)

 

38

 

properly
completed and duly executed by such Foreign Lender, together with any
information, if any, such Foreign Lender chooses to transmit with such form,
and any other certificate or statement of exemption required under the Internal
Revenue Code or the regulations thereunder, to establish that such Foreign
Lender is not acting for its own account with respect to a portion of any such
sums payable to such Foreign Lender;

 

(e)                                  without
limiting the generality of the foregoing, in the event that Company is resident
for tax purposes in the United States, any Lender that is not a Foreign Lender
and has not otherwise established to the reasonable satisfaction of Company and
Administrative Agent that it is an exempt recipient (as defined in section
6049(b)(4) of the Internal Revenue Code and the United States Treasury
Regulations thereunder) shall deliver to Company and Administrative Agent (in
such number of copies as shall be requested by the recipient) on or prior to
the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter as prescribed by applicable law or upon the request of
Company or Administrative Agent), duly executed and properly completed copies
of Internal Revenue Service Form W-9;

 

(f)                                    without
limiting the generality of the foregoing, each Lender hereby agrees, from time
to time after the initial delivery by such Lender of such forms, whenever a
lapse in time or change in circumstances renders such forms, certificates or
other evidence so delivered obsolete or inaccurate in any material respect,
that such Lender shall promptly (1) deliver to Administrative Agent and Company
two original copies of renewals, amendments or additional or successor forms,
properly completed and duly executed by such Lender, together with any other
certificate or statement of exemption required in order to confirm or establish
that such Lender is entitled to an exemption from or reduction of any Tax with
respect to payments to such Lender under the Loan Documents and, if applicable,
that such Lender does not act for its own account with respect to any portion
of such payment, or (2) notify Administrative Agent and Company of its
inability to deliver any such forms, certificates or other evidence;

 

(g)                                 without
limiting the generality of the foregoing, each Foreign Lender shall comply with
any information gathering and reporting requirements, in each case, that are
required to obtain the maximum available exemption from U.S. federal
withholding taxes under Title I of the proposed Foreign Account Tax Compliance
Act of 2009 (the “Proposed Act”)
if such proposed legislation is enacted into law (or under enacted legislation
that is substantially similar to Title I of the Proposed Act) with respect to
payments received by or on behalf of such Foreign Lender;

 

(h)                                 If
Administrative Agent or a Lender has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by Company or with respect to which
Company has paid additional amounts pursuant to this subsection 2.7, it shall
pay over such refund to Company (but only to the extent of

 

39

 

indemnity
payments made, or additional amounts paid by Company under this subsection 2.7
with respect to the Taxes or Other Taxes giving rise to such refund), net of
all out-of-pocket expenses of Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Government Authority
with respect to such refund); provided that Company, upon the request of
Administrative Agent or such Lender, agrees to repay the amount paid over to
Company (plus any penalties, interest or other charges imposed by the relevant
Government Authority) to Administrative Agent or such Lender in the event
Administrative Agent or such Lender is required to repay such refund to such
Government Authority. This subsection shall not be construed to require
Administrative Agent or Lender to make available its tax returns (or any other
information relating to its taxes which it deems confidential) to Company or
any other Person; and

 

(i)                                     In the event of
any inconsistency between any other provision contained herein and this
subsection 2.7B, this subsection 2.7B shall govern.

 

C.                                     [Reserved].

 

2.8                               Statement
of Lenders; Obligation of Lenders to Mitigate.

 

A.                                   Statements.  Each Lender claiming compensation or
reimbursement pursuant to subsection 2.7 or 2.8B shall deliver to Company (with
a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such compensation or
reimbursement, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.

 

B.                                     Mitigation.  Each Lender agrees that, as promptly as
practicable after the officer of such Lender responsible for administering the
Loans of such Lender, as the case may be, becomes aware of the occurrence of an
event or the existence of a condition that would entitle such Lender to receive
payments under subsection 2.7, it will use reasonable efforts to make, issue,
fund or maintain the Loans of such Lender through another lending office of
such Lender, if (i) the additional amounts which would otherwise be
required to be paid to such Lender pursuant to subsection 2.7 would be
materially reduced and (ii) as determined by such Lender in its sole
discretion, such action would not otherwise be materially disadvantageous to
such Lender; provided that such Lender will not be obligated to utilize
such other lending office pursuant to this subsection 2.8B unless Company
agrees to pay all incremental expenses incurred by such Lender as a result of
utilizing such other lending office as described above.

 

2.9                               [Reserved].

 

2.10                        Replacement
of a Lender.

 

If Company receives a statement of amounts due
pursuant to subsection 2.8A from a Lender, Company is required to pay any
additional amounts under subsection 2.7 or a Lender (a “Non-Consenting
Lender”) refuses to consent to an amendment, modification or waiver
of this Agreement that, pursuant to subsection 10.6, either (i) requires
consent of 100% of

 

40

 

the Lenders or
100% of the Lenders with Obligations directly affected or (ii) requires
consent of Requisite Lenders, (any such Lender, a “Subject
Lender”), so long as (1) Company has obtained a commitment from
another Lender or an Eligible Assignee to purchase at par the Subject Lender’s
Loans and all other obligations of the Subject Lender hereunder and (2), if
applicable, the Subject Lender is unwilling or unable to withdraw the notice
delivered to Company pursuant to subsection 2.8, Company may require the
Subject Lender to assign all of its Loans to such other Lender, Lenders,
Eligible Assignee or Eligible Assignees pursuant to the provisions of
subsection 10.1B; provided that, prior to or concurrently with such
replacement, (A) Company has paid to the Lender giving such notice all
amounts under subsections 2.7 and/or 2.8B (if applicable) through such date of
replacement, (B) the processing fee required to be paid by subsection
10.1B(i) shall have been paid to Administrative Agent, (C) all of the
requirements for such assignment contained in subsection 10.1B have been
fulfilled, including, the consent of Administrative Agent and the receipt by
Administrative Agent of an executed Assignment Agreement and other supporting
documents, and (D) in the event such Subject Lender is a Non-Consenting
Lender, each assignee shall consent, at the time of such assignment, to each
matter in respect of which such Subject Lender was a Non-Consenting Lender and
Company requires each other Subject Lender that is a Non-Consenting Lender to
assign its Loans.

 

Each Lender hereby grants to Administrative
Agent an irrevocable power of attorney (which power is coupled with an
interest) to execute and deliver, on behalf of such Lender or such Issuing
Bank, as the case may be, as assignor, any Assignment Agreement necessary to
effectuate any assignment of such Lender’s interests hereunder in the
circumstances contemplated by this subsection 2.10.

 

Section 3.              [Reserved].

 

Section 4.              CONDITIONS TO LOANS

 

The obligations of Lenders to continue the
Existing Loans are subject to prior or substantially concurrent satisfaction of
the following conditions:

 

A.            Loan Party
Documents.  On or before the
Closing Date, Company shall, and shall cause each other Loan Party to, deliver
to Administrative Agent with sufficient originally executed copies, where
appropriate, for each Lender the following with respect to Company or such Loan
Party, as the case may be, each, unless otherwise noted, dated the Closing
Date:

 

(i)            Copies
of the Organizational Documents of such Person, certified by the Secretary of
State of its jurisdiction of organization or, if such document is of a type
that may not be so certified, certified by the secretary or similar officer of
the applicable Loan Party, together with a good standing certificate from the
Secretary of State of its jurisdiction of organization and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes of such jurisdiction of
organization, each dated a recent date prior to the Closing Date;

 

41

 

(ii)           Resolutions
of the Governing Body of such Person approving and authorizing the execution,
delivery and performance of the Loan Documents to which it is a party,
certified as of the Closing Date by the secretary or similar officer of such
Person as being in full force and effect without modification or amendment;

 

(iii)          Signature
and incumbency certificates of the officers of such Person executing the Loan
Documents to which it is a party;

 

(iv)          Executed
originals of the Loan Documents to which such Person is a party; and

 

(v)           Such
other documents as Administrative Agent may reasonably request.

 

B.            Fees.  Company shall have paid to Administrative
Agent and Lenders, the fees payable on the Closing Date referred to in
subsection 2.3.

 

C.            Financial
Statements; Financial Plan. 
On or before the Closing Date, Company shall have made available to
Lenders (i) unaudited financial statements of Panolam Industries
International, Inc. and its Subsidiaries for the eleven (11) months ended November 30,
2009; and (ii) the Preliminary Financial Plan for Fiscal Year 2010.

 

D.            Opinions of
Counsel to Loan Parties. 
Lenders shall have received originally executed copies of one or more
written opinions of Weil, Gotshal & Manges LLP, counsel for Loan
Parties, in form reasonably satisfactory to Administrative Agent and its
counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit IV annexed hereto and
as to such other matters as Administrative Agent acting on behalf of Lenders
may reasonably request (this Agreement constituting a written request by
Company to such counsel to deliver such opinions to Lenders).

 

E.             Evidence of
Insurance.  Administrative
Agent shall have received a certificate from Company’s insurance broker or
other evidence satisfactory to it that all insurance required to be maintained
pursuant to subsection 6.4 is in full force and effect and that Administrative
Agent on behalf of Lenders has been named as additional insured and/or loss
payee thereunder to the extent required under subsection 6.4.

 

F.             Necessary
Governmental Authorizations and Consents; Expiration of Waiting Periods, Etc.  Company shall have obtained all Governmental
Authorizations and all consents of other material Persons, in each case that
are necessary in connection with the transactions contemplated by the Loan
Documents.  All applicable waiting
periods shall have expired without any action being taken or threatened by any
competent authority that would restrain, prevent or otherwise impose adverse
conditions on the Restructuring or the transactions contemplated by the Loan
Documents.  No action, request for stay,
petition for review or rehearing, reconsideration, or appeal with respect to
any of the foregoing shall be pending.

 

G.            Security
Interests in Personal and Mixed Property.  To the extent not otherwise satisfied (with
respect to real property) pursuant to subsection 4.1H, Administrative Agent
shall have received evidence satisfactory to it that Holdings, Company and
Subsidiary 

 

42

 

Guarantors shall have taken or caused to be
taken all such actions, executed and delivered or caused to be executed and
delivered all such agreements, documents and instruments, in the reasonable
opinion of Administrative Agent, desirable in order to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and (upon such filing
and recording) perfected Second Priority security interest in the entire
personal and mixed property Collateral.  Except as otherwise provided in subsection
6.15, such actions shall include the following:

 

(i)            Stock
Certificates and Instruments. 
Delivery to First Lien Agent of (a) certificates (which
certificates shall be accompanied by irrevocable undated stock powers, duly
endorsed in blank and otherwise satisfactory in form and substance to the First
Lien Agent) representing all Capital Stock pledged pursuant to the Security
Agreement and (b) all promissory notes or other instruments (duly
endorsed, where appropriate, in a manner satisfactory to the First Lien Agent)
evidencing any Collateral;

 

(ii)           Lien
Searches and UCC Termination Statements. 
Delivery to Administrative Agent of (a) the results of a recent
search of all effective UCC financing statements and fixture filings which may
have been made with respect to any personal or mixed property of any Loan
Party, together with copies of all such filings disclosed by such search, and (b) copies
of duly completed UCC termination statements, and authorization from the
applicable secured party of the First Lien Agent to file such termination
statements, as may be necessary to terminate any effective UCC financing
statements or fixture filings disclosed in such search (other than any such
financing statements or fixture filings in respect of Liens permitted to remain
outstanding pursuant to the terms of this Agreement or the First Lien Credit Agreement);

 

(iii)          UCC
Financing Statements and Fixture Filings. 
Delivery to Administrative Agent of duly completed UCC financing
statements and, where appropriate, fixture filings, with respect to all
personal and mixed property Collateral of such Loan Party, for filing in all
jurisdictions as may be necessary or, in the reasonable opinion of
Administrative Agent, desirable to perfect the Second Priority security
interests created in such Collateral pursuant to the Collateral Documents; and

 

(iv)          IP
Filings.  Delivery to Administrative
Agent of copies of releases duly executed (if necessary) of security interests
by all applicable Persons to be filed in the applicable jurisdictions as may be
necessary to terminate any effective filings in any IP Filing Office in respect
of any IP Collateral (other than any such filings in respect of Liens permitted
to remain outstanding pursuant to the terms of this Agreement or to the terms
of the First Lien Credit Documents).

 

H.            Closing Date
Mortgages; Closing Date Mortgage Policies; Etc.  On or before the
Closing Date, Administrative Agent shall have received from Company and each
applicable Subsidiary Guarantor:

 

(i)            Closing
Date Mortgages.  Fully executed and
notarized Mortgages listed on Schedule 4.1H annexed hereto (each a “Closing Date Mortgage” and, collectively, the “Closing Date Mortgages”), either with evidence of
recordation or, if not recorded, in proper form for recording in all
appropriate places, in all applicable 

 

43

 

jurisdictions,
encumbering each Real Property Asset listed on Schedule 4.1H annexed
hereto (each a “Closing Date Mortgaged Property”
and collectively, the “Closing Date Mortgaged
Properties”);

 

(ii)           Opinions
of Local Counsel.  An opinion of
counsel (which counsel shall be reasonably satisfactory to Administrative
Agent) in each state in which a Closing Date Mortgaged Property is located with
respect to the enforceability of the form(s) of Closing Date Mortgages to
be recorded in such state and such other matters as Administrative Agent may
reasonably request, in each case in form reasonably satisfactory to
Administrative Agent;

 

(iii)          Title
Insurance.  (a) ALTA mortgagee
title insurance policies or unconditional commitments therefor listed on Schedule
4.1H annexed hereto (the “Closing Date Mortgage
Policies”) issued by the Title Company with respect to the Closing
Date Mortgaged Properties listed in Schedule 4.1H annexed hereto (other than
the leasehold property located at Chino, California listed on Schedule 4.1H
annexed hereto), in amounts insuring (1) fee simple title to each such
Closing Date Mortgaged Property owned in fee and (2) leasehold title to
the Norcross, Georgia property listed on Schedule 4.1H annexed hereto, vested
in such Loan Party and assuring Administrative Agent that the applicable
Closing Date Mortgages create valid and enforceable Second Priority mortgage
Liens on the respective Closing Date Mortgaged Properties encumbered thereby,
subject only to (i) Liens permitted by this Agreement and the First Lien
Credit Agreement, (ii) minor defects on title that do not materially
interfere with Company’s or its Subsidiaries’ ability to conduct its business
or to utilize such assets for their intended purposes, (iii) where the
failure to have such title or other property interests described above could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and (iv) a standard survey exception; and (b) evidence
satisfactory to Administrative Agent that such Loan Party has (i) delivered
to the Title Company all certificates and affidavits required by the Title
Company in connection with the issuance of the Closing Date Mortgage Policies
and (ii) paid to the Title Company or to the appropriate Government
Authorities all expenses and premiums of the Title Company in connection with
the issuance of the Closing Date Mortgage Policies and all recording and stamp
taxes (including mortgage recording and intangible taxes) payable in connection
with recording the Closing Date Mortgages in the appropriate real estate
records;

 

(iv)          Title
Reports.  With respect to each
Closing Date Mortgaged Property listed in Schedule 4.1H annexed hereto,
a title report issued by the Title Company with respect thereto, satisfactory
in form and substance to Administrative Agent;

 

(v)           Copies
of Documents Relating to Title Exceptions. 
Copies of all recorded documents listed as exceptions to title or
otherwise referred to in the Closing Date Mortgage Policies or in the title
reports delivered pursuant to subsection 4.1H(iv); and

 

44

 

(vi)          Matters
Relating to Flood Hazard Properties. 
(a) Evidence, which may be in the form of a letter from an
insurance broker or a municipal engineer, as to whether (1) any Closing
Date Mortgaged Property is a Flood Hazard Property and (2) the community
in which any such Flood Hazard Property is located is participating in the
National Flood Insurance Program, (b) if there are any such Flood Hazard
Properties, such Loan Party’s written acknowledgement of receipt of written
notification from Administrative Agent (1) as to the existence of each
such Flood Hazard Property and (2) as to whether the community in which
each such Flood Hazard Property is located is participating in the National
Flood Insurance Program, and (c) in the event any such Flood Hazard
Property is located in a community that participates in the National Flood
Insurance Program, evidence that Company has obtained flood insurance in
respect of such Flood Hazard Property to the extent required under the
applicable regulations of the Board of Governors.

 

I.              Solvency
Assurances.  On the Closing
Date, Administrative Agent and Lenders shall have received an Officer’s
Certificate of Company and its Subsidiaries, certified by a Financial Officer
of Company, dated the Closing Date, substantially in the form of Exhibit VI
annexed hereto, certifying that, after giving effect to the consummation of
the transactions contemplated by the Loan Documents and First Lien Credit
Documents, Company and its Subsidiaries on a consolidated basis will be
Solvent.

 

J.             Patriot Act
Compliance.  Administrative
Agent shall have received, at least five Business Days prior to the Closing
Date, all documentation and other information required by bank regulatory
authorities under the applicable “know your customer” and anti-money laundering
rules and regulations, including without limitation the Patriot Act.

 

K.            Bankruptcy
Court.  The Plan shall have
been confirmed by the Bankruptcy Court.

 

L.             First Lien
Credit Documents.

 

(i)            Form of
First Lien Credit Agreement.  The
First Lien Credit Documents shall be reasonably satisfactory in form and
substance to Administrative Agent.

 

(ii)           Officer’s
Certificate.  Administrative Agent
shall have received an Officer’s Certificate to the effect that the First Lien
Credit Documents attached thereto are in full force and effect and are true and
correct copies of the executed versions of such agreements.

 

M.           [Reserved].

 

N.            [Reserved].

 

O.            No Material
Adverse Effect.  Other than
events giving rise to, arising or occurring in connection with or as a result
of the Bankruptcy Case, or the Restructuring, there shall have been (a) no
material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or operating results of Holdings and its
Subsidiaries, taken as a 

 

45

 

whole or (b) no condition or event or
series of events that has resulted in, or could reasonably be expected to
result in, any losses, liabilities, obligations, damages, costs and expenses of
any kind to such Person of $15,000,000 or more; provided, however,
that any such effect shall not include an effect resulting from (i) a
change in applicable laws, (ii) a change in economic, business or
financial market conditions generally, so long as such conditions do not
disproportionately affect Holdings, Company and Company’s Subsidiaries or (iii) any
act of war.

 

P.             The representations
and warranties contained herein and in the other Loan Documents shall be true,
correct and complete in all material respects on and as of the Closing Date to
the same extent as though made on and as of that date, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case such representations and warranties shall have been true, correct
and complete in all material respects on and as of such earlier date; and

 

Q.            No event shall have
occurred and be continuing or would result from the continuation of the Loans
contemplated by this Agreement that would constitute an Event of Default or a
Potential Event of Default.

 

Section 5.              COMPANY’S
REPRESENTATIONS AND WARRANTIES

 

Company represents and warrants to the
Administrative Agent and the Lenders that as of the Closing Date:

 

5.1          Organization, Powers,
Qualification, Good Standing, Business and Subsidiaries.

 

A.            Organization
and Powers.  Each of Holdings
and Company is a corporation duly organized or formed, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization as specified in Schedule 5.1A annexed hereto.  Each of Holdings and Company has all
requisite power and authority to own, lease and operate its assets, to carry on
its business, except, in each of the foregoing cases, where the failure to have
such power and authority could not reasonably be expected to have a Material
Adverse Effect, and to enter into the Loan Documents to which it is a party and
to carry out the transactions contemplated thereby.

 

B.            Qualification
and Good Standing.  Each of
Holdings and Company is qualified to do business and in good standing in every
jurisdiction where ownership, lease or operation of its assets or conduct of
its business and operations require such qualification, except in jurisdictions
where the failure to be so qualified or in good standing could not reasonably
be expected to result in a Material Adverse Effect.

 

C.            Subsidiaries.  As of the Closing Date, all of the
Subsidiaries of Holdings, their jurisdictions of organization and the ownership
interest of Holdings and each of its Subsidiaries in each of the Subsidiaries
of Holdings are identified in Schedule 5.1C annexed hereto.  The Capital Stock of each of the Subsidiaries
of Holdings identified in Schedule 5.1C annexed hereto is duly
authorized, validly issued, fully paid, nonassessable and is owned by Holdings
or Company, directly or indirectly, free and clear of all consensual Liens
(other than Liens created under the Collateral Documents and the First Lien
Credit Documents).  Each of the 

 

46

 

Subsidiaries of Holdings identified in Schedule
5.1C annexed hereto is a corporation, partnership, trust or limited
liability company duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation or organization set
forth therein, has all requisite power and authority to own, lease and operate
its assets and to carry on its business, and is qualified to do business and in
good standing in every jurisdiction where ownership, lease or operation of its
assets or conduct of its business and operations require such qualification, in
each case except where failure to be so qualified or in good standing or a lack
of such power and authority could not reasonably be expected to result in a
Material Adverse Effect.  Except as set
forth on Schedule 5.1C, as of the Closing Date, there are no outstanding
subscriptions, options, warrants, calls, put rights or any other agreements or
commitments of any nature with respect to the Capital Stock of any Subsidiary
of Holdings.

 

5.2          Authorization of
Borrowing, etc.

 

A.            Authorization
of Borrowing.  The execution,
delivery and performance of the Loan Documents have been duly authorized by all
necessary action on the part of each Loan Party that is a party thereto.

 

B.            No Conflict.  The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Holdings or any of its Subsidiaries, the
Organizational Documents of Holdings or any of its Subsidiaries or any order,
judgment or decree of any court or other Government Authority binding on
Holdings or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of Holdings or any of its Subsidiaries, (iii) result
in or require the creation or imposition of any Lien upon any of the properties
or assets of Holdings or any of its Subsidiaries (other than any Liens
permitted by subsection 7.2), or (iv) require any approval of stockholders
or any approval or consent of any Person under any Contractual Obligation of
Holdings or any of its Subsidiaries, except for such approvals or consents
which will be obtained on or before the Closing Date and except, in each case, to
the extent such violation, conflict, Lien or failure to obtain such approval or
consent could not reasonably be expected to result in a Material Adverse
Effect.

 

C.            Governmental
Consents.  The execution,
delivery and performance by Loan Parties of the Loan Documents to which they
are parties and the consummation of the transactions contemplated by the Loan
Documents do not and will not require any Governmental Authorization, except (i) Governmental
Authorizations that have been obtained, (ii) filings necessary to perfect
the Liens on the Collateral granted by the Loan Parties in favor of
Administrative Agent on behalf of Lenders and (iii) Governmental
Authorizations the failure of which to obtain or make could not reasonably be
expected to have a Material Adverse Effect.

 

D.            Binding
Obligation.  Each of the Loan
Documents has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Person,
enforceable against such Person in accordance with its respective terms, except
as may be limited by bankruptcy, insolvency, reorganization, 

 

47

 

receivership, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability.

 

5.3          Financial Condition.

 

A.            Company has heretofore
delivered to Lenders (i) audited financial statements for the Fiscal Years
ended 2006, 2007 and 2008, (ii) unaudited financial statements for the
first three Fiscal Quarters of 2009 and (iii) unaudited financial
statements for the portion of the Fiscal Year 2009 ended November 30,
2009.  All such statements (other than
the statements for the eleven(11) month portion of the Fiscal Year ended November 30,
2009) were, and all financials statements which shall hereafter be furnished by
or on behalf of any Loan Party to the Agent pursuant to subsection 6.1B, C or D
will be, prepared in conformity with GAAP (except as otherwise expressly noted
therein) and fairly present, in all material respects, the financial position
(on a consolidated basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated basis) of the entities described therein for each
of the periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments.

 

5.4          No Material Adverse
Change.

 

Except for events giving rise to, arising or
occurring in connection with or as a result of the Bankruptcy Case or the
Restructuring or as set forth on Schedule 5.4, since December 31,
2008, no event or change has occurred that has resulted in or evidences, either
in any case or in the aggregate, a Material Adverse Effect.

 

5.5          Title to Properties;
Liens; Real Property; Intellectual Property.

 

A.            Title to
Properties; Liens.  Company
and its Subsidiaries have (i) good and legal title to (in the case of fee
interests in real property), (ii) valid leasehold interests in (in the
case of leasehold interests in real or personal property), or (iii) good
title to (in the case of all other personal property), all of their respective
properties and assets necessary in the ordinary conduct of its business, and
all such properties and assets are free and clear of Liens, except for (a) Liens
permitted by this Agreement, (b) minor defects on title that do not
materially interfere with Company’s or its Subsidiaries’ ability to conduct its
business or to utilize such assets for their intended purposes and (c) where
the failure to have such title or other property interests described above
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

B.            Real
Property.  As of the Closing
Date, Schedule 5.5B annexed hereto contains a true, accurate and
complete list of (i) all fee interests in any Real Property Assets and (ii) all
leases, subleases or assignments of leases (together with all amendments,
modifications, supplements, renewals or extensions of any thereof) affecting
each Real Property Asset, regardless of whether a Loan Party is the landlord or
tenant (whether directly or as an assignee or successor in interest) under such
lease, sublease or assignment.

 

(i)            Condemnation.  No Taking has been commenced or, to Company’s
knowledge, is contemplated with respect to all or any portion of any Closing
Date 

 

48

 

Mortgaged
Property or for the relocation of roadways providing access to such Closing
Date Mortgaged Property, which Taking, contemplated Taking or condemnation
could reasonably be expected to materially and adversely affect the use of such
Closing Date Mortgaged Property.

 

C.            Intellectual
Property.  Company and its
Subsidiaries own or have the right to use, all Intellectual Property necessary
for the conduct of their business, except where the failure to own or have such
right to use in the aggregate could not reasonably be expected to result in a
Material Adverse Effect.  No claim has
been asserted and is pending by any Person challenging or questioning the use
of any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does Company know of any valid basis for any such
claim, except for such claims that in the aggregate could not reasonably be
expected to result in a Material Adverse Effect.  The use of such Intellectual Property by
Company and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.  All material federal, state and foreign
registrations of and applications for Intellectual Property that are owned or
licensed by Company or any of its Subsidiaries on the Closing Date are
described on Schedule 5.5C annexed hereto.

 

5.6          Litigation; Adverse
Facts.

 

Except as disclosed on Schedule 5.6,
there are no Proceedings (whether or not purportedly on behalf of Company or
any of its Subsidiaries) at law or in equity, before or by any court or other
Government Authority (including any Environmental Claims) that are pending or,
to the knowledge of Company, threatened in writing against Company or any of
its Subsidiaries or any property of Company or any of its Subsidiaries and
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.  Neither
Company nor any of its Subsidiaries (i) is in violation of any applicable
laws (including Environmental Laws) or (ii) is subject to or in default
with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or other Government Authority, except for such
violations or defaults (a) that are being contested in good faith by
appropriate proceedings or (b) that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.

 

5.7          Payment of Taxes.

 

Except to the extent permitted by subsection
6.3, all Tax returns and reports of Holdings and its Subsidiaries required to
be filed by any of them have been timely filed, and all Taxes shown on such Tax
returns to be due and payable and all assessments, fees, other governmental
charges and any other Tax upon Holdings and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises that are due
and payable have been paid when due and payable except those (i) which are
not overdue by more than thirty (30) days and intended to be contested in good
faith by appropriate proceedings diligently conducted and for which adequate
reserves have been provided in accordance with GAAP, (ii) which are being
contested in good faith by appropriate proceedings diligently conducted and for
which adequate reserves have been provided in accordance with GAAP or (iii) with
respect to which the failure to make such filing or payment could not
reasonably be expected to have a Material 

 

49

 

Adverse Effect
and will not result in a Lien securing such Taxes, assessments, fees or other
governmental charges in excess of $990,000.

 

5.8          Governmental
Regulation.

 

Neither Company nor any of its Subsidiaries
is subject to regulation under the Public Utility Holding Company Act of 1935
or the Investment Company Act of 1940.

 

5.9          Securities Activities.

 

A.            Neither Company nor
any of its Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying any Margin Stock.

 

B.            Following application
of the proceeds of each Loan, not more than 25% of the value of the assets
(either of Company only or of Company and its Subsidiaries on a consolidated
basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any
restriction contained in any agreement or instrument, between Company and any
Lender or any Affiliate of any Lender, relating to Indebtedness and within the
scope of subsection 8.2, will be Margin Stock.

 

5.10        Employee Benefit Plans.

 

A.            Company, each of its
Subsidiaries and each of their respective ERISA Affiliates are in compliance in
all material respects with all applicable provisions and requirements of ERISA
and the regulations and published interpretations thereunder with respect to
each Employee Benefit Plan, and have performed in all material respects all
their obligations under each Employee Benefit Plan, except to the extent that
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.  Each Employee
Benefit Plan that is intended to qualify under Section 401(a) of the
Internal Revenue Code is so qualified except as would reasonably be expected to
have a Material Adverse Effect.

 

B.            No ERISA Event has
occurred or is reasonably expected to occur (i) other than in connection
with the Bankruptcy Case or (ii) that could reasonably be expected to have
a Material Adverse Effect.

 

C.            As of the most recent
valuation date for any Pension Plan, the amount of unfunded benefit liabilities
(as defined in Section 4001(a)(18) of ERISA), individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which assets exceed benefit liabilities), could
not reasonably be expected to have a Material Adverse Effect.

 

D.            As of the most recent
valuation date for each Multiemployer Plan for which the actuarial report is
available, the potential liability of Company, its Subsidiaries and their
respective ERISA Affiliates for a complete withdrawal from such Multiemployer
Plan (within the meaning of Section 4203 of ERISA), when aggregated with
such potential liability for a complete withdrawal from all Multiemployer
Plans, based on information available

 

50

 

pursuant to Section 4221(e) of
ERISA, could not reasonably be expected to have a Material Adverse Effect.

 

E.             As of the date
hereof, Company and its Subsidiaries have made full payment when due of all
required contributions to any Foreign Plan, except to the extent the failure to
make such contributions could not reasonably be expected to have a Material
Adverse Effect.

 

5.11        Certain Fees.

 

No broker’s or finder’s fee or commission
will be payable with respect to this Agreement.

 

5.12        Environmental Protection.

 

Except as set forth in Schedule 5.12
annexed hereto:

 

(i)            neither
Company nor any of its Subsidiaries nor any of their respective Facilities or
operations are subject to any outstanding written order, consent decree or
settlement agreement with any Person relating to (a) any Environmental
Law, (b) any Environmental Claim, or (c) any Hazardous Materials
Activity that, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect;

 

(ii)           there
are and, to Company’s knowledge, have been no conditions, occurrences, or
Hazardous Materials Activities that, as of the date of this Agreement, could
reasonably be expected to form the basis of an Environmental Claim against
Company or any of its Subsidiaries that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect; and

 

(iii)          Company
and its Subsidiaries are in compliance with all Environmental Laws, except for
such non-compliance as would not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect.

 

5.13        Employee Matters.

 

There is no strike or work stoppage in
existence or threatened involving Company or any of its Subsidiaries that could
reasonably be expected to result in a Material Adverse Effect.

 

5.14        Solvency.

 

Immediately after the consummation of the
Restructuring and other transactions to occur on the Closing Date, the Loan
Parties, on a consolidated basis, are Solvent.

 

5.15        Matters Relating to
Collateral.

 

A.            Governmental
Authorizations.  No
authorization, approval or other action by, and no notice to or filing with,
any Government Authority is required for either (i) the 

 

51

 

pledge or grant by any Loan Party of the
Liens purported to be created in favor of Administrative Agent pursuant to any
of the Collateral Documents or (ii) the exercise by Administrative Agent
of any rights or remedies in respect of any Collateral (whether specifically
granted or created pursuant to any of the Collateral Documents or created or
provided for by applicable law), except (a) for filings or recordings
contemplated by the Collateral Documents, (b) authorizations, approvals,
actions, notices or filings which have been obtained, (c) authorizations,
approvals, actions, notices or filings the failure of which to obtain or make
could not reasonably be expected to have a Material Adverse Effect and (d) as
may be required, in connection with the disposition of any Collateral, by laws
generally affecting the offering and sale of securities.

 

B.            Margin
Regulations.  The pledge of
the Collateral pursuant to the Collateral Documents does not violate Regulation
T, U or X of the Board of Governors.

 

5.16        Disclosure.

 

To the knowledge of Company, no representation
or warranty of Holdings or any of its Subsidiaries contained in the Disclosure
Statement, in any Loan Document, or in any other document, certificate or
written statement furnished to Lenders by Company or its agents or
representatives or, after the Closing Date, on behalf of Holdings or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not materially misleading in light of the circumstances in which the
same were made.  Any projections, pro
forma financial information and other forward-looking information contained in
such materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Lenders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results and that such differences may be
material.  No representation is made with
respect to information of a general economic or general industry nature.

 

5.17        Deposit
Accounts and Securities Accounts.

 

Neither Holdings, Company or any Loan Party
has any Deposit Accounts into which cash is deposited by or on behalf of either
Holdings, Company or any Loan Party other than the Deposit Accounts (i) which
are either (a) subject to an Account Control Agreement in full force and
effect and which, as of the Closing Date, are listed on Schedule 5.17, (b) the
Deposit Accounts in which the average aggregate daily balance in Dollars shall
not exceed $35,000 for any period of five (5) consecutive Business Days
(each a “De Minimis Account”) which, as of the
Closing Date, are listed on Schedule 5.17 or (c) are the Trust Fund
Accounts or (ii) that are held on deposit with the First Lien Agent.  Neither Holdings, Company nor any Loan Party
has any Securities Accounts other than the Securities Accounts which are each
subject to an Account Control Agreement in full force and effect and which, as
of the Closing Date, are listed on Schedule 5.17.

 

52

 

5.18        Insurance.

 

Schedule 5.18 sets
forth a complete and correct description of all material insurance maintained
by Company or its Subsidiaries as of the Closing Date. As of each such date,
such insurance is in full force and effect and all premiums have been duly
paid. Company reasonably believes that it and its Subsidiaries have insurance
in such amounts and covering such risks and liabilities as are in accordance
with normal industry practice for Persons of their respective size in the
locations where such Persons conduct business.

 

5.19        First
Lien Credit Agreement.

 

On the Closing
Date, Company has delivered to the Administrative Agent a complete and correct
copy of the First Lien Credit Documents (including all schedules and exhibits
thereto) as in effect on the date thereof.

 

5.20        Sanctioned
Persons.

 

None of Holdings, Company or any of their
respective Subsidiaries nor, to the knowledge of Company, any director,
officer, agent, employee or Affiliate of Holdings, Company or any of their
respective Subsidiaries is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and Company will not, to its knowledge, directly or
indirectly use the proceeds of the Loans or otherwise make available such
proceeds to any Person, for the purpose of financing the activities of any
Person currently subject to any U.S. sanctions administered by OFAC.

 

Section 6.              AFFIRMATIVE
COVENANTS

 

Company covenants and agrees that until
payment in full of all of the Loans and other Obligations (other than
Unasserted Obligations), unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 6.

 

6.1          Financial Statements
and Other Reports.

 

Company will deliver to Administrative Agent
and Lenders:

 

A.            Events of
Default, etc.  Promptly upon
any Officer of Holdings or Company obtaining knowledge (i) of any
condition or event that constitutes an Event of Default or Potential Event of
Default, or (ii) of the occurrence of any event or change that has caused
or evidences, either in any case or in the aggregate, a Material Adverse
Effect, an Officer’s Certificate specifying the nature and period of existence
of such condition, event or change, or specifying the notice given or action
taken by any such Person and the nature of such claimed Event of Default,
Potential Event of Default, event or condition, and what action Company has
taken, is taking and proposes to take with respect thereto;

 

B.            Monthly
Financials. For so long as the Consolidated Senior Leverage Ratio is
greater than 4.00:1.00, as soon as available and in any event within 30 days
after the end of each of the first two Fiscal Months of each Fiscal Quarter,
the consolidated balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Month and the related consolidated statements of income and cash
flows of Company and its Subsidiaries for such Fiscal Month and 

 

53

 

for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Month, setting forth in each case
commencing with the financial statements for January 2011, in comparative
form the corresponding figures for the corresponding periods of the previous
Fiscal Year, all in reasonable detail and certified by a Financial Officer of
Company that they fairly present, in all material respects, the financial
condition of Company and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments and the absence of
footnotes;

 

C.            Quarterly
Financials.  As soon as
available and in any event within 45 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, the consolidated balance sheets of
Company and its Subsidiaries as at the end of such Fiscal Quarter and the
related consolidated statements of income and cash flows of Company and its
Subsidiaries for such Fiscal Quarter and for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, setting forth
in each case commencing with the first Fiscal Quarter of 2011, in comparative
form the corresponding figures for the corresponding periods of the previous
Fiscal Year and, commencing with the financial statements for the first Fiscal
Quarter of 2010, the corresponding figures from the Financial Plan for the
current Fiscal Year, to the extent prepared for such fiscal period, all in
reasonable detail and certified by a Financial Officer of Company that they
fairly present, in all material respects, the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments and the absence of
footnotes;

 

(i)            Within
ten (10) Business Days (or such later date to which the Administrative
Agent may agree) after the delivery, as required above, of quarterly financials
reflecting a Consolidated Senior Leverage Ratio greater than 3.50:1.00, Company
shall host a telephone conference for a discussion of such financial statements
with Administrative Agent and those Lenders desiring to participate in such
call; provided, however, that for so long as the Consolidated
Senior Leverage Ratio is less than or equal to 3.50:1.00, such telephone
conference shall only be required to be held within ten (10) Business Days
(or such later date to which the Administrative Agent may agree) after the
delivery of the quarterly financials, as required above, for the first and
third Fiscal Quarters of each Fiscal Year to discuss the financial statements
for the immediately preceding six (6) month period..

 

D.            Year-End Financials.

 

(i)            Unaudited
Financials.  As soon as available and
in any event within 120 days after the end of Fiscal Year 2009 and within 90
days after the end of each Fiscal Year thereafter, the unaudited consolidated
balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year
and the related unaudited consolidated statements of income, stockholders’
equity and cash flows of Company and its Subsidiaries for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures for
the previous Fiscal Year and, starting with the financial statements for Fiscal
Year 2010, the corresponding figures from the Financial Plan for the Fiscal
Year covered by such financial statements, all in reasonable detail and
certified by 

 

54

 

a Financial
Officer of Company that they fairly present, in all material respects, the
financial condition of Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments and the absence of footnotes, provided, that Company may
deliver the audited financials described in subsection 6.1(D)(ii) in lieu
of the unaudited financials if such audited financial are delivered within 120
days or 90 days (as the case may be) after the end of the relevant Fiscal Year;

 

(ii)           Audited
Financials.  As soon as available and
in any event within 150 days after the end of Fiscal Year 2009 and within 120
days after the end of each  Fiscal Year
thereafter, or such earlier date as may be required of Company by the SEC or
any applicable Government Authority (after giving effect to any extensions),
the audited consolidated balance sheet of Company and its Subsidiaries as at
the end of such Fiscal Year and the related audited consolidated statements of
income, stockholders’ equity and cash flows of Company and its Subsidiaries for
such Fiscal Year, setting forth in each case in comparative form the
corresponding figures for the previous Fiscal Year and, starting with the
financial statements for Fiscal Year 2010, the corresponding figures from the
Financial Plan for the Fiscal Year covered by such financial statements, all in
reasonable detail and certified by a Financial Officer of Company that they
fairly present, in all material respects, the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated;

 

E.             Accountant’s
Report. As soon as available and in any event within 150 days after
the end of Fiscal Year 2009 and within 120 days after the end of each Fiscal
Year thereafter, or such earlier date as may be required of Company by the SEC
or any applicable Government Authority (after giving effect to any extensions),
in the case of the audited consolidated financial statements described in
subsection 6.1(D)(ii), a report thereon of Deloitte & Touche LLP or
other independent certified public accountants of recognized national standing
selected by Company and reasonably satisfactory to Administrative Agent, which
report shall not be subject to any “going concern” or like qualification or
exception, and shall state that such consolidated financial statements fairly
present, in all material respects, the consolidated financial position of
Company and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity with
GAAP applied on a basis consistent with the prior year (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards;

 

F.             Compliance
Certificates.  Not later than
five (5) days after the relevant financial statements are required to be
delivered pursuant to subsection 6.1(C) and subsection 6.1(D)(ii) above,
(i) an Officer’s Certificate of Company stating that the signers have
reviewed the terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period covered
by such financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the signers
do not have knowledge of the existence as at the date of such Officer’s
Certificate, of any condition or 

 

55

 

event that constitutes an Event of Default or
Potential Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
Company has taken, is taking and proposes to take with respect thereto; and (ii) a
Compliance Certificate demonstrating in reasonable detail compliance during and
at the end of the applicable accounting periods with the restrictions contained
in subsection 7.6, in each case to the extent compliance with such restrictions
is required to be tested at the end of the applicable accounting period;

 

G.            Reconciliation
Statements.  If, as a result
of any change in accounting principles and policies from those used in the
preparation of the audited financial statements for the Fiscal Year ended December 31,
2008 or any subsequent Fiscal Year thereafter, the consolidated financial
statements of Holdings and its Subsidiaries delivered pursuant to subsections
6.1(C) and 6.1(D) will differ in any material respect from the
consolidated financial statements that would have been delivered pursuant to
such subsections had no such change in accounting principles and policies been
made, then not later than five (5) days after the first delivery of
financial statements pursuant to subsections 6.1(C) and 6.1(D) following
such change, pursuant to subsection 1.2, a written statement of a Financial
Officer of Company setting forth the differences (including any differences
that would affect any calculations relating to the financial covenants set
forth in subsection 7.6) which would have resulted if such financial statements
had been prepared without giving effect to such change;

 

H.            Accountants’
Certification.  Not later than
five (5) days after each delivery of consolidated financial statements
pursuant to subsection 6.1(D)(ii) above, a written statement by the
independent certified public accountants giving the report thereon (i) stating
that their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to subsection 7.6
and (ii) stating whether, in connection with their audit examination, any
condition or event that constitutes an Event of Default or Potential Event of
Default under subsection 7.6 has come to their attention and, if such a
condition or event has come to their attention, specifying the nature and
period of existence thereof; provided that such accountants shall not be
liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in the course
of their audit examination;

 

I.              Government
Filings.  Promptly upon their
becoming available, copies of all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by Company or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority;

 

J.             Litigation
or Other Proceedings. 
Promptly upon any Officer of Company obtaining knowledge of (i) the
institution of, or non-frivolous threat of, any Proceeding against or affecting
Company or any of its Subsidiaries not previously disclosed in writing by
Company to Lenders or (ii) any material development in any such Proceeding
that, in any such case has a reasonable possibility after giving effect to the
coverage and policy limits of insurance policies issued to Company and its
Subsidiaries of giving rise to a Material Adverse Effect, written notice
thereof together with such other information as may be reasonably requested by
Lenders and their counsel to evaluate such matters;

 

56

 

K.            ERISA
Events.  Promptly upon
becoming aware of the occurrence of or forthcoming occurrence of any ERISA
Event (other than any ERISA Event occurring in connection with the Bankruptcy
Case) which could reasonably be expected to have a Material Adverse Effect, a
written notice specifying the nature thereof, what action Company, any of its
Subsidiaries or any of their respective ERISA Affiliates has taken, is taking
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto;

 

L.             Financial
Plans.

 

(i)            At
least 30 days prior to end of each Fiscal Year, a preliminary budget for the
upcoming Fiscal Year (the “Preliminary Financial Plan”);
and

 

(ii)           As
soon as practicable and in any event no later than 60 days after the beginning
of each Fiscal Year, a final budget for such Fiscal Year (the “Financial Plan” for such Fiscal Year), including, in the
case of both the Preliminary Financial Plan and the Financial Plan, (a) forecasted
consolidated balance sheets and forecasted consolidated statements of income
and cash flows of Holdings and its Subsidiaries for each Fiscal Quarter of such
Fiscal Year, and (b) such other financial information as Administrative
Agent may reasonably request;

 

M.           Notices from
Holders of Subordinated Indebtedness.  Promptly, upon receipt, copies of all notices
of events of default from holders of Subordinated Indebtedness or a trustee, agent
or other representative of such a holder;

 

N.            Other
Information.  With reasonable
promptness, such other information and data with respect to Company or any of
its Subsidiaries as from time to time may be reasonably requested by
Administrative Agent; and

 

O.            Patriot Act.  With reasonable promptness, information to
confirm compliance with the Patriot Act.

 

P.             First Lien
Credit Documents.  Promptly (i) after
all parties thereto have executed and delivered such document, any amendment,
restatement, amendment and restatement, supplement or other modification of any
First Lien Credit Document entered into by any Loan Party and (ii) after
receipt, copies of any material notices (including notices of default and
acceleration) received from First Lien Agent or any First Lien Lender, under or
with respect to the First Lien Credit Agreement.

 

Provided, that
any documents required to be delivered pursuant to subsections 6.1C, 6.1D, 6.1E
or 6.1I shall be deemed to have been delivered on the earliest to occur of the date
on which (i) Company delivers such documents in accordance with subsection
10.7A; (ii) Company notifies Agent that Company has posted such documents,
or has provided a link thereto on Company’s website on the Internet at the
website address which Company specifies to the Administrative Agent in
accordance with subsection 10.7; provided, in each case, that such
documents are then-accessible via such posting or link; and (iii) on which
such documents are posted on Company’s behalf on the Platform.

 

57

 

6.2          Existence,
etc.

 

Except as permitted under subsection 7.7,
Company will, and will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect its existence in its jurisdiction of
organization or formation and all rights and franchises necessary or desirable
to its business, except to the extent the failure to do so could not reasonably
be expected to have a Material Adverse Effect.

 

6.3          Payment of Taxes and
Claims; Tax.

 

A.            Holdings will, and
will cause each of its Subsidiaries to, duly and timely file complete and
correct material Tax returns and duly and timely, before the same shall become
delinquent or in default (after giving effect to all properly obtained
extensions thereof), pay all Taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
income, businesses or franchises, and all claims (including claims for labor,
services, materials and supplies) for sums that have become due and payable and
that by law have or may become a Lien upon any of its properties or assets; provided
that no such Tax, assessment, charge or claim need be paid (or Tax returns
filed) if (i) it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, so long as (a) such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (b) in the case of
a Tax, assessment, charge or claim which has or may become a Lien against any
of the Collateral, such proceedings operate to stay the sale of any portion of
the Collateral to satisfy such charge or claim or (ii) the failure to make
such filing or such payment thereof could not reasonably be expected to have a
Material Adverse Effect and will not result in a Lien securing such Taxes,
assessments and other governmental charges in excess of $990,000.

 

6.4          Maintenance of
Properties; Insurance.

 

A.            Maintenance
of Properties.  Except if the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, Company will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear, casualty and condemnation excepted, all material properties used
or useful in the business of Company and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof in accordance with
prudent industry practice.

 

B.            Insurance.  Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to liabilities, losses or damage in respect of the assets, properties
and businesses of Company and its Subsidiaries as may customarily be carried or
maintained under similar circumstances by organizations of established
reputation engaged in similar businesses, in each case in such amounts (giving
effect to self-insurance), with such deductibles, covering such risks and
otherwise on such terms and conditions as shall be customary for organizations
similarly situated in the industry. 
Company shall have delivered evidence prior to the Closing Date that
each such policy of insurance (a) names Administrative Agent for the
benefit of Lenders as an additional insured thereunder as its interests may
appear and (b) in the case of each casualty insurance policy, contains a
loss 

 

58

 

payable clause or endorsement, reasonably
satisfactory in form and substance to Administrative Agent, that names
Administrative Agent for the benefit of Lenders as the loss payee thereunder
for any covered loss and provides for at least 30 days prior written notice to
Administrative Agent of any material reduction or cancellation of such policy;
provided that such insurance may be cancelable for non-payment upon no less
than 10 days’ prior written notice.

 

6.5          Inspection Rights.

 

Company shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by
Administrative Agent and any Lender to visit and inspect any of the properties
of Company or of any of its Subsidiaries, to inspect, copy and take extracts from
its and their financial and accounting records, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants (provided that Company may, if it so chooses, be
present at or participate in any such discussion), all upon reasonable prior
written notice to Company and at such reasonable times during normal business
hours and as often as may reasonably be requested or at any time or from time
to time following the occurrence and during the continuation of an Event of
Default, provided that, excluding any such visits and inspections during
the continuation of an Event of Default, only Administrative Agent on behalf of
the Lenders may exercise rights under this subsection 6.5 and the
Administrative Agent shall not exercise such rights more often than two (2) times
during any calendar year absent the existence of an Event of Default and only
one (1) such time shall be at Company’s expense.

 

6.6          Compliance with Laws,
etc.

 

Company shall comply, and shall cause each of
its Subsidiaries to comply, with the requirements of all applicable laws,
rules, regulations and orders of any Government Authority (including all
Environmental Laws), noncompliance with which could reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect.

 

6.7          Environmental Matters.

 

A.            Environmental
Disclosure.  Company will
deliver to Administrative Agent and Lenders:

 

(i)            Environmental
Audits and Reports.  As soon as
practicable following receipt thereof, copies of all non-privileged
environmental audits, investigations, analyses and reports of any kind or
character, whether prepared by personnel of Company or any of its Subsidiaries
or by independent consultants, Government Authorities or any other Persons,
with respect to significant environmental matters at any Facility that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or with respect to any Environmental Claims that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.

 

(ii)           Notice
of Certain Releases, Remedial Actions, Etc. 
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any unauthorized, non-routine Release required to be
reported to any Government Authority 

 

59

 

under any
applicable Environmental Laws (but excluding standard reports for routine
Releases), (b) any remedial action taken by Company or any other Person in
response to (1) any Hazardous Materials Activities the existence of which
could reasonably be expected to result in one or more Environmental Claims
having, individually or in the aggregate, a Material Adverse Effect, or (2) any
Environmental Claims that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, and (c) Company’s
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of any Facility that could reasonably be expected to cause such
Facility or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use thereof under any Environmental
Laws which could reasonably be expected to result in a Material Adverse Effect.

 

(iii)          Written
Communications Regarding Environmental Claims, Releases, Etc.  As soon as practicable following the sending
or receipt thereof by Company or any of its Subsidiaries, a copy of any and all
written non-privileged communications with respect to (a) any
Environmental Claims that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, (b) any unauthorized,
non-routine Release required to be reported to any Government Authority (but
excluding standard reports for routine Releases), and (c) any request for
information from any Government Authority that suggests such Government
Authority is investigating whether Company or any of its Subsidiaries may be
potentially responsible for any Hazardous Materials Activity which could
reasonably be expected to result in a Material Adverse Effect.

 

(iv)          Notice
of Certain Proposed Actions Having Environmental Impact.  Prompt written notice describing in
reasonable detail (a) any proposed acquisition of stock, assets, or
property by Company or any of its Subsidiaries that could reasonably be
expected to (1) expose Company or any of its Subsidiaries to, or result
in, Environmental Claims that could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect or (2) affect
the ability of Company or any of its Subsidiaries to maintain in full force and
effect all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (b) any proposed
action to be taken by Company or any of its Subsidiaries to modify current
operations in a manner that could reasonably be expected to subject Company or
any of its Subsidiaries to any additional obligations or requirements under any
Environmental Laws that could reasonably be expected to result in, individually
or in the aggregate, a Material Adverse Effect.

 

B.            Company’s
Actions Regarding Hazardous Materials Activities, Environmental Claims and
Violations of Environmental Laws.

 

(i)            Remedial
Actions Relating to Hazardous Materials Activities.  Company shall, in compliance with all
applicable Environmental Laws, promptly undertake, and shall cause each of its
Subsidiaries promptly to undertake, any and all investigations, studies,
sampling, testing, abatement, cleanup, removal, remediation or other response
actions necessary to remove, remediate, clean up or abate any Hazardous
Materials Activity on, under or about any Facility that is a violation of any

 

60

 

Environmental
Laws or that presents a risk of giving rise to an Environmental Claim which
violation or risk, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

(ii)           Actions
with Respect to Environmental Claims and Violations of Environmental Laws.  Company shall promptly take, and shall cause
each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure
any violation of applicable Environmental Laws by Company or its Subsidiaries
that could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect and (ii) make an appropriate response
to any Environmental Claim against Company or any of its Subsidiaries and
discharge any obligations it may have to any Person thereunder where failure to
do so could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect.

 

C.            Environmental
Review and Investigation. 
Company agrees that Administrative Agent may, from time to time and in
its reasonable discretion, retain, at Company’s expense, an independent
professional consultant to review any non-privileged environmental audits,
investigations, analyses and reports relating to Hazardous Materials prepared
by or for Company in the event (a) Administrative Agent reasonably
believes that Company has breached any representation, warranty or covenant
contained in subsection 5.6, 5.12, 6.6 or 6.7 as a result of a violation of
Environmental Laws at any Facility then owned, leased or operated by Company or
its Subsidiaries, or by Company or any of its Subsidiaries at any other
location or (b) an Event of Default has occurred and is continuing, and
conduct its own investigation of any Facility then owned, leased or operated by
Company or its Subsidiaries.  For
purposes of conducting such a review and/or investigation, Company hereby
grants to Administrative Agent and its agents, employees, consultants and
contractors the right to enter into or onto any such Facilities and to perform
such tests on such property (including taking samples of soil, groundwater and
suspected asbestos-containing materials) as are reasonably necessary in
connection therewith, subject to any restrictions in applicable leases.  Any such investigation of any Facility shall
be conducted, unless otherwise agreed to by Company and Administrative Agent,
during normal business hours and, to the extent reasonably practicable, shall
be conducted so as not to interfere with the ongoing operations at such
Facility or to cause any damage or loss to any property at such Facility and
shall be conducted by a qualified environmental professional possessing
reasonable levels of insurance.  Company
and Administrative Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of Administrative Agent pursuant to this
subsection 6.7C will be obtained and shall be used by Administrative Agent and
Lenders for the purposes of Lenders’ internal credit decisions, to monitor
compliance with and to protect Lenders’ security interests, if any, created by
the Loan Documents.  Administrative Agent
agrees to deliver a copy of any such report to Company with the understanding
that Company acknowledges and agrees that (x) it will indemnify and hold
harmless Administrative Agent and each Lender from any costs, losses or
liabilities relating to Company’s use of or reliance on such report, (y) neither
Administrative Agent nor any Lender makes any representation or warranty with
respect to such report, and (z) by delivering such report to Company,
neither Administrative Agent nor any Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such report.

 

61

 

6.8          Execution of Subsidiary
Guaranty and Personal Property Collateral Documents After the Closing Date.

 

A.            Execution of
Subsidiary Guaranty and Personal Property Collateral Documents.  In the event that any Person becomes a
Subsidiary of Company after the date hereof, Company will promptly notify
Administrative Agent of that fact and cause any such Subsidiary that is
required to become a guarantor hereunder to execute and deliver to
Administrative Agent a counterpart of the Subsidiary Guaranty and Security
Agreement and to take all such further actions and execute all such further
documents and instruments (including actions, documents and instruments
comparable to those described in subsection 4G) as may be necessary or, in the
reasonable opinion of Administrative Agent, desirable to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and perfected Second
Priority Lien on all of the personal and mixed property assets of such
Subsidiary described in the applicable forms of Collateral Documents.  In addition, as provided in the Security
Agreement, Company shall, or shall cause the Subsidiary that owns the Capital
Stock of such Person to, execute and deliver to Administrative Agent a
supplement to the Security Agreement and to deliver to, prior to the Discharge
of First Lien Obligations, the First Lien Agent and, thereafter to
Administrative Agent, all certificates representing such Capital Stock of such
Person (accompanied by irrevocable undated stock powers, duly endorsed in
blank).  Anything contained herein to the
contrary notwithstanding, the Collateral shall exclude those assets as to which
Administrative Agent shall reasonably determine that the costs of obtaining a
security interest are unreasonably excessive in relation to the benefit to the Lenders
of the security afforded thereby.

 

B.            Foreign
Subsidiaries.  Notwithstanding
anything to the contrary in any Loan Document, (i) no Foreign Subsidiary
shall be required to guaranty the Obligations, (ii) no more than 65% of
the voting stock of any first-tier Foreign Subsidiary (and such stock shall not
represent more than 65% of the total combined voting power of all classes of
stock of such Subsidiary entitled to vote) shall be pledged to as security for
the Obligations, (iii) no Foreign Subsidiary shall be required to pledge
as security for the Obligations the stock of any other Foreign Subsidiary, and (iv) no
assets of any Foreign Subsidiary shall be pledged as security for the
Obligations.

 

C.            Subsidiary
Organizational Documents, Legal Opinions, Etc.  Company shall within
thirty (30) days after the reasonable request therefor by Administrative Agent
deliver to Administrative Agent, together with such Loan Documents, (i) certified
copies of such Subsidiary’s Organizational Documents, together with, if such
Subsidiary is a Domestic Subsidiary, a good standing certificate from the
Secretary of State of the jurisdiction of its organization, (ii) a
certificate executed by the secretary or similar officer of such Subsidiary as
to (a) the fact that the attached resolutions of the Governing Body of
such Subsidiary approving and authorizing the execution, delivery and
performance of such Loan Documents are in full force and effect and have not
been modified or amended and (b) the incumbency and signatures of the
officers of such Subsidiary executing such Loan Documents, and (iii) if
requested by Administrative Agent, an opinion of counsel to such Subsidiary as
to (a) the due organization and good standing of such Subsidiary, (b) the
due authorization, execution and delivery by such Subsidiary of such Loan
Documents, (c) the enforceability of such Loan Documents against such
Subsidiary and (d) such other matters (including matters relating to the
creation and perfection of Liens in any Collateral pursuant to such Loan
Documents) as Administrative Agent may 

 

62

 

reasonably request, all of the
foregoing to be reasonably satisfactory in form and substance to Administrative
Agent and its counsel.

 

6.9          Matters Relating to Additional
Real Property Collateral.

 

From and after the Closing Date, in the event
that (i) Company or any Subsidiary Guarantor acquires any fee interest in
real property or any Leasehold Property or (ii) at the time any Person
becomes a Subsidiary Guarantor, such Person owns or holds any fee interest in
real property or any Leasehold Property, excluding any such Real Property Asset
the encumbrancing of which requires the consent of any applicable lessor or
then-existing senior lienholder, where Company and its Subsidiaries have
attempted in good faith, but are unable, to obtain such lessor’s or senior
lienholder’s consent (any such non-excluded Real Property Asset described in
the foregoing clause (i) or (ii) being an “Additional
Mortgaged Property”), Company or such Subsidiary Guarantor shall
deliver to Administrative Agent, as soon as practicable after such Person
acquires such Additional Mortgaged Property or becomes a Subsidiary Guarantor,
as the case may be, a fully executed and notarized Mortgage (an “Additional Mortgage”), in proper form for recording in all
appropriate places in all applicable jurisdictions, encumbering the interest of
such Loan Party in such Additional Mortgaged Property; and such opinions,
appraisals, documents, title insurance, and environmental reports that would
have been delivered on or before the Closing Date if such Additional Mortgaged
Property were an Closing Date Mortgaged Property or that may be reasonably
required by Administrative Agent.

 

6.10        Merger.

 

The merger of Panolam Holdings II Co. with
and into Company shall occur on the Effective Date (as defined in the Plan).

 

6.11        Ratings.

 

Holdings shall use commercially reasonable
efforts to obtain and maintain ratings of the Loans by Moody’s and S&P.

 

6.12        Recorded Leasehold
Interests.

 

To the extent not delivered on or prior to
the Closing Date, Company shall, and shall cause each of its Subsidiaries to,
use commercially reasonable efforts to deliver within 90 days after the Closing
Date, for each Closing Date Mortgaged Property consisting of a Leasehold
Property, evidence that such Leasehold Property is a Recorded Leasehold
Interest.

 

6.13        Further Assurances.

 

Company and Holdings agree that from time to
time, at Administrative Agent’s reasonable request, Company and Holdings shall,
and shall cause their Subsidiaries to, at their expense, promptly execute and
deliver, or cause to be executed and delivered, all further agreements,
documents and instruments, and do or cause to be done all further acts as may
be necessary or desirable, in order to effectuate the Liens and security
interests purported to be granted pursuant to this Agreement and the other Loan
Documents.

 

63

 

6.14        Deposit
Accounts and Securities Accounts.

 

A.            Prior to the deposit
of any cash into any Deposit Account (other than into any De Minimis Account or
any Trust Fund Account) not already subject to an Account Control Agreement,
Company shall enter into an Account Control Agreement with respect to such
Deposit Account.

 

B.            Prior to the
establishment of any Securities Account, Company shall enter into an Account
Control Agreement with respect to such Securities Account.

 

6.15        Post-Closing
Items.

 

The
Company shall, and shall cause each of the other Loan Parties to, take all
necessary actions to satisfy the requirements set forth on Schedule 6.15 within
the applicable time period set forth on such schedule (and the Administrative
Agent may, in its sole discretion, extend the applicable time periods).

 

Section 7.              NEGATIVE COVENANTS

 

Company covenants and agrees that until
payment in full of all of the Loans and other Obligations (other than
Unasserted Obligations), unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its
Subsidiaries to perform all covenants in this Section 7.

 

7.1          Indebtedness.

 

Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur or assume, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

 

(i)            the
Obligations;

 

(ii)           Contingent
Obligations permitted by subsection 7.4;

 

(iii)          Indebtedness
in respect of Capital Leases and purchase money obligations within the
limitations of subsection 7.2A(xii) aggregating not in excess of $3,300,000 at
any time outstanding;

 

(iv)          Indebtedness
of Company or any Subsidiary owing to Company or any Subsidiary in respect of
an Investment permitted by subsection 7.3(ii) or 7.3(xvi); provided
that if such intercompany Indebtedness is evidenced by a promissory note or
other instrument, such promissory note or instrument shall have been pledged to
Administrative Agent pursuant to the Security Agreement;

 

(v)           Indebtedness
described in Schedule 7.1 annexed hereto and any Permitted Refinancing
thereof;

 

64

 

(vi)          Indebtedness
of Company or any Subsidiary under the First Lien Credit Documents and any
Permitted Refinancing thereof in an aggregate principal amount not to exceed
$148,115,867, which principal amount may be increased, in accordance with the
terms of the Intercreditor Agreement, up to a total aggregate amount of $163,115,867;

 

(vii)         Indebtedness
assumed in connection with a Permitted Acquisition and of a Person that becomes
a direct or indirect Subsidiary of Company as a result of a Permitted
Acquisition; provided that such Indebtedness is not created in
anticipation of such acquisition, and any Permitted Refinancing thereof;

 

(viii)        Indebtedness
of Foreign Subsidiaries in an aggregate principal amount at any time
outstanding for all such Persons taken together not exceeding $5,500,000;

 

(ix)           Indebtedness
(other than for borrowed money or with respect to Capital Leases or purchase
money obligations) subject to Liens permitted under subsection 7.2;

 

(x)            Indebtedness
representing deferred compensation to directors, officers, members of
management or employees of Company or any of its Subsidiaries incurred in the
ordinary course of business or in connection with any Permitted Acquisitions;

 

(xi)           Indebtedness
consisting of promissory notes issued to future, present or former directors,
officers, members of management, employees or consultants of Holdings or any of
its Subsidiaries or their respective estates, heirs, family members, spouses or
former spouses to finance the purchase or redemption of Capital Stock of
Holdings or any of its direct or indirect parent companies;

 

(xii)          Cash
management obligations and other Indebtedness in respect of netting services,
overdraft protections and similar arrangements in each case in connection with
cash management and deposit accounts;

 

(xiii)         Indebtedness
consisting of the financing of insurance premiums, so long as the aggregate
amount payable pursuant to such Indebtedness does not materially exceed the
amount of the premium for such insurance;

 

(xiv)        Subordinated
Indebtedness owed to the seller of any property acquired in a Permitted
Acquisition on an unsecured basis, which subordination shall be on terms
reasonably satisfactory to the Administrative Agent, so long as both
immediately prior and after giving effect thereto (1) no Event of Default
shall exist or result therefrom, (2) Company shall be in Pro Forma
Compliance with the covenants set forth in subsection 7.6 after giving effect
to the issuance of such Indebtedness; provided that the Consolidated
Senior Leverage Ratio, calculated on a Pro Forma Basis, shall be lower by at
least 0.25:1.00 than the Consolidated Senior Leverage Ratio then required
pursuant to subsection 7.6B, and (3) such Indebtedness does not amortize
and matures no earlier than 180 days after the Maturity Date;

 

65

 

(xv)         Subordinated
Indebtedness in an aggregate amount not to exceed $8,250,000, which subordination
shall be on terms reasonably satisfactory to the Administrative Agent, provided
that the Net Securities Proceeds of such Indebtedness are utilized within 120
days of the incurrence thereof to finance a Permitted Acquisition; provided
that (1) the terms thereof are reasonably satisfactory to the
Administrative Agent, (2) no Event of Default shall exist or result
therefrom, (3) Company shall be in Pro Forma Compliance with the covenants
set forth in subsection 7.6A after giving effect to the issuance of such
Indebtedness, and any Permitted Refinancing thereof, (4) such Indebtedness
does not amortize and matures no earlier than 180 days after the Maturity Date
and (5) until payment in full in cash of all of the Loans and other
Obligations, such Indebtedness does not bear any interest payable in cash;

 

(xvi)        Subordinated
Indebtedness, which subordination shall be on terms reasonably satisfactory to
the Administrative Agent, provided that, after the Discharge of First
Lien Obligations, the Net Securities Proceeds of such Indebtedness are utilized
to make a voluntary prepayment of the Loans; provided, (1) the
terms thereof are reasonably satisfactory to the Administrative Agent, (2) no
Event of Default shall exist or result therefrom, and (3) such
Indebtedness does not amortize and matures no earlier than 180 days after the
Maturity Date;

 

(xvii)       Indebtedness
of Canadian Subsidiaries in an aggregate principal amount not to exceed
$8,250,000 (or the Canadian dollar equivalent thereof) at any time outstanding,
which Indebtedness may be secured only by the assets of such Canadian
Subsidiaries; provided that (i) no Event of Default shall have
occurred or be continuing or shall result therefrom, (ii) such
Indebtedness shall not be guaranteed by Company or any Subsidiary Guarantor, (iii) after
the Discharge of First Lien Obligations, Company shall make a mandatory
prepayment of the Loans pursuant to subsection 2.4B(iii)(d) in an amount
equal to the Net Securities Proceeds of such Indebtedness, and (iv) such
Indebtedness shall not reasonably be expected to have a Material Adverse Effect
on Company or any of its Subsidiaries;

 

(xviii)      Indebtedness
pursuant to the Pioneer Plastics Maine Guaranty;

 

(xix)         Other
Indebtedness in an aggregate principal amount not to exceed $5,500,000 at any
time outstanding; and

 

(xx)          all
premiums (if any), interest (including post-petition interest), fees, expenses,
charges and additional or contingent interest on obligations described in
clauses (i) through (xix).

 

7.2          Liens and Related Matters.

 

A.            Prohibition
on Liens.  Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any
property or asset of any kind, whether now owned or hereafter acquired, except:

 

(i)            Liens
for Taxes, assessments or governmental charges or claims the payment of which
is not, at the time, required by subsection 6.3;

 

66

 

(ii)           statutory
Liens of landlords, Liens of collecting banks under the UCC on items in the
course of collection, statutory Liens and other Liens arising as a matter of
law (including rights of set-off of banks, statutory Liens of carriers,
warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens
imposed by law), in each case incurred in the ordinary course of business (a) for
amounts not overdue by more than 30 days or if more than 30 days overdue that
are being contested in good faith by appropriate proceedings, so long as (1) such
adequate reserves with respect thereto are maintained in accordance with GAAP,
and (2) in the case of a Lien with respect to any portion of the
Collateral, such contest proceedings operate to stay the sale of any portion of
the Collateral on account of such Lien or (b) with respect to which the
failure to make payment could not reasonably be expected to have a Material
Adverse Effect;

 

(iii)          pledges
or deposits made in the ordinary course of business in connection with (a) workers’
compensation, unemployment insurance and other types of social security, (b) to
secure the performance of statutory obligations, bids, leases, government
contracts, trade contracts, and other similar obligations (exclusive of
obligations for the payment of borrowed money), (c) securing insurance
premiums or reimbursement obligations or liabilities under insurance policies, (d) surety,
stay, customs and appeal bonds, performance bonds, performance and completion
guarantee and other obligations of a similar nature, and (e) obligations
in respect of letters of credit or bank guarantees that have been posted to
support payment of the items in clauses (a), (b), (c) and (d) of this
subsection 7.2A(iii);

 

(iv)          any
attachment or judgment Lien not constituting an Event of Default under subsection
8.8;

 

(v)           (a) licenses,
sublicenses, leases or subleases granted to other Persons not interfering in
any material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries or (b) the rights reserved or vested in any Person
by the terms of any lease, license, franchise, grant or permit held by Company
or any of its Subsidiaries or by a statutory provision, to terminate any such
lease, license, franchise, grant or permit, or to require annual or periodic
payments as a condition to the continuance thereof;

 

(vi)          easements,
rights-of-way, restrictions, encroachments, and other minor defects or
irregularities in title, in each case which do not interfere in any material
adverse respect with the ordinary conduct of the business of Company or any of
its Subsidiaries;

 

(vii)         any
(a) interest or title of a lessor or sublessor under any lease not
prohibited by this Agreement, (b) Lien or restriction that the interest or
title of such lessor or sublessor may be subject to, or (c) subordination
of the interest of the lessee or sublessee under such lease to any Lien or
restriction referred to in the preceding clause (b), so long as the holder of
such Lien or restriction agrees to recognize the rights of such lessee or
sublessee under such lease;

 

67

 

(viii)        Liens
arising from filing UCC financing statements relating solely to leases not
prohibited by this Agreement;

 

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

 

(x)            any
zoning or similar law or right reserved to or vested in any Government
Authority to control or regulate the use of any real property;

 

(xi)           Liens
securing obligations (other than obligations representing Indebtedness for
borrowed money) under operating, reciprocal easement or similar agreements
entered into in the ordinary course of business of Company and its
Subsidiaries;

 

(xii)          with
respect to acquisitions of assets not prohibited by this Agreement, Liens on
such asset existing at the time of its acquisition, or Liens to secure the
payment of all or any part of the purchase price of such asset upon its
acquisition by Company or a Subsidiary or to secure any Indebtedness permitted
hereby incurred at the time of or within 270 days after the acquisition,
construction or improvement of such asset, which Indebtedness is incurred for
the purpose of financing all or any part of the purchase price or cost thereof;
provided, however, that the Lien shall apply only to the asset so
acquired and proceeds and products thereof, and after-acquired property
subjected to a Lien pursuant to terms existing at the time of such acquisition;
provided  further that individual financings provided by one
Person or its Affiliate may be cross-collateralized to other financings
provided by such Person or its Affiliate, and any modifications, replacements,
renewals or extensions thereof; provided that (a) the Lien does not
extend to any additional property other than (1) after-acquired property
that is affixed or incorporated into the property covered by such Lien or
financed by Indebtedness permitted under subsection 7.1, (2) proceeds and
products thereof, and (3) property serving as collateral for a financing
which is cross-collateralized to the financing secured by such Lien provided by
the same Person or its Affiliate, and (b) the modification, replacement,
renewal, extension or refinancing of the obligations secured or benefited by
such Liens (if such obligations constitute Indebtedness) is permitted by
subsection 7.1 or subsection 7.4;

 

(xiii)         Liens
assumed in connection with a Permitted Acquisition and Liens on assets of a
Person that becomes a direct or indirect Subsidiary of Company after the date
of this Agreement in a Permitted Acquisition, provided, however,
that such Liens exist at the time such Person becomes a Subsidiary and are not
created in anticipation of such acquisition and any modifications,
replacements, renewals or extensions thereof; provided that (a) the
Lien does not extend to any additional property other than (1) after-acquired
property that is affixed or incorporated into the property covered by such Lien
or financed by Indebtedness permitted under subsection 7.1, (2) proceeds
and products thereof, and (3) property serving as collateral for a
financing which is cross-collateralized to the financing secured by such Lien
provided by the same Person or its Affiliate, and (b) the modification,
replacement, renewal, extension or refinancing of the obligations 

 

68

 

secured or
benefited by such Liens (if such obligations constitute Indebtedness) is
permitted by subsection 7.1 or subsection 7.4;

 

(xiv)        Liens
described in Schedule 7.2 annexed hereto and any modifications,
replacements, renewals or extension thereof; provided that (a) the
Lien does not extend to any additional property other than (1) after-acquired
property that is affixed or incorporated into the property covered by such Lien
or financed by Indebtedness permitted under subsection 7.1, (2) proceeds
and products thereof, and (3) property serving as collateral for a
financing which is cross-collateralized to the financing secured by such Lien
provided by the same Person or its Affiliate, and (b) the modification,
replacement, renewal, extension or refinancing of the obligations secured or
benefited by such Liens (if such obligations constitute Indebtedness) is
permitted by subsection 7.1 or subsection 7.4;

 

(xv)         Liens
(a)(1) on advances of Cash or Cash Equivalents in favor of the seller of
any property to be acquired in an Investment permitted pursuant to subsection
7.3 to be applied against the purchase price for such Investment and (2) consisting
of an agreement to dispose of any property in a disposition of assets permitted
under subsection 7.7, in each case under this clause (a), solely to the extent
such Investment or disposition, as the case may be, would have been permitted
on the date of the creation of such Lien and (b) on earnest money deposits
of Cash or Cash Equivalents made by Company or any of the Subsidiaries in
connection with any letter of intent or purchase agreement permitted hereunder;

 

(xvi)        Liens
on property of any Foreign Subsidiary securing Indebtedness of such Foreign
Subsidiary permitted under subsection 7.1;

 

(xvii)       Liens
in favor of Company or any of its Domestic Subsidiaries securing Indebtedness
of a Foreign Subsidiary permitted under subsection 7.1(iv) or 7.1(xix);

 

(xviii)      Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for sale of goods entered into by Company or any of the
Subsidiaries in the ordinary course of business and not prohibited by this
Agreement;

 

(xix)         Liens
that are contractual rights of set-off (a) relating to the establishment
of depository relations with banks not given in connection with the issuance of
Indebtedness (other than as described in clause (v) of the definition
thereof), (b) relating to pooled deposit or sweep accounts of Company or
any Subsidiary to permit satisfaction of overdraft or similar obligations
incurred in the ordinary course of business of Company and its Subsidiaries or (c) relating
to purchase orders and other agreements entered into with customers of Company
or any Subsidiary in the ordinary course of business;

 

(xx)          Liens
encumbering reasonable customary initial deposits and margin deposits and
similar Liens attaching to commodity trading accounts or other 

 

69

 

brokerage
accounts incurred in the ordinary course of business and not for speculative
purposes;

 

(xxi)         Liens
pursuant to the Loan Documents;

 

(xxii)        Other
Liens securing Indebtedness in an aggregate amount not to exceed $2,750,000 at
any time outstanding; and

 

(xxiii)       Liens
created pursuant to the First Lien Credit Documents.

 

Notwithstanding
the foregoing, except for the Loan Documents and the First Lien Credit
Documents, Company and its Domestic Subsidiaries shall not enter into, or
suffer to exist, any agreement which grants “control” as contemplated by the
UCC except with respect to restricted accounts established for the purposes of
granting Liens otherwise permitted hereby.

 

B.            No Further
Negative Pledges.  Neither
Company nor any of its Subsidiaries shall enter into any agreement prohibiting
the creation or assumption of any Lien upon any of its properties or assets,
whether now owned or hereafter acquired, to secure Indebtedness under this
Agreement, other than (i) the First Lien Credit Agreement or any agreement
prohibiting only the creation of Liens securing Subordinated Indebtedness, (ii) any
agreement evidencing Indebtedness secured by Liens permitted by subsection
7.2A, as to the assets securing such Indebtedness, (iii) any agreement
evidencing an asset sale, as to the assets being sold, (iv) (a) any
agreements which exist on the date hereof and (to the extent not otherwise
permitted by this subsection 7.2B are listed on Schedule 7.2 hereto) and (b) to
the extent agreements permitted by clause (a) are set forth in an
agreement evidencing Indebtedness, are set forth in any agreement evidencing
any permitted modification, replacement, refinancing, refunding, renewal or
extension thereof so long as such modification, replacement, refinancing, refunding,
renewal or extension does not expand the scope of the restrictions; (v) any
agreement binding on a Subsidiary at the time such Subsidiary first becomes a
Subsidiary of Company, so long as such agreement was not entered into in
contemplation of such Person becoming a Subsidiary of Company; (vi) any
agreement representing Indebtedness of a Subsidiary which is not a Loan Party
which is permitted by subsection 7.1; (vii) customary provisions in Joint
Venture agreements and other similar agreements applicable to Joint Ventures
permitted under subsection 7.3 and applicable solely to such Joint Venture; (viii) negative
pledges and restrictions on Liens in favor of any holder of Indebtedness
permitted under subsection 7.1 but solely to the extent any negative pledge
relates to the property financed by or the subject of such Indebtedness or that
expressly permits Liens for the benefit of Administrative Agent and the Lenders
with respect to the credit facilities established hereunder and the Obligations
under the Loan Documents on a senior basis without the requirement that such
holders of such Indebtedness be secured by such Liens on an equal and ratable,
or junior, basis; (ix) customary restrictions in leases, subleases,
licenses or asset sale agreements otherwise permitted hereby so long as such
restrictions relate to the assets subject thereto; (x) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest; or (xi) customary provisions restricting assignment or
transfer of any agreement entered into in the ordinary course of business.

 

70

 

C.                                     No
Restrictions on Subsidiary Distributions to Company or Other Subsidiaries.  Company will not, and will not permit any of
its Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Subsidiary to (i) pay dividends or make any other distributions on
any of such Subsidiary’s Capital Stock owned by Company or any other Subsidiary
of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary
to Company or any other Domestic Subsidiary of Company, (iii) make loans
or advances to Company or any other Domestic Subsidiary of Company, or (iv) transfer
any of its property or assets to Company or any other Domestic Subsidiary of
Company, except (a) as provided in this Agreement and the First Lien
Credit Agreement, (b) as may be provided in an agreement with respect to a
sale of such assets or such Subsidiary, (c) as provided in any agreement
evidencing Indebtedness secured by Liens permitted by subsection 7.2A, as to
the assets securing such Indebtedness, and (d) as provided in (1) (a) any
agreements which exist on the date hereof and (to the extent not otherwise
permitted by this subsection 7.2C are listed on Schedule 7.2 hereto) and (b) to
the extent agreements permitted by clause (a) are set forth in an
agreement evidencing Indebtedness, are set forth in any agreement evidencing
any permitted modification, replacement, refinancing, refunding, renewal or
extension thereof so long as such modification, replacement, refinancing,
refunding, renewal or extension does not expand the scope of the restrictions; (2) any
agreement binding on a Subsidiary at the time such Subsidiary first becomes a
Subsidiary of Company, so long as such agreement was not entered into in
contemplation of such Person becoming a Subsidiary of Company; (3) any
agreement representing Indebtedness of a Subsidiary which is not a Loan Party
which is permitted by subsection 7.1; (4) customary provisions in Joint
Venture agreements and other similar agreements applicable to Joint Ventures
permitted under subsection 7.3 and applicable solely to such Joint Venture; (5) negative
pledges and restrictions on Liens in favor of any holder of Indebtedness
permitted under subsection 7.1 but solely to the extent any negative pledge
relates to the property financed by or the subject of such Indebtedness or that
expressly permits Liens for the benefit of Administrative Agent and the Lenders
with respect to the credit facilities established hereunder and the Obligations
under the Loan Documents on a senior basis without the requirement that such
holders of such Indebtedness be secured by such Liens on an equal and ratable,
or junior, basis; (6) customary restrictions in leases, subleases,
licenses or asset sale agreements otherwise permitted hereby so long as such
restrictions relate to the assets subject thereto; (7) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest; or (8) customary provisions restricting assignment or
transfer of any agreement entered into in the ordinary course of business.

 

7.3                               Investments;
Acquisitions.

 

Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person except:

 

(i)                                     Investments in
Cash and Cash Equivalents;

 

(ii)                                  Investments (a) by
any Loan Party in any other Loan Party, (b) by any Subsidiary that is not
a Loan Party in any Loan Party or in any other Subsidiary that is also not a
Loan Party or (c) on or after January 1, 2010, by any Loan Party in
any Subsidiary that is not a Loan Party in an aggregate amount not to exceed
$5,500,000 at any time outstanding;

 

71

 

(iii)                               loans or
advances to officers, directors, members of management, and employees of
Holdings, Company or any of its Subsidiaries (a) for relocation and
analogous ordinary business purposes, or (b) in connection with such
Person’s purchase of Capital Stock of Holdings or its direct or indirect parent
(or after the occurrence of a Qualifying IPO, of the Qualifying IPO Issuer) in
an aggregate amount not to exceed $1,100,000 at any time outstanding;

 

(iv)                              Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from account debtors and other credits to suppliers in the ordinary
course of business;

 

(v)                                 Investments
consisting of Indebtedness, Liens, Contingent Obligations, Restricted Junior
Payments, fundamental changes and dispositions of assets permitted by
subsections 7.1, 7.2, 7.4, 7.5 and 7.7, respectively;

 

(vi)                              Investments in
Hedge Agreements entered into in the ordinary course of business for the
purpose of hedging against any Loan Party’s risk related to fluctuations in
interest rates, currency values or commodity prices and not for speculative
purposes;

 

(vii)                           Investments in
the ordinary course of business consisting of (a) endorsements for
collection or deposit or (b) customary trade arrangements with customers;

 

(viii)                        loans and
advances to Holdings in lieu of, and not in excess of the amount of (after
giving effect to any other loans, advances or Restricted Junior Payments in
respect thereof), Restricted Junior Payments permitted to be made to Holdings
in accordance with subsection 7.5;

 

(ix)                                advances of
payroll payments to employees in the ordinary course of business;

 

(x)                                   Investments to
the extent the consideration paid therefor consists solely of Capital Stock of
Holdings or made with the Net Securities Proceeds of the sale of Capital Stock
of Holdings to the extent not required to prepay any Loans pursuant to
subsection 2.4B(iii)(c);

 

(xi)                                Investments
consisting of promissory notes issued to any Loan Party by future, present or
former officers, directors, employees, members of management, or consultants of
Holdings or any of its Subsidiaries or their respective estates, heirs, family
members, spouses or former spouses to finance the purchase or redemption of
Capital Stock of Holdings or its direct or indirect parent (or, after the
occurrence of a Qualifying IPO, of the Qualifying IPO Issuer), to the extent
the applicable Restricted Junior Payment is permitted by subsection 7.5;

 

(xii)                             [Reserved];

 

72

 

(xiii)                          Consolidated
Capital Expenditures permitted by subsection 7.8;

 

(xiv)                         Investments
owned on the Closing Date and described in Schedule 7.3 annexed hereto
and any modification, replacement, refinancing, refunding, renewal or extension
thereof; provided that the amount of the original Investment is not
increased except by the terms of such Investment or as otherwise permitted by
this subsection 7.3;

 

(xv)                            on or after January 1,
2010, acquisition of assets (including Capital Stock and including Capital
Stock of Subsidiaries formed in connection with any such acquisition) having a
fair market value not in excess of $16,500,000 in the aggregate; provided
that (a) no Potential Event of Default or Event of Default shall have
occurred and be continuing at the time such acquisition occurs or after giving
effect thereto, (b) Company shall, and shall cause its Subsidiaries to,
comply with the requirements of subsections 6.8 and 6.9 with respect to such
acquisition if it results in a Person becoming a Subsidiary, (c) Company
shall have demonstrated that, after giving effect to such acquisition and any
Indebtedness to be incurred in connection therewith, it shall be in Pro Forma
Compliance with the financial covenants set forth in subsection 7.6, (d) after
giving effect to such acquisition, Company shall be in compliance with the
terms of subsection 7.11, (e) as a result of such acquisition, Company
shall not assume or become liable for Contingent Obligations that could
reasonably be expected to have a Material Adverse Effect, and (f) no more
than $8,250,000 of the aggregate purchase price of assets permitted to be
acquired under this subsection 7.3(xv) shall be financed with cash of Company
and its Subsidiaries;

 

(xvi)                         on or after January 1,
2010, Company and its Domestic Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time $5,500,000, which other
Investments may include Permitted Acquisitions;

 

(xvii)                      receipt and
possession of promissory notes and other non-cash consideration received in
connection with any Asset Sale permitted by subsection 7.7; and

 

(xviii)                   acquisition of
Securities in connection with the satisfaction or enforcement of Indebtedness
or claims due or owing to Company or any of its Subsidiaries or as security for
any such Indebtedness or claim.

 

7.4                               Contingent
Obligations.

 

Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or become
or remain liable with respect to any Contingent Obligation, except:

 

(i)                                     Contingent
Obligations under Hedge Agreements entered into in the ordinary course of
business for the purpose of hedging against any Loan Party’s risk related to fluctuations
in interest rates, currency values or commodity prices and not for speculative
purposes;

 

73

 

(ii)                                  Contingent
Obligations in respect of customary indemnification and purchase price
adjustment obligations incurred in connection with Asset Sales or other sales
of assets and Permitted Acquisitions;

 

(iii)                               Contingent
Obligations under guarantees in the ordinary course of business;

 

(iv)                              Contingent
Obligations in respect of any Indebtedness of Company or any of its
Subsidiaries permitted by subsection 7.1;

 

(v)                                 Contingent
Obligations described in Schedule 7.4 annexed hereto and any Permitted
Refinancing thereof;

 

(vi)                              Contingent
Obligations arising under the guaranties of the obligations under the First
Lien Credit Documents and Subordinated Indebtedness permitted under
subsection 7.1;

 

(vii)                           Contingent
Obligations consisting of take or pay obligations contained in supply
agreements, in each case incurred in the ordinary course of business;

 

(viii)                        obligations in
respect of performance, stay, customs, appeal and surety bonds and performance
and completion guarantees provided by Company or its Subsidiaries;

 

(ix)                                Contingent
Obligations constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course in respect of workers’ compensation,
unemployment insurance and other types of social security, to secure the
performance of statutory obligations, bids, leases, government contracts, trade
contracts and other similar obligations, securing insurance premiums or
reimbursement obligations or liabilities under insurance policies, surety,
stay, customs and appeal bonds, performance bonds, performance and completion
guarantees and other obligations of a similar nature; provided that upon
the drawing of such letters of credit or the incurrence of such Indebtedness,
such obligations are reimbursed within 30 days following such drawing or
incurrence;

 

(x)                                   Contingent
Obligations constituting Indebtedness permitted by subsection 7.1;

 

(xi)                                Guarantees by
Company or its Subsidiaries of leases or of other obligations of Loan Parties
that do not constitute Indebtedness, in each case entered into in the ordinary
course of business; and

 

(xii)                             Company and its
Domestic Subsidiaries may become and remain liable with respect to other
Contingent Obligations; provided that the maximum aggregate liability,
contingent or otherwise, of Company and its Subsidiaries in respect of all such
Contingent Obligations, when added to the aggregate principal amount of
Indebtedness permitted under subsection 7.1(xix), shall at no time exceed
$5,500,000.

 

74

 

7.5                               Restricted
Junior Payments.

 

Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that:

 

(i)                                     [Reserved].

 

(ii)                                  Company may
make regularly scheduled payments of interest in respect of any Subordinated
Indebtedness in accordance with the terms of, and only to the extent required
by, and subject to the subordination provisions contained in, the indenture or
other agreement pursuant to which such Subordinated Indebtedness was issued;

 

(iii)                               [Reserved];

 

(iv)                              Company may
convert any Subordinated Indebtedness to Capital Stock of Company, Holdings or
any direct or indirect parent;

 

(v)                                 Company may
make Restricted Junior Payments to Holdings (a) so long as no Event of
Default or Potential Event of Default shall have occurred and be continuing or
shall be caused thereby, in an aggregate amount not to exceed $1,100,000 in any
Fiscal Year, to the extent necessary to permit Holdings to pay overhead and
general administrative costs and expenses (including, without limitation,
customary salary, bonus and other benefits payable to directors, officers and
employees of Holdings), (b) so long as no Event of Default or Potential
Event of Default shall have occurred and be continuing or shall be caused
thereby, in an aggregate amount not to exceed $2,200,000 in any Fiscal Year, to
the extent necessary to permit Holdings to repurchase shares of Capital Stock
(or options or warrants to acquire Capital Stock) from any future, present or
former director, officer, member of management, employee or consultant of Holdings
or any of its Subsidiaries (or the estate, heirs, family members, spouse or
former spouse of any of the foregoing); provided that the aggregate
unused amounts in any Fiscal Year may be carried over to the next succeeding
Fiscal Year so long as the total aggregate amount permitted in any Fiscal Year,
after giving effect to such carryover, does not exceed $4,400,000; (c) to
the extent necessary to permit Holdings to discharge the consolidated tax
liabilities of Holdings and each Subsidiary that files on a consolidated return
basis with Holdings, in each case so long as Holdings applies the amount of any
such Restricted Junior Payment for such purpose (or to make a Restricted Junior
Payment to its direct or indirect parent to enable it to make such payment so
long as the amount is applied for such purpose);  provided,
that (A) the amount of such Restricted Junior Payment shall not exceed the
aggregate amount that Holdings and each Subsidiary that files on a consolidated
return basis with Holdings would be required to pay in respect of federal,
state and local taxes were Holdings and each such Subsidiary to pay such taxes
as stand-alone taxpayers, (B) all Restricted Junior Payments made to
Holdings pursuant to this subsection (v)(c) must be used by Holdings for
the purposes specified herein within 45 days of the receipt thereof, and (C) Holdings
and each Subsidiary shall promptly provide any information requested by the
Administrative Agent reasonably necessary for the Administrative Agent to
verify the

 

75

 

accuracy
and timeliness of any Restricted Junior Payments made pursuant to this
subsection (v)(c), (d) to the extent permitted pursuant to subsection
7.9(ii), (e) the proceeds of which shall be used by Holdings to pay
customary indemnification claims made by directors, officers, members of
management, employees or consultants of Holdings attributable to the ownership
or operations of Company and its Subsidiaries; (f) the proceeds of which
shall be used by Holdings to pay franchise or similar taxes and other similar
out-of-pocket fees and expenses required to maintain Holdings’ corporate
existence (or to make a Restricted Junior Payment to its direct or indirect
parent to enable it to make such payment so long as the amount is applied for
such purpose); (g) to finance any Investment permitted to be made pursuant
to subsection 7.3; provided that (A) such Restricted Junior Payment
shall be made substantially concurrently with the closing of such Investment
and (B) Holdings shall, immediately following the closing thereof, cause (1) all
property acquired (whether assets or Capital Stock) to be contributed to
Company or another Loan Party or (2) the merger (to the extent permitted
in subsection 7.7) of the Person formed or acquired into Company or one or more
other Loan Party in order to consummate such Investment; (h) the proceeds
of which shall be used by Holdings to pay fees and expenses related to any
unsuccessful equity or debt offering permitted by this Agreement; and (i) the
proceeds of which shall be used to (or to make Restricted Junior Payments to
Holdings’ direct or indirect parent to enable it to) make cash payments in lieu
of issuing fractional shares in connection with the exercise of warrants,
options or other securities convertible into or exchangeable for Capital Stock
of Holdings (or such parent) or its Subsidiaries;

 

(vi)                              each Subsidiary
may make Restricted Junior Payments to Company and to any other Loan Party
(and, in the case of a Restricted Junior Payment by a non-wholly owned
Subsidiary that is not a Loan Party, to (a) Company or another Subsidiary
and (b) each other owner of Capital Stock of such non-wholly owned
Subsidiary based on their relative ownership interests);

 

(vii)                           to the extent
constituting Restricted Junior Payments, Company and its Subsidiaries may enter
into transactions expressly permitted by subsection 7.7 or 7.9;

 

(viii)                        Company or its
Subsidiaries may make repurchases of Capital Stock deemed to occur upon
exercise of stock options or warrants if such Capital Stock represents a
portion of the exercise price of such options or warrants or payments of Taxes
made by Company or its Subsidiaries in respect of options or warrants exercised
or vested in connection therewith;

 

(ix)                                from and after
a Qualifying IPO of Company, Company may make the Restricted Junior Payments
permitted to be made by Holdings under this subsection 7.5; and

 

(x)                                   Company and its
Subsidiaries may declare and make dividend payments or other distributions
payable solely in the Capital Stock of such Person.

 

76

 

7.6                               Financial
Covenants.

 

A.                                   Minimum
Interest Coverage Ratio. 
Company shall not permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated
Cash Interest Expense for any four-Fiscal Quarter period ending as of each date
set forth below, to be less than the correlative ratio indicated as of such
date:

 

	
  Period
  Ending

  	
   

  	
  Minimum Interest

  Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2010

  	
   

  	
  1.28:1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  1.28:1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  1.35:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2011

  	
   

  	
  1.35:1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  1.57:1.00

  	
   

  
	
  September 30, 2011

  	
   

  	
  1.70:1.00

  	
   

  
	
  December 31, 2011

  	
   

  	
  1.80:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2012

  	
   

  	
  1.80:1.00

  	
   

  
	
  June 30, 2012

  	
   

  	
  1.80:1.00

  	
   

  
	
  September 30, 2012

  	
   

  	
  1.80:1.00

  	
   

  
	
  December 31, 2012

  	
   

  	
  1.80:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2013

  	
   

  	
  1.80:1.00

  	
   

  
	
  June 30, 2013

  	
   

  	
  1.80:1.00

  	
   

  
	
  September 30, 2013

  	
   

  	
  1.80:1.00

  	
   

  
	
  December 31, 2013

  	
   

  	
  1.80:1.00

  	
   

  

 

B.                                     Maximum
Leverage Ratio.  Company
shall not permit the Consolidated Senior Leverage Ratio as of the dates set
forth below to exceed the correlative ratio indicated as of such date:

 

	
  Date
  of Determination

  	
   

  	
  Maximum Leverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2010

  	
   

  	
  7.89:1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  7.89:1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  7.36:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2011

  	
   

  	
  7.36:1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  6.56:1.00

  	
   

  
	
  September 30, 2011

  	
   

  	
  5.85:1.00

  	
   

  
	
  December 31, 2011

  	
   

  	
  5.27:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2012

  	
   

  	
  5.27:1.00

  	
   

  
	
  June 30, 2012

  	
   

  	
  4.66:1.00

  	
   

  
	
  September 30, 2012

  	
   

  	
  4.08:1.00

  	
   

  
	
  December 31, 2012

  	
   

  	
  3.59:1.00

  	
   

  

 

77

 

	
  Date
  of Determination

  	
   

  	
  Maximum Leverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2013

  	
   

  	
  3.59:1.00

  	
   

  
	
  June 30, 2013

  	
   

  	
  3.10:1.00

  	
   

  
	
  September 30, 2013

  	
   

  	
  2.64:1.00

  	
   

  
	
  December 31, 2013

  	
   

  	
  2.17:1.00

  	
   

  

 

7.7                               Restriction
on Fundamental Changes; Asset Sales; Issuance of Capital Stock.

 

A.                                   Fundamental  Changes.  Company
shall not, and shall not permit any of its Subsidiaries to, enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution), except:

 

(i)                                     any Subsidiary
may merge or consolidate with or liquidate into (a) Company (including a
merger, the purpose of which is to reorganize Company into a new jurisdiction);
provided that Company shall be the continuing or surviving Person, or
the continuing or surviving Person shall expressly assume the obligations of
Company under the Loan Documents in a manner reasonably acceptable to
Administrative Agent, or (b) any one or more other Subsidiaries; provided
that when any such Subsidiary that is a Loan Party is merging with another
Subsidiary, (1) a Loan Party shall be the continuing or surviving Person
or (2) to the extent constituting an Investment, such Investment must be
an Investment permitted by subsection 7.3;

 

(ii)                                  so long as no
Event of Default exists or would result therefrom, Company or any Subsidiary
may merge with any other Person in order to effect an Investment permitted
pursuant to subsection 7.3; provided that (a) if the continuing or
surviving Person is a Subsidiary, such Subsidiary shall have complied with the
requirements of subsections 6.8 and 6.9, (b) to the extent constituting an
Investment, such Investment must be permitted under subsection 7.3 and (c) if
Company is a party thereto, Company shall be the continuing or surviving Person
or the continuing or surviving Person shall expressly assume the obligations of
Company under the Loan Documents in a manner reasonably acceptable to
Administrative Agent;

 

(iii)                               any Subsidiary
of Company may consummate a merger, dissolution, liquidation, consolidation or
winding up, the purpose of which is to effect an Asset Sale permitted pursuant
to subsection 7.7B;

 

(iv)                              Company may
merge with one of its Subsidiaries for the purpose of effecting an Investment
permitted pursuant to subsection 7.3; provided that Company shall be the
continuing or surviving Person or the continuing or surviving Person shall
expressly assume the obligations of Company under the Loan Documents in a
manner reasonably acceptable to Administrative Agent;

 

(v)                                 any Subsidiary
of Company may liquidate, wind up or dissolve; provided that Company
determines in good faith that such liquidation, winding up or dissolution is in
the best interests of Company and is not materially disadvantageous to the
Lenders; provided, further, that Company shall deliver a written
notice to

 

78

 

Administrative
Agent five (5) Business Days prior to the intended liquidation, winding up
or dissolution of such Subsidiary notifying Administrative Agent of the same,
together with an Officer’s Certificate certifying that such liquidation,
winding up or dissolution is in the best interests of Company and is not
materially disadvantageous to the Lenders; and

 

(vi)                              Panolam
Holdings II Co. may merge with and into Company.

 

B.                                     Asset  Sales.  Company shall
not, and shall not permit any of its Subsidiaries to, make any Asset Sale,
except:

 

(i)                                     sales of
inventory in the ordinary course of business;

 

(ii)                                  sales or other
dispositions of Cash and Cash Equivalents;

 

(iii)                               sales,
assignments, transfers or dispositions of accounts in the ordinary course of
business for purposes of collection;

 

(iv)                              sales of assets
to the extent that the aggregate value of such assets sold in any single
transaction or related series of transactions is equal to $1,100,000 or less; provided
that (a) the consideration received for such assets is in an amount at
least equal to the fair market value thereof and (b) the aggregate value
of all assets sold pursuant to this subsection 7.7B(iv) shall not exceed
$5,500,000;

 

(v)                                 dispositions of
obsolete, worn out or surplus property or property no longer useful in the
business of Company and its Subsidiaries in the ordinary course of business;

 

(vi)                              Asset Sales
having a fair market value not in excess of $5,500,000 in any Fiscal Year; provided
that (a) the consideration received for such assets shall be in an amount
at least equal to the fair market value thereof; (b) at least 80% of the
consideration received shall be Cash or Cash Equivalents; (c) no Potential
Event of Default or Event of Default shall have occurred or be continuing after
giving effect thereto; and (d) the proceeds of such Asset Sales shall be
applied as required by subsection 2.4B(iii)(a); provided, further,
that if any such Asset Sale involves the issuance of Capital Stock, such Asset
Sale shall comply with subsection 7.7C;

 

(vii)                           in order to
resolve disputes that occur in the ordinary course of business, Company and its
Subsidiaries may discount or otherwise compromise for less than the face value
thereof, notes or accounts receivable;

 

(viii)                        Company or a
Subsidiary may sell or dispose of shares of Capital Stock of any of its
Subsidiaries in order to qualify members of the Governing Body of the
Subsidiary if required by applicable law;

 

(ix)                                [Reserved];

 

79

 

(x)                                   any Foreign Subsidiary may from time to
time sell U.S. Dollar-denominated accounts receivable to Company or a Domestic
Subsidiary so long as (1) such accounts receivable are, in the good faith
judgment of the management of Company, collectable in accordance with their
terms and sold for a purchase price not exceeding the face amount thereof
(without giving effect to any write down or write off thereof) and (2) the
aggregate uncollected face amount of such accounts receivable  purchased by Company or a Subsidiary Guarantor
does not exceed $6,600,000 at any time outstanding;

 

(xi)                                Assets Sales of
tangible property to the extent that (i) such property is exchanged for
credit against the purchase price of similar replacement property or (ii) the
proceeds of such Assets Sale are promptly applied to the purchase price of such
replacement property;

 

(xii)                             Asset Sales by
Company or any Subsidiary to Company or any Subsidiary (including (1) any
Asset Sale effected pursuant to a merger, consolidation, liquidation or
dissolution and (2) sales of all or substantially all of such transferor’s
assets (upon voluntary liquidation or otherwise)); provided that if the
transferor of such property is a Loan Party (a) the transferee thereof
must either be a Loan Party or (b) to the extent such transaction
constitutes an Investment, such transaction is permitted under subsection 7.3;

 

(xiii)                          Asset Sales by
Company or its Subsidiaries of property pursuant to sale-leaseback transactions;
provided that (a) the fair market value of all property so disposed
of shall not exceed $5,500,000 from and after the Closing Date and (b) the
purchase price for such property shall be paid to Company or its Subsidiaries
for not less than 75% cash consideration;

 

(xiv)                         leases,
subleases, licenses or sublicenses of property in the ordinary course of
business and which do not materially interfere with the business of Company and
its Subsidiaries;

 

(xv)                            transfers of
property subject to any casualty or condemnation or eminent domain (or deed in
lieu thereof) upon receipt of the Net Insurance/Condemnation Proceeds of such
event;

 

(xvi)                         Asset Sales in
the ordinary course of business consisting of the abandonment of intellectual
property rights which, in the reasonable good faith determination of Company,
are not material to the conduct of the business of Company and its
Subsidiaries;

 

(xvii)                      Asset Sales of
Investments in Joint Ventures to the extent required by, or made pursuant to
buy/sell arrangements between the joint venture parties set forth in, joint
venture arrangements and similar binding arrangements;

 

(xviii)                   [Reserved];

 

(xix)                           voluntary
terminations of Hedge Agreements; and

 

80

 

(xx)          Asset Sales to the
extent constituting an Investment permitted by subsection 7.3, a fundamental
change permitted by subsection 7.7A (so long as any Asset Sale pursuant to a
liquidation permitted pursuant to subsection 7.7A shall be done on a pro rata
basis among the equity holders of the applicable Subsidiary), a Restricted
Junior Payment permitted by subsection 7.5 or a Lien permitted by subsection
7.2.

 

C.            Issuances of Capital Stock.  Other than a Permitted Cure Issuance, no
issuance (including, without limitation, any issuance in connection with the
conversion of any Loan) of the Capital Stock of any Loan Party shall be
consummated during the two-week period immediately preceding the last day of
each Fiscal Quarter. Sales of Capital Stock permitted by subsection 7.7B shall
not be restricted by this subsection 7.7C, but nothing in this subsection 7.7C
shall permit any Asset Sale involving the sale of Capital Stock not otherwise
permitted hereunder.

 

7.8                               Consolidated
Capital Expenditures.

 

Company shall not, and shall not permit its
Subsidiaries to, make or incur Consolidated Capital Expenditures, for any
four-Fiscal Quarter period ending as of each date set forth, in an aggregate
amount in excess of the corresponding amount (the “Maximum
Consolidated Capital Expenditures Amount”) set forth below opposite
such date:

 

	
  Period
  Ending

  	
   

  	
  Maximum Consolidated

  Capital Expenditures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2010

  	
   

  	
  $

  	
  5,142,500

  	
   

  
	
  September 30,
  2010

  	
   

  	
  $

  	
  5,294,300

  	
   

  
	
  December 31,
  2010

  	
   

  	
  $

  	
  5,445,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2011

  	
   

  	
  $

  	
  5,596,800

  	
   

  
	
  June 30,
  2011

  	
   

  	
  $

  	
  5,747,500

  	
   

  
	
  September 30,
  2011

  	
   

  	
  $

  	
  5,899,300

  	
   

  
	
  December 31,
  2011

  	
   

  	
  $

  	
  6,050,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2012

  	
   

  	
  $

  	
  6,201,800

  	
   

  
	
  June 30,
  2012

  	
   

  	
  $

  	
  6,352,500

  	
   

  
	
  September 30,
  2012

  	
   

  	
  $

  	
  6,504,300

  	
   

  
	
  December 31,
  2012

  	
   

  	
  $

  	
  6,655,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2013

  	
   

  	
  $

  	
  6,806,800

  	
   

  
	
  June 30,
  2013

  	
   

  	
  $

  	
  6,957,500

  	
   

  
	
  September 30,
  2013

  	
   

  	
  $

  	
  7,109,300

  	
   

  
	
  December 31,
  2013

  	
   

  	
  $

  	
  7,260,000

  	
   

  

 

; provided that any Consolidated Capital Expenditures
constituting a Permitted Acquisition shall not be included in the foregoing
limitations.

 

81

 

7.9                               Transactions
with Shareholders and Affiliates.

 

Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of Company, on terms that are
less favorable to Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not an Affiliate; provided
that the foregoing restriction shall not apply to:

 

(i)            any transaction
between Holdings and any of its Subsidiaries not prohibited by this Agreement;

 

(ii)           reimbursement of
reasonable out-of-pocket costs and expenses of members of the Governing Bodies
of Holdings and its Subsidiaries (or after a Qualifying IPO of Company, of
Company), and reasonable and customary fees paid to such members who are not
employed by Company, any other Loan Party, any Equity Holder, any Affiliate of
any Equity Holder or any Permitted Successor of any Equity Holder (or an
immediate family member of an employer of any of the foregoing);

 

(iii)          [Reserved];

 

(iv)          [Reserved];

 

(v)           equity issuances to
Affiliates otherwise permitted under this Agreement;

 

(vi)          employment and
severance arrangements between Company and any of its Subsidiaries and their
officers and employees in the ordinary course of business;

 

(vii)         payments by Company
and its Subsidiaries pursuant to tax sharing agreements, if any, solely among
Holdings and its Domestic Subsidiaries on customary terms;

 

(viii)        transactions
pursuant to permitted agreements in existence on the Closing Date and set forth
on Schedule 7.9 or any amendment thereto to the extent such an amendment
is not adverse to the Lenders in any material respect;

 

(ix)           Restricted Junior
Payments permitted under subsection 7.5; and

 

(x)            indemnification
payments to officers or directors of Holdings and its Subsidiaries.

 

7.10                        Conduct
of Business By Holdings.

 

Prior to a Qualifying IPO of Company, Holdings shall
not (i) engage in any business other than in connection with or incidental
to (a) purchasing and owning the Capital Stock of Company, (b) issuing
and selling its Capital Stock or options or warrants in respect thereof, (c) entering
into and performing its obligations under and in accordance with the Loan
Documents and First Lien Credit Documents to which it is a party and (d) other
activities 

 

82

 

contemplated by this subsection
7.10 or (ii) own any assets other than (a) the Capital Stock of
Company, (b) Cash and Cash Equivalents for the purpose of paying general
operating expenses of Holdings and (c) pursuant to a
purchase or acquisition of all or substantially all of the property and assets
or business or a division of a Person, or all of the Capital Stock in a Person,
provided that immediately upon such purchase or acquisition the same is
contributed to Company or (iii) have any Indebtedness or other
liability other than its obligations under the Holdings Guaranty and First Lien
Holdings Guaranty or other unsecured Indebtedness of Holdings which (x) does
not require any cash payment until the Maturity Date and (y) does not
mature earlier than 180 days after the Maturity Date, and (z) is otherwise
on terms reasonably satisfactory to the Administrative Agent, provided
that the amount thereof, when taken together with Indebtedness incurred or
maintained pursuant to subsection 7.1(xv), does not exceed the maximum
principal amount of Indebtedness permitted under subsection 7.1(xv), and provided
further that the proceeds thereof are contributed to Company as common
equity.

 

7.11                        Conduct
of Business by Company.

 

From and after the Closing Date, Company shall not,
and shall not permit any of its Subsidiaries to, engage in any material
business other than the businesses engaged in by Company and its Subsidiaries
on the Closing Date and similar, related or ancillary businesses.

 

7.12                        Amendments
to Organizational Documents; Amendments of Documents Relating to Subordinated
Indebtedness.

 

A.            Amendments to
Organizational Documents. 
Holdings shall not agree to any material amendment to, or otherwise
change any material terms of, its Organizational Documents, in a manner
materially adverse to Holdings or any of its Subsidiaries or to Lenders without
the prior written consent of Administrative Agent and Requisite Lenders.

 

B.            Amendments of First Lien
Credit Documents.  Company
shall not, and shall not permit any of its Subsidiaries to amend or otherwise
change the terms of the First Lien Credit Documents in any manner inconsistent
with the terms of the Intercreditor Agreement.

 

C.            Amendments of Documents
Relating to Subordinated Indebtedness.  Company shall not, and shall not permit any
of its Subsidiaries to, amend or otherwise change the terms of any Subordinated
Indebtedness if the effect of such amendment or change is to increase the
interest rate on such Subordinated Indebtedness, accelerate any dates upon
which payments of principal or interest are due thereon, change any event of
default in a manner materially adverse to Company or Lenders, change the
redemption, mandatory prepayment or defeasance provisions thereof in a manner
materially adverse to Company or Lenders, change the subordination provisions
thereof (or of any guaranty thereof), or change any collateral therefor (other
than to release such collateral), or if the effect of such amendment or change,
together with all other amendments or changes made, is to increase materially the
obligations of the obligor thereunder or to confer any material additional
rights on the holders of such Subordinated Indebtedness (or a trustee or other
representative on their behalf) which would be materially adverse to Company or
Lenders.

 

83

 

7.13                        Fiscal
Year.

 

Company shall not change its Fiscal Year-end from December 31.

 

Section 8.                                          EVENTS OF
DEFAULT

 

If any of the following conditions or events (“Events of Default”) shall occur:

 

8.1                               Failure
to Make Payments When Due.

 

Failure by Company to pay (i) any installment
of principal of the Loan when due, whether at stated maturity, by acceleration,
by mandatory prepayment or otherwise or (ii) any interest on the Loan, any
fee or any other amount due under this Agreement within five Business Days
after the date due; or

 

8.2                               Default
in Other Agreements.

 

(i)            The acceleration of
maturity of any of the loans or the termination of any of the commitments under
the First Lien Credit Agreement in connection with any default or event of
default thereunder or the exercise of any remedies against Collateral
consisting of cash pursuant to the Account Control Agreements by the First Lien
Agent or the First Lien Lenders in connection with such default or event of
default; or

 

(ii)           Failure of
Holdings, Company or any of its Subsidiaries to pay when due any principal of
or interest on or any other amount payable in respect of one or more items of
Indebtedness (other than Indebtedness referred to in subsection 8.1) or Contingent
Obligations in an individual principal amount of $5,500,000 or more or with an
aggregate principal amount of $5,500,000 or more, in each case beyond the end
of any grace period provided therefor; or

 

(iii)          breach or default
by Holdings, Company or any of its Subsidiaries with respect to any other
material term of (a) one or more items of Indebtedness or Contingent
Obligations in the individual or aggregate principal amounts referred to in
clause (ii) above or (b) any loan agreement, mortgage, indenture or
other agreement relating to such item(s) of Indebtedness or Contingent
Obligation(s), if the effect of such breach or default is to cause, or to
permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or
a trustee on behalf of such holder or holders) to cause, that Indebtedness or
Contingent Obligation(s) to become or be declared due and payable prior to
its stated maturity or the stated maturity of any underlying obligation, as the
case may be (after the giving or receiving of notice, lapse of time, both, or
otherwise); provided that this subsection 8.2(iii) shall
not apply to (x) secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness, if such sale or transfer is permitted hereunder and under the
documents providing for such Indebtedness and such Indebtedness is paid in full
upon the consummation of such sale or (y) Indebtedness or Contingent
Obligations under the First Lien Credit Agreement; or

 

84

 

8.3                               Breach
of Certain Covenants.

 

Failure of Company to perform or comply with any
term or condition contained in Section 7 of this Agreement; provided,
however, that Company shall have the right to cure an Event of Default
under the financial covenants set forth in subsection 7.6 by applying as an
addition to Consolidated EBITDA, the Net Securities Proceeds of any issuance of
Capital Stock of Holdings to the Permitted Holders, their Affiliates and any
other Person making a co-investment with the Permitted Holders and/or their
Affiliates, solely to the extent that such Net Securities Proceeds (A) are
actually received by Holdings no later than fifteen (15) Business Days after
Company delivers a written notice to Administrative Agent of its intent to cure
such Event of Default, such notice to be delivered with the Compliance
Certificate required pursuant to subsection 6.1F(ii) with respect to the
relevant Fiscal Quarter, (B) do not exceed the aggregate amount necessary
to cure such Event of Default under subsection 7.6 of the First Lien Credit
Agreement or, after the Discharge of First Lien Obligations, subsection 7.6
hereof, for any applicable period (each, a “Permitted Cure Issuance”),
it being understood that this proviso may not be relied on for purposes of
calculating any financial ratios other than as applicable to subsection 7.6,
and (C) are applied as a mandatory prepayment of Indebtedness under the
First Lien Credit Agreement in accordance with the terms thereof or, after the
Discharge of First Lien Obligations, of the Loans in accordance with subsection
2.4(B)(iii)(c)(2); provided that (1) no more than two Permitted
Cure Issuances may be made in any four consecutive Fiscal Quarter period, (2) no
more than three Permitted Cure Issuances may be made during the period
beginning on the Closing Date until the Obligations are paid in full, and (3) the
aggregate amount of Net Securities Proceeds applied as additions to
Consolidated EBITDA pursuant to all Permitted Cure Issuances shall not exceed
$15,000,000; provided, further that to the extent the receipt of
any Net Securities Proceeds of any Permitted Cure Issuance is an effective
addition to Consolidated EBITDA as contemplated by, and in accordance with, the
foregoing and, as a result thereof, any Event of Default of the covenants set
forth in subsection 7.6 shall have been cured for any applicable period, such
cure shall be deemed to be effective as of the last day of such applicable
period and such addition to Consolidated EBITDA shall apply to any period of
four consecutive Fiscal Quarters that includes the Fiscal Quarter in respect of
which such addition was made; provided  still  further, that
in no event prior to the Discharge of First Lien Obligations shall any
Permitted Cure Issuance be exercised by Company hereunder unless Company
simultaneously exercises a Permitted Cure Issuance under (and as defined in)
the First Lien Credit Agreement to cure an Event of Default thereunder with
respect to the same financial covenant that the Company seeks to cure by a
Permitted Cure Issuance hereunder; or

 

8.4                               Breach
of Warranty.

 

Any representation, warranty, certification or other
statement of fact made by Company or any of its Subsidiaries in any Loan
Document or in any certificate at any time delivered by Company or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or

 

8.5                               Other
Defaults Under Loan Documents.

 

Any Loan Party shall default in the performance of
or compliance with any covenant or agreement contained in this Agreement or any
of the other Loan Documents, other than any such term referred to in any other
subsection of this Section 8, and such default shall 

 

85

 

not have been remedied or
waived within 30 days after the receipt by Company and such Loan Party of
notice from Administrative Agent or any Lender of such default; or

 

8.6                               Involuntary
Bankruptcy; Appointment of Receiver, etc.

 

(i)            A court having
jurisdiction in the premises shall enter a decree or order for relief in
respect of Holdings, Company or any of its Subsidiaries in an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is not
controverted within 30 days or remains unstayed or undischarged for a period of
60 days; or any other similar relief shall be granted under any applicable
federal or state law; or

 

(ii)           an involuntary case
shall be commenced against Holdings, Company or any of its Subsidiaries under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian of
Holdings, Company or any of its Subsidiaries for all or a substantial part of
its property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Holdings,
Company or any of its Subsidiaries, and any such event described in this clause
(ii) shall continue for 60 days unless dismissed, bonded or discharged; or

 

8.7                               Voluntary
Bankruptcy; Appointment of Receiver, etc.

 

(i)            Holdings, Company
or any of its Subsidiaries shall commence a voluntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Holdings, Company or any of its Subsidiaries shall
make a general assignment for the benefit of creditors; or

 

(ii)           Holdings, Company
or any of its Subsidiaries shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become due; or
the Governing Body of Holdings, Company or any of its Subsidiaries (or any
committee thereof) shall adopt any resolution of the actions referred to in
clause (i) above or this clause (ii); or

 

8.8                               Judgments
and Attachments.

 

Any money judgment, writ or warrant of attachment or
similar process involving (i) in any individual case an amount in excess
of $5,500,000 or (ii) in the aggregate at any time an amount in excess of
$5,500,000, in either case to the extent not adequately covered by insurance as
to which a solvent insurance company has been notified of such judgment and has
not denied coverage, shall be entered or filed against Company or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days; or

 

86

 

8.9                               Dissolution.

 

Any order, judgment or decree shall be entered
against Holdings, Company or any of its material Subsidiaries decreeing the
dissolution or split up of Holdings, Company or that material Subsidiary and
such order shall remain undischarged or unstayed for a period in excess of 60
days; or

 

8.10                        Employee
Benefit Plans.

 

There shall occur one or more ERISA Events that
individually or in the aggregate result in or could reasonably be expected to
result in a Material Adverse Effect; or

 

8.11                        Change
in Control.

 

A Change in Control shall have occurred; or

 

8.12                        Invalidity
of Loan Documents; Failure of Security; Repudiation of Obligations.

 

At any time after the execution and delivery
thereof, (i) any Loan Document or any material provision thereof, for any
reason other than as expressly permitted hereunder or thereunder or the
satisfaction in full of all Obligations, shall cease to be in full force and
effect (other than in accordance with its terms) or shall be declared to be
null and void, (ii) Administrative Agent shall not have or shall cease to
have a valid and perfected Second Priority Lien in any Collateral purported to
be covered by the Collateral Documents having a fair market value, individually
or in the aggregate, exceeding $1,100,000, in each case for any reason other
than the failure of Administrative Agent or any Lender to take any action
within its control, or (iii) any Loan Party shall contest the validity or
enforceability of any Loan Document or any provision thereof in writing or deny
in writing that it has any further liability, other than as a result of
repayment in full of the Obligations, under any Loan Document or any provision
thereof to which it is a party;

 

THEN (i) upon the occurrence of any Event of
Default described in subsection 8.6 or 8.7, each of (a) the unpaid
principal amount of and accrued interest on the Loans and (b) all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which
are hereby expressly waived by Company and (ii) upon the occurrence and
during the continuation of any other Event of Default, Administrative Agent
shall, upon the written request or with the written consent of Requisite
Lenders, by written notice to Company, declare all or any portion of the
amounts described in clauses (a) and (b) above to be, and the same
shall forthwith become, immediately due and payable; provided that from
the date of delivery of a written notice to Administrative Agent of the intent
to cure an Event of Default with a Permitted Cure Issuance in accordance with
subsection 8.3 above until the date that is 15 Business Days thereafter,
neither Administrative Agent nor the Lenders shall exercise any such remedies
with respect to any Event of Default under subsection 8.3 addressed in such
notice; provided further that, the provisions of this Article 8 shall be
subject to the terms of the Intercreditor Agreement.

 

87

 

Section 9.                                          ADMINISTRATIVE
AGENT

 

9.1                               Appointment.

 

A.            Appointment of
Administrative Agent.  Apollo
Agent is hereby appointed Administrative Agent hereunder and under the other
Loan Documents.  Each Lender hereby
authorizes Administrative Agent to act as its agent in accordance with the
terms of this Agreement and the other Loan Documents.  Apollo Agent agrees to act upon the express
conditions contained in this Agreement and the other Loan Documents, as
applicable.  The provisions of this Section 9
are solely for the benefit of Administrative Agent and Lenders and no Loan
Party shall have rights as a third party beneficiary of any of the provisions
thereof (other than subsection 9.5 and subsection 9.6).  In performing its functions and duties under
this Agreement, Administrative Agent (other than as provided in subsection
2.1F) shall act solely as an agent of Lenders and does not assume and shall not
be deemed to have assumed any obligation towards or relationship of agency or
trust with or for Company or any other Loan Party.

 

B.            Appointment of
Supplemental Collateral Agents. 
It is the purpose of this Agreement and the other Loan Documents that
there shall be no violation of any law of any jurisdiction denying or
restricting the right of banking corporations or associations to transact
business as agent or trustee in such jurisdiction.  It is recognized that in case of litigation
under this Agreement or any of the other Loan Documents, and in particular in
case of the enforcement of any of the Loan Documents, or in case Administrative
Agent deems that by reason of any present or future law of any jurisdiction it
may not exercise any of the rights, powers or remedies granted herein or in any
of the other Loan Documents or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that Administrative
Agent appoint an additional individual or institution as a separate trustee,
co-trustee, collateral agent or collateral co-agent (any such additional
individual or institution being referred to herein individually as a “Supplemental Collateral Agent” and collectively as “Supplemental Collateral Agents”).

 

In the event that Administrative Agent appoints a
Supplemental Collateral Agent with respect to any Collateral, (i) each and
every right, power, privilege or duty expressed or intended by this Agreement
or any of the other Loan Documents to be exercised by or vested in or conveyed
to Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable
by either Administrative Agent or such Supplemental Collateral Agent, and (ii) the
provisions of this Section 9 and of subsections 10.2 and 10.3 that refer
to Administrative Agent shall inure to the benefit of such Supplemental
Collateral Agent and all references therein to Administrative Agent shall be
deemed to be references to Administrative Agent and/or such Supplemental
Collateral Agent, as the context may require.

 

Should any instrument in writing from Company or any
other Loan Party be required by any Supplemental Collateral Agent so appointed
by Administrative Agent for more fully and certainly vesting in and confirming
to him or it such rights, powers, privileges and 

 

88

 

duties, Company shall, or
shall cause such Loan Party to, execute, acknowledge and deliver any and all
such instruments promptly upon request by Administrative Agent.  In case any Supplemental Collateral Agent, or
a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be
exercised by Administrative Agent until the appointment of a new Supplemental
Collateral Agent.

 

C.            Control.  Each Lender and Administrative Agent hereby
appoint each other Lender as agent for the purpose of perfecting Administrative
Agent’s security interest in assets that, in accordance with the UCC, can be
perfected by possession or control.

 

9.2                               Powers
and Duties; General Immunity.

 

A.                                   Powers;
Duties Specified.

 

(i)            Each Lender
irrevocably authorizes Administrative Agent to take such action on such Lender’s
behalf and to exercise such powers, rights and remedies hereunder and under the
other Loan Documents as are specifically delegated or granted to Administrative
Agent by the terms hereof and thereof, together with such powers, rights and
remedies as are reasonably incidental thereto. 
Administrative Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan
Documents.  Administrative Agent may
exercise such powers, rights and remedies and perform such duties by or through
its agents or employees.  Administrative
Agent shall not have, by reason of this Agreement or any of the other Loan
Documents, a fiduciary relationship in respect of any Lender or Company; and
nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon
Administrative Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.

 

(ii)           Each Lender
hereunder (a) acknowledges that it has received a copy of the
Intercreditor Agreement, (b) agrees that it will be bound by and will take
no actions contrary to the provisions of the Intercreditor Agreement and (c) authorizes
and instructs the Administrative Agent to enter into the Intercreditor
Agreement as Collateral Agent and on behalf of such Lender.

 

B.                                     No
Responsibility for Certain Matters.  Administrative Agent shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any
other documents furnished or made by Administrative Agent to Lenders or by or
on behalf of Company to Administrative Agent or any Lender in connection with
the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor shall Administrative Agent be required
to ascertain or inquire as to the performance or observance of any of the
terms, conditions, provisions, covenants or agreements contained in any of the
Loan 

 

89

 

Documents or as to the use of the proceeds of
the Loans or as to the existence or possible existence of any Event of Default
or Potential Event of Default.  Unless
and until Administrative Agent has received written notice of an Event of
Default or a Potential Event of Default from Holdings or Company, or of an
alleged Event of Default or Potential Event of Default from any Lender,
Administrative Agent shall not be deemed to have knowledge of any Event of
Default, Potential Event of Default or alleged Event of Default.  Except as expressly set forth in the Loan
Documents, Administrative Agent shall not have any duty to disclose, nor shall
it be liable for the failure to disclose, any information related to Holdings,
Company or any of their Subsidiaries that is communicated to or obtained by the
Administrative Agent or any of its Affiliates in any capacity. Anything contained
in this Agreement to the contrary notwithstanding, Administrative Agent shall
not have any liability arising from confirmations of the amount of outstanding
Loans.

 

C.            Exculpatory Provisions.  Neither Administrative Agent nor any of its
Related Parties shall be liable to Lenders for any action taken or omitted by
Administrative Agent under or in connection with any of the Loan Documents
except to the extent caused by Administrative Agent’s gross negligence or
willful misconduct.  Administrative Agent
shall be entitled to refrain from any act or the taking of any action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents or from the exercise of any power, discretion
or authority vested in it hereunder or thereunder unless and until
Administrative Agent shall have received instructions in respect thereof from
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6) and, upon receipt of such instructions from
Requisite Lenders (or such other Lenders, as the case may be), Administrative
Agent shall be entitled to act or (where so instructed) refrain from acting, or
to exercise such power, discretion or authority, in accordance with such
instructions; provided that Administrative Agent shall not be required
to take any action that, in its opinion or the opinion of its counsel, may
expose Administrative Agent to liability or that is contrary to any Loan
Document or applicable law.  Without
prejudice to the generality of the foregoing, (i) Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication (including any electronic message, Internet or intranet website
posting or other distribution), notice, request, certificate, consent,
statement, instrument or document believed by it to be genuine and correct and
to have been signed or sent by the proper Person or Persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it (and shall not be liable
for any action taken or not taken by it in accordance with the advice of any
such counsel, accountants experts or other professional advisors), and shall be
further entitled to rely upon any statement made to it orally or by telephone
and believed by it to have been made by the proper Person, and shall not incur
any liability for relying thereon; and (ii) no Lender shall have any right
of action whatsoever against Administrative Agent as a result of Administrative
Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders (or such other Lenders as may be required to
give such instructions under subsection 10.6).

 

D.            Administrative Agent
Entitled to Act as Lender. 
The agency hereby created shall in no way impair or affect any of the rights
and powers of, or impose any duties or obligations upon, Administrative Agent
in its individual capacity as a Lender hereunder.  With

 

90

 

respect to its participation in the Loans,
Administrative Agent shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder, and the term “Lender” or “Lenders”
or any similar term shall, unless the context clearly otherwise indicates,
include Administrative Agent in its individual capacity.  Administrative Agent and its Affiliates may
accept deposits from, lend money to, acquire equity interests in and generally
engage in any kind of commercial banking, investment banking, trust, financial
advisory or other business with Company or any of its Affiliates as if it were
not performing the duties specified herein, and may accept fees and other consideration
from Company for services in connection with this Agreement and otherwise
without having to account for the same to Lenders.

 

9.3                               Independent
Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness.

 

Each Lender agrees that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans hereunder and that
it has made and shall continue to make its own appraisal of the creditworthiness
of Company and its Subsidiaries. Administrative Agent shall not have any duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter, and Administrative Agent shall not have any responsibility
with respect to the accuracy of or the completeness of any information provided
to Lenders.

 

9.4                               Right
to Indemnity.

 

A.                                   To the extent determined by the Administrative Agent to be required by any
applicable law, the Administrative Agent may withhold from any interest, fee or
other payment to any Lender (including with respect to any Participant of such
Lender) an amount equivalent to any applicable withholding tax.  If the Internal Revenue Service or any other
Government Authority asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
because the appropriate form was not delivered or was not properly executed or
because such Lender failed to notify the Administrative Agent of a change in
circumstance which rendered the exemption from, or reduction of, withholding
tax ineffective or for any other reason, such Lender shall indemnify the
Administrative Agent fully for all amounts paid, directly or indirectly, by the
Administrative Agent as tax or otherwise, including any penalties and interest
and together with all expenses (including legal expenses, allocated internal
costs and out-of-pocket expenses) incurred.

 

B.                                     Except as set
forth in subsection 9.4A, each Lender, in proportion to its Pro Rata Share,
severally agrees to indemnify Administrative Agent and its Related Parties to
the extent that any such Person shall not have been reimbursed by Company, for
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including reasonable counsel fees
and disbursements and fees and disbursements of any financial advisor engaged
by Administrative Agent) or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against Administrative Agent
or 

 

91

 

such other Person in exercising the powers,
rights and remedies of Administrative Agent or performing duties of
Administrative Agent hereunder or under the other Loan Documents or otherwise
in its capacity as Administrative Agent in any way relating to or arising out
of this Agreement or the other Loan Documents; provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of Administrative Agent resulting solely from Administrative Agent’s gross
negligence or willful misconduct as determined by a final judgment of a court
of competent jurisdiction.  If any
indemnity furnished to Administrative Agent or any other such Person for any
purpose shall, in the opinion of Administrative Agent, be insufficient or
become impaired, Administrative Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such
additional indemnity is furnished.

 

9.5                               Resignation
of Administrative Agent; Successor Administrative Agent.

 

Administrative Agent may resign at any time by
giving 30 days’ prior written notice thereof to Lenders and Company.  Upon any such notice of resignation by
Administrative Agent, Requisite Lenders shall have the right, upon five
Business Days’ notice to Company, to appoint a successor Administrative Agent,
subject, except during the existence of an Event of Default under subsection 8.1,
8.6 or 8.7, to the consent of Company (which consent shall not be unreasonably
withheld).  If no such successor shall
have been so appointed by Requisite Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, the retiring Administrative Agent may, on behalf of
Lenders, after consulting with Company, appoint a successor Administrative
Agent.  If Administrative Agent shall
notify Lenders and Company that no Person has accepted such appointment as
successor Administrative Agent, such resignation shall nonetheless become
effective in accordance with Administrative Agent’s notice and (i) the
retiring Administrative Agent shall be discharged from its duties and
obligations under the Loan Documents, except that any Collateral held by
Administrative Agent will continue to be held by it until a Person shall have
accepted the appointment of successor Administrative Agent, and (ii) all
payments, communications and determinations provided to be made by, to or
through Administrative Agent shall instead be made by, to or through each
Lender directly, until such time as Requisite Lenders appoint a successor
Administrative Agent in accordance with this subsection 9.5.  Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement (if not already discharged
as set forth above).  After any retiring
Administrative Agent’s resignation hereunder, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.

 

9.6                               Collateral
Documents and Second Lien Guaranties.

 

Each Lender hereby further authorizes Administrative
Agent, on behalf of and for the benefit of Lenders, to enter into each
Collateral Document as secured party and to be the agent for and representative
of Lenders under each Second Lien Guaranty, and each Lender agrees to be bound
by the terms of each Collateral Document and the Second Lien Guaranties; provided
that Administrative Agent shall not (i) enter into or consent to any
material amendment, 

 

92

 

modification, termination or
waiver of any provision contained in any Collateral Document or the Second Lien
Guaranties or (ii) release any Collateral (except as otherwise expressly
permitted or required pursuant to the terms of this Agreement, the applicable
Collateral Document or the Intercreditor Agreement), in each case without the
prior consent of the Lenders required pursuant to subsection 10.6; provided
further, however, that, without further written consent or
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of
Collateral that is the subject of a sale or other disposition of assets
permitted by this Agreement, to which the Lenders required pursuant to
subsection 10.6 have otherwise consented or that is as otherwise provided in
the Intercreditor Agreement, (b) release any Subsidiary Guarantor from the
Subsidiary Guaranty if all of the Capital Stock of such Subsidiary Guarantor is
sold to any Person (other than a Domestic Subsidiary of Company) pursuant to a
sale or other disposition permitted hereunder, to which the Lenders required
pursuant to subsection 10.6 have otherwise consented or that is otherwise
provided in the Intercreditor Agreement, or (c) subordinate the Liens of
Administrative Agent, on behalf of Lenders, to any Liens permitted by clauses
(i)-(xvi), (xviii)-(xx), (xxii) and (xxiii) of subsection 7.2A; provided
that, in the case of a sale of such item of Collateral or stock referred to in
clauses (a) or (b) above, the requirements of subsection 10.13 are
satisfied.  Anything contained in any of
the Loan Documents to the contrary notwithstanding, Company, Administrative
Agent and each Lender hereby agree that (1) no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral
Document or to enforce any Second Lien Guaranty, it being understood and agreed
that all powers, rights and remedies under the Collateral Documents and the
Second Lien Guaranties may be exercised solely by Administrative Agent for the
benefit of Lenders in accordance with the terms thereof, and (2) in the
event of a foreclosure by Administrative Agent on any of the Collateral
pursuant to a public or private sale, Administrative Agent or any Lender may be
the purchaser of any or all of such Collateral at any such sale and
Administrative Agent, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any Collateral payable by Administrative Agent at such sale.

 

9.7                               Duties
of Other Agents.

 

To the extent that any Lender is identified in this
Agreement as a co-agent or syndication agent, such Lender shall not have any
right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of such
Lenders shall have or be deemed to have a fiduciary relationship with any
Lender.

 

9.8                               Administrative
Agent May File Proofs of Claim.

 

In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to Holdings, Company or any
of the Subsidiaries of Holdings or Company and subject to the terms of the
Intercreditor Agreement, Administrative Agent (irrespective of whether the
principal of any Loan shall then be due and payable as herein expressed or by
declaration or otherwise and 

 

93

 

irrespective of whether
Administrative Agent shall have made any demand on Company) shall be entitled
and empowered, by intervention in such proceeding or otherwise

 

(i)                                     to file and
prove a claim for the whole amount of principal and interest owing and unpaid
in respect of the Loans and any other Obligations that are owing and unpaid and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of Lenders and Administrative Agent (including any
claim for the reasonable compensation, expenses, disbursements and advances of
Lenders and Administrative Agent and their agents and counsel and all other
amounts due Lenders and Administrative Agent under subsections 2.3 and 10.2)
allowed in such judicial proceeding, and

 

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

 

and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Lender to make such
payments to Administrative Agent and, in the event that Administrative Agent
shall consent to the making of such payments directly to Lenders, to pay to
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of Administrative Agent and its agents and counsel,
and any other amounts due Administrative Agent under subsections 2.3 and 10.2.

 

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

 

Section 10.                                   MISCELLANEOUS

 

10.1                        Successors
and Permitted Assigns; Assignments and Participations in Loans .

 

A.                                   General.  This Agreement shall be binding upon the
parties hereto and their respective successors and permitted assigns and shall
inure to the benefit of the parties hereto and the successors and permitted
assigns of Lenders (it being understood that Lenders’ rights of assignment are
subject to the further provisions of this subsection 10.1).  Neither Company’s rights or obligations
hereunder nor any interest therein may be assigned or delegated by Company
without the prior written consent of all Lenders (and any attempted assignment
or transfer by Company without such consent shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, the Indemnitees) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

94

 

B.                                     Assignments.

 

(i)                                     Amounts and
Terms of Assignments.  Any Lender
may assign to one or more Eligible Assignees all or any portion of its rights
and obligations under this Agreement; provided that (a), except (1) in
the case of an assignment of the entire remaining amount of the assigning
Lender’s rights and obligations under this Agreement or (2) in the case of
an assignment to a Lender or an Affiliate of a Lender or an Approved Fund of a
Lender, the aggregate amount of the Loan Exposure, as the case may be, of the
assigning Lender and the assignee subject to each such assignment shall not be
less than $1,000,000 or an integral multiple thereof; provided that
simultaneous assignments to two or more related Funds shall be treated as one
assignment for purposes of determining whether such minimum assignment
requirements are met, (b) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans assigned, (c) the
parties to each assignment shall (A) electronically execute and deliver to
Administrative Agent an Assignment Agreement via an electronic settlement
system acceptable to Administrative Agent or (B) manually execute and
deliver to Administrative Agent an Assignment Agreement, together with a
processing and recordation fee of $3,500 (which fee Company shall not be obligated
to pay except as required hereunder, and provided that only one such fee
shall be payable in connection with simultaneous assignments to or by related
Funds), and the Eligible Assignee, if it shall not already be a party to this
Agreement, shall deliver to Administrative Agent information reasonably
requested by Administrative Agent, including an administrative questionnaire
and such forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iv) and with respect to information requested
under the Patriot Act, and (d) (1) Administrative Agent and (2), if
no Event of Default has occurred and is continuing under subsection 8.1, 8.6 or
8.7, Company, shall have consented thereto (which consents shall not be
unreasonably withheld or delayed); provided that no consent of Company
shall be required with respect to any assignment to a Lender, any Affiliate of
a Lender or any Approved Fund.

 

Upon acceptance and recording by Administrative Agent pursuant to
clause (ii) below, from and after the effective date specified in such
Assignment Agreement, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment Agreement, shall have the rights and obligations
of a Lender hereunder and shall be deemed to have made all of the agreements of
a Lender contained in the Loan Documents arising out of or otherwise related to
such rights and obligations and (y) the assigning Lender thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights (other than any
rights which survive the termination of this Agreement under subsection 10.8B)
and be released from its obligations under this Agreement (and, in the case of
an Assignment Agreement covering all or the remaining portion of an assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease
to be a party hereto.  The assigning
Lender shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its Notes, if any, to Administrative Agent
for cancellation, and thereupon new Notes shall, if so requested by the
assignee and/or the assigning Lender in accordance with subsection 2.1G, be
issued to the assignee and/or to the assigning Lender, 

 

95

 

substantially in the form of Exhibit I annexed hereto, as
the case may be, with appropriate insertions, to reflect the amounts of
outstanding Loans, as the case may be, of the assignee and/or the assigning
Lender.  Other than as provided in
subsection 10.5, any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection
10.1B shall be treated for purposes of this Agreement as a sale by such Lender
of a participation in such rights and obligations in accordance with subsection
10.1C.

 

(ii)                                  Acceptance by
Administrative Agent; Recordation in Register.  Upon its receipt of an Assignment Agreement
executed by an assigning Lender and an assignee representing that it is an
Eligible Assignee, together with the processing and recordation fee referred to
in subsection 10.1B(i) and any forms, certificates or other evidence with
respect to United States federal income tax withholding matters that such
assignee may be required to deliver to Administrative Agent pursuant to
subsection 2.7B(iv), Administrative Agent shall, if Administrative Agent and
Company have consented to the assignment evidenced thereby (in each case to the
extent such consent is required pursuant to subsection 10.1B(i)), (a) accept
such Assignment Agreement by executing a counterpart thereof as provided
therein (which acceptance shall evidence any required consent of Administrative
Agent to such assignment) and (b) record the information contained therein
in the Register.  Administrative Agent
shall maintain a copy of each Assignment Agreement delivered to and accepted by
it as provided in this subsection 10.1B(ii). 
No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this clause (ii).

 

(iii)                               Special Purpose
Funding Vehicles. 
Notwithstanding anything to the contrary contained herein, any Lender (a
“Granting Lender”) may grant to a
special purpose funding vehicle (a “SPC”),
identified as such in writing from time to time by the Granting Lender to
Administrative Agent and Company, the option to provide to Company all or any
part of any Loan that such Granting Lender would otherwise be obligated to make
to Company pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to make any Loan, and (ii) if
an SPC elects not to exercise such option or otherwise fails to provide all or
any part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. Each party hereto hereby agrees that (i) neither
the grant to any SPC nor the exercise by any SPC of such option shall increase
the costs or expenses or otherwise increase or change the obligations of
Company or any Subsidiary under this Agreement; (ii) no SPC shall be
liable for any indemnity or similar payment obligation under this Agreement
(all liability for which shall remain with the Granting Lender); and (iii) the
Granting Lender shall for all purposes, including the approval of any
amendment, waiver or other modification of any provision of any Loan Document,
remain the Lender of record hereunder.  In furtherance
of the foregoing, each party hereto hereby agrees (which agreement shall
survive the termination of this Agreement) that, prior to the date that is one
year and one day after the payment in full of all outstanding commercial paper
or other senior indebtedness of any SPC, it will not institute against, or join
any other Person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the
laws of the United States or any state thereof. 
In addition, notwithstanding anything to the contrary contained in this 

 

96

 

subsection
10.1B(iii), any SPC may (i) without paying any processing fee therefor,
assign all or a portion of its interests in any Loans to the Granting Lender
(with notice to, but without the prior written consent of, Company and Administrative
Agent) or to any financial institutions (with prior written consent of Company
and Administrative Agent) providing liquidity and/or credit support to or for
the account of such SPC to support the funding or maintenance of Loans and (ii) disclose
on a confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of any surety, guarantee or
credit or liquidity enhancement to such SPC.

 

C.                                     Participations.  Any Lender may, without the consent of, or
notice to, Company or Administrative Agent, sell participations to one or more
Persons (other than a natural Person or Company or any of its Affiliates) in
all or a portion of such Lender’s rights and/or obligations under this
Agreement; provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) Company, Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement.  Notwithstanding the foregoing, any Lender may
sell participations to any Equity Holder or any Permitted Successor of any
Equity Holder; provided that (a) each of the selling Lender and
purchasing Equity Holder (or Permitted Successor of such Equity Holder) shall
deliver to Administrative Agent prior written notice of such participation sale
and (b) such Participant shall deliver to Administrative Agent information
reasonably requested by the Administrative Agent about such Participant (akin
to the information required to be delivered pursuant to subsection
10.1B(i)(c).  Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and the other Loan
Documents and to approve any amendment, modification or waiver of any provision
of this Agreement and the other Loan Documents; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver directly affecting (A) the extension of (1) the
Maturity Date or (2) the regularly scheduled maturity of any portion of
the principal amount of or interest on any Loan allocated to such participation
or (B) a reduction of the principal amount of or the rate of interest
payable on any Loan allocated to such participation.  Subject to the further provisions of this
subsection 10.1C, Company agrees that each Participant shall be entitled to the
benefits of subsection 2.7 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to subsection 10.1B.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of subsection 10.4 as though
it were a Lender, provided such Participant agrees to be subject to
subsection 10.5 as though it were a Lender. 
A Participant shall not be entitled to receive any greater payment under
subsection 2.7 than the applicable Lender would have been entitled to receive
with respect to the participation sold to such Participant unless the sale of
the participation to such Participant is made with Company’s prior written
consent.  No Participant shall be
entitled to the benefits of subsection 2.7 unless Company is notified of the
participation sold to such Participant and such Participant specifically agrees
(and references the obligations of Company under subsection 2.7), for the
benefit of Company, to comply with subsection 2.7B(iv) as though it were a
Lender.  In the event that a Lender sells
a participation, Lender shall maintain, acting solely for this purpose as a
non-fiduciary agent of the Administrative Agent and Company, a register on
which it enters the name of all participants in the Registered Loan held by
such Lender and the principal amount thereof (and stated interest thereon) (as
to each Lender, 

 

97

 

the “Participant Register”).  Each Registered Loan (and the registered
note, if any, evidencing the same) may be participated in whole or in part only
by registration of such participation on the Participant Register (and each
registered note shall expressly so provide). 
Any participation of such Registered Loan (and the registered note, if
any, evidencing the same) may be effected only by the registration of such
participation on the Participant Register. 
The Participant Register shall be available for inspection by Company
and the Administrative Agent at any reasonable time and from time to time upon
reasonable prior notice.

 

D.                                    Pledges
and Assignments.  Any Lender
may, without the consent of the Administrative Agent or Company, at any time
pledge or assign a security interest in all or any portion of its Loans, and
the other Obligations owed to such Lender, to secure obligations of such
Lender, including without limitation any pledge or assignment to secure
obligations to any Federal Reserve Bank; provided that (i) no Lender shall be relieved of any of
its obligations hereunder as a result of any such assignment or pledge and (ii) in
no event shall any assignee or pledgee be considered to be a “Lender” or be
entitled to require the assigning Lender to take or omit to take any action
hereunder.

 

E.                                      Information.  Each Lender may furnish any information
concerning Holdings and its Subsidiaries in the possession of that Lender from
time to time to permitted assignees and participants (including prospective
assignees and participants), subject to subsection 10.18.

 

F.                                      Agreements
of Lenders.  Each Lender
listed on the signature pages hereof hereby agrees, and each Lender that
becomes a party hereto pursuant to an Assignment Agreement shall be deemed to
agree, (i) that it is an Eligible Assignee; (ii) that it has
experience and expertise in the making of or purchasing loans such as the
Loans; and (iii) that it will make or purchase its Loans for its own
account in the ordinary course of business and without a view to distribution
of such Loans within the meaning of the Securities Act or the Exchange Act or
other federal securities laws (it being understood that, subject to the
provisions of this subsection 10.1, the disposition of such Loans or any interests
therein shall at all times remain within its exclusive control).  Each Lender that becomes a party hereto
pursuant to an Assignment Agreement shall also be deemed to represent that such
Assignment Agreement constitutes a legal, valid and binding obligation of such
Lender, enforceable against such Lender in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws affecting
creditors’ rights generally and by general principles of equity.

 

10.2                        Expenses.

 

Company agrees to pay Administrative Agent promptly (i) all
reasonable out-of-pocket costs and expenses of Administrative Agent for the
negotiation, preparation, syndication, execution and administration of the Loan
Documents and any consents, amendments, waivers or other modifications thereto,
including all reasonable out-of-pocket fees, expenses and disbursements of
counsel to Administrative Agent in connection therewith; (ii) all
reasonable out-of-pocket costs and expenses of perfecting Liens in favor of
Administrative Agent on behalf of Lenders pursuant to any Collateral Document,
including filing and recording fees, expenses and taxes, stamp or documentary
taxes, search fees, title insurance premiums, and reasonable 

 

98

 

fees, expenses and
disbursements of outside counsel to Administrative Agent; (iii) all
reasonable out-of-pocket costs and expenses incurred by Administrative Agent in
connection with the custody or preservation of any of the Collateral; and (iv) all
reasonable out-of-pocket costs and expenses, including reasonable out-of-pocket
attorneys’ fees and fees, costs and expenses of accountants, advisors and
consultants, incurred by Administrative Agent relating to efforts to (a) evaluate
or assess any Loan Party, its business or financial condition and (b) protect,
evaluate, assess or dispose of any of the Collateral.  Company agrees to pay Administrative Agent or
Lender promptly all reasonable out-of-pocket costs and expenses, including
reasonable attorneys’ fees of one counsel to Administrative Agent and the
Lenders (except that in the case of a bona fide conflict of interest the
attorney’s fees of one additional counsel shall be included, so that counsel
may be retained for the benefit of the Administrative Agent on the one hand and
the Lenders on the other hand), fees, costs and expenses of accountants,
advisors and consultants and costs of settlement, incurred by Administrative Agent
and Lenders in enforcing any Obligations of or in collecting any payments due
from any Loan Party hereunder or under the other Loan Documents (including in
connection with the sale of, collection from, or other realization upon any of
the Collateral or the enforcement of the Loan Documents) after the occurrence
of an Event of Default or pursuant to any insolvency or bankruptcy proceedings.

 

10.3                        Indemnity.

 

In addition to the payment of expenses pursuant to
subsection 10.2, whether or not the transactions contemplated hereby shall be
consummated, Company agrees to defend (subject to Indemnitees’ selection of
counsel), indemnify, pay and hold harmless Administrative Agent and Lenders,
and each Related Party of the foregoing, together with the successors and
permitted assigns of Administrative Agent and Lenders (collectively called the “Indemnitees”), from and against any and all Indemnified
Liabilities (as hereinafter defined); provided that Company shall not
have any obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise solely from (i) the
gross negligence or willful misconduct or material breach of the Loan Documents
of such Indemnitee as determined by a final judgment of a court of competent
jurisdiction or (ii) any claim, litigation, investigation or proceeding
that does not involve an act, omission or material breach by Company or any of
its Affiliates of the Loan Documents and that is brought by an Indemnitee
against another Indemnitee unless brought by a Lender against Administrative
Agent in its capacity as such.

 

As used herein, “Indemnified
Liabilities” means, collectively, any and all liabilities,
obligations, losses, damages (including natural resource damages), penalties,
actions, judgments, suits, claims (including Environmental Claims), costs
(including the costs of any investigation, study, sampling, testing, abatement,
cleanup, removal, remediation or other response action necessary to remove,
remediate, clean up or abate any Hazardous Materials Activity), expenses and
disbursements of any kind or nature whatsoever (including the reasonable
out-of-pocket fees and disbursements of counsel (including costs of one special
or local counsel for Indemnitees in each appropriate jurisdiction), provided,
however, that all Indemnitees use a single outside counsel of each type,
except that in the case of a bona fide conflict of interest, the costs of one
additional counsel shall be included, so that counsel may be retained for the benefit
of the Administrative Agent on the one hand and the Lenders on the other hand)
in connection with any investigative, administrative or judicial proceeding
commenced or 

 

99

 

threatened by any Person, whether
or not any such Indemnitee shall be designated as a party or a potential party
thereto, and any fees or expenses incurred by Indemnitees in enforcing this
indemnity, whether based on any federal, state or foreign laws, statutes, rules or
regulations (including securities and commercial laws, statutes, rules or
regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of (i) this
Agreement, the other Loan Documents or the transactions contemplated hereby or
thereby (including Lenders’ agreement to continue the Loans hereunder, or any
enforcement of any of the Loan Documents (including any sale of, collection
from, or other realization upon any of the Collateral or the enforcement of the
Second Lien Guaranties)), (ii) the statements contained in the commitment
letter delivered by any Lender to Company with respect thereto, or (iii) any
Environmental Claim or any Hazardous Materials Activity relating to or arising
from, directly or indirectly, any past or present activity, operation, land
ownership, or practice of Company or any of its Subsidiaries.

 

To the extent that the undertakings to defend, indemnify,
pay and hold harmless set forth in this subsection 10.3 may be unenforceable in
whole or in part because they are violative of any law or public policy,
Company shall contribute the maximum portion that it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Indemnitees or any of them.

 

10.4                        Set-Off.

 

In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuation of any Event of Default after obtaining
the prior written consent of Administrative Agent each of Lenders and their
Affiliates is hereby authorized by Company at any time or from time to time,
without notice to Company or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, time or demand, provisional or final, including
Indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including any and all Trust Funds and Trust Fund Accounts)
and any other Indebtedness at any time held or owing by that Lender or any
Affiliate of that Lender to or for the credit or the account of Company and each
other Loan Party against and on account of the Obligations of Company or any
other Loan Party to that Lender (or any Affiliate of that Lender) or to any
other Lender (or any Affiliate of any other Lender) under this Agreement and
participations therein and the other Loan Documents, including all claims of
any nature or description arising out of or connected with this Agreement and
participations therein or any other Loan Document, irrespective of whether or
not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due hereunder
shall have become due and payable pursuant to Section 8 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.

 

10.5                        Ratable
Sharing.

 

Lenders hereby agree among themselves that if any of
them shall, whether by voluntary or mandatory payment (other than a payment or
prepayment of Loans made and applied in accordance with the terms of this
Agreement), by realization upon security, through

 

100

 

the exercise of any right of
set-off or banker’s lien, by counterclaim or cross action or by the enforcement
of any right under the Loan Documents or otherwise, or as adequate protection
of a deposit treated as cash collateral under the Bankruptcy Code, receive
payment or reduction of a proportion of the aggregate amount of principal,
interest, fees and other amounts then due and owing to that Lender hereunder or
under the other Loan Documents (collectively, the “Aggregate
Amounts Due” to such Lender) that is greater than the proportion
received by any other Lender in respect of the Aggregate Amounts Due to such
other Lender, then the Lender receiving such proportionately greater payment
shall, unless such proportionately greater payment is required by the terms of
this Agreement, (i) notify Administrative Agent and each other Lender of
the receipt of such payment and (ii) apply a portion of such payment to
purchase assignments (which it shall be deemed to have purchased from each
seller of an assignment simultaneously upon the receipt by such seller of its
portion of such payment) of the Aggregate Amounts Due to the other Lenders so
that all such recoveries of Aggregate Amounts Due shall be shared by all
Lenders in proportion to the Aggregate Amounts Due to them; provided
that (A) if all or part of such proportionately greater payment received
by such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy or reorganization of Company or otherwise, those purchases shall be
rescinded and the purchase prices paid for such assignments shall be returned
to such purchasing Lender ratably to the extent of such recovery, but without
interest and (B) the foregoing provisions shall not apply to (1) any
payment made by Company pursuant to and in accordance with the express terms of
this Agreement or (2) any payment obtained by a Lender as consideration
for the assignment (other than an assignment pursuant to this subsection 10.5)
of or the sale of a participation in any of its Obligations to any Eligible
Assignee or Participant pursuant to subsection 10.1C.  Company expressly consents to the foregoing
arrangement and agrees that any purchaser of an assignment so purchased may
exercise any and all rights of a Lender as to such assignment as fully as if
that Lender had complied with the provisions of subsection 10.1B with respect
to such assignment.  In order to further
evidence such assignment (and without prejudice to the effectiveness of the
assignment provisions set forth above), each purchasing Lender and each selling
Lender agree to enter into an Assignment Agreement at the request of a selling
Lender or a purchasing Lender, as the case may be, in form and substance
reasonably satisfactory to each such Lender.

 

10.6                        Amendments
and Waivers.

 

No amendment, modification, termination or waiver of
any provision of this Agreement or of the Notes, and no consent to any
departure by Company therefrom, shall in any event be effective without the
written concurrence of Requisite Lenders; provided that no such
amendment, modification, termination, waiver or consent shall, without the
consent of:

 

(i)                                     each Lender
with Obligations directly affected (whose consent shall be sufficient for any
such amendment, modification, termination or waiver without the consent of
Requisite Lenders) (1) reduce or forgive the principal amount of any Loan,
(2) postpone the Maturity Date, or postpone the date or reduce the amount
of any scheduled payment (but not prepayment) of principal of any Loan, (3) postpone
the date on which any interest or any fees are payable or (4) decrease the
interest rate borne by any Loan (other than any waiver of any increase in the
interest rate applicable to any of the Loans pursuant to subsection 2.2E) or
the amount of any fees payable hereunder 

 

101

 

excluding
any change in the manner in which any financial ratio used in determining any
interest rate or fee is calculated that would result in a reduction of any such
rate or fee);

 

(ii)                                  each Lender, (1) change
in any manner the definition of “Pro Rata Share” or the definition of “Requisite
Lenders” or (2) change in any manner or waive the provisions contained in
subsection 10.5 or this subsection 10.6;

 

(iii)                               Lenders having
or holding 95% or more of the aggregate Loan Exposure of all Lenders, (1) release
any Lien granted in favor of Administrative Agent with respect to all or
substantially all of the Collateral, (2) release Holdings from its
obligations under the Holdings Guaranty or (3) release all or
substantially all of the Subsidiary Guarantors from their obligations under the
Subsidiary Guaranty, in each case other than in accordance with the terms of
the Loan Documents and the Intercreditor Agreement.

 

In addition, no amendment, modification, termination
or waiver of any provision (i) of any Note shall be effective without the
written concurrence of the Lender which is the holder of that Note, (ii) of
Section 9 shall be effective without the written concurrence of
Administrative Agent and (iii) of the Intercreditor Agreement shall be
effective (subject to the last paragraph of this Section 10.06) without
the written concurrence of the Requisite Lenders.

 

Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender.  Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given.  No notice to or demand on Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances.  Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection 10.6 shall be binding upon each Lender at the time outstanding, each
future Lender and, if signed by Company, on Company.

 

Administrative Agent and Company may amend any Loan
Document to correct administrative errors or omissions, or to effect
administrative changes that are not adverse to any Lender.  Notwithstanding anything to the contrary
contained herein, such amendment shall become effective without any further
consent of any other party to such Loan Document.

 

10.7                        Notices;
Effectiveness of Signatures.

 

A.                                   Unless
otherwise specifically provided herein, any notice or other communication
herein required or permitted to be given shall be in writing and may be
personally served, or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile in complete and legible form, or
three Business Days after depositing it in the United States mail with postage
prepaid and properly addressed; provided that notices to Administrative
Agent under Sections 2 and 3 shall not be effective until received.  For the purposes hereof, the address of each
party hereto shall be as set forth under such party’s name on the signature pages hereof
or (i) as to Company and Administrative Agent, such other address as shall
be designated by such Person in a written notice delivered to the other parties
hereto and 

 

102

 

(ii) as to each other party, such other
address as shall be designated by such party in a written notice delivered to
Administrative Agent and Company.  As
agreed to among Holdings, Company, the Administrative Agent and the applicable
Lender from time to time, notices and other communications may also be
delivered by e-mail to the e-mail addresses of a representative of the
applicable Person provided from time to time by such Person.

 

B.                                     Company hereby
agrees, unless directed otherwise by the Administrative Agent or unless the
electronic mail address referred to below has not been provided by the
Administrative Agent to Company, that it will, or will cause its Subsidiaries
to, provide to the Administrative Agent all information, documents and other
materials that it is obligated to furnish to the Administrative Agent pursuant
to the Loan Documents or to the Lenders under Article 6, including all
notices, requests, financial statements, financial and other reports,
certificates and other information materials, but excluding any such
communication that (i) relates to the payment of any principal or other
amount due under this Agreement prior to the scheduled date therefor, (ii) provides
notice of any Potential Event of Default or Event of Default under this
Agreement or any other Loan Document or (iii) is required to be delivered
to satisfy any condition precedent to the effectiveness of this Agreement
and/or any borrowing of Loans or other extension of credit hereunder (all such
non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an
electronic/soft medium that is properly identified in a format reasonably
acceptable to the Administrative Agent to an electronic mail address as
directed by the Administrative Agent.  In
addition, Company agrees, and agrees to cause its Subsidiaries, to continue to
provide the Communications to the Administrative Agent or the Lenders, as the
case may be, in the manner specified in the Loan Documents but only to the
extent requested by the Administrative Agent.

 

C.                                     Company hereby
acknowledges that (i) the Administrative Agent will make available to the
Lenders the information provided by or on behalf of Company hereunder
(collectively, the “Borrower
Materials”) by posting the Borrower Materials on Intralinks or
another similar electronic system (the “Platform”) and (ii) certain of the
Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive
material non-public information with respect to Company or its securities)
(each, a “Public
Lender”). Company hereby agrees that (a) all Borrower Materials
that are to be made available to Public Lenders shall be clearly and
conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC”
shall appear prominently on the first page thereof; (b) by marking
Borrower Materials “PUBLIC,” Company shall be deemed to have authorized the
Administrative Agent and the Lenders to treat such Borrower Materials as not
containing any material non-public information with respect to Company or its
securities for purposes of United States federal and state securities laws; (c) all
Borrower Materials marked “PUBLIC” are permitted to be made available through a
portion of the Platform designated as appropriate for Public Lenders and (d) the
Administrative Agent shall be entitled to treat any Borrower Materials that are
not marked “PUBLIC” as being suitable only for posting on a portion of the
Platform not designated as appropriate for Public Lenders.  Notwithstanding the foregoing, the following
Borrower Materials shall be marked “PUBLIC”, unless Company notifies the Administrative
Agent promptly that any such document contains material non-public information:
(1) the Loan Documents and (2) notification of changes in the terms
of the Loans.

 

103

 

D.                                    THE PLATFORM IS
PROVIDED “AS IS” AND “AS AVAILABLE”. 
NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES WARRANTS
THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF THE PLATFORM AND
EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE
COMMUNICATIONS.  NO WARRANTY OF ANY KIND,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS IS MADE BY THE ADMINISTRATIVE AGENT
OR ANY OF ITS RELATED PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE
PLATFORM.  IN NO EVENT SHALL THE
ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO ANY
LOAN PARTY, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR
NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT,
CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR THE ADMINISTRATIVE
AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE
EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL RULING BY A COURT
OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH PERSON’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

 

E.                                      The
Administrative Agent agrees that the receipt of the Communications by the
Administrative Agent at its e-mail address set forth on its signature page hereto
shall constitute effective delivery of the Communications to the Administrative
Agent for purposes of the Loan Documents. 
Each Lender agrees that receipt of notice to it (as provided in the next
sentence) specifying that the Communications have been posted to the Platform
shall constitute effective delivery of the Communications to such Lender for
purposes of the Loan Documents.  Each
Lender agrees to notify the Administrative Agent in writing (including by
electronic communication) from time to time of such Lender’s e-mail address to
which the foregoing notice may be sent by electronic transmission and that the
foregoing notice may be sent to such e-mail address.

 

F.                                      Loan Documents
and notices under the Loan Documents may be transmitted and/or signed by
telefacsimile and by signatures delivered in ‘PDF’ format by electronic
mail.  The effectiveness of any such
documents and signatures shall, subject to applicable law, have the same force
and effect as an original copy with manual signatures and shall be binding on
all Loan Parties, Administrative Agent and Lenders.  Administrative Agent may also require that
any such documents and signature be confirmed by a manually-signed copy
thereof; provided, however, that the failure to request or
deliver any such manually-signed copy shall not affect the effectiveness of any
facsimile document or signature.

 

10.8                        Survival
of Representations, Warranties and Agreements.

 

A.                                   All
representations, warranties and agreements made herein shall survive the
execution and delivery of this Agreement and the making of the Loans.

 

104

 

B.                                     Notwithstanding
anything in this Agreement or implied by law to the contrary, the agreements of
Company set forth in subsections 2.7, 10.2, 10.3, 10.16 and 10.17 and the
agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5, 10.16B and
10.17 shall survive the payment of the Loans and the termination of this
Agreement.

 

10.9                        Failure
or Indulgence Not Waiver; Remedies Cumulative.

 

No failure or delay on the part of Administrative
Agent or any Lender in the exercise of any power, right or privilege hereunder
or under any other Loan Document shall impair such power, right or privilege or
be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other power, right or
privilege.  All rights and remedies
existing under this Agreement and the other Loan Documents are cumulative to,
and not exclusive of, any rights or remedies otherwise available.

 

10.10                 Marshalling;
Payments Set Aside.

 

Neither Administrative Agent nor any Lender shall be
under any obligation to marshal any assets in favor of Company or any other
party or against or in payment of any or all of the Obligations.  To the extent that Company makes a payment or
payments to Administrative Agent or Lenders (or to Administrative Agent for the
benefit of Lenders), or Administrative Agent or Lenders enforce any security
interests or exercise their rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be revived and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
setoff had not occurred.

 

10.11                 Severability.

 

In case any provision in or obligation under this
Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.  The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.

 

10.12                 Obligations
Several; Independent Nature of Lenders’ Rights; Damage Waiver.

 

The obligations of Lenders hereunder are several and
no Lender shall be responsible for the obligations of any other Lender
hereunder.  Nothing contained herein or
in any other Loan Document, and no action taken by Lenders pursuant hereto or
thereto, shall be deemed to constitute Lenders, or Lenders and Company, as a
partnership, an association, a Joint Venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender 

 

105

 

shall be a separate and
independent debt, and, subject to subsection 9.6, each Lender shall be entitled
to protect and enforce its rights arising out of this Agreement and it shall
not be necessary for any other Lender to be joined as an additional party in
any proceeding for such purpose.

 

To the extent permitted by law, each of the parties
hereto shall not assert, and hereby waives, any claim against any party hereto,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with or as a result of this Agreement, any other Loan Document, any transaction
contemplated by the Loan Documents, any Loan or the use of proceeds
thereof.  No Indemnitee shall be liable
for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with the
Loan Documents or the transactions contemplated thereby.

 

10.13                 Release
of Security Interest or Second Lien Guaranty.

 

Subject to the terms of the Intercreditor Agreement,
upon the proposed sale or other disposition of any Collateral to any Person
(other than a Domestic Subsidiary of Company) that is permitted by this
Agreement or to which Requisite Lenders have otherwise consented (or such
greater number of Lenders as required under subsection 10.6), or the sale or
other disposition of all of the Capital Stock of a Subsidiary Guarantor to any
Person (other than Company or a Domestic Subsidiary of Company) that is
permitted by this Agreement or to which Requisite Lenders have otherwise
consented (or such greater number of Lenders as required under subsection
10.6), for which a Loan Party desires to obtain a security interest release or
a release of the Subsidiary Guaranty from Administrative Agent, such Loan Party
shall deliver an Officer’s Certificate (i) stating that the Collateral or
the Capital Stock subject to such disposition is being sold or otherwise
disposed of in compliance with the terms hereof and (ii) specifying the
Collateral or Capital Stock being sold or otherwise disposed of in the proposed
transaction.  Upon the receipt of such
Officer’s Certificate, Administrative Agent shall, at such Loan Party’s
expense, so long as Administrative Agent (a) has no reason to believe that
the facts stated in such Officer’s Certificate are not true and correct and
(b), if the sale or other disposition of such item of Collateral or Capital
Stock constitutes an Asset Sale pursuant to subsection 7.7B(vi), (xiii) or
(xvii), shall have received evidence satisfactory to it that arrangements
satisfactory to it have been made for delivery of the Net Asset Sale Proceeds
if and as required by subsection 2.4, subject to the terms of the Intercreditor
Agreement, execute and deliver such releases of its security interest in such
Collateral or such Subsidiary Guaranty, as may be reasonably requested by such
Loan Party.

 

10.14                 Applicable
Law.

 

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN ANY SUCH LOAN DOCUMENT) AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS

 

106

 

LAW OF THE STATE OF NEW YORK),
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION
OF ANOTHER LAW.

 

10.15                 Construction
of Agreement; Nature of Relationship.

 

Each of the parties hereto acknowledges that (i) it
has been represented by counsel in the negotiation and documentation of the
terms of this Agreement, (ii) it has had full and fair opportunity to
review and revise the terms of this Agreement, (iii) this Agreement has
been drafted jointly by all of the parties hereto, and (iv) neither
Administrative Agent nor any Lender or other Agent has any fiduciary
relationship with or fiduciary duty to Company arising out of or in connection
with this Agreement or any of the other Loan Documents, and the relationship
between Administrative Agent and Lenders, on one hand, and Company, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor.  Accordingly, each of the
parties hereto acknowledges and agrees that the terms of this Agreement shall
not be construed against or in favor of another party.

 

10.16                 Consent
to Jurisdiction and Service of Process.

 

A.            EACH OF THE LOAN PARTIES
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY NEW YORK STATE COURT
OR FEDERAL COURT OF THE UNITED STATES SITTING IN NEW YORK CITY, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT.  EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO
THE EXTENT PERMITTED BY LAW, SUCH FEDERAL COURT AND THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  Nothing in this
Agreement shall affect any right that the Administrative Agent or any Lender
may otherwise have to bring any action or proceeding relating to this Agreement
or the other Loan Documents against any Loan Party or its properties in the
courts of any jurisdiction.

 

B.            EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES:

 

(i)            WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS;

 

(ii)           AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT MAY BE MADE BY

 

107

 

REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SUBSECTION 10.7;

 

(iii)          AGREES THAT SERVICE AS PROVIDED IN CLAUSE (ii) ABOVE IS SUFFICIENT
TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT; AND

 

(iv)          AGREES THAT
THE PROVISIONS OF THIS SUBSECTION 10.16 RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

 

10.17                 Waiver
of Jury Trial.

 

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS.  EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS.  EACH PARTY HERETO
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. 
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 10.17 AND EXECUTED BY EACH OF THE PARTIES
HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE
HEREUNDER.  IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

108

 

10.18                 Confidentiality.

 

Each Lender shall hold all non-public information
obtained pursuant to the requirements of this Agreement in accordance with such
Lender’s customary procedures for handling confidential information of this
nature, it being understood and agreed by Company that in any event a Lender
may make disclosures (a) to its and its Affiliates’ directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such information and instructed to keep such
information confidential) in connection with the transactions contemplated
hereby, (b) to the extent requested by any Government Authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement in
connection with the transactions contemplated hereby, (e) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
subsection 10.18, to any pledgee under subsection 10.1D, or Eligible Assignee
of or participant in, or any prospective Eligible Assignee of or Participant
in, any of its rights or obligations under this Agreement, (g) with the
written consent of Company, (h) to the extent such information becomes
publicly available prior to delivery by Company other than as a result of a
breach of this subsection 10.18 or (i) to the National Association of Insurance
Commissioners or any other similar organization or any nationally recognized
rating agency that requires access to information about a Lender’s or its
Affiliates’ investment portfolio in connection with ratings issued with respect
to such Lender or its Affiliates and that no written or oral communications
from counsel to Administrative Agent and no information that is or is
designated as privileged or as attorney work product may be disclosed to any
Person unless such Person is a Lender or a Participant hereunder; provided
that, unless specifically prohibited by applicable law or court order, each
Lender shall notify Company of any request by any Government Authority or
representative thereof (other than any such request in connection with any examination
of the financial condition of such Lender by such Government Authority) for
disclosure of any such non-public information prior to disclosure of such
information.  In addition, Administrative
Agent and Lenders may disclose the existence of this Agreement and information
about this Agreement to market data collectors, similar service providers to
the lending industry, and service providers to Administrative Agent and
Lenders, and Administrative Agent or any of its Affiliates may place customary “tombstone”
advertisements relating hereto in publications (including publications
circulated in electronic form) of its choice at its own expense.

 

Notwithstanding anything herein to the contrary,
information required to be treated as confidential by reason of the foregoing
shall not include, and Administrative Agent and each Lender may disclose to any
and all Persons, without limitation of any kind, any information with respect
to United States federal income tax treatment and United States federal income
tax structure of the transactions contemplated hereby and all materials of any
kind (including opinions or other tax analyses) that are provided to
Administrative Agent or such Lender relating to such tax treatment and tax
structure.

 

10.19                 Counterparts;
Effectiveness.

 

This Agreement and any amendments, waivers, consents
or supplements hereto or in connection herewith may be executed in any number
of counterparts and by different parties 

 

109

 

hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages are
physically attached to the same document. 
Delivery by telecopier or electronic mail of an executed counterpart of
a signature page to this Agreement and each other Loan Document shall be
effective as delivery of an original executed counterpart of such
document.  This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.

 

10.20                 USA
Patriot Act.

 

Each Lender and Administrative Agent hereby notifies
Company that pursuant to the requirements of the Patriot Act, it is required to
obtain, verify and record information that identifies Loan Parties, which
information includes the name and address of each Loan Party and other
information that will allow such Lender and Administrative Agent to identify
such Loan Party in accordance with the Patriot Act.

 

10.21                 Entire
Agreement; No Third Party Beneficiaries.

 

This Agreement and the other Loan Documents
constitute the entire contract between the parties relative to the subject
matter hereof.  Any other previous
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement and the other Loan Documents.

 

10.22                 Intercreditor
Agreement.

 

Reference is made to the Intercreditor Agreement,
dated as of December 23, 2009 (as amended, restated, amended and restated,
supplemented or otherwise modified from time to time, the “Intercreditor
Agreement”) among the Borrower, Holdings, Panolam Industries, Inc.,
Pioneer Plastics Corporation, Nevamar Holding Corp., Nevamar Holdco, LLC,
Nevamar Company, LLC, the other Subsidiaries of Borrower and Holdings from time
to time party thereto, Credit Suisse AG, Cayman Islands Branch, as First Lien
Collateral Agent (as defined therein), and Apollo Agent, as Second Lien
Collateral Agent (as defined therein). 
Each Lender hereunder (a) acknowledges that it has received a copy
of the Intercreditor Agreement, (b) consents to the subordination of Liens
provided for in the Intercreditor Agreement, (c) agrees that it will be
bound by and will take no actions contrary to the provisions of the
Intercreditor Agreement and (d) authorizes and instructs the
Administrative Agent to enter into the Intercreditor Agreement as Collateral
Agent and on behalf of such Lender.  The
foregoing provisions are intended as an inducement to the lenders under the
First Lien Credit Agreement to permit the incurrence of Indebtedness under this
Agreement and to extend credit to Company, and such lenders are intended third
party beneficiaries of such provisions.

 

10.23                 Legend.

 

THE
LOANS HAVE BEEN ISSUED WITH OID FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES.  THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO
MATURITY OF THESE LOANS MAY BE OBTAINED BY 

 

110

 

WRITING
TO THE ADMINISTRATIVE AGENT AT THE ADDRESS IDENTIFIED AS THE NOTICE ADDRESS ON
THE ADMINISTRATIVE AGENT’S SIGNATURE PAGE.

 

[Remainder of page intentionally left blank]

 

111

 

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

 

	
  COMPANY:

  	
   

  
	
   

  	
   

  
	
   

  	
  PANOLAM INDUSTRIES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ROBERT J. MULLER, JR.

  
	
   

  	
   

  	
  Name:
   Robert J. Muller, Jr.

  
	
   

  	
   

  	
  Title:
   President and Chief Executive Officer

  

 

 

	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  20 Progress Drive

  
	
   

  	
   

  	
  Shelton, Connecticut 06484

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy (which shall not constitute notice) to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Panolam Industries International, Inc.

  
	
   

  	
   

  	
  20 Progress Drive

  
	
   

  	
   

  	
  Shelton, Connecticut 06484

  
	
   

  	
   

  	
  Attention: Jeffrey Muller

  
	
   

  	
   

  	
  Facsimile: (203) 225-0051

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy (which shall not constitute notice) to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Weil, Gotshal & Manges LLP

  
	
   

  	
   

  	
  200 Crescent Court, Suite 300

  
	
   

  	
   

  	
  Dallas, Texas 75201-6950

  
	
   

  	
   

  	
  Attention: Angela L. Fontana

  
	
   

  	
   

  	
  Facsimile: (214) 746-7777

  

 

Signature Page to Second Lien Credit Agreement

 

 

	
  HOLDINGS:

  	
   

  
	
   

  	
   

  
	
   

  	
  PANOLAM HOLDINGS CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ROBERT J. MULLER, JR.

  
	
   

  	
   

  	
  Name:
  Robert J. Muller, Jr.

  
	
   

  	
   

  	
  Title: President and Chief Executive Officer

  

 

 

	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  20 Progress Drive

  
	
   

  	
   

  	
  Shelton, Connecticut 06484

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy (which shall not constitute notice)
  to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Panolam Industries International, Inc.

  
	
   

  	
   

  	
  20 Progress Drive

  
	
   

  	
   

  	
  Shelton, Connecticut 06484

  
	
   

  	
   

  	
  Attention: Jeffrey Muller

  
	
   

  	
   

  	
  Facsimile: (203) 225-0051

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy (which shall not constitute notice) to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Weil, Gotshal & Manges LLP

  
	
   

  	
   

  	
  200 Crescent Court, Suite 300

  
	
   

  	
   

  	
  Dallas, Texas 75201-6950

  
	
   

  	
   

  	
  Attention: Angela L. Fontana

  
	
   

  	
   

  	
  Facsimile: (214) 746-7777

  

 

Signature
Page to Second Lien Credit Agreement

 

 

	
   

  	
  APOLLO LAMINATES AGENT, LLC,

  
	
   

  	
  individually and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  JOSEPH D. GLATT

  
	
   

  	
   

  	
  Name:
  Joseph D. Glatt

  
	
   

  	
   

  	
  Title: Vice President and Assistant Secretary

  

 

 

	
   

  	
  Notice
  Address:

  
	
   

  	
   

  
	
   

  	
  APOLLO
  LAMINATES AGENT, LLC

  
	
   

  	
  c/o
  Apollo Capital Management, L.P.

  
	
   

  	
  9
  West 57th Street, 37th Floor

  
	
   

  	
  New
  York, New York 10019

  
	
   

  	
  Attn:

  	
  Lacary
  Sharpe

  
	
   

  	
  Tel:

  	
  212.822.0813

  
	
   

  	
  Fax:

  	
  646.607.0197

  
	
   

  	
  Email:

  	
  lsharpe@apollocapital.com

  
	
   

  	
   

  
	
   

  	
  Payment
  Instructions:

  

 

Signature Page to Second
Lien Credit AgreementExhibit
10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT
(this “Agreement”), dated December 21, 2009, is entered into by and
between CREDO Petroleum Corporation, a Delaware corporation (the “Company”),
and Marlis E. Smith, Jr., an individual (the “Employee”), to be effective
as of January 1, 2010 (the “Effective Date”) as to all provisions
hereof except for Section 3.(a), which shall become effective on January 16,
2010.

 

WHEREAS, Employee and the Company desire to enter
into an agreement providing for the employment of Employee as President and
Chief Executive Officer of the Company;

 

NOW, THEREFORE, the Company and Employee hereby
agree as follows:

 

1.                                       Employment.   The Company hereby employs Employee, and
Employee hereby accepts employment with the Company, on the terms and
conditions set forth in this Agreement.

 

2.                                       Term.  Subject to the provisions for earlier
termination set forth in Section 5 below, the term of Employee’s
employment under this Agreement (the “Term”) will commence on the
Effective Date and end on December 31, 2011; provided, however, that on January 1, 2012 and on each
succeeding anniversary thereafter, the Term automatically will be extended by
an additional year, unless (a) thirty (30) days prior to any such
succeeding anniversary either Employee or the Company has given the other
written notice to the contrary (which notice is not rescinded before such
anniversary date) or (b) this Agreement has otherwise been terminated as
provided in Section 5 of this Agreement.

 

3.                                       Positions and
Duties.

 

(a)                                  During the
Term, Employee shall have the title of President and Chief Executive Officer of
the Company and such duties and responsibilities as are assigned to him by the
Board of Directors of the Company (the “Board”) from time to time.

 

(b)                                 Employee shall
devote his exclusive professional time, energy, and attention to the affairs
and operations of the Company, and shall use his best efforts to carry out his
responsibilities under this Agreement faithfully and efficiently; provided, however, that nothing contained
herein shall preclude Employee from (i) investing Employee’s personal
assets in such form or manner as will not require Employee’s services in any
capacity in the operations and affairs of the businesses in which such
investments are made, except as precluded in Section 6(b), or (ii) participating
in charitable or other not-for-profit activities as long as such activities do
not interfere with Employee’s work for the Company.

 

4.                                       Compensation.  During the Term:

 

(a)                                  Salary.  Employee shall initially be paid an aggregate
annual base salary of $250,000 per year, less applicable withholdings and
deductions (the “Base Salary”). 
The Board shall review the Base Salary from time to time and may, in its
sole discretion, increase but not decrease the Base Salary.  The Base Salary shall be payable in
accordance with the Company’s standard payroll practices and policies.

 

 

(b)                                 Bonuses.

 

(i)                                     Initial Annual
Incentive Bonuses.  For the
years ended December 31, 2010 and 2011, Employee also will be eligible to
receive, in the sole discretion of the Board, an annual incentive bonus (an “Initial
Annual Incentive Bonus”) based in part on performance goals which may be
established from time to time by the Board and\or based on the Board’s
judgment regarding the overall performance of Employee in light of general
industry conditions, product prices, and other considerations that the Board
considers appropriate under the circumstances.  Any Initial Annual Incentive Bonus award shall be paid in the form
of cash or, at Employee’s discretion and with Board approval, any portion of
said Initial Annual Incentive bonus may be paid in the form of incentive stock
options in lieu of cash.  If any portion
of the Initial Annual Incentive Bonus is paid in stock options, the number of
options granted calculated at the then current Exercise Price will equal the
number of options required to create pre-tax charges to the Income Statement
over the option vesting period that are equal to the bonus cash consideration
given up by Employee.

 

(ii)                                  Subsequent
Annual Incentive Bonuses.  For
any year subsequent to December 31, 2011, Employee will be eligible to
receive, in the sole discretion of the Board, an annual incentive bonus (a “Subsequent
Annual Incentive Bonus”) based in part on performance goals which may be
established from time to time by the Board and\or on the Board’s judgment
regarding the overall performance of Employee in light of general industry
conditions, product prices, and other considerations that the Board considers
appropriate under the circumstances.  Any Subsequent Annual Incentive Bonus
award shall be paid in the form of cash or, at Employee’s discretion and with
Board approval, any portion of said Subsequent Annual Incentive bonus may be
paid in the form of incentive stock options in lieu of cash.  If any portion of the Subsequent Annual
Incentive Bonus is paid in stock options, the number of options granted
calculated at the then current Exercise Price will equal the number of options
required to create pre-tax charges to the Income Statement over the option
vesting period that are equal to the bonus cash consideration given up by
Employee.

 

(iii)                               Bonus Payments.  Each Initial Annual Incentive Bonus and
Subsequent Annual Incentive Bonus, or portion thereof, that is payable in cash
shall be paid, less applicable deductions and withholdings, in accordance with
the Company’s standard payroll practices and procedures, no later than March 15
of the calendar year following the year in which the bonus accrues.

 

(c)                                  Initial Stock
Option Award.  On the
Effective Date, the Company shall grant to Employee incentive stock options to
acquire a number of shares of the Company’s common stock equal to 50,000
shares.

 

2

 

(d)                                 Stock Option
Terms.

 

(i)                                     Value.  For the purposes of this Agreement, the
dollar value of stock options granted hereunder shall be determined in good
faith by the Board in a manner consistent with the Company’s determination of
such value for financial reporting purposes.

 

(ii)                                  Exercise Price.  The exercise price of the options granted
pursuant to Section 4(c) shall be equal to the closing trading price
of the Company’s common stock on the date of grant on the principal exchange on
which such stock is traded, provided,
however, that in no event will such exercise price be less than the “Fair
Market Value” of the underlying shares, as that term is defined in the Company’s
2007 Stock Option Plan (as the same may be amended from time to time, the “Stock
Option Plan”).

 

(iii)                               Vesting.  Stock options granted pursuant to this
Agreement shall vest one-third on each of the first, second and third
anniversaries of the option grant date.

 

(iv)                              Plan.  The stock options issuable pursuant to this
Agreement shall be issued under and subject to the terms of the Stock Option
Plan, including a customary award agreement as contemplated by the Stock Option
Plan, or such other plan or plans as may be adopted from time to time by the
Company.

 

(e)                                  Other Benefits.  During
the Term, (i) Employee shall be eligible to participate in the Company’s
401(k) plan subject to plan entry requirements, (ii) Employee and/or
Employee’s family, as the case may be, shall be eligible to participate in, and
shall receive all benefits under, to the extent provided by the Company,
medical, prescription and dental plans, (iii) Employee shall be provided
$500,000 of term life insurance in the name of Employee.  Nothing in this Agreement requires that the
Company maintain any particular benefits plan or coverage, which may be
modified or eliminated based on the Company’s needs; provided,
however, that Employee will not be treated differently than other
employees with respect to any such modification or elimination.

 

(f)                                    Expenses and
Allowances.   Employee
is authorized, in carrying out his responsibilities and duties under this
Agreement, to incur reasonable business expenses for the benefit of the
Company, all of types and at levels determined in good faith to be consistent
with his duties as President and Chief Executive Officer of the Company.  All such expenses will either be paid
directly by the Company or the Company shall promptly reimburse Employee for
expenditures upon the submission, from time to time, of itemized accountings
for such expenditures subject to Company policy.

 

(g)                                 Vacation.  Employee shall be entitled to four weeks paid
vacation per year, which shall accrue and be subject to the terms of the
Company’s vacation policy, as the same may be amended from time to time.

 

3

 

5.                                       Termination.

 

(a)                                  Certain
Definitions.  For the
purposes of this Section 5, the following terms shall be assigned the
following meanings:

 

(i)                                     “Accrued
Obligations” means all accrued Base Salary amounts as in effect at the time
of termination, accrued vacation pay or other benefits and reasonable and
necessary business expenses incurred by Employee in connection with his duties,
as contemplated by Sections 4(a), (d) (e), and (g), in each case to the
extent unpaid as of the date of termination and less applicable deductions and
withholdings.

 

(ii)                                  “Cause”
shall mean (i) dishonesty toward, fraud upon, or deliberate injury or
attempted deliberate injury to, the Company, (ii) final conviction for a
felony or crime involving moral turpitude, (iii) willful refusal or
willful failure to follow the lawful directions of the Board, (iv) misfeasance,
malfeasance, or negligence with respect to the performance of Employee’s job
duties, or (v) material violation of the Company’s or its successor’s
established policies and procedures.

 

(iii)                               “Disability”
means a physical or mental impairment which renders Employee unable to perform
the essential functions of his position for a period expected to last at least
60 days, even with reasonable accommodation which does not impose an undue
hardship on the Company.  The
Company reserves the right, in good faith, to make the determination of
disability under this Agreement based upon information supplied by Employee
and/or his medical personnel, as well as information from medical personnel (or
others) selected by the Company or its insurers.

 

(iv)                              “Good Reason”
shall mean the occurrence of any of the following conditions, provided that
Employee gives the Company written notice of such condition within thirty (30)
days of its occurrence, and the Company fails to remedy the condition within
thirty (30) days of its receipt of notice:

 

(1)                                  material
diminution by the Company of Employee’s authority, duties and responsibilities,
which change would cause Employee’s position to become one of less
responsibility, importance and scope;

 

(2)                                  material
reduction by the Company of the Base Salary, as it may be increased from time
to time;

 

(3)                                  the Company or
its successor requiring Employee to be based anywhere other than within thirty
miles of the Company’s principal office location or in or near Denver,
Colorado, except for required business travel to an extent substantially
consistent with Employee’s business travel requirements; or

 

(4)                                  any action or
inaction that constitutes a material breach by the Company of this Agreement.

 

4

 

(b)                                 Death or
Disability.  Employee’s employment shall terminate
automatically upon Employee’s death.  If the Company determines in good
faith that the Disability of Employee has occurred, it may give to Employee
written notice of its intention to terminate Employee’s employment.  In
such event, Employee’s employment with the Company shall terminate effective on
the 30th day after receipt of such notice by Employee unless, within the 30
days after such receipt, Employee has returned to full-time performance of his
duties.  Following termination pursuant
to this Section 5(b), the Company’s only obligation to Employee shall be
to pay to Employee, in a lump sum, an amount equal to the Accrued Obligations,
plus payment to the Executive or his estate or beneficiary, as applicable, of
any amounts due pursuant to the terms of any applicable welfare benefit plans.

 

(c)                                  Termination for
Cause or Without Good Reason.  This Agreement may be terminated at any time
by the Company for Cause or by Employee without Good Reason.  In the case of termination by the Company for
Cause, Employee shall be given written notice by the Board of the intention to
terminate him for Cause, such notice (i) to state in reasonable detail the
act(s) or failure(s) to act that constitute the grounds on which the
proposed termination for Cause is based and (ii) to be given within six
months of the date the Board has reasonable notice of why the act(s) or
failure(s) to act constitute grounds for termination for Cause.  Employee shall be entitled to a hearing
before the Board, provided he requests such hearing within ten calendar days of
receiving the written notice from the Board, and such hearing shall take place
within 10 calendar days of Employee’s request. 
If, within five calendar days following such hearing, Employee is
furnished written notice by the Board confirming that, in its reasonable
judgment, grounds for Cause on the basis of the original notice exist, he shall
thereupon be terminated for Cause.  In
the case of termination by Employee without Good Reason, the termination shall
be effective thirty (30) days after Employee notifies the Company of such
termination.  Following termination
pursuant to this Section 5(c), the Company’s only obligation to Employee
shall be to pay to Employee, in a lump sum, an amount equal to the Accrued
Obligations.

 

(d)                                 Termination
Without Cause or for Good Reason.  This Agreement may be terminated at any time
by the Company without Cause or by Employee with Good Reason.  In each case, such termination shall be
effective immediately upon delivery of notice to the non-terminating party.  In the event of a termination pursuant to
this Section 5(d), the Company shall pay Employee, (i) in a lump sum,
the Accrued Obligations and (ii) in twelve equal monthly installments, the
Base Salary in effect at the time of termination, unless the termination occurs
on or prior to December 31, 2010, in which case the amount payable under
this Section 5(d)(ii) shall be 50% of the Base Salary in effect at
the time of termination payable in six equal monthly installments.

 

(e)                                  Termination
Upon a Change of Control.  In
the event of a termination upon a “Change of Control,” as that term is defined
in the Company’s Key Employee Retention Plan (the “Employee Retention Plan”),
Employee shall be entitled to the benefits provided under Section 4 of the
Employee Retention Plan, but based on a minimum of 12 years of service.  If, in the sole opinion of the Company’s
Board of Directors, such Change of Control results primarily or in large part
due to the constructive efforts of Employee with the prior support of the Board
of Directors, Employee shall be entitled to the benefits provided under Section 4
of the Employee Retention Plan, but based on a minimum of 24 years of service.

 

5

 

(f)                                    Continued
Benefits.  If Employee’s
employment is terminated pursuant to Sections 5(b) or 5(d), Employee
and/or Employee’s dependents, as applicable, shall be entitled to continue any
participation Employee had immediately prior to termination in each of the
Company’s welfare benefit plans as provided in Section 4 of the Employee
Retention Plan, but based on a minimum of 12 years of service.

 

6.                                       Confidentiality;
Non-Competition; Non-Solicitation.

 

Proprietary
Information.  As of the Effective Date, a fiduciary
relationship of confidence and trust is established between Employee and the
Company as to all “Proprietary Information” (as defined below) then existing
and subsequently created or developed by or for the Company, including but not
limited to, information created or developed by Employee during his employment
or association with the Company.  Use and
disclosure of the Proprietary Information shall be governed by Employee’s
duties to the Company under applicable law and by the terms and conditions of
this Agreement.  Employee shall use
Proprietary Information only for the benefit of the Company and for no other
purpose whatsoever.  Except in the
performance of his duties for the benefit of the Company, Employee shall not
disclose to any person or entity or use any Proprietary Information, in any
form.  Employee agrees and acknowledges
that all of the Proprietary Information, in any form, and copies and extracts
thereof, is and shall remain the sole and exclusive property of the Company,
and Employee shall, on request, assign such information of Employee’s
origination to the Company and/or return to the Company the originals and all
copies of all Proprietary Information provided to or acquired by Employee in
connection with his employment or association with the Company, and shall
return to the Company all files, correspondence and/or other communications received,
maintained and/or originated by Employee during the course of such employment
or association.  For the purposes of this
Agreement, the term “Proprietary Information” shall mean all information
which provides an actual or perceived competitive or technological advantage to
the Company relating to the Company or its business, including, but not limited
to, the Calliope Gas Recovery System and Tractor Seal technologies and related
intellectual property; provided, however, that
Proprietary Information shall not include any information which was in Employee’s
possession prior to the date hereof, as evidenced by bona fide written, dated
documents, or any information which is or becomes generally known to the public
through no fault of Employee or others owing duties of trust and
confidentiality to the Company.  Employee
acknowledges that Proprietary Information may include information relating to
applications and unknown uses of the Proprietary Information, and that, while
certain information described above is excluded from the definition of
Proprietary Information, the new uses and unknown applications of any public
information recognized by Employee also constitute Proprietary
Information.  Furthermore, all new uses
and unknown applications of the Proprietary Information which become apparent
to Employee after the Effective Date shall be deemed Proprietary
Information.  Notwithstanding any other
provision of this Agreement and any termination of this Agreement, Proprietary
Information shall remain such until excluded pursuant to the proviso above.

 

Non-Competition.  Except as set forth in this Section 6.(b) or
as may otherwise be approved in advance in writing by the Board, during the
Term and for a period of eighteen months after the termination of Employee’s
employment, Employee shall not compete, directly or indirectly, with the
Company within lease boundaries, spacing units, or governmental sections

 

6

 

where the Company owns
interests as of the Effective Date or within five miles of any lease
boundaries, spacing units or governmental sections in which the Company
acquires interests after the Effective Date. 
Without limiting the generality of the foregoing, Employee shall not
promote or assist, financially or otherwise, any person, firm, association,
partnership, corporation, or any other entity violate the above
restriction.  Primarily due to Employee’s
participation in Company projects during the past 10 years, Employee currently
owns interests in many leases, spacing units and governmental sections in which
the Company also owns interests (collectively referred to as “Employee’s
Predating Ownership Interests”).  Such
Employee’s Predating Ownership Interests are owned by Employee pursuant to
agreements between Employee and the Company which grant Employee certain
ownership rights as set forth in the applicable agreements.  Such Employee’s Predating Ownership Interests
are generally evidenced by, among other things, participation agreements,
assignments, joint interest billings, payments of joint ownership billings,
title opinions, division orders, transfer orders, and revenue receipts which
predate this Agreement.  With respect to
Employee’s Predating Ownership Interests (i) they are hereby acknowledged
and approved, (ii) each parties’ continuing rights and obligations related
to Employee’s Predating Ownership Interests are hereby acknowledged and
approved, and (iii) Employee’s Predating Ownership Interests are hereby
excepted from this Section 6(b).

 

Non-Solicitation.  During the Term and for a period of eighteen
months after the termination of Employee’s employment either by the Company for
Cause or by Employee without Good Reason, Employee shall not directly or
indirectly solicit or induce or attempt to solicit or induce any employee(s),
agent(s) or consultant(s) of the Company to terminate their
employment, representation or other association with the Company.

 

Reasonableness
of Restrictions.  Employee agrees that the covenants set forth
in Sections 6(b) and 6(c) are reasonable with respect to their
duration and scope.  In the event that any of the provisions of
Sections 6(b) and 6(c) shall be declared by a court of competent
jurisdiction to exceed the maximum restrictiveness such court deems
enforceable, such provision shall be deemed to be replaced herein by the
maximum restriction deemed enforceable by such court.

 

7.                                       Injunctive
Relief.  The parties hereto agree that the Company would suffer
irreparable harm from a breach by Employee of any of the covenants or
agreements contained herein, for which there is no adequate remedy at
law.  Therefore, in the event of the actual or threatened breach by
Employee of any of the provisions of this Agreement, the Company, or its
respective successors or assigns, may, in addition and supplementary to other
rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance, injunctive or other
relief in order to enforce compliance with, or prevent any violation of, the
provisions hereof, and that, in the event of such a breach or threat thereof,
the Company shall be entitled, without posting a bond, to obtain a temporary
restraining order and/or a preliminary or permanent injunction restraining
Employee from engaging in activities prohibited hereby or such other relief as
may be required to specifically enforce any of the covenants contained herein.

 

8.                                       Governing Law;
Venue.  This Agreement and the legal relations hereby created between
the parties hereto shall be governed by and construed under and in accordance
with the internal 

 

7

 

laws of the State of
Colorado, without regard to conflicts of laws principles thereof.  Any actions under or with respect to this Agreement
shall be filed only in the state or federal courts located in the State of
Colorado and the parties consent to the jurisdiction and venue of solely such
courts.

 

9.                                       Taxes.

 

(a)                                  Except as
otherwise provided in Section 11, and to the extent specifically provided
in Section 10, Employee shall be solely liable for Employee’s tax
consequences of compensation and benefits payable under this Agreement,
including any consequences of the application of Section 409A of the Code.

 

(b)                                 In order to
comply with all applicable federal or state income tax laws or regulations, the
Company may withhold from any payments made under this Agreement all applicable
federal, state, city or other applicable taxes.

 

10.                                 Section 409A
Savings Clause.

 

(a)                                  It is the
intention of the parties that compensation or benefits payable under this
Agreement not be subject to the additional tax imposed pursuant to Section 409A
of the Code.  To the extent such potential payments or benefits could
become subject to such Section, the parties shall cooperate to amend this
Agreement with the goal of giving Employee the economic benefits described
herein in a manner that does not result in such tax being imposed.

 

(b)                                 Notwithstanding
anything in this Agreement to the contrary, if on the date of termination of
Employee’s employment with the Company,

 

(i)                                     Employee would
not have a separation from service within the meaning of Section 409A of
the Code and the Treasury Regulations thereunder (“Separation From Service”),
and as a result of such termination of employment would receive any payment
that, absent the application of this Section 10(b)(i), would be subject to
additional tax imposed pursuant to Section 409A of the Code, then such
payment shall instead be payable on the date that is the earliest of (A) Employee’s
Separation From Service, (B) the date Employee becomes disabled (within
the meaning of Section 409A(a)(2)(C) of the Code), (C) Employee’s
death, or (D) such other date as will not result in such payment being
subject to such additional tax; and if

 

(ii)                                  Employee is a
specified employee within the meaning of Section 409A(a)(2)(B)(i) of
the Code and would receive any payment sooner than six months after
Employee’s separation from service that, absent the application of this Section 10(b)(ii),
would be subject to additional tax imposed pursuant to Section 409A of the
Code as a result of such status as a specified employee, then such payment
shall instead be payable on the date that is the earliest of (A) six months
after Employee’s Separation From Service, (B) Employee’s death, or (C) such
other date as will not result in such payment being subject to such additional
tax.

 

11.                                 Limitation of
Payments to Employee. 
Notwithstanding any other provision of this Agreement, in the event that
any payment (or portion thereof) to be made hereunder to Employee would
constitute a “parachute payment” for purposes of Section 280G(b)(2) of
the Code, such payment (or portion thereof) shall be reduced so that the
remaining portion of such payment (if 

 

8

 

any) does not constitute a
parachute payment.  In the event that more than one payment (or portion
thereof) would constitute a parachute payment, the preceding sentence shall be
applied to such payments in the order designated by Employee until none of the
remaining payments (or portions thereof) constitute parachute payments. 
If Employee does not designate the order in which such payments shall be
reduced, each payment (or portion thereof) shall be reduced in the order in
which it is payable starting with the payment payable last in time, and then
the payment payable next to last in time, and so forth until none of the
remaining payments (or portions thereof) constitute parachute payments.

 

12.                                 Entire
Agreement.  
Subject to final Board approval of the methodology to review and, if
deemed appropriate, approve Employee elections pursuant to joint operating
agreements or participation agreements for wells where Employee and the Company
both own an interest, this Agreement constitutes and contains the entire
agreement and final understanding concerning Employee’s employment with the
Company and the other subject matters addressed herein between the
parties.  It is intended by the parties as a complete and exclusive statement
of the terms of their agreement.  It supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matter hereof.  Any representation, promise or
agreement not specifically included in this Agreement shall not be binding upon
or enforceable against either party.  This is a fully integrated
agreement.

 

13.                                 Amendment and
Waiver.  The provisions of this Agreement may be amended or waived only
with the prior written consent of the Board (or a person expressly authorized
thereby) and Employee, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.

 

14.                                 Miscellaneous.

 

(a)                                  Binding Effect.  This Agreement will be binding upon and shall
inure to the benefit of both Employee and the Company and their respective
successors, heirs and legal representatives, but neither this Agreement nor any
rights under this Agreement may be assigned by Employee or the Company without
the written consent of the other, and any assignment in violation of the
foregoing shall be void.

 

(b)                                 Notices.  Any notice required or permitted to be given
under this Agreement is to be in writing and either given by personal delivery
or deemed to be delivered three days after deposited, postage pre-paid, in the
U.S. certified or registered mail, return receipt requested, addressed as
follows:

 

	
  If to the Company:

  	
  CREDO Petroleum
  Corporation

  1801 Broadway, Suite 900

  Denver, Colorado 80202

  Attn: Alford B. Neely

  

 

9

 

	
  If to Employee:

  	
  Marlis E. Smith, Jr.

  5030 Sanford Circle West

  Englewood, CO 80113

  

 

or at such other address as
is specified in written notice given in the manner required in this Agreement.

 

(c)                                  Headings.  The
section and other headings contained in this Agreement are for the convenience
of the parties only and are not intended to be a part hereof or to affect the
meaning or interpretation hereof

 

(d)                                 Construction.  Each
party has cooperated in the drafting and preparation of this Agreement. 
Hence, in any construction to be made of this Agreement, the same shall not be
construed against any party on the basis that the party was the drafter.

 

(e)                                  Severability.  If any
provision of this Agreement or the application thereof is held invalid, the
invalidity shall not affect other provisions or applications of the Agreement
which can be given effect without the invalid provisions or applications and to
this end the provisions of this Agreement are declared to be severable.

 

(f)                                    Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
instrument.

 

This Employment Agreement has been executed by the
parties on the date and year first above written.

 

	
   

  	
  CREDO PETROLEUM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MARLIS E. SMITH, JR.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Marlis E. Smith, Jr.,
  Individually

  

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]