Document:

EXHIBIT 10.15

 

CLIENT SERVICE AGREEMENT

 

AGREEMENT
(the “Agreement”) made as of the 26th day of
January, 2010 by and between S & W Seed (“the Client”) and PR
Financial Marketing, LLC (“PRF”).

 

WITNESSETH
THAT:

 

WHEREAS,
PRF is a management, financial and marketing consulting firm specializing in
assisting publicly traded companies design, implement and monitor strategies to
increase investor awareness, and

 

WHEREAS,
the Client is publicly held, with their common stock trading on one or more
stock exchanges and/or “over the counter”, and

 

WHEREAS,
the Client desires to publicize themselves with the intention of making their
name and business better known to investors, brokerage houses and industry
professionals, and

 

WHEREAS,
PRF is willing to accept the Client as a client.

 

NOW,
THEREFORE, in consideration of the mutual covenants herein contained, it is
agreed:

 

Engagement.  The Client
hereby engages PRF, commencing January 26, 2010 to create publicity to
brokers, prospective investors and shareholders under the Investor Awareness
Program (“IAP”), the
activities of which are described below. PRF hereby accepts the Client as a
client from and after January 26, 2010 for a period of 36 months.
PRF agrees to work with the Client under the IAP, but subject to the further
provisions of this Agreement. The Client has the option to cancel this
Agreement at any time during the contract period with 90 days written notice to
PRF. All fees and expenses due at cancellation and through the 90 days notice
in accordance with this Agreement will be paid to PRF by Client.

 

1.              PRF will, on a daily basis,
be in contact with investors, brokers and fund managers in constant effort to
generate investors.

 

2.              PRF will conduct meetings
and presentations with its in-house database of financial professionals that
will feature the Client as an investment opportunity.

 

3.              PRF will consult with the
Client’s in-house IR/PR staff as to coordination of efforts during the JAR.

 

 

4.              PRF will help design,
develop and write all future financial marketing material to be used with this
campaign, subject to the approval of Client.

 

Compensation and Expenses.  In consideration of the services to be
performed by PRF in connection with the services provided, and as may otherwise
be herein provided, the Client agrees to pay PRF the following compensation:

 

(A)  For services,
the Client agrees to pay a monthly fee in accordance with the schedule below:

 

$5,000.00
/ Per Month

 

·                Payment is due the
first day of every month.

 

(B)  The Client
will also issue to PRF for IPO services, 25,000 shares of five year warrants at
$4.00 upon completion of IPO. In the event the company calls the warrants in
the IPO, and if PRF is employed by the client at that time, PRF shall receive
warrants for 25,000 shares for $4.00 purchase price at the closing of the A
warrants

 

(C)  Any
extraordinary or out of pocket expenses by PRF will be reimbursed by the
Client, however, any out of pocket expense above $500 per month will first be
approved in writing by the Client.

 

Representations and Warranties of the Client.  The Client represents and warrants to PRF,
each such representation and warranty being deemed to be material, that:

 

1.             The execution and performance of
this Agreement by the Client has been duly authorized by the Client;

 

Representations and Warranties of PRF.  PRF represents and warrants to the Client,
each such representation and warranty being deemed to be material, that:

 

I.             PRF will cooperate fully and timely
with the Client;

 

ii

 

2.                                      the performance
by PRF of this Agreement will not violate any applicable court decree, law or
regulation, nor will it violate any provision of the organizational documents
of PRF or any contractual obligation by which PRF may be bound;

 

3.                                      PRF will not
disseminate any written communication to the public about the Client without
the Client’s review and written approval of each communication. Additionally,
Client shall have prior approval over all oral statements made to the public
about Client. In order to comply with the prior sentence, PRF, as part of the
IAP, will disclose to, and receive prior approval from, Client concerning the
oral presentation or strategic approach PRF intends to take with respect to
oral statements about Client. PRF will be liable for any written or oral
information about the Client that is not approved by the Client.

 

4.                                      PRF will not
misrepresent any information which it disseminates about the Client, provided,
however, that PRF shall not be liable for inaccuracies in any information
provided to PRF by the Client, and;

 

5.                                      PRF believes
that the Client’s performance under this Agreement will not constitute any
violation of the laws or regulations of the State of Texas wherein PRF is
organized and operates, and hereby undertakes to notify the Client immediately
if PRF is notified in writing at any time while it is rendering services under
this Agreement that such performance by the Client under this Agreement would
constitute a violation of the laws or regulations of the State of Texas.

 

6.                                      Confidentiality.  Until such time as the same may become
publicly known, PRF agrees that any information provided to it by Client of a
confidential nature will not be revealed or disclosed to any person or entity
for any reason, and upon completion of its services and upon the written
request of the Client, any original documentation provided by the Client will
be returned to it.

 

DISCLAIMER BY PRF. PRF MAY BE THE
PREPARER OR DISTRIBUTOR OF CERTAIN ADVERTISING MATERIALS. PRF MAKES NO
REPRESENTATION THAT (A) ITS SERVICES WILL RESULT IN ANY ENHANCEMENT TO THE
CLIENT, (B) THE PRICE OF THE CLIENT’S PUBLICLY TRADED SECURITIES WILL
INCREASE, (C) ANY PERSON WILL PURCHASE SECURITIES IN THE CLIENT OR (D) ANY
INVESTOR WILL LEND MONEY TO OR INVEST IN OR WITH THE CLIENT.

 

iii

 

Miscellaneous

 

1.                                      Governing Law.  This Agreement shall be governed by and
interpreted under the laws of the State of California where client has been
organized and this Agreement has been deemed accepted by client.

 

2.                                      Currency.  References to dollars shall be deemed to be
United States Dollars unless otherwise specified.

 

3.                                      Separability.  If any one or more of the provisions of this
Agreement shall .be held invalid, illegal or unenforceable in any respect, such
provision, to the extent invalid, illegal or unenforceable, and provided that
such provision is not essential to the transaction provided for by this
Agreement, shall not affect any other provision hereof, and this Agreement
shall be construed as if such provision had never been contained herein.

 

Executed
as a sealed instrument as of January 26, 2010.

 

 

PR
Financial Marketing, LLC

 

 

	
  By:

  	
  /s/
  Mark S. Grewal

  	
   

  	
  By:

  	
  /s/
  Jim Blackman

  
	
   

  	
  S &
  W Seed

  	
   

  	
   

  	
  PR
  Financial Marketing, LLC

  
	
   

  	
  Duly
  Authorized

  	
   

  	
   

  	
  Duly
  Authorized

  

 

ivExhibit 10.6

 

Execution Copy

 

 

KAPSTONE PAPER AND PACKAGING
CORPORATION 

KAPSTONE KRAFT PAPER CORPORATION

$40,000,000

8.30% SENIOR SECURED NOTES DUE JULY 1, 2015

 

NOTE PURCHASE AGREEMENT

 

 

Dated as of July 1,
2008

 

 

 

TABLE OF CONTENTS

(Not Part of Agreement)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  AUTHORIZATION
  OF ISSUE OF NOTES

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  PURCHASE
  AND SALE OF NOTES

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS
  OF CLOSING

  	
  2

  
	
   

  	
   

  	
   

  
	
   

  	
  3A.

  	
  Documents

  	
  2

  
	
   

  	
  3B.

  	
  Opinion
  of Purchasers’ Special Counsel

  	
  4

  
	
   

  	
  3C.

  	
  Opinion
  of Company’s and Guarantors’ Counsel

  	
  5

  
	
   

  	
  3D.

  	
  Representations
  and Warranties; No Default; Satisfaction of Conditions; Material Adverse
  Effect

  	
  5

  
	
   

  	
  3E.

  	
  Purchase
  Permitted By Applicable Laws; Approvals

  	
  5

  
	
   

  	
  3F.

  	
  Title
  Insurance, Surveys and Environmental Assessments

  	
  6

  
	
   

  	
  3G.

  	
  Certificates
  of Insurance

  	
  6

  
	
   

  	
  3H.

  	
  Material
  Adverse Change

  	
  6

  
	
   

  	
  3I.

  	
  New
  Credit Agreement

  	
  6

  
	
   

  	
  3J.

  	
  Termination
  of Existing Credit Agreement

  	
  7

  
	
   

  	
  3K.

  	
  Kraft
  Acquisition

  	
  7

  
	
   

  	
  3L.

  	
  Note
  Assignment; BONY Documents; SCANA Side Letters; Underwriting Agreement;
  Warrants; International Paper Purchase Agreement

  	
  7

  
	
   

  	
  3M.

  	
  Financial
  Information

  	
  8

  
	
   

  	
  3N.

  	
  Capitalization

  	
  8

  
	
   

  	
  3O.

  	
  Debt

  	
  8

  
	
   

  	
  3P.

  	
  Intercompany
  Subordinated Note

  	
  8

  
	
   

  	
  3Q.

  	
  Fees
  and Expenses

  	
  9

  
	
   

  	
  3R.

  	
  Structuring
  Fee

  	
  9

  
	
   

  	
  3S.

  	
  Proceedings

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  PREPAYMENTS

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  4A(1).

  	
  Required
  Prepayments

  	
  9

  
	
   

  	
  4A(2).

  	
  Required
  Prepayment Pursuant to Intercreditor Agreement

  	
  9

  
	
   

  	
  4B.

  	
  Optional
  Prepayment With Yield-Maintenance Amount

  	
  9

  
	
   

  	
  4C.

  	
  Notice
  of Optional Prepayment

  	
  10

  
	
   

  	
  4D.

  	
  Partial
  Payments Pro Rata

  	
  10

  
	
   

  	
  4E.

  	
  Offer
  to Prepay Notes upon a Senior Debt Prepayment Event

  	
  10

  
	
   

  	
  4F.

  	
  No
  Acquisition of Notes

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5A.

  	
  Financial
  Statements

  	
  11

  
	
   

  	
  5B.

  	
  Information Required by Rule 144A

  	
  15

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  5C.

  	
  Inspection
  of Property

  	
  15

  
	
   

  	
  5D.

  	
  Covenant
  to Secure Notes Equally

  	
  15

  
	
   

  	
  5E.

  	
  Compliance
  with Law

  	
  15

  
	
   

  	
  5F.

  	
  Maintenance
  of Insurance

  	
  16

  
	
   

  	
  5G.

  	
  Maintenance
  of Properties

  	
  16

  
	
   

  	
  5H.

  	
  Payment
  of Taxes

  	
  16

  
	
   

  	
  5I.

  	
  Corporate
  Existence

  	
  16

  
	
   

  	
  5J.

  	
  Lines
  of Business

  	
  16

  
	
   

  	
  5K.

  	
  Subsequent
  Guarantors

  	
  17

  
	
   

  	
  5L.

  	
  Deliveries;
  Further Assurances

  	
  17

  
	
   

  	
  5M.

  	
  Agreement
  Assuming Liability on Notes

  	
  18

  
	
   

  	
  5N.

  	
  Compliance
  with Terms of Leaseholds

  	
  18

  
	
   

  	
  5O.

  	
  Material
  Contracts

  	
  18

  
	
   

  	
  5P.

  	
  Amendments
  to Credit Agreement or Loan Documents

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6A.

  	
  Financial
  Covenants

  	
  19

  
	
   

  	
  6A(1).

  	
  Total
  Leverage Ratio

  	
  19

  
	
   

  	
  6A(2).

  	
  Fixed
  Charge Coverage Ratio

  	
  19

  
	
   

  	
  6B.

  	
  Debt

  	
  19

  
	
   

  	
  6C.

  	
  Liens

  	
  21

  
	
   

  	
  6D.

  	
  Operating
  Leases

  	
  22

  
	
   

  	
  6E.

  	
  Restricted
  Payments

  	
  22

  
	
   

  	
  6F.

  	
  Mergers,
  Consolidations, Acquisitions, Sales

  	
  23

  
	
   

  	
  6G.

  	
  Modification
  of Organization Documents

  	
  24

  
	
   

  	
  6H.

  	
  Transactions
  with Affiliates

  	
  24

  
	
   

  	
  6I.

  	
  Unconditional
  Purchase Obligations

  	
  24

  
	
   

  	
  6J.

  	
  Inconsistent
  Agreements

  	
  24

  
	
   

  	
  6K.

  	
  Business
  Activities; Issuance of Equity

  	
  25

  
	
   

  	
  6L.

  	
  Investments

  	
  25

  
	
   

  	
  6M.

  	
  Restriction
  of Amendments to Certain Documents

  	
  26

  
	
   

  	
  6N.

  	
  Working
  Capital Facility

  	
  26

  
	
   

  	
  6O.

  	
  Accounting
  Changes; Fiscal Year

  	
  26

  
	
   

  	
  6P.

  	
  Prepayments,
  Etc. of Debt

  	
  26

  
	
   

  	
  6Q.

  	
  Amendment,
  Etc. of Debt

  	
  26

  
	
   

  	
  6R.

  	
  Holding
  Company

  	
  27

  
	
   

  	
  6S.

  	
  Limitation
  on Speculative Hedging

  	
  27

  
	
   

  	
  6T.

  	
  Terrorism
  Sanctions Regulations

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  EVENTS OF DEFAULT

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7A.

  	
  Acceleration

  	
  27

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7B.

  	
  Rescission
  of Acceleration

  	
  30

  
	
   

  	
  7C.

  	
  Notice
  of Acceleration or Rescission

  	
  30

  
	
   

  	
  7D.

  	
  Other
  Remedies

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  REPRESENTATIONS, COVENANTS AND WARRANTIES

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8A(1).

  	
  Organization;
  Subsidiary Preferred Equity

  	
  31

  
	
   

  	
  8A(2).

  	
  Power
  and Authority

  	
  31

  
	
   

  	
  8A(3).

  	
  Execution
  and Delivery of Transaction Documents

  	
  31

  
	
   

  	
  8B.

  	
  Financial
  Statements

  	
  32

  
	
   

  	
  8C.

  	
  Actions
  Pending

  	
  32

  
	
   

  	
  8D.

  	
  Outstanding
  Debt

  	
  33

  
	
   

  	
  8E.

  	
  Title
  to Properties

  	
  33

  
	
   

  	
  8F.

  	
  Taxes

  	
  33

  
	
   

  	
  8G.

  	
  Conflicting
  Agreements and Other Matters

  	
  33

  
	
   

  	
  8H.

  	
  Offering
  of Notes

  	
  34

  
	
   

  	
  8I.

  	
  Use
  of Proceeds

  	
  34

  
	
   

  	
  8J.

  	
  ERISA

  	
  34

  
	
   

  	
  8K.

  	
  Governmental
  Consent

  	
  35

  
	
   

  	
  8L.

  	
  Compliance
  with Environmental and Other Laws

  	
  35

  
	
   

  	
  8M.

  	
  Regulatory
  Status

  	
  36

  
	
   

  	
  8N.

  	
  Permits
  and Other Operating Rights

  	
  36

  
	
   

  	
  8O.

  	
  Rule 144A

  	
  36

  
	
   

  	
  8P.

  	
  Absence
  of Financing Statements, Etc.

  	
  36

  
	
   

  	
  8Q.

  	
  Establishment
  of Security Interest

  	
  36

  
	
   

  	
  8R.

  	
  Foreign
  Assets Control Regulations, Etc.

  	
  37

  
	
   

  	
  8S.

  	
  Disclosure

  	
  37

  
	
   

  	
  8T.

  	
  Labor
  Matters

  	
  38

  
	
   

  	
  8U.

  	
  Related
  Agreements, etc.

  	
  38

  
	
   

  	
  8V.

  	
  Casualty,
  Etc.

  	
  39

  
	
   

  	
  8W.

  	
  Material
  Contracts

  	
  39

  
	
   

  	
  8X.

  	
  Kraft
  Acquisition Documents

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  REPRESENTATIONS
  OF EACH PURCHASER

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9A.

  	
  Nature
  of Purchase

  	
  40

  
	
   

  	
  9B.

  	
  Source
  of Funds

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  DEFINITIONS;
  ACCOUNTING MATTERS

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10A.

  	
  Yield-Maintenance
  Terms

  	
  41

  
	
   

  	
  10B.

  	
  Other
  Terms

  	
  43

  
	
   

  	
  10C.

  	
  Accounting
  Principles, Terms and Determinations

  	
  60

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11A.

  	
  Note
  Payments

  	
  61

  
	
   

  	
  11B.

  	
  Expenses

  	
  61

  
	
   

  	
  11C.

  	
  Consent
  to Amendments

  	
  62

  
	
   

  	
  11D.

  	
  Form,
  Registration, Transfer and Exchange of Notes; Lost Notes

  	
  63

  
	
   

  	
  11E.

  	
  Persons
  Deemed Owners; Participations

  	
  64

  
	
   

  	
  11F.

  	
  Survival
  of Representations and Warranties; Entire Agreement

  	
  64

  
	
   

  	
  11G.

  	
  Successors
  and Assigns

  	
  64

  
	
   

  	
  11H.

  	
  Independence
  of Covenants

  	
  64

  
	
   

  	
  11I.

  	
  Notices

  	
  64

  
	
   

  	
  11J.

  	
  Payments
  Due on Non-Business Days

  	
  65

  
	
   

  	
  11K.

  	
  Satisfaction
  Requirement

  	
  65

  
	
   

  	
  11L.

  	
  GOVERNING
  LAW

  	
  65

  
	
   

  	
  11M.

  	
  SUBMISSION
  TO JURISDICTION; WAIVER OF JURY TRIAL

  	
  65

  
	
   

  	
  11N.

  	
  Severability

  	
  66

  
	
   

  	
  11O.

  	
  Descriptive
  Headings; Advice of Counsel; Interpretation; Time of the Essence

  	
  66

  
	
   

  	
  11P.

  	
  Counterparts;
  Facsimile or Electronic Signatures

  	
  66

  
	
   

  	
  11Q.

  	
  Severalty
  of Obligations

  	
  67

  
	
   

  	
  11R.

  	
  Independent
  Investigation

  	
  67

  
	
   

  	
  11S.

  	
  Directly
  or Indirectly

  	
  67

  
	
   

  	
  11T.

  	
  Confidential
  Information

  	
  67

  
	
   

  	
  11U.

  	
  Transaction
  References

  	
  68

  
	
   

  	
  11V.

  	
  Binding
  Agreement

  	
  69

  

 

iv

 

PURCHASER
SCHEDULE

 

	
  SCHEDULE
  3A

  	
   

  	
  —

  	
   

  	
  EXCLUDED
  ESTOPPEL AND CONSENT AGREEMENTS

  
	
  SCHEDULE
  3H

  	
   

  	
  —

  	
   

  	
  MATERIAL
  ADVERSE EFFECT

  
	
  SCHEDULE
  6B(f)

  	
   

  	
  —

  	
   

  	
  EXISTING
  DEBT

  
	
  SCHEDULE
  6B(g)

  	
   

  	
  —

  	
   

  	
  DEBT
  TO BE REPAID

  
	
  SCHEDULE
  6C

  	
   

  	
  —

  	
   

  	
  EXISTING
  LIENS

  
	
  SCHEDULE
  6I

  	
   

  	
  —

  	
   

  	
  UNCONDITIONAL
  PURCHASE OBLIGATIONS

  
	
  SCHEDULE
  6L

  	
   

  	
  —

  	
   

  	
  INVESTMENTS

  
	
  SCHEDULE
  6R

  	
   

  	
  —

  	
   

  	
  HOLDING
  COMPANY CONTRACTS

  
	
  SCHEDULE
  8A(1)

  	
   

  	
  —

  	
   

  	
  SUBSIDIARIES

  
	
  SCHEDUL
  8C

  	
   

  	
  —

  	
   

  	
  ACTONS
  PENDING

  
	
  SCHEDULE
  8F

  	
   

  	
  —

  	
   

  	
  TAXES

  
	
  SCHEDULE
  8G

  	
   

  	
  —

  	
   

  	
  LIST
  OF AGREEMENTS RESTRICTING INDEBTEDNESS

  
	
  SCHEDULE
  8K

  	
   

  	
  —

  	
   

  	
  FILINGS
  AND RECORDINGS

  
	
  SCHEDULE
  8Q

  	
   

  	
  —

  	
   

  	
  INFORMATION
  REGARDING THE PARENT AND SUBSIDIARIES

  
	
  SCHEDULE
  8T

  	
   

  	
  —

  	
   

  	
  LABOR
  MATTERS

  
	
  SCHEDULE
  8V

  	
   

  	
  —

  	
   

  	
  CASUALTY

  
	
  SCHEDULE
  8W

  	
   

  	
  —

  	
   

  	
  MATERIAL
  CONTRACTS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT
  A

  	
   

  	
  —

  	
   

  	
  FORM OF
  NOTE

  
	
  EXHIBIT
  B

  	
   

  	
  —

  	
   

  	
  FORM OF
  DISBURSEMENT DIRECTION LETTER

  
	
  EXHIBIT
  C

  	
   

  	
  —

  	
   

  	
  FORM OF
  GUARANTY AGREEMENT

  
	
  EXHIBIT
  D-1

  	
   

  	
  —

  	
   

  	
  FORM OF
  OPINION OF COMPANY’S AND GUARANTORS’ COUNSEL

  
	
  EXHIBIT D-2

  	
   

  	
  —

  	
   

  	
  FORM OF OPINION OF
  COMPANY’S AND GUARANTOR’S LOCAL COUNSEL

  

 

v

 

KAPSTONE PAPER AND PACKAGING
CORPORATION 

KAPSTONE KRAFT PAPER CORPORATION

1101 Skokie Boulevard, Suite 300

Northbrook, Illinois  60062

 

As of July 1, 2008

 

To Each of the Purchasers
Named in the

Purchaser Schedule Attached Hereto

 

Ladies and Gentlemen:

 

The undersigned, Kapstone Kraft
Paper Corporation, a Delaware corporation (the “Company”),
and Kapstone Paper and Packaging Corporation, a Delaware corporation and the
owner of all of the outstanding shares of capital stock of the Company (the “Parent”), hereby agree with the purchasers named in the
Purchaser Schedule attached hereto (herein called the “Purchasers”) as set forth below.  Reference is made to paragraph 10 hereof for
definitions of capitalized terms used herein and not otherwise defined.

 

1.             AUTHORIZATION
OF ISSUE OF NOTES.  The Company
will authorize the issue of its senior secured promissory notes (the “Notes”) in the aggregate principal amount
of $40,000,000, to be dated the date of issue thereof, to mature July 1,
2015, to bear interest on the unpaid balance thereof from the date thereof
until the principal thereof shall have become due and payable at the rate of
8.30% per annum (provided that, during any period when an Event of Default
shall be in existence, at the election of the Required Holder(s) the
outstanding principal balance of the Notes shall bear interest from and after
the date of such Event of Default and until the date such Event of Default
ceases to be in existence at the rate per annum from time to time equal to the
Default Rate) and on overdue payments at the rate per annum from time to time
equal to the Default Rate, and to be substantially in the form of Exhibit A
attached hereto.  The term “Notes” as used herein shall include each
such senior secured promissory note delivered pursuant to any provision of this
Agreement and each such senior secured promissory note delivered in
substitution or exchange for any other Note pursuant to any such provision.

 

2.             PURCHASE
AND SALE OF NOTES.  The Company
hereby agrees to sell to each Purchaser and, subject to the terms and
conditions herein set forth, each Purchaser agrees to purchase from the Company
the aggregate principal amount of Notes set forth opposite such Purchaser’s
name in the Purchaser Schedule attached hereto at 100% of such aggregate
principal amount.  The Company will
deliver to each Purchaser, at the offices of Schiff Hardin LLP at 6600 Sears
Tower, Chicago, Illinois, 60606, one or more Notes registered in such Purchaser’s
name (or, if specified in the Purchaser Schedule, in the name of the nominee(s) for
such Purchaser specified in the Purchaser Schedule), evidencing the aggregate
principal amount of Notes to be purchased by such Purchaser and in the
denomination or denominations specified with respect to such Purchaser in the
Purchaser Schedule against payment of the purchase price thereof by transfer of
immediately available funds on the date of closing, which shall be July 1,

 

 

2008 (herein called the “closing” or the “date of closing”), for credit to the account or accounts as
shall be specified in a letter on the Company’s letterhead, in substantially
the form of Exhibit B attached hereto, from the Company to the Purchasers
delivered prior to the date of closing.

 

3.             CONDITIONS
OF CLOSING.  Each
Purchaser’s obligation to purchase and pay for the Notes to be purchased by
such Purchaser hereunder is subject to the satisfaction, on or before the date
of closing, of the following conditions:

 

3A.          Documents.  Such Purchaser shall have received original
counterparts or, if satisfactory to such Purchaser, certified or other copies,
of all of the following, each duly executed and delivered by the party or
parties thereto, in form and substance satisfactory to such Purchaser, dated
the date of closing unless otherwise indicated, and on the date of closing in
full force and effect with no event having occurred and being then continuing
that would constitute a default thereunder or constitute or provide the basis
for the termination thereof:

 

(i)            the Note or Notes to be
purchased by such Purchaser in the form of Exhibit A attached hereto;

 

(ii)           an Intercreditor and
Collateral Agency Agreement among the Purchasers, the Bank Agent, the
Collateral Agent, the Company and the Guarantors (herein, as the same may be
amended, modified or supplemented from time to time in accordance with the
provisions thereof, called the “Intercreditor
Agreement”);

 

(iii)          a Guaranty Agreement made by
each Guarantor in favor of the holders of the Notes in the form of Exhibit C
attached hereto (together with any other guaranty pursuant to which the Notes
are guarantied and which is entered into as contemplated hereby or by the
Intercreditor Agreement or by any other Transaction Document, as the same may
be amended, modified or supplemented from time to time in accordance with the
provisions thereof, together with all joinders thereto, the “Guaranty Agreement”);

 

(iv)          a Pledge and Security
Agreement made by the Company and each Guarantor in favor of the Collateral
Agent for the benefit of the Banks and the holders of the Notes under which the
Notes, the Company’s obligations under the Credit Agreement and such Guarantor’s
obligations under its Guaranty Agreement are secured by a security interest in
all personal property of the Company and such Guarantor, including without
limitation by a pledge of all of the capital stock of or other ownership
interests in the Company and each Subsidiary of the Company (together with any
other security agreement pursuant to which the Notes are secured and which is
entered into as contemplated hereby, by the Intercreditor Agreement or by any
other Transaction Document, as the same may be amended, modified, or
supplemented from time to time in accordance with the provisions thereof,
collectively called the “Security Agreements”
and individually called a “Security Agreement”);

 

(v)           a Mortgage or Leasehold
Mortgage made by the Company and each Guarantor, as appropriate, with respect
to each parcel of real property owned or leased by the Company or such
Guarantor which is listed on Schedule 8Q hereto in favor of the Collateral
Agent for the benefit of the Banks and the holders of the Notes under which

 

2

 

the Notes, the Company’s
obligations under the Credit Agreement and such Guarantor’s obligations under
its Guaranty Agreement, as applicable, are secured by a mortgage lien in such
parcel or leasehold interest, as the case may be (together with any other
mortgage pursuant to which the Notes are secured and which is entered into as
contemplated hereby, by the Intercreditor Agreement or by any other Transaction
Document, as the same may be amended, modified or supplemented from time to
time in accordance with the provisions thereof, collectively called the “Mortgages” and individually called a “Mortgage”);

 

(vi)          Deposit Account Control
Agreements and the Securities Account Control Agreements made by the Company
and each Guarantor to the extent required under the Security Agreement, in
favor of the Collateral Agent for the benefit of the Banks and the holders of
the Notes under which the Notes, the Company’s obligations under the Credit
Agreement and such Guarantor’s obligations under its Guaranty Agreement, as
applicable, are secured by a lien in such each deposit account and each
securities account of the Company and the Guarantors described therein;

 

(vii)         except as set forth on
Schedule 3A, estoppel and consent agreements executed by each of the lessors of
the leased real properties of the Company and each Guarantor, along with (1) a
memorandum of lease in recordable form with respect to such leasehold interest,
executed and acknowledged by the owner of the affected real property, as
lessor, or (2) evidence that the applicable lease with respect to such
leasehold interest or a memorandum thereof has been recorded in all places
necessary or desirable, in such Purchaser’s reasonable judgment, to give
constructive notice to third-party purchasers of such leasehold interest, or (3) if
such leasehold interest was acquired or subleased from the holder of a recorded
leasehold interest, the applicable assignment or sublease document, executed
and acknowledged by such holder, in each case in form sufficient to give such
constructive notice upon recordation and otherwise in form satisfactory to such
Purchaser;

 

(viii)        all chattel paper,
instruments and documents of title in which the Collateral Agent has been
granted a security interest and are then required under the Collateral
Documents to be delivered to the Collateral Agent, together with the related
transfer documents executed in blank, in each case received by the Collateral
Agent, all Uniform Commercial Code financing statements perfecting the security
interests and liens granted to the Collateral Agent, duly filed in all offices
necessary to perfect such security interests and liens or deemed by such
Purchaser to be advisable, and all such other certificates, documents,
agreements, recording and filings necessary to establish a valid and perfected
first priority lien and security interest (subject only to Liens described in
paragraph 6C) in favor of the Collateral Agent in all of the Collateral or
deemed by such Purchaser to be advisable;

 

(ix)           a Secretary’s Certificate
signed by the Secretary or an Assistant Secretary and one other officer of the
Company and each Guarantor certifying, among other things, (a) as to the
names, titles and true signatures of the officers of the Company or such
Guarantor, as the case may be, authorized to sign the Transaction Documents to
which the Company or such Guarantor, as the case may be, is a party, (b) that
attached thereto is

 

3

 

a
true, accurate and complete copy of the certificate of incorporation or other
formation document of the Company or such Guarantor, as the case may be,
certified by the Secretary of State of the state of organization of the Company
or such Guarantor, as the case may be, as of a recent date, (c) that
attached thereto is a true, accurate and complete copy of the by-laws,
operating agreement or other organizational document of the Company or the
Guarantor, as the case may be, which were duly adopted and are in effect as of
the date of closing and have been in effect immediately prior to and at all
times since the adoption of the resolutions referred to in clause (d), below, (d) that
attached thereto is a true, accurate and complete copy of the resolutions of
the board of directors or other managing body of the Company or such Guarantor,
as the case may be, duly adopted at a meeting or by unanimous written consent
of such board of directors or other managing body, authorizing the execution,
delivery and performance of the Transaction Documents to which the Company or
such Guarantor, as the case may be, is a party, and that such resolutions have
not been amended, modified, revoked or rescinded, are in full force and effect
and are the only resolutions of the shareholders, partners or members of the
Company or such Guarantor, as the case may be, or of such board of directors or
other managing body or any committee thereof relating to the subject matter
thereof, (e) that the Transaction Documents executed and delivered to such
Purchaser by the Company or such Guarantor, as the case may be, are in the form
approved by its board of directors or other managing body in the resolutions
referred to in clause (d), above, and (f) that no dissolution or
liquidation proceedings as to the Company or any Subsidiary have been commenced
or are contemplated;

 

(x)            a certificate of corporate
or other type of entity and tax good standing for the Company and each
Guarantor from the Secretary of State of the state of organization of the
Company and each Guarantor and of each state in which the Company or any
Guarantor is required to be qualified to transact business as a foreign
organization, in each case dated as of a recent date;

 

(xi)           Certified copies of Requests
for Information or Copies (Form UCC-11) or equivalent reports listing all
effective financing statements which name the Company, any Subsidiary or any
Guarantor (under its present name and previous names) or any Seller (to the
extent the collateral described on such financing statement includes any “Purchased
Assets” as defined in the Mead Purchase Agreement) as debtor and which are
filed in the office of the Secretary of State in any state in which the
Company, any Subsidiary or any Guarantor or any Seller is located (as
determined under the UCC), and lien and judgment search reports from the county
recorder of any county in which the Company, any Subsidiary or any Guarantor or
any Seller maintains an office or in which any assets of the Company, any
Subsidiary or any Guarantor or any Seller (to the extent such assets include
any “Purchased Assets” as defined in the Mead Purchase Agreement) are located;
and

 

(xii)          such other certificates, documents
and agreements as such Purchaser may reasonably request.

 

3B.          Opinion of
Purchasers’ Special Counsel.  Such Purchaser shall have received from
Schiff Hardin LLP, who are acting as special counsel for the Purchasers in
connection with

 

4

 

this
transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.

 

3C.          Opinion of
Company’s and Guarantors’ Counsel.  Such Purchaser shall have received from (i) Sonnenschein Nath & Rosenthal LLP,
special counsel for the Company and the Guarantors, a favorable opinion
satisfactory to such Purchaser and substantially in the form of Exhibit D-1
attached hereto, (ii) Ellis Lawhorne & Sims, P.A., special South
Carolina counsel to the Company and the Guarantors, a favorable opinion
satisfactory to such Purchaser and substantially in the form of Exhibit D-2
attached hereto, and (iii) Seller’s
counsel, a favorable opinion delivered in connection with the Kraft Acquisition
which opinion is either (A) addressed to such Purchaser or (B) accompanied
by a reliance letter from such counsel addressed to such Purchaser that
expressly states that such Purchaser may rely on such opinion, and each
of the Parent and the Company, by its execution hereof, hereby requests and
authorizes the counsel referenced in clauses (i) and (ii) to render
such opinions and to allow such Purchaser to rely on such opinions, and
understands and agrees that each Purchaser receiving such opinions will be
relying, and is hereby authorized to rely, on such opinions.

 

3D.          Representations
and Warranties; No Default; Satisfaction of Conditions; Material Adverse
Effect.  The representations and
warranties contained in paragraph 8 hereof and in the other Transaction
Documents shall be true on and as of the date of closing, both before and
immediately after giving effect to the issuance of the Notes on the date of
closing and the consummation of any other transactions contemplated hereby,
including the consummation of the Kraft Acquisition, and by the other
Transaction Documents; there shall exist on the date of closing no Event of
Default or Default, both before and immediately after giving effect to the
issuance of the Notes on the date of closing and the consummation of any other
transactions contemplated hereby, including the consummation of the Kraft
Acquisition, and by the other Transaction Documents; the Company and each
Guarantor shall have performed all agreements and satisfied all conditions
required under this Agreement or the other Transaction Documents to be
performed or satisfied on or before the date of closing; and the Company and
each Guarantor shall have delivered to such Purchaser an Officer’s Certificate
of the Parent, dated the date of closing, to each such effect.

 

3E.          Purchase
Permitted By Applicable Laws; Approvals.  The purchase of and payment for the Notes to
be purchased by such Purchaser on the date of closing on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation
T, U or X of the Board of Governors of the Federal Reserve System) and shall
not subject such Purchaser to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and such Purchaser shall have received such certificates or other evidence as
it may request to establish compliance with this condition.  All necessary authorizations, consents,
approvals, exceptions or other actions by or notices to or filings with any
court or administrative or governmental body or other Person required in connection
with the execution, delivery and performance of this Agreement, the Notes and
the other Transaction Documents and the Mead Purchase Agreement or the
consummation of the transactions contemplated hereby or thereby shall have been
issued or made, shall be final and in full force and effect and shall be in
form and substance satisfactory

 

5

 

to
such Purchaser, and the Company and each Guarantor shall have delivered to such
Purchaser an Officer’s Certificate, dated the date of closing, to each such
effect.

 

3F.          Title
Insurance, Surveys and Environmental Assessments.  Such Purchaser shall have received (i) fully
paid American Land Title Association Lender’s Extended Coverage title insurance
policies or binder therefore (the “Mortgage Policies”), with endorsements and in amounts
acceptable to the Required Holders, issued, coinsured and reinsured by title
insurers acceptable to such Purchaser, insuring the Mortgages to be valid first
and subsisting Liens on the property described therein, free and clear of all
defects (including, but not limited to, mechanics’ and materialmen’s Liens) and
encumbrances, excepting only those encumbrances specifically permitted under
each respective Mortgage and other Liens permitted under the Transaction
Documents, and providing for such other affirmative insurance (including for
mechanics’ and materialmen’s Liens and for zoning of the applicable property)
and such coinsurance and direct access reinsurance as such Purchaser may deem
necessary or desirable, (ii) Express Map form surveys, for which all
necessary fees (where applicable) have been paid, and dated no more than 30
days before the day of closing, and which shall be in form sufficient to delete
any standard “survey exception” which would otherwise be contained in the
related Mortgage Policy, certified to such Purchaser and the issuer of the
Mortgage Policies in a manner satisfactory to such Purchaser by a land surveyor
duly registered and licensed in the States in which the property described in
such surveys is located and acceptable to such Purchaser, showing all buildings
and other improvements, any off-site improvements, the location of any
easements, parking spaces, rights of way, building set-back lines and other
dimensional regulations and the absence of encroachments, either by such
improvements or on to such property, and other defects, other than
encroachments and other defects acceptable to such Purchaser, (iii) engineering,
soils and other reports (including environmental audits and corresponding reliance
letters) as to the properties described in the Mortgages, from professional
firms acceptable to such Purchaser, (iv) evidence of the insurance
required by the terms of the Mortgages, and (v) evidence that all other
action that such Purchaser or the Collateral Agent may deem necessary or
desirable in order to create valid first and subsisting Liens on the property
described in the Mortgages has been taken.

 

3G.          Certificates
of Insurance.  The Company
shall have delivered from insurance carriers acceptable to such Purchaser
certificates of insurance in such forms and amounts acceptable to such
Purchaser evidencing insurance required to be maintained under paragraph 5F
hereof or under any of the Collateral Documents under insurance policies with
loss payable and additional insured clauses in favor of the Collateral Agent
and acceptable to such Purchaser.

 

3H.          Material
Adverse Change.  No material
adverse change in the business, condition (financial or otherwise), operations
or prospects of the Parent, the Company and its Subsidiaries, taken as a whole,
since December 31, 2007 shall have occurred or be threatened, as
determined by such Purchaser in its sole judgment, except as set forth on
Schedule 3H hereto.

 

3I.           New Credit
Agreement.  The Credit
Agreement, providing for a $100,000,000 revolving credit facility to the
Company and for term loans to the Company in the aggregate principal amount of
$415,000,000 (or if the Term B-2 Loan (as defined in the Credit Agreement) is
funded prior to the date of closing, then $455,000,000) and having other terms
and conditions satisfactory to such Purchaser, shall have been duly executed
and delivered by the Company, the Bank Agent and the Banks, and shall be in
full force and effect.  All conditions
precedent to the

 

6

 

making of the term loans and the initial
revolving loan under the Credit Agreement shall have been satisfied (except to
the extent waived with the consent of such Purchaser) and the Company shall
have received the proceeds of the term loans and the initial revolving loan
thereunder.  Such Purchaser shall have
received a copy of the Credit Agreement and all instruments, documents and
agreements delivered at the closing of making of the term loan and the initial
revolving loan thereunder, certified by an Officer’s Certificate of the Parent,
dated the date of closing, as correct and complete.

 

3J.          Termination
of Existing Credit Agreement.  All obligations of the Company under the
Credit Agreement, dated January 2, 2007, between the Company, LaSalle Bank
National Association, as agent, and the lenders party thereto (as amended and
in effect on the date of closing, the “Existing Credit Agreement”),
shall have been discharged, the Existing Credit Agreement shall have been
terminated, all liens and security interests securing any of such obligations,
and all financing statements or other filings and recordings relating thereto,
shall have been terminated and released, or such Purchaser shall have received
payoff letters with respect to the release of such liens and termination of
such financing statements, and otherwise in form and substance satisfactory to
such Purchaser, and such payoff letters shall be in full force and effect, and
such Purchaser shall have received such evidence as it may reasonably request
to demonstrate the satisfaction of the foregoing.

 

3K.          Kraft
Acquisition.  The Asset
Purchase Agreement dated April 4, 2008, among the Sellers, the Parent and
Oak Acquisition LLC (the “Mead Purchase Agreement”),
shall be in form and substance satisfactory to such Purchaser, shall have been
duly executed and delivered by the parties thereto and shall be in full force
and effect.  All conditions precedent to
the Company’s obligations to acquire the “Purchased Assets” (as defined in the
Mead Purchase Agreement) thereunder (the “Kraft Acquisition”)
shall have been satisfied (except to the extent waived with the consent of such
Purchaser), and substantially concurrently with the closing of the transaction
contemplated hereby, Oak Acquisition LLC (now known as Kapstone Charleston
Kraft LLC) shall have consummated the acquisition of the assets to be acquired
thereunder.  All necessary
authorizations, consents, approvals, exceptions or other actions by or notices
to or filings with any court or administrative or governmental body or other
Person required in connection with the execution, delivery or performance of
the Mead Purchase Agreement or the consummation of the transactions
contemplated thereby shall be final and in full force and effect and shall be
in form and substance satisfactory to such Purchaser.  Such Purchaser shall have received (i) a
copy of the Mead Purchase Agreement and all instruments, documents and
agreements related thereto (the “Kraft Acquisition Documents”),
and all other Related Agreements, certified by an Officer’s Certificate of the
Parent, dated the date of closing, as correct and complete, (ii) an
Officer’s Certificate of the Parent, dated as of the date of closing,
certifying that no event or circumstance since December 31, 2007 that has
had or could be reasonably expected to have, either individually or in the
aggregate, a Material Adverse Effect (as such term is defined in the Mead
Purchase Agreement) except as set forth on Schedule 3H hereto shall have
occurred or be threatened; and (iii) evidence that the sum of (a) the
aggregate purchase price of the Kraft Acquisition, (b) the amount required
to refinance the Existing Credit Agreement and (c) related fees and
expenses shall not exceed $551,000,000.

 

3L.          Note
Assignment; BONY Documents; SCANA Side Letters; Underwriting Agreement;
Warrants; International Paper Purchase Agreement.  Such Purchaser shall have

 

7

 

received a copy of (i) the assignment agreement
relating to the assignment of the Cogen Notes from Teachers to the Seller (the “Note Assignment”), (ii) the acknowledgement signed by
Teachers relating to the Note Assignment, (iii) the BONY documents, (iv) the
SCANA Side Letters, (v) the Underwriting Agreement, (vi) the Warrants
and (vii) the International Paper Purchase Agreement, each on terms and
conditions satisfactory to such Purchaser, certified by an Officer’s
Certificate of the Parent, dated the date of closing, as correct and complete.

 

3M.         Financial
Information.  Such
Purchaser shall have received:

 

(i)            the financial statements
described in paragraph 8B;

 

(ii)           projected income statements,
balance sheets and cash flow statements prepared by the Company on a Pro Forma
Basis and giving effect to the Kraft Acquisition, the issuance of the Notes
contemplated hereby and the Loans (as defined in the Credit Agreement)
contemplated by the Credit Agreement and the use of proceeds therefrom, on a
quarterly basis for the fiscal year ending December 31, 2008 and on an
annual basis for each fiscal year thereafter;

 

(iii)          a pro forma consolidated
balance sheet of the Parent and its Subsidiaries as of the date of the most
recent consolidated balance sheet delivered pursuant to clause (ii) of
this paragraph 3M, adjusted to give effect to the consummation of the Kraft
Acquisition and the issuance of the Notes contemplated hereby and the Loans (as
defined in the Credit Agreement) contemplated by the Credit Agreement as if
such transactions had occurred on such date, and which is consistent in all
material respects with the sources and uses of cash for the Kraft Acquisition
previously described to such Purchaser and the forecasts previously provided to
such Purchaser; and

 

(iv)          an officer’s certificate
prepared by the chief financial officer of the Company as to the financial
condition, solvency and related matters of the Company and its Subsidiaries,
after giving effect to the Kraft Acquisition, the issuance of the Notes and the
Loans (as defined in the Credit Agreement) to be made on the date of closing
and the other transactions contemplated by the Transaction Documents, in form
and substance reasonably satisfactory to such Purchaser.

 

3N.          Capitalization.  The pro forma capitalization and structure of
the Parent and its Subsidiaries (excluding any change in ownership of the
Parent involving a non-material shareholder) after giving effect to the Kraft
Acquisition as disclosed in the Mead Purchase Agreement shall not have been
modified in any material respect without the approval of the Required Holders.

 

3O.         Debt.  Such Purchaser shall have received evidence
that the Parent and its Subsidiaries shall have no Debt other than the Debt
evidenced by the Notes and other Debt permitted pursuant to paragraph 6B.

 

3P.          Intercompany
Subordinated Note.  Such
Purchaser shall have received a copy of the Intercompany Subordinated Note in
form and substance satisfactory to such Purchaser, certified by an Officer’s
Certificate of the Parent, dated the date of closing, as correct and complete.

 

8

 

3Q.         Fees and
Expenses.  Without
limiting the provisions of paragraph 11B hereof, the Company shall have paid
the reasonable fees, charges and disbursements of special counsel to the
Purchaser referred to in paragraph 3B hereof.

 

3R.          Structuring
Fee.  The Company shall have paid to
such Purchaser, by wire transfer of immediately available funds, such Purchaser’s
ratable portion (in proportion to the aggregate principal amount of the Notes
to be purchased by such Purchaser) of a structuring fee in the aggregate
amount, for all Purchasers, of $300,000.00.

 

3S.          Proceedings.  All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in substance and
form to such Purchaser, and such Purchaser shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.

 

4.             PREPAYMENTS.  The Notes shall be subject to prepayment only
with respect to the required prepayments specified in paragraphs 4A and 4E, the
optional prepayments permitted by paragraph 4B, and upon acceleration pursuant
to paragraph 7A.

 

4A(1).     Required
Prepayments.  Until the
Notes shall be paid in full, the Company shall apply to the prepayment of the
Notes, without premium, the sum of $3,000,000 on July 1, 2009, $4,000,000
on July 1, 2010, and $5,000,000 on July 1 in each of the years 2011
to 2014, inclusive, and such principal amounts of the Notes, together with
interest thereon to the prepayment dates, shall become due on such prepayment
dates (provided that upon any prepayment or purchase of the Notes pursuant to
paragraph 4B, 4E or 4F the principal amount of each required prepayment of the
Notes becoming due under this paragraph 4A(1) on and after the date of
such prepayment or purchase shall be reduced in the same proportion as the
aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment
or purchase).  The remaining outstanding
principal amount of the Notes, together with any accrued and unpaid interest
thereon, shall become due on July 1, 2015, the maturity date of the Notes.

 

4A(2).     Required
Prepayment Pursuant to Intercreditor Agreement.  If any amounts are to be applied to the
principal of the Notes on any date pursuant to the terms of the Intercreditor
Agreement other than as a result of a Senior Debt Prepayment Event (prepayments
as a result of which are governed by paragraph 4E), such principal amount of
the Notes, together with interest thereon to such date and together with the
Yield-Maintenance Amount, if any, with respect to each Note, shall be due and
payable on such date.  Any partial
prepayment of the Notes pursuant to this paragraph 4A(2) shall be applied
in satisfaction of the required payments of principal thereof (including the
required payment of principal due upon the maturity thereof) in the  inverse order of their scheduled due dates.

 

4B.          Optional
Prepayment With Yield-Maintenance Amount.  The Notes shall be subject to prepayment, in
whole at any time or from time to time in part (in integral multiples of
$1,000,000 and in a minimum amount of $5,000,000 on any one occurrence), at the
option of the Company, at 100% of the principal amount so prepaid plus interest
thereon to the prepayment date and the Yield-Maintenance Amount, if any, with
respect to each Note.  Any partial
prepayment of the Notes pursuant to this paragraph 4B shall be applied in
satisfaction of required

 

9

 

payments of principal thereof (including the
required payment of principal due upon the maturity thereof) on a pro rata
basis in proportion to the respective amounts thereof.

 

4C.          Notice of
Optional Prepayment.  The Company
shall give the holder of each Note irrevocable written notice of any prepayment
pursuant to paragraph 4B not less than 10 Business Days prior to the prepayment
date, specifying such prepayment date and the aggregate principal amount of the
Notes, and of the Notes held by such holder, to be prepaid on such date and
stating that such prepayment is to be made pursuant to paragraph 4B.  Notice of prepayment having been given as
aforesaid, the principal amount of the Notes specified in such notice, together
with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, with respect thereto, shall become due and
payable on such prepayment date.  The
Company shall, on or before the day on which it gives written notice of any
prepayment pursuant to paragraph 4B, give telephonic notice of the principal
amount of the Notes to be prepaid and the prepayment date to each Significant
Holder which shall have designated a recipient of such notices in the Purchaser
Schedule attached hereto or by notice in writing to the Company.

 

4D.          Partial
Payments Pro Rata.  In the case
of each prepayment of less than the entire outstanding principal amount of all
Notes pursuant to paragraph 4A(1), 4A(2) or 4B, the principal amount so
prepaid shall be allocated pro rata to all Notes at the time outstanding in
proportion to the respective outstanding principal amounts thereof.

 

4E.          Offer to Prepay Notes upon a
Senior Debt Prepayment Event.

 

4E(1).     Notice of
Senior Debt Prepayment Event.  The Company
will, at least 15 days prior to any Senior Debt Prepayment Event (or, if such
prior notice is not possible, as promptly as possible), give written notice of
such Senior Debt Prepayment Event to each holder of the Notes.  Such notice shall contain and constitute an
offer to prepay the Notes as described in paragraph 4E(3) and shall be
accompanied by the certificate described in paragraph 4E(6).

 

4E(2).     Notice of
Acceptance of Offer under Paragraph 4E(1). 
If the Company shall at any time receive an acceptance to an offer to
prepay Notes under paragraph 4E(1) from some, but not all, of the holders
of the Notes, then the Company will, within two Business Days after the receipt
of such acceptance, give written notice of such acceptance to each other holder
of the Notes.

 

4E(3).     Offer to
Prepay Notes.  The offer to
prepay Notes contemplated by paragraph 4E(1) shall be an offer to prepay,
in accordance with and subject to this paragraph 4E, the Ratable Portion of the
Notes held by each holder (in this case only, “holder” in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) at the time of the occurrence of the Senior Debt
Prepayment Event.

 

4E(4).     Rejection;
Acceptance.  A holder of
Notes may accept or reject the offer to prepay made pursuant to this paragraph
4E by causing a notice of such acceptance or rejection to be delivered to the
Company prior to the prepayment date.  A
failure by a

 

10

 

holder of Notes to so
respond to an offer to prepay made pursuant to this paragraph 4E shall be
deemed to constitute a rejection of such offer by such holder if no Event of
Default exists at the time of such Senior Debt Prepayment Event and no Event of
Default would result therefrom, or an acceptance of such offer by such holder
if an Event of Default exists at the time of such Senior Debt Prepayment Event
or would result therefrom.

 

4E(5).     Prepayment.  Prepayment of the Notes to
be prepaid pursuant to this paragraph 4E shall be at 100% of the principal
amount of such Notes to be prepaid, together with interest on the principal
amount of such Notes to be prepaid accrued to the date of prepayment and, if an
Event of Default exists at the time of such Senior Debt Prepayment Event or
would result therefrom, the Yield-Maintenance Amount, if any, with respect
thereto.  The prepayment shall be made at
the time of occurrence of a Senior Debt Prepayment Event.

 

4E(6).     Officer’s
Certificate.  Each offer to
prepay the Notes pursuant to this paragraph 4E shall be accompanied by a
certificate, executed by a Responsible Officer of the Company and dated the
date of such offer, specifying (i) the proposed prepayment date (which
shall be the date of the Senior Debt Prepayment Event), (ii) that such
offer is made pursuant to this paragraph 4E, (iii) the Ratable Portion of
the principal amount of each Note offered to be prepaid, (iv) the interest
that would be due on the ratable Portion of each Note offered to be prepaid,
accrued to the prepayment date, (v) that the conditions of this paragraph
4E have been fulfilled, and (vi) in reasonable detail, the nature and
anticipated date of the Senior Debt Prepayment Event.

 

4F.          No
Acquisition of Notes.  The
Company shall not, and shall not permit any of its Subsidiaries or Affiliates
to, prepay or otherwise retire in whole or in part prior to their stated final
maturity (other than by prepayment pursuant to paragraph 4A or 4B, upon
acceptance of an offer to prepay pursuant to paragraph 4E or upon acceleration
of such final maturity pursuant to paragraph 7A), or purchase or otherwise
acquire, directly or indirectly, Notes held by any holder unless the Company or
such Subsidiary or Affiliate shall have offered to prepay or otherwise retire
or purchase or otherwise acquire, as the case may be, the same proportion of
the aggregate principal amount of Notes held by each other holder of Notes at
the time outstanding upon the same terms and conditions.  Any Notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement.

 

5.             AFFIRMATIVE COVENANTS.

 

5A.          Financial
Statements.  Each of the
Parent and the Company  covenants that it
will deliver to each Significant Holder in duplicate:

 

(i)            as soon as practicable and
in any event within 30 days after the end of each month (other than the last
month of a quarterly period) in each fiscal year, consolidated statements of
earnings and cash flows of the Parent and its Subsidiaries for the period from
the beginning of the current fiscal year to the end of such month, and a
consolidated balance sheet of the Parent and its Subsidiaries as at the end of such
month,

 

11

 

setting
forth in each case in comparative form figures for the corresponding period in
the preceding fiscal year, all in reasonable detail and certified by an
authorized financial officer of the Parent as fairly presenting, in all
material respects, the financial position of the Parent and its Subsidiaries
and their results of operations and cash flows, subject to changes resulting
from year-end adjustments; provided, however, that any comparisons delivered in
accordance with this clause (i) with respect to any period preceding the
date of closing shall include a comparison with respect to the Business for
such period;

 

(ii)           as soon as practicable and
in any event within 45 days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, consolidated statements of
earnings and cash flows of the Parent and its Subsidiaries for the period from
the beginning of the current fiscal year to the end of such quarterly period,
and a consolidated balance sheet of the Parent and its Subsidiaries as at the
end of such quarterly period, setting forth in each case in comparative form
figures for the budget for such quarterly period and for the corresponding
period in the preceding fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles applicable to
quarterly financial statements and certified by an authorized financial officer
of the Parent as fairly presenting, in all material respects, the financial
position of the Parent and its Subsidiaries and their results of operations and
cash flows, subject to changes resulting from year-end adjustments; provided,
however, that any comparisons delivered in accordance with this clause (ii) with
respect to any period preceding the date of closing shall include a comparison
with respect to the Business for such period;

 

(iii)          as soon as practicable and
in any event within 90 days after the end of each fiscal year, consolidating
and consolidated statements of earnings and cash flows of the Parent and its
Subsidiaries for such year, and a consolidating and consolidated balance sheet
of the Parent and its Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
budget for such fiscal year and from the preceding annual audit, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles and, as to the consolidated statements, certified without reference
to going concern value and without qualification by independent public
accountants of recognized national standing selected by the Parent and
reasonably acceptable to the Required Holder(s), and, as to the consolidating
statements, certified by an authorized financial officer of the Parent;
provided, however, that any comparisons delivered in accordance with this
clause (iii) with respect to any period preceding the date of closing
shall include a comparison with respect to the Business for such period;

 

(iv)          promptly upon transmission
thereof, copies of all such financial statements, proxy statements, notices and
reports as it shall send to the Parent’s public stockholders generally and
copies of all registration statements (without exhibits) (other than on Form S-8)
and all reports which it files with the Securities and Exchange Commission (or
any governmental body or agency succeeding to the functions of the Securities
and Exchange Commission);

 

12

 

(v)           promptly upon receipt
thereof, a copy of each management letter or other report submitted to the
Parent, the Company or any other Subsidiary of the Parent by independent
accountants in connection with any annual or interim audit made by them of the
books of the Parent, the Company or any other Subsidiary of the Parent;

 

(vi)          as soon as practicable, and
in any event not later than 45 days after the commencement of each fiscal year,
financial projections for the Parent and its Subsidiaries for such fiscal year
(including quarterly operating and cash flow budgets) prepared in a manner
consistent with the projections delivered by the Parent to the Purchasers prior
to the date of closing or otherwise in a manner reasonably satisfactory to the Required
Holders, accompanied by an Officer’s Certificate of the Parent on behalf of the
Parent to the effect that (a) such projections were prepared by the Parent
in good faith, (b) the Parent has a reasonable basis for the assumptions
contained in such projections and (c) such projections have been prepared
in accordance with such assumptions;

 

(vii)         promptly upon becoming aware
of any of the following, written notice describing the same and the steps being
taken by the Parent or the Subsidiary affected thereby with respect thereto:

 

(a)           any litigation,
arbitration or governmental investigation or proceeding not previously
disclosed by the Company to the holders of the Notes which has been instituted
or, to the knowledge of the Company or the Parent, is threatened against the
Parent or any Subsidiary or to which any of the properties of any thereof is
subject which might reasonably be expected to have a Material Adverse Effect;

 

(b)           the institution
of any steps by any member of the Controlled Group or any other Person to
terminate any Plan, or the failure of any ERISA Affiliate to make a required
contribution to any Plan (if such failure is sufficient to give rise to a Lien
under Section 302(f) of ERISA) or to any Multiemployer Plan, or the
taking of any action with respect to a Plan which could result in the
requirement that the Parent or any Subsidiary furnish a bond or other security
to the PBGC or such Plan, or the occurrence of any event with respect to any
Plan or Multiemployer Plan which could result in the incurrence by any ERISA
Affiliate of any material liability, fine or penalty (including any claim or
demand for withdrawal liability or partial withdrawal from any Multiemployer
Plan), or any material increase in the contingent liability of the Parent or
any Subsidiary with respect to any post-retirement welfare benefit plan or
other employee benefit plan of the Company or another ERISA Affiliate, or any
notice that any Multiemployer Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, that any such plan is or has been funded at a rate
less than that required under Section 412 of the Code, that any such plan
is or may be terminated, or that any such plan is or may become insolvent but
only to the extent that the event(s) described in this subsection
individually or in the aggregate might reasonably be expected to have a
Material Adverse Effect;

 

13

 

(c)           any cancellation
or material change in any material insurance maintained by the Parent or any
Subsidiary; or

 

(d)           any other event
(including (1) any violation of any Environmental Law or the assertion of
any Environmental Claim or (2) the enactment or effectiveness of any law, rule or
regulation) which might reasonably be expected to have a Material Adverse
Effect.

 

(viii)        promptly following receipt,
copies of any material notices (including notices of default or acceleration)
received in connection with the Related Transactions;

 

(ix)           simultaneously with the
transmission thereof, to the extent not otherwise furnished hereunder, copies
of all notices, reports, financial statements or other communications given to
the Bank Agent or the Banks under the Credit Agreement, excluding routine
borrowing requests and notices selecting interest rates applicable thereto; and

 

(x)            with reasonable promptness,
such other information as such Significant Holder may reasonably request.

 

Together with each delivery of financial
statements required by clauses (ii) and (iii) above, the Parent will
deliver to each Significant Holder an Officer’s Certificate of the Parent
demonstrating (with computations in reasonable detail) compliance by the Parent
and its Subsidiaries with the provisions of paragraphs 6A(1), 6A(2), 6B, 6D,
6E, 6F and 6L and stating that there exists no Event of Default or Default, or,
if any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Parent and its Subsidiaries propose to
take with respect thereto.  The Parent
also covenants that immediately after any Responsible Officer obtains knowledge
of an Event of Default or Default, it will deliver to each Significant Holder
an Officer’s Certificate of the Parent specifying the nature and period of
existence thereof and what action the Parent proposes to take with respect
thereto.

 

Documents
required to be delivered pursuant to paragraphs 5A(i), (ii) (iii) and
(iv) (to the extent any such documents are included in materials otherwise
filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date (i) on which the Parent posts such documents, or provides a link
thereto on the Parent’s website on the Internet at the website address
[www.kapstonepaper.com] to which each holder of the Notes has access; or (ii) on
which such documents are posted on the Parent’s behalf on an Internet or
intranet website, if any, to which each holder of the Notes has access (whether
a commercial, third-party website); provided that:  (a) the Parent shall deliver paper
copies of such documents to each Significant Holder that requests the Parent to
deliver such paper copies until a written request to cease delivering paper
copies is given by such Significant Holder and (b) the Parent shall notify
each holder of the Notes (by telecopier or, if instructed by such Significant
Holder, electronic mail) of the posting of any such documents and provide to
the such Significant Holder by electronic mail, electronic versions (i.e.,
soft copies) of such documents and any passwords or other requirements to
access such documents on the website where they have been posted.  Notwithstanding anything contained herein, in
every instance the Parent shall be required to provide paper copies of the
Officer’s Certificates of the

 

14

 

Parent
and the certificate of accountants described in the prior paragraph to each
Significant Holder.

 

5B.          Information
Required by Rule 144A.  The Company covenants that it will, upon the
request of the holder of any Note, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes, except at such times as
the Company is subject to and in compliance with the reporting requirements of
section 13 or 15(d) of the Exchange Act. 
For the purpose of this paragraph 5B, the term “qualified institutional
buyer” shall have the meaning specified in Rule 144A under the Securities
Act.

 

5C.          Inspection
of Property.  Each of the
Parent and the Company covenants that it will permit any Person designated by
any Significant Holder in writing, at such Significant Holder’s expense if no
Default or Event of Default exists and at the Company’s expense if a Default or
an Event of Default exists, to visit and inspect any of the properties of the
Parent, the Company and any Subsidiary, to examine the corporate books and
financial records of the Parent, the Company and any Subsidiary and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of the Parent and the
Company and its independent public accountants, all at such reasonable times
and with reasonable notice (or at any time without notice if an Event of
Default exists) and as often as such Significant Holder may reasonably request.

 

5D.          Covenant to
Secure Notes Equally.  Each
of the Parent and the  Company covenants
that if the Parent, the Company or any other Subsidiary of the Parent shall
create or assume any Lien upon any of its property or assets, whether now owned
or hereafter acquired, other than Liens permitted by the provisions of
paragraph 6C (unless prior written consent to the creation or assumption
thereof shall have been obtained pursuant to paragraph 11C), it will make or
cause to be made effective provision whereby the Notes will be secured by such
Lien equally and ratably with any and all other Debt thereby secured so long as
any such other Debt shall be so secured; provided that the creation and
maintenance of such equal and ratable Lien shall not in any way limit or modify
the right of the holders of the Notes to enforce the provisions of paragraph
6C.

 

5E.          Compliance
with Law.  Each of the
Parent and the Company covenants that it will, and will cause each of the
Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
environmental laws, and will obtain and maintain in full force and effect all
licenses, certificates, permits, franchises, operating rights and other
authorizations from federal, state, foreign, regional, municipal and other
local regulatory bodies or administrative agencies or governmental bodies
having jurisdiction over the Parent and its Subsidiaries or any of their
respective properties necessary to the ownership, operation or maintenance of
their respective properties or to the conduct of their respective businesses,
in each case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in full force and effect such licenses, certificates,
permits, franchises,

 

15

 

operating rights and other authorizations
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

 

5F.          Maintenance
of Insurance.  Each of the
Parent and the  Company covenants that it
will, and will cause each of its Subsidiaries to, maintain, with financially
sound and reputable insurers, insurance with respect to their respective
properties and businesses against such casualties and contingencies, of such
types, on such terms and in such amounts as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

 

5G.          Maintenance
of Properties.  Each of the
Parent and the  Company covenants that it
will, and will cause each of its Subsidiaries to, maintain and keep, or cause
to be maintained and kept, their respective properties in good repair, working
order and condition (other than ordinary wear and tear), and from time to time
make, or cause to be made, all needful and proper repairs, renewals and
replacements thereto, so that the business carried on in connection therewith
may be properly conducted at all times, provided that this paragraph 5G shall
not prevent the Parent or any of its Subsidiaries from discontinuing the
operation and the maintenance of any of its properties if such discontinuance
is desirable in the conduct of its business and such discontinuance could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

 

5H.          Payment of
Taxes.  Each of the Parent and the
Company covenants that it will, and will cause each of its Subsidiaries to,
file all income tax or similar tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges or levies
payable by any of them, and to pay and discharge all amounts payable for work,
labor and materials, in each case to the extent such taxes, assessments,
charges, levies and amounts payable have become due and payable and before they
have become delinquent, provided that neither the Parent nor any Subsidiary of
the Parent need pay any such tax, assessment, charge, levy or amount payable if
(i) the amount, applicability or validity thereof is being actively
contested by the Parent or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Parent or such Subsidiary has established
adequate reserves therefor in accordance with generally accepted accounting
principles on the books of the Parent or such Subsidiary or (ii) the
nonpayment of all such taxes, assessments, charges, levies and amounts payable
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.

 

5I.           Corporate
Existence.  Each of the
Parent and the Company will at all times preserve and keep in full force and
effect its corporate existence.  The
Parent will at all times preserve and keep in full force and effect the
corporate existence of the Company. 
Subject to paragraphs 6F and 6G, each of the Parent and the Company will
at all times preserve and keep in full force and effect the corporate, limited
liability company or partnership, as the case may be, existence of each of the
Subsidiaries (other than the Company), unless the termination of or failure to
preserve and keep in full force and effect such corporate existence,
certificate, could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.

 

5J.          Lines of
Business.  Each of the
Parent and the Company covenants that it will not, and it will not permit any
of the Subsidiaries to, engage in any business if, as a result

 

16

 

thereof, the general nature of the businesses
of the Parent and its Subsidiaries, taken as a whole, would be substantially
changed from the businesses of the Parent and its Subsidiaries as conducted as
of the date of closing.

 

5K.          Subsequent
Guarantors.  Each of the
Parent and the Company covenants that if at any time any Person, which is not a
Domestic Subsidiary as of the date hereof, shall become a Domestic Subsidiary,
the Parent and the Company will cause such Person to execute and deliver to the
holders of the Notes a joinder to the Guaranty Agreement substantially in the
form of the joinder attached to the Guaranty Agreement delivered at the closing
pursuant to paragraph 3A(iii) hereof, and will cause such Person to comply
with the provisions of paragraph 5L hereof. 
Each such joinder shall be accompanied by a certificate of the Secretary
or Assistant Secretary of such Person certifying such Person’s charter and
by-laws (or comparable governing documents), resolutions of the board of
directors (or comparable governing body) of such Person authorizing the
execution and delivery of such joinder to the Guaranty Agreement and documents
executed by such Person pursuant to paragraph 5L hereof and incumbency and
specimen signatures of the officers of such Person executing such
documents.  Without limiting the
generality of the foregoing, the Company shall cause Cogen JV and any other
Domestic Subsidiary acquired or formed in connection with the consummation of
the Kraft Acquisition to comply with the provisions of this paragraph 5K and
the provisions of paragraph 5L not later that 14 days after the date of
closing.

 

5L.          Deliveries;
Further Assurances.  Each of the
Parent and the Company covenants to, and to cause each Subsidiary to, at its
sole expense, promptly execute and deliver, or cause to be executed and
delivered, to the holders of the Notes or the Collateral Agent, in due form for
filing or recording (the Company hereby agrees to pay the cost of filing or
recording the same (including without limitation any and all filing fees and
recording taxes)) in all public offices necessary or deemed necessary by the
Required Holder(s) or the Collateral Agent, such collateral assignments,
security agreements, pledge agreements, mortgages, leasehold mortgages,
warehouse receipts, bailee letters, consents, waivers, financing statements and
other instruments and documents, and do such other acts and things, including,
without limitation, all acts and things as the Required Holder(s) or the
Collateral Agent may from time to time reasonably request, to establish and
maintain to the satisfaction of the Required Holder(s) and the Collateral
Agent a valid and perfected first priority security interest in favor of the
Collateral Agent in all of the present and/or future Collateral free of all
other Liens whatsoever (subject only to the Liens permitted by paragraph 6C),
and to deliver to the Collateral Agent or the holders of the Notes such
certificates, documents, instruments and opinions in connection therewith as
may be reasonably requested by the Collateral Agent or the Required Holder(s),
each in form and substance reasonably satisfactory to the Collateral Agent and
the Required Holder(s).  In the event
that the Company or any Subsidiary hereafter acquires any real property or
interest in real property on which a Lien is required to be granted to the
Collateral Agent pursuant to this paragraph, then the Company shall also supply
to the Collateral Agent and the holders of the Notes, at the Company’s sole
cost and expense, a survey, environmental report, hazard insurance policy and a
mortgagee’s policy of title insurance from a title insurer reasonably
acceptable to the Required Holder(s) insuring the validity of such Lien on
the real property or interest in real property encumbered thereby, each in form
and substance reasonably satisfactory to the Collateral Agent and the Required
Holder(s).  Each of the Parent and the
Company hereby irrevocably makes, constitutes and appoints the Collateral Agent
(and all other persons

 

17

 

designated by the Collateral Agent for that
purpose) as the Parent’ and the Company’s true and lawful agent and
attorney-in-fact to, if the Parent or the Company, as the case may be, fails to
do so as required upon the request of the Required Holder(s) or the
Collateral Agent, sign the Parent’s or the Company’s, as the case may be, name
on any such agreements, instruments and documents referred to in the preceding
sentences and to deliver such agreements, instruments and documents to such
Persons as the Required Holder(s) or the Collateral Agent in their sole
discretion may elect.

 

5M.         Agreement
Assuming Liability on Notes.  Each of the Parent and the Company covenants
that, if at any time any Person should become liable (as co-obligor, endorser,
guarantor or surety) on any other obligation of the Parent or any Subsidiary
under the Credit Agreement or any other Loan Documents (as defined in the
Credit Agreement), the Parent and the Company will, at the same time, cause
such Person to deliver to the holders of the Notes an agreement pursuant to
which such Person becomes similarly liable on the Notes.  The delivery of such an agreement shall not in
any way limit or modify the rights of the holders of the Notes to enforce the
provisions of paragraph 6B.

 

5N.          Compliance with Terms of Leaseholds.  Each of the Parent and the
Company covenants to, and shall cause its Subsidiaries to, make all payments
and otherwise perform all obligations in respect of all leases of real property
to which the Parent, the Company or any other Subsidiary is a party, keep such
leases in full force and effect and not allow such leases to lapse or be
terminated or any rights to renew such leases to be forfeited or cancelled,
notify the holders of the Notes of any default by any party with respect to
such leases and cooperate with the holders of the Notes in all respects to cure
any such default, and cause each of its Subsidiaries to do so, except, in any
case, where the failure to do so, either individually or in the aggregate,
could not be reasonably likely to have a Material Adverse Effect.

 

5O.         Material Contracts.  Each of the Parent and the
Company covenants to, and shall cause the Subsidiaries to, perform and observe
all the terms and provisions of each Material Contract to be performed or
observed by it, maintain each such Material Contract in full force and effect
(except in connection with the termination or replacement of such Material
Contracts in the ordinary course of business), enforce each such Material
Contract in accordance with its terms, except, in any case, where the failure
to do so, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

 

5P.          Amendments to Credit Agreement or Loan Documents.  Each of the Parent and the
Company covenants that if either the Credit Agreement or any of the other Loan
Documents (as defined in the Credit Agreement as in effect on the date of
closing) is amended after the date of closing to change (in a manner that is
more restrictive to the Parent, the Company or any of the other Subsidiaries)
any financial covenant, negative covenant or event of default as it exists on
the date of closing, or any such section or other provision of such document is
amended to include any additional financial covenants, negative covenants or
events of default that are not set forth in (or that are more restrictive than
those set forth in) this Agreement, then the Parent and the Company shall, and
shall cause each applicable Subsidiary to, offer to amend this Agreement and/or
the other Transaction Documents, as applicable (and, upon the request of the
Required Holders, the Parent and the Company shall, and shall cause

 

18

 

each applicable Subsidiary to, execute
appropriate amendment documents) to reflect corresponding changes.

 

6.             NEGATIVE COVENANTS.

 

6A.          Financial
Covenants.

 

6A(1).     Total Leverage Ratio.  The Parent covenants is shall not
permit the Total Leverage Ratio as of the end of any fiscal quarter of the
Parent set forth below to be greater than the ratio corresponding to such
fiscal quarter:

 

	
  Calendar Year

  	
   

  	
  March 31

  	
   

  	
  June 30

  	
   

  	
  September 30

  	
   

  	
  December 31

  	
   

  
	
  2008

  	
   

  	
  N/A

  	
   

  	
  4.00:1.00

  	
   

  	
  4.00:1.00

  	
   

  	
  3.75:1.00

  	
   

  
	
  2009

  	
   

  	
  3.50:1.00

  	
   

  	
  3.50:1.00

  	
   

  	
  3.50:1.00

  	
   

  	
  3.00:1.00

  	
   

  
	
  2010

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  
	
  2011

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  
	
  2012

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  	
  3.00:1.00

  	
   

  
	
  2013

  	
   

  	
  3.00:1.00

  	
   

  	
  2.50:1.00

  	
   

  	
  2.50:1.00

  	
   

  	
  2.50:1.00

  	
   

  
	
  Thereafter

  	
   

  	
  2.50: 1.00

  	
   

  	
  2.50: 1.00

  	
   

  	
  2.50: 1.00

  	
   

  	
  2.50: 1.00

  	
   

  

 

6A(2).     Fixed
Charge Coverage Ratio.  The
Parent covenants it shall not permit the Fixed Charge Coverage Ratio as of the
end of any fiscal quarter of the Parent to be less than (i) from the date
of closing to and including the fiscal quarter ending September 30, 2011,
1.10:1.00 and (ii) commencing with the fiscal quarter ending December 31,
2011 and thereafter, 1.15:1.00.

 

6B.          Debt.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to, create, incur,
assume or suffer to exist any Debt, except:

 

(a)           the obligations under this
Agreement and Notes;

 

(b)           Debt secured by Liens
permitted by paragraph 6C(d), and extensions, renewals and refinancings
thereof; provided that the aggregate amount of all such Debt at any time
outstanding shall not exceed $5,000,000;

 

(c)           Debt (other than the
Intercompany Subordinated Debt) of the Company to any Guarantor or of any
Guarantor to the Company; provided that to the extent requested in
writing by the Required Holders such Debt shall be evidenced by a demand note
in form and substance reasonably satisfactory to the Required Holders and
pledged and delivered to the Collateral Agent pursuant to the Collateral
Documents as additional collateral security for the Notes, and the obligations
under such demand note shall be subordinated to the Notes in a manner
reasonably satisfactory to the Required Holders;

 

(d)           the Earn-Out Obligations;

 

(e)           Hedging Obligations incurred
for bona fide hedging purposes and not for speculation, and Debt in respect of
Cash Management Agreements;

 

19

 

(f)            Debt outstanding on the date
hereof and listed on Schedule 6B(f) and any refinancings, refundings,
renewals or extensions thereof; provided  that (i) the amount
of such Debt is not increased at the time of such refinancing, refunding,
renewal or extension except by an amount equal to a reasonable premium or other
reasonable amount paid, and fees and expenses reasonably incurred, in
connection with such refinancing and by an amount equal to any existing
commitments unutilized thereunder and (ii) the terms relating to principal
amount, amortization, maturity, collateral (if any) and subordination (if any),
and other material terms taken as a whole, of any such refinancing, refunding,
renewing or extending Debt, and of any agreement entered into and of any
instrument issued in connection therewith, are no less favorable in any
material respect to the Parent, the Company and the other Subsidiaries or the
holders of the Notes than the terms of any agreement or instrument governing
the Debt being refinanced, refunded, renewed or extended and the interest rate
applicable to any such refinancing, refunding, renewing or extending Debt does
not exceed the then applicable market interest rate;

 

(g)           the Debt to be Repaid (which
Debt shall include the Term B-2 Loan (as defined in the Credit Agreement) if
such Term B-2 Loan is funded prior to the date of closing) set forth on
Schedule 6B(g) (so long as such Debt is repaid on the date of closing);

 

(h)           Contingent Liabilities
arising with respect to indemnification obligations in favor of (i) sellers
in connection with acquisitions or (ii) purchasers in connection with
dispositions, in each case permitted under paragraph 6F;

 

(i)            Intercompany Subordinated
Debt in an aggregate outstanding principal amount not at any time exceeding
$87,000,000 (plus accrued paid-in-kind interest);

 

(j)            Contingent Liabilities in respect
of guarantees of the Company or any Guarantor in respect of Debt or other
obligations otherwise permitted hereunder and to the extent such Debt is
required to be subordinated such Contingent Liabilities will be equally
subordinated;

 

(k)           subject to the
terms of the Intercreditor Agreement (to the extent applicable), Debt pursuant
to the Credit Agreement and the Loan Documents (as defined in the Credit
Agreement) in an aggregate outstanding principal amount not at any time
exceeding $515,000,000, and any refinancings, refundings, renewals or
extensions thereof to the extent permitted under the Intercreditor Agreement
(to the extent applicable), provided that the Term B-2 Loan (as defined in the
Credit Agreement) shall not be permitted under this clause (k) and instead
is addressed in the foregoing clause (g);

 

(l)            unsecured Debt
and Debt secured by Liens permitted under paragraph 6C(h), in addition to the
Debt listed above, collectively, in an aggregate outstanding principal amount
not at any time exceeding $20,000,000 so long as (i) no Default or Event
of Default has occurred and is continuing on the date of any such Debt is
incurred

 

20

 

or would result therefrom,
and (ii) after giving effect to such Debt, the Parent and its Subsidiaries
are in compliance on a pro forma basis with the financial covenants set forth
in paragraph 6A as of the last day of the most recent fiscal quarter for which
an Officer’s Certificate of the Parent has been delivered in accordance with
paragraph 5A;  and

 

(m)          other unsecured Debt, in
addition to the Debt listed above, in an aggregate outstanding principal amount
not at any time exceeding $30,000,000 so long as (i) such Debt is
subordinated to the Notes, and pursuant to documentation, on terms satisfactory
to the Required Holders, (ii) no Default or Event of Default has occurred
and is continuing on the date of any such Debt is incurred or would result
therefrom, and (iii) after giving effect to such Debt, the Parent and its
Subsidiaries are in compliance on a pro forma basis with the financial
covenants set forth in paragraph 6A as of the last day of the most recent
fiscal quarter for which an Officer’s Certificate of the Parent has been
delivered in accordance with paragraph 5A.

 

6C.          Liens.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:

 

(a)           Liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in
each case, for which it maintains adequate reserves;

 

(b)           Liens arising in the
ordinary course of business (such as (i) Liens of landlords, carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by law
and (ii) Liens in the form of deposits or pledges incurred in connection
with worker’s compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety
bonds, bids, performance bonds and similar obligations) for sums not overdue or
being contested in good faith by appropriate proceedings and not involving any
advances or borrowed money or the deferred purchase price of property or
services and, in each case, for which it maintains adequate reserves;

 

(c)           Liens described on Schedule
6C as of the date of closing;

 

(d)           subject to the limitation
set forth in paragraph 6B(b), (i) Liens arising in connection with Capital
Leases (and attaching only to the property being leased), (ii) Liens
existing on property at the time of the acquisition thereof by the Company or
any Guarantor (and not created in contemplation of such acquisition) and (iii) Liens
that constitute purchase money security interests on any property securing debt
incurred for the purpose of financing all or any part of the cost of acquiring
such property, provided that any such Lien attaches to such property
within 60 days of the acquisition thereof and attaches solely to the property
so acquired;

 

21

 

(e)           attachments, appeal bonds,
judgments and other similar Liens, for sums not exceeding $5,000,000 arising in
connection with court proceedings, provided the execution or other
enforcement of such Liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate proceedings;

 

(f)            easements, rights of way,
restrictions, minor defects or irregularities in title and other similar Liens
not interfering in any material respect with the ordinary conduct of the
business of the Parent, the Company or any other Subsidiary;

 

(g)           Liens in favor of the
Collateral Agent arising under the Collateral Documents, which also may secure,
subject to the terms of the Intercreditor Agreement (to the extent applicable),
the obligations under the Credit Agreement to the extent permitted under
paragraph 6B(k);

 

(h)           Liens on the property of a
Person existing at the time such Person becomes a Subsidiary of the Company in
a transaction permitted hereunder; provided, however, that any
such Lien may not extend to any other property of the Parent, the Company or
any other Subsidiary that is not a Subsidiary of such Person; provided,
further, that any such Lien was not created in anticipation of or in connection
with the transaction or series of transactions pursuant to which such Person
became a Subsidiary of the Company; and

 

(i)            the
replacement, extension or renewal of any Lien permitted by clause (c) above
upon or in the same property subject thereto arising out of the extension,
renewal or replacement of the Debt secured thereby (without increase in the
amount thereof).

 

6D.          Operating Leases.  Each of the Parent and the
Company covenants that it shall not permit the aggregate amount of all rental
payments under Operating Leases made (or scheduled to be made) by the Parent,
the Company and the other Subsidiaries (on a consolidated basis) to exceed
$5,000,000 in any fiscal year.

 

6E.          Restricted Payments.  Each of the Parent and the
Company covenants that it shall not, and shall not permit any Subsidiary to,
make any distribution to any holders of its Capital Securities, purchase or
redeem any of its Capital Securities, pay any management fees or similar fees
or expenses to any of its equityholders or any Affiliate thereof, make any
redemption, prepayment, defeasance, repurchase or any other payment in respect
of any Intercompany Subordinated Debt or set aside funds for any of the
foregoing. Notwithstanding the foregoing:

 

(a)           the Company may reimburse
Parent for out-of-pocket costs and expenses incurred by Parent on behalf of or
for the benefit of the Company, and for fees charged by Parent to the Company,
in an aggregate amount not to exceed $4,000,000 during any fiscal year;

 

22

 

(b)           subject to the Intercompany
Subordination Agreement, the Company may make payments in kind of scheduled
interest on the Intercompany Subordinated Note at the non-default rate of
interest set forth in the Intercompany Subordinated Note;

 

(c)           any Subsidiary may pay
dividends or make other distributions to the Company or to a Domestic
Subsidiary that is a Wholly-Owned Subsidiary and a Guarantor;

 

(d)           so long as the Company files
a consolidated income tax return with Parent, the Company may make
distributions to Parent to permit Parent to pay federal and state income taxes
then due and owing; provided that the amount of such distribution shall
not be greater, nor the receipt by the Company of tax benefits less, than they
would have been had the Company not filed a consolidated return with Parent;

 

(e)           the Company may make, and
the Parent may distribute to its shareholders, the Permitted Parent Dividends
and other cash distributions to Parent from time to time so long as (i) no
Default or Event of Default has occurred and is continuing on the date of any
such distribution or would result therefrom, (ii) after giving effect to
any such distribution (and any Debt incurred to fund such distribution), the
Parent is in compliance on a pro forma basis with the financial covenants set
forth in paragraph 6A as of the last day of the most recent fiscal quarter for
which an Officer’s Certificate of the Parent has been delivered in accordance
with paragraph 5A, and (iii) after giving effect to any such distribution,
the aggregate amount of all such distributions made following the date of
closing shall not exceed Cumulative Available Excess Cash Flow as of the date
of such distribution; and

 

(f)            the Parent may satisfy its
obligations in connection with the Warrants and the Underwriting Agreement.

 

6F.          Mergers,
Consolidations, Acquisitions, Sales.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to:

 

(a)           be a party to any merger or
consolidation, or purchase or otherwise acquire all or substantially all of the
assets or any Capital Securities of any class of, or any partnership or joint
venture interest in, any other Person other than in connection with a Permitted
Acquisition,

 

(b)           sell, transfer, convey or
lease all or any substantial part of its assets or Capital Securities (including
the sale of Capital Securities of any Subsidiary) except for the disposition of
assets no longer useful or used in connection with the Company or a Guarantor’s
business, sales of inventory in the ordinary course of business and obsolete or
worn-out equipment, or

 

(c)           sell or assign with or
without recourse any receivables,

 

23

 

except for (i) any such
merger, consolidation, sale, transfer, conveyance, lease or assignment of or by
any Wholly-Owned Subsidiary into the Company or into any other Domestic
Subsidiary that is a Wholly-Owned Subsidiary and a Guarantor; (ii) any
such purchase or other acquisition by the Company or any Domestic Subsidiary
that is a Wholly-Owned Subsidiary and a Guarantor of the assets or Capital
Securities of any Wholly-Owned Subsidiary; (iii) sales and dispositions of
assets (including the Capital Securities of Subsidiaries) for at least fair
market value (as determined by the Board of Directors of the Parent) so long as
the net book value of all assets sold or otherwise disposed of in any fiscal
year does not exceed 10% of the net book value of the consolidated assets of
the Parent and its Subsidiaries as of the last day of the preceding fiscal
year.

 

6G.          Modification of
Organization Documents.  Each of the Parent and the Company covenants
that it shall not permit any Organizational Documents of the Parent, the
Company or any other Subsidiary to be amended or modified in any way which
could reasonably be expected to adversely affect the interests of the holders
of the Notes; and not change, or allow the Parent, the Company or any other
Subsidiary to change, its state of formation or its organizational form upon
less than 30 days’ prior notice to the holders of the Notes.

 

6H.          Transactions
with Affiliates.   Each of the
Parent and the Company covenants that it shall not, and shall not permit any
Subsidiary to, enter into, or cause, suffer or permit to exist any transaction,
arrangement or contract with any of its other Affiliates (other than the
Company, the Parent and the other Guarantors) which is on terms which are less
favorable than are obtainable from any Person which is not one of its
Affiliates; provided, that the transactions contemplated under the Intercompany
Subordinated Note shall not be deemed violative of this paragraph 6H.

 

6I.           Unconditional
Purchase Obligations.  Except as set forth on Schedule 6I, each of
the Parent and the Company covenants that it shall not, and shall not permit
any Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services if such contract requires
that payment be made by it regardless of whether delivery is ever made of such
materials, supplies or other property or services.

 

6J.          Inconsistent Agreements.  Each of the Parent and the
Company covenants that it shall not, and shall not permit any Subsidiary to,
enter into any agreement containing any provision which would (a) be
violated or breached by the issuance of the Notes by the Company hereunder or
by the performance by the Company or any Subsidiary of its obligations
hereunder, under the Notes or under any other Transaction Document, (b) prohibit
the Parent, the Company or any other Subsidiary from granting to the Collateral
Agent a Lien on any of its assets or (c) create or permit to exist or
become effective any encumbrance or restriction on the ability of any
Subsidiary to (i) pay dividends or make other distributions to the Company
or any other Subsidiary, or pay any Debt owed to the Company or any other
Subsidiary, (ii) make loans or advances to the Company or any Guarantor or
(iii) transfer any of its assets or properties to the Company or any
Guarantor, other than (A) customary restrictions and conditions contained
in agreements relating to the sale of all or a substantial part of the assets
of any Subsidiary pending such sale, provided that such restrictions and
conditions apply only to the Subsidiary to be sold and such sale is permitted
hereunder (B) restrictions or conditions imposed by any agreement

 

24

 

relating
to purchase money Debt, Capital Leases and other secured Debt permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Debt and (C) customary provisions in leases and other
contracts restricting the assignment thereof.

 

6K.                             Business
Activities; Issuance of Equity.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to, engage in any line
of business other than the businesses engaged in on the date hereof and
businesses reasonably related thereto. The Company covenants that it shall not,
and each of the Parent and the Company covenants that it shall not permit any
Subsidiary (other than the Parent) to, issue any Capital Securities other than
any issuance by a Subsidiary to the Company or another Subsidiary that is a
Guarantor in accordance with paragraphs 6E and 6L.

 

6L.                              Investments.  Each of the Parent and the
Company covenants that it shall not, and shall not permit any Subsidiary to,
make or permit to exist any Investment in any other Person, except the
following:

 

(a)           contributions by the Company to the
capital of any Domestic Subsidiary that is a Wholly-Owned Subsidiary, or by any
Subsidiary to the capital of any other Domestic Subsidiary that is a
Wholly-Owned Subsidiary, so long as the recipient of any such capital
contribution has guaranteed the Company’s obligations under the Notes and this
Agreement and such guaranty is secured by a pledge of all of its Capital
Securities and substantially all of its 
real and personal property, in each case in accordance with paragraph
5L;

 

(b)           Investments constituting Debt
permitted by paragraph 6B;

 

(c)           Contingent Liabilities constituting
Debt permitted by paragraph 6B or Liens permitted by paragraph 6C;

 

(d)           Cash Equivalent Investments;

 

(e)           bank deposits in the ordinary course
of business and in connection with Cash Management Agreements; provided
that any such deposit accounts shall (A) be subject to a Deposit Account
Control Agreement in favor of the Collateral Agent or other similar arrangement
satisfactory to the Required Holders or (B) not at any time exceed
$150,000;

 

(f)            Investments in securities of Account
Debtors received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such account debtors;

 

(g)           Investments in Foreign Subsidiaries
in an aggregate amount not to exceed $500,000 at any one time outstanding; and

 

(h)           Investments listed on Schedule 6L as
of the date of closing;

 

25

 

provided that (x) any
Investment which when made complies with the requirements of the definition of
the term “Cash Equivalent Investment” may
continue to be held notwithstanding that such Investment if made thereafter would
not comply with such requirements; and (y) no Investment otherwise
permitted by clause (b) or (c) shall be permitted to be made if,
immediately before or after giving effect thereto, any Default or Event of
Default exists.

 

6M.         Restriction of
Amendments to Certain Documents.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Guarantor to, amend or otherwise
modify, or waive any rights under, the Related Agreements, if, in any case,
such amendment, modification or waiver could be adverse to the interests of the
holders of the Notes. Without limiting the generality of the foregoing, the
Company shall not amend the International Paper Purchase Agreement in any
manner which would accelerate the payment of the Earn-Out Obligations and the
Company shall not prepay the Earn-Out Obligations.

 

6N.          Working
Capital Facility.  The Company
covenants that it shall not at any time fail to maintain in full force and
effect a working capital credit facility with aggregate commitments to provide
revolving loans to the Company of not less than $75,000,0000.

 

6O.         Accounting
Changes; Fiscal Year.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to, make any change in (a) accounting
policies or reporting practices, except as permitted by GAAP, or (b) its
fiscal year.

 

6P.          Prepayments,
Etc. of Debt.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to, prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner, or make any payment in violation of any subordination terms of,
any Debt, except (a) the prepayment of the Notes in accordance with the
terms of this Agreement, (b) regularly scheduled or required repayments or
redemptions of Debt set forth in Schedule 6B(f) and refinancings and
refundings of such Debt in compliance with paragraph 6B(c), (c) with
respect to the term loans outstanding under the Credit Agreement, (i) scheduled
principal amortization payments as provided in the Credit Agreement as in
effect on the closing date, provided if the Term B-2 Loan (as defined in the
Credit Agreement) has been funded prior to the date of closing, then it shall
be prepaid on the date of closing with proceeds of the Notes, (ii) mandatory
prepayments as provided in the Credit Agreement as in effect on the closing
date, and (iii) so long as no Default or Event of Default has occurred or
is continuing, optional prepayments of the Term Loans (as defined in the Credit
Agreement) in accordance with the terms of this Agreement and the Intercreditor
Agreement (to the extent applicable) and (d) repayments of the revolving
loans outstanding under the Credit Agreement.

 

6Q.         Amendment, Etc.
of Debt.  Each of the Parent and the Company covenants
that it shall not, and shall not permit any Subsidiary to, amend, modify or
change in any manner any term or condition of (a) any Debt set forth in
Schedule 6B, except for (i) any refinancing, refunding, renewal or
extension thereof permitted by paragraph 6B(c), (ii) in connection with
Contingent Liabilities arising with respect to indemnification obligations, any
modification or amendment that does not increase the amount or accelerate the
time of payment of any such Debt

 

26

 

and
(iii) any other amendment or modification if, taken as a whole, such
amendment or modification would not (w) be adverse in any material respect
to the Parent, the Company and the other Subsidiaries, (x) shorten the
final maturity or average life to maturity, (y) require any payment to be
made sooner than originally scheduled or (z) increase the interest rate
applicable thereto or (b) the Credit Agreement, except to the extent
permitted under the Intercreditor Agreement (to the extent applicable) and in
accordance with paragraph 6P hereof.

 

6R.                             Holding Company.  The Parent covenants that it
shall not engage in any business or activity other than (a) the ownership
of all outstanding Capital Securities of the Company, (b) maintaining its
corporate existence, (c) formation and ownership of direct or indirect
Subsidiaries, (d) the issuance of Equity Interests (subject to compliance
with the applicable terms of this Agreement), (e) participating in tax,
accounting and other administrative activities as the parent of the
consolidated group of companies, including the Company and the other Guarantors
(including execution and delivery of contracts and agreements in the ordinary
course of business in connection therewith), (f) the execution and
delivery of the Transaction Documents and Loan Documents (as defined in the
Credit Agreement) to which it is a party and the performance of its obligations
thereunder, (g) fulfilling its obligations as an issuer of publicly traded
securities and an entity subject to (i) regulation by the SEC and (ii) applicable
securities laws and NASDAQ rules, (h) acting as the lender under the
Intercompany Subordinated Note, (i) the performance of its obligations
under the applicable contracts set forth on Schedule 6R, (j) the
performance of its obligations under the Warrants and the Underwriting
Agreement, (k) guarantees of obligations of the Company and the other
Guarantors in the ordinary course of business and (l) activities
incidental to the businesses or activities described in clauses (a) through
(l) of this paragraph 6Q.

 

6S.                              Limitation
on Speculative Hedging.  Each
of the Parent and Company covenants that it will not, and will not permit any Subsidiary to, at any time enter into any obligations under
any swap, hedging or similar transactions except to the extent entered into in
the ordinary course of business to hedge or limit currency exchange rate,
interest rate, commodity price or other price exposures from its line of
business and not entered into for speculative purposes.

 

6T.                              Terrorism
Sanctions Regulations.  Each of the Parent and the Company covenants
that it will not and will not permit any Subsidiary to (a) become a Person
described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in Section 1 of
the Anti-Terrorism Order or (b) engage in any dealings or transactions
with any such Person.

 

7.                                      EVENTS OF DEFAULT.

 

7A.                             Acceleration.  If any of
the following events shall occur and be continuing for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or otherwise):

 

(i)            the Company defaults in the payment of any principal of
or Yield-Maintenance Amount payable with respect to any Note when the same
shall become due, either by the terms thereof or otherwise as herein provided;
or

 

27

 

(ii)           the Company defaults in the payment of any interest on any
Note for more than 3 days after the date due; or

 

(iii)          except for Contingent Liabilities arising with respect to
indemnification obligations of the Parent, the Company or any other Subsidiary
being contested in good faith by appropriate proceedings and for which the
Parent, the Company or such other Subsidiary maintains adequate reserves, any
default or other event shall occur under the terms applicable to (i) Debt
under the Credit Agreement or any of the other Loan Documents (as defined in
the Credit Agreement) or (ii) any other Debt of the Parent, the Company or
any other Subsidiary in an aggregate amount (for all such Debt so affected and
including undrawn committed or available amounts and amounts owing to all
creditors under any combined or syndicated credit arrangement) exceeding
$5,000,000 and, in either case, such default or event shall (a) consist of
the failure to pay such Debt when due, whether by acceleration or otherwise, or
(b) accelerate the maturity of such Debt or permit the holder or holders
thereof, or any trustee or agent for such holder or holders, to cause such Debt
to become due and payable (or require the Parent, the Company or any other
Subsidiary to purchase or redeem such Debt or post cash collateral in respect
thereof) prior to its expressed maturity;

 

(iv)          any representation or warranty made by the Company, the
Parent or any other Guarantor herein or in any other Transaction Document or by
the Company, the Parent or any other Guarantor or any of its respective
officers in any writing furnished in connection with or pursuant to this
Agreement or any other Transaction Document shall be false or misleading in any
material respect on the date as of which made; or

 

(v)           the Company fails to perform or observe any agreement
contained in paragraph 4E or the Parent or the Company fails to perform or
observe any agreement contained in paragraph 5C, 5E, 5H or 6; or

 

(vi)          (a) the Parent or the Company fails to perform or
observe any agreement contained in paragraph 5A(i), (ii), (iii), (v) or (vi) or
the penultimate paragraph of paragraph 5A and such failure shall not be
remedied within 5 days after the earlier of the date any Responsible Officer
obtains actual knowledge thereof or any notice thereof is given to the Parent
or the Company by any Significant Holder, (b) the Parent or the Company
fails to perform or observe any other agreement, term or condition contained
herein and such failure shall not be remedied within 30 days after the earlier
of the date any Responsible Officer obtains actual knowledge thereof or any
notice thereof is given to the Parent or the Company by any Significant Holder,
or (c) the Company or any Guarantor fails to perform or observe any
agreement contained in any other Transaction Document and such failure shall
not be remedied within the grace period, if any, provided therefor in such
Transaction Document; or

 

(vii)         the Parent, the Company or any other Subsidiary becomes
insolvent or generally fails to pay, or admits in writing its inability or
refusal to pay, debts as they become due; or the Parent, the Company or any
other Subsidiary applies for, consents to, or the Parent, the Company or any
other Subsidiary acquiesces in the appointment of a trustee, receiver or other
custodian for such Person or any property thereof, or makes a

 

28

 

general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is
appointed for the Parent, the Company or any other Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of the Parent, the Company or
any other Subsidiary, and if such case or proceeding is not commenced by such
Person, it is consented to or acquiesced in by such Person, or remains for 60
days undismissed; or the Parent, the Company or any other Subsidiary takes any
action to authorize, or in furtherance of, any of the foregoing; or

 

(viii)        one or more judgments or orders for the
payment of money (not paid or fully covered by insurance maintained in
accordance with the requirements of this Agreement and as to which the relevant
insurance company has acknowledged coverage) aggregating in excess of
$5,000,000 shall be rendered against any or all of the Parent, the Company or
any other Subsidiary and either (a) enforcement proceedings shall have
been commenced by any creditor upon any such judgments or orders or (b) there
shall be any period of thirty (30) consecutive days during which a stay of
enforcement of any such judgments or orders, by reason of a pending appeal,
bond or otherwise, shall not be in effect; or

 

(ix)           (i) any Person institutes steps to terminate a Plan
if as a result of such termination the Parent, the Company or any ERISA
Affiliate could be required to make a contribution to such Plan, or could incur
a liability or obligation to such Pension Plan, in excess of $5,000,000; (ii) a
contribution failure occurs with respect to any Pension Plan sufficient to give
rise to a Lien under Section 302(f) of ERISA; (iii) the Unfunded
Liability exceeds twenty percent of the Total Plan Liability, or (iv) there
shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and
the withdrawal liability (without unaccrued interest) to Multiemployer Plans as
a result of such withdrawal (including any outstanding withdrawal liability
that the Parent, the Company or any ERISA Affiliate have incurred on the date
of such withdrawal) exceeds $5,000,000; or

 

(x)            any Guaranty Agreement or any Collateral Document shall
cease to be in full force and effect, or the Company or any Guarantor shall
contest or deny the validity or enforceability of, or deny that it has any
liability or obligations under, any Guaranty Agreement or any Collateral
Document, or the Collateral Agent does not have or ceases to have a valid first
priority perfected security interest (subject only to Liens permitted by
paragraph 6C) in any material part of the Collateral for the benefit of the
holders of the Notes; or

 

(xi)           an “Event of Default”, as defined in the Credit Agreement,
has occurred;

 

(xii)          the “Maturity Date” with respect to the “Revolving Credit
Facility” or the “Term A Loan” (each as defined in the Credit Agreement), has
occurred before June 12, 2013 or the “Maturity Date” with respect to the “Term
B Loan” (each as defined in the Credit Agreement), has occurred before June 12,
2015; or

 

29

 

(xiii)                          a Change of
Control has occurred; or

 

(xiv)        any subordination provision in the Intercompany Subordination
Agreement shall cease to be in full force and effect, or the Parent, the
Company or any other Subsidiary shall contest in any manner the validity,
binding nature or enforceability of any such provision;

 

then (a) if such event
is an Event of Default specified in clause (i) or (ii) of this
paragraph 7A, any holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare all of the Notes held by such holder to be, and all of the
Notes held by such holder shall thereupon be and become, immediately due and
payable at par together with interest accrued thereon, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company, (b) if such event is an Event of Default specified in clause (vii) of
this paragraph 7A with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and payable together
with interest accrued thereon and together with the Yield-Maintenance Amount,
if any, with respect to each Note, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company, and (c) if
such event is not an Event of Default specified in clause (vii) of this
paragraph 7A with respect to the Company, the Required Holder(s) may at
its or their option, by notice in writing to the Company, declare all of the
Notes to be, and all of the Notes shall thereupon be and become, immediately
due and payable together with interest accrued thereon and together with the
Yield-Maintenance Amount, if any, with respect to each Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company.  The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and without the occurrence
of an Event of Default and that the provision for payment of Yield-Maintenance
Amount by the Company in the event the Notes are prepaid or are accelerated as
a result of an Event of Default is intended to provide compensation for the
deprivation of such right under such circumstances.

 

7B.                             Rescission of Acceleration.  At any time after any or all of the Notes
shall have been declared immediately due and payable pursuant to paragraph 7A,
the Required Holder(s) may, by notice in writing to the Company, rescind
and annul such declaration and its consequences if (i) the Company shall
have paid all overdue interest on the Notes, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes which have
become due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal and Yield-Maintenance Amount at the
Default Rate, (ii) the Company shall not have paid any amounts which have
become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 11C, and (iv) no judgment or decree shall have been entered
for the payment of any amounts due pursuant to the Notes or this
Agreement.  No such rescission or
annulment shall extend to or affect any subsequent Event of Default or Default
or impair any right arising therefrom.

 

7C.                             Notice of Acceleration or Rescission.  Whenever any Note shall be declared
immediately due and payable pursuant to paragraph 7A or any such declaration
shall be

 

30

 

rescinded
and annulled pursuant to paragraph 7B, the Company shall forthwith give written
notice thereof to the holder of each Note at the time outstanding.

 

7D.          Other Remedies.  If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement, the other Transaction Documents and
such Note by exercising such remedies as are available to such holder in
respect thereof under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any covenant or other
agreement contained in this Agreement or the other Transaction Documents or in
aid of the exercise of any power granted in this Agreement or any Transaction
Document.  No remedy conferred in this
Agreement or the other Transaction Documents upon the holder of any Note or the
Collateral Agent is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.

 

8.             REPRESENTATIONS, COVENANTS AND WARRANTIES.  Each of the Parent and the Company
represents, covenants and warrants as follows, both immediately before and
after giving effect to the Kraft Acquisition:

 

8A(1).     Organization; Subsidiary Preferred Equity.  Each of the Parent and the Company is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware and each Subsidiary other than the Company is duly organized
and existing in good standing under the laws of the jurisdiction in which it is
organized.  The Parent, the Company and
each of the other Subsidiaries have duly qualified or been duly licensed, and
are authorized to do business and are in good standing, in each jurisdiction in
which the ownership of their respective properties or the nature of their
respective businesses makes such qualification or licensing necessary and in
which the failure to be so qualified or licensed could be reasonably likely to
have a Material Adverse Effect.  The
Parent owns all of the outstanding shares of capital stock of the Company free
and clear of any Liens other than Liens permitted by paragraph 6C(g).  Schedule 8A(1) hereto sets forth, as of
the date hereof, a correct list of each Subsidiary, its jurisdiction of
incorporation and its ownership.  No
Subsidiary has any outstanding shares of any class of capital stock or other
equity interests which has priority over any other class of capital stock or
other equity interests of such Subsidiary as to dividends or distributions or
in liquidation except as may be owned beneficially and of record by the Company
or a Wholly-Owned Subsidiary.  Except as
set forth on Schedule 8A(1), there are no 
options for, rights to acquire, agreements to issue, or securities exercisable
for or convertible into shares of the Company’s capital stock or the equity
interests of any other Subsidiary.

 

8A(2).     Power and Authority.  The Parent, the Company and each other
Subsidiary has all requisite corporate, limited liability company or
partnership, as the case may be, power to own or hold under lease and operate
their respective properties which it purports to own or hold under lease and to
conduct its business as currently conducted and as currently proposed to be
conducted.

 

8A(3).     Execution and Delivery of Transaction
Documents.  The Parent,
the Company and each other Subsidiary has all requisite corporate, limited
liability company or partnership, as the case may be, power to execute, deliver
and perform its obligations under this Agreement, the

 

31

 

Notes
and the other Transaction Documents to which it is a party.  The execution, delivery and performance of
this Agreement, the Notes and the other Transaction Documents has been duly
authorized by all requisite corporate, limited liability company or
partnership, as the case may be, action, and this Agreement, the Notes and the
other Transaction Documents have been duly executed and delivered by authorized
officers of the Parent, the Company and each other Subsidiary which is a party
thereto and are valid obligations of the Parent, the Company and each such
other Subsidiary, legally binding upon and enforceable against the Parent, the
Company and each such other Subsidiary in accordance with their terms, except
as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

8B.          Financial Statements.   The Parent and the Company have furnished
each Purchaser with the following financial statements, identified by a
principal financial officer of the Parent: 
(i) a consolidated balance sheet of the Parent and its Subsidiaries
as at December 31 in each of the years 2005 to 2007, inclusive, and
consolidated statements of income, stockholders’ equity and cash flows of the
Parent and its Subsidiaries for each such year, all reported on by
PricewaterhouseCoopers LLP; (ii) a consolidated balance sheet of the
Business as at December 31 in each of the years 2005 to 2007, inclusive,
and consolidated statements of income, stockholders’ equity and cash flows of
the Seller and its Subsidiaries for each such year, all reported on by
PricewaterhouseCoopers LLP; and (iii) unaudited consolidated balance sheet
of the Parent and its Subsidiaries as at March 31, 2008 and consolidated
statements of income or operations and cash flows for the three-month period
ended on each such date, prepared by the Parent.  Such financial statements (including any
related schedules and/or notes) are true and correct in all material respects
(subject, as to interim statements, to changes resulting from audits and
year-end adjustments), have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of the Parent and its Subsidiaries
and the Seller and its Subsidiaries, as applicable, required to be shown in
accordance with such principles.  The
balance sheets fairly present the condition of the Parent and its Subsidiaries
and the Seller and its Subsidiaries, as applicable, as at the dates thereof,
and the statements of income, stockholders’ equity and cash flows fairly
present the results of the operations of the Parent and its Subsidiaries and
the Seller and its Subsidiaries, as applicable, and their respective cash flows
for the periods indicated.  Since December 31,
2007, neither the Parent nor any Subsidiary of the Parent has paid or declared
any dividend on any shares of its capital stock or made any other distribution
on account of any shares of its capital stock (other than dividends or
distributions payable solely to the Parent or a Wholly-Owned Subsidiary of the
Parent) or redeemed, purchased, retired or otherwise acquired any shares of its
capital stock or any warrants, rights or options to acquire, or securities
convertible into or exchangeable for, any shares of its capital stock (other
than from the Parent or a Wholly-Owned Subsidiary of the Parent).  There has been no material adverse change in
the business, property or assets, condition (financial or otherwise),
operations or prospects of the Parent, the Company and the other Subsidiaries
taken as a whole or Seller and its Subsidiaries, taken as a whole, in either
case since December 31, 2007, except as set forth on Schedule 3H.

 

8C.          Actions Pending.  There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Parent or the Company,
threatened against the Parent, the Company

 

32

 

or
any of the other Subsidiaries, or any properties or rights of the Parent or any
of its Subsidiaries, by or before any court, arbitrator or administrative or
governmental body which, individually or in the aggregate, could reasonably be
expected to result in any Material Adverse Effect, except as set forth on
Schedule 8C.

 

8D.          Outstanding Debt.  Neither the Parent, nor the Company nor any
other Subsidiaries has outstanding any Debt except as permitted by paragraph
6B.  There exists no material default
under the provisions of any instrument evidencing such Debt or of any agreement
relating thereto.

 

8E.          Title to Properties.  The Parent, the Company and each of the other
Subsidiaries has good and marketable title to its respective real properties
(other than properties which it leases) and good title to all of its other
respective properties and assets, including the properties and assets reflected
in the balance sheet of the Parent as at December 31, 2007 referred to in
paragraph 8B (other than properties and assets disposed of in the ordinary
course of business), and after giving effect to the Kraft Acquisition, the “Purchased
Assets” (as defined in the Mead Purchase Agreement) reflected in the balance
sheet of the Seller as at December 31, 2007, subject to no Lien of any
kind except Liens permitted by paragraph 6C. 
All leases necessary in any material respect for the conduct of the
respective businesses of the Parent and its Subsidiaries are valid and
subsisting and are in full force and effect.

 

8F.          Taxes.  Except as set forth on Schedule 8F, the
Parent and the Company has, and each of the other Subsidiaries has, filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Parent and its Subsidiaries, are required to be filed, and each
has paid all taxes as shown on such returns and on all assessments received by
it to the extent that such taxes have become due, except such taxes as are
being actively contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with generally accepted
accounting principles.

 

8G.          Conflicting Agreements and Other
Matters.  Neither the
Parent, nor the Company nor any of the other Subsidiaries is a party to any
contract or agreement or subject to any charter, by-law, limited liability
company operating agreement, partnership agreement, or other corporate, limited
liability company or partnership restriction which could reasonably be expected
to have a Material Adverse Effect. 
Neither the execution nor delivery of this Agreement, the Notes or the
other Transaction Documents, nor the offering, issuance and sale of the Notes,
nor fulfillment of nor compliance with the terms and provisions hereof and of
the Notes and the other Transaction Documents will conflict with, or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation of any Lien
(other than Liens created pursuant to the Collateral Documents) upon any of the
properties or assets of the Parent, the Company or any of the other
Subsidiaries pursuant to, the charter, limited liability company operating
agreement, partnership agreement, by-laws, limited liability company operating
agreement or partnership agreement of the Parent, the Company or any of the
other Subsidiaries, any award of any arbitrator or, assuming, solely with
respect to the Existing Credit Agreement, the satisfaction of the condition
contained in paragraph 3J, any agreement
(including any agreement with stockholders, members or partners), instrument,
order, judgment, decree, statute, law, rule or regulation to which the
Parent, the Company or any of the other Subsidiaries is subject.  Neither the Parent, nor the Company nor

 

33

 

any
of the other Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Debt of the Parent, the Company or such
other Subsidiary, any agreement relating thereto or any other contract or
agreement (including its charter, by-laws, limited liability company operating
agreement or partnership agreement) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of the type to be
evidenced by the Notes or Debt of any Guarantor of the type to be evidenced by
the Guaranty Agreement except as set forth in the agreements listed on Schedule
8G.

 

8H.          Offering of Notes.  Neither the Company nor any agent acting on
its behalf has, directly or indirectly, offered the Notes, any Guaranty
Agreement or any similar security of the Company or any Guarantor for sale to,
or solicited any offers to buy the Notes, any Guaranty Agreement or any similar
security of the Company or any Guarantor from, or otherwise approached or
negotiated with respect thereto with, any Person other than Institutional
Investors, and neither the Company, any Guarantor nor any agent acting on its
behalf has taken or will take any action which would subject the issuance or
sale of the Notes or the execution and delivery of the Guaranty Agreements to
the provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.

 

8I.           Use of Proceeds.  Neither the Parent, nor the Company nor any
other Subsidiary owns or has any present intention of acquiring any “margin
stock” as defined in Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System (herein called “margin stock”).  The proceeds of sale of the Notes will be
used first, if the Term B-2 Loan (as defined in the Credit Agreement) has been
funded prior to the date of closing, to repay the such Term B-2 Loan, and
second to finance the Kraft Acquisition and for general corporate
purposes.  None of such proceeds will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any Debt which was originally incurred to
purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute the sale or purchase of any Notes a “purpose
credit” within the meaning of such Regulation U.  Neither the Parent nor the Company is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock.  Neither the Company nor any agent acting on
its behalf has taken or will take any action which might cause this Agreement,
any of the other Transaction Documents or any Note to violate Regulation T,
Regulation U or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Exchange Act, in each case as in
effect now or as the same may hereafter be in effect.

 

8J.          ERISA.

 

(a)           The Unfunded Liability of all Plans does not in the
aggregate exceed the greater of (i) twenty percent of the Total Plan
Liability for all such Plans and (ii) $5,000,000.  Each Plan complies in all material respects
with all applicable requirements of law and regulations. No contribution
failure under Section 412 of the Code, Section 302 of ERISA or the terms
of any Plan has occurred with respect to any Plan, sufficient to give rise to a
Lien under Section 302(f) of ERISA, or otherwise to have a Material
Adverse Effect.  There are no pending or,
to the knowledge of the Company, threatened, claims, actions, investigations or
lawsuits against any Plan, any fiduciary of any Plan, or the Company or any
ERISA Affiliate with respect to a Plan or

 

34

 

a
Multiemployer Plan which could reasonably be expected to have a Material
Adverse Effect.  Neither the Company nor
any ERISA Affiliate has engaged in any prohibited transaction (as defined in Section 4975
of the Code or Section 406 of ERISA) in connection with any Plan or
Multiemployer Plan which could reasonably be expected to have a Material
Adverse Effect. Within the past five years, neither the Company nor any ERISA
Affiliate engaged in a transaction which resulted in a Plan with an Unfunded
Liability being transferred out of the Company and its ERISA Affiliates, which
could reasonably be expected to have a Material Adverse Effect.  No Termination Event has occurred or is
reasonably expected to occur with respect to any Plan, which could reasonably
be expected to have a Material Adverse Effect.

 

(b)           All contributions (if any) have been made to any
Multiemployer Plan that are required to be made by the Company or any ERISA
Affiliate under the terms of the plan or of any collective bargaining agreement
or by applicable law; neither the Company nor any ERISA Affiliate has withdrawn
or partially withdrawn from any Multiemployer Plan, incurred any material
withdrawal liability with respect to any such plan or received notice of any
material claim or demand for withdrawal liability or partial withdrawal
liability from any such plan, and no condition has occurred which, if
continued, could result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any ERISA Affiliate has received any notice
that any Multiemployer Plan is in reorganization, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of any
excise tax, that any such plan is or has been funded at a rate less than that
required under Section 412 of the Code, that any such plan is or may be
terminated, or that any such plan is or may become insolvent.

 

8K.          Governmental Consent.  Neither the nature of the Parent, of the
Company or of any other Subsidiary, nor any of their respective businesses or
properties, nor any relationship between the Parent, the Company or any other
Subsidiary and any other Person, nor any circumstance in connection with the
offering, issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (other than
routine filings after the date of closing with the Securities and Exchange
Commission and/or state Blue Sky authorities and other than the filings and
recordings necessary to perfect the Liens in the Collateral intended to be
created by the Collateral Documents described on Schedule 8K hereto and any
other consent or approval that has been obtained and is in full force and
effect and copies of which have been provided to the Purchasers prior to the
date of closing) in connection with the execution and delivery of this
Agreement or the other Transaction Documents, the offering, issuance, sale or
delivery of the Notes or fulfillment of or compliance with the terms and
provisions hereof, thereof or of the Notes.

 

8L.          Compliance with Environmental and
Other Laws.  The Parent,
the Company and the other Subsidiaries and all of their respective properties
and facilities have complied at all times and in all respects with all federal,
state, local, foreign and regional statutes, laws, ordinances and judicial or
administrative orders, judgments, rulings and regulations, including, without
limitation, those  relating to protection
of the environment except, in any such case, where failure to comply,
individually or in the aggregate, could not reasonably be expected to  result in a Material Adverse Effect.

 

35

 

8M.         Regulatory Status.  Neither the Parent, nor the Company nor any
of the other Subsidiaries is (i) an “investment company” or a company “controlled”
by an “investment company” within the meaning of the Investment Company Act of
1940, as amended, or an “investment adviser” within the meaning of the
Investment Advisers Act of 1940, as amended, (ii) a “holding company” or a
“subsidiary company” or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 2005, or (iii) a “public utility” within the
meaning of the Federal Power Act, as amended.

 

8N.          Permits and Other Operating Rights.  The Parent, the Company and each other
Subsidiary has all such valid and sufficient certificates of convenience and
necessity, franchises, licenses, permits, operating rights and other
authorizations from federal, state, foreign, regional, municipal and other
local regulatory bodies or administrative agencies or other governmental bodies
having jurisdiction over the Parent, the Company or any other Subsidiary or any
of its properties, as are necessary for the ownership, operation and
maintenance of its businesses and properties, as presently conducted and as
proposed to be conducted while the Notes are outstanding, subject to exceptions
and deficiencies which, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect, and such certificates of
convenience and necessity, franchises, licenses, permits, operating rights and
other authorizations from federal, state, foreign, regional, municipal and
other local regulatory bodies or administrative agencies or other governmental
bodies having jurisdiction over the Parent, the Company, any other Subsidiary
or any of its properties are free from restrictions or conditions which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, and neither the Parent, nor the Company nor any other
Subsidiary is in violation of any thereof in any material respect.

 

8O.         Rule 144A.  The Notes are not of the same class as
securities of the Company, if any, listed on a national securities exchange,
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.

 

8P.          Absence of Financing Statements, Etc.  Except with respect to the Liens permitted by
paragraph 6C hereof, there is no financing statement, security agreement,
chattel mortgage, real estate mortgage or other document filed or recorded with
any filing records, registry or other public office, that purports to cover,
affect or give notice of any present or possible future Lien on, or security
interest in, any assets or property of the Parent, the Company or any other
Subsidiary or any rights relating thereto.

 

8Q.         Establishment of Security Interest.  Schedule 8Q hereto sets forth as of the date
of closing a complete and accurate list of (i) the name, jurisdiction of
organization and organizational identification number of the Parent, the
Company and each of its other Subsidiaries, (ii) if the Parent, the
Company or any other Subsidiary is not a “registered organization” (as defined
in the UCC) organized under that law of a “State” (as defined in the UCC), the
location of its place of business (if it has only one place of business) or its
chief executive office (if it has more than one place of business), (iii) all
real property owned or leased by the Parent, the Company or any of the other
Subsidiaries, and (iv) all registered patents, trademarks, trade names,
service marks, services names or copyrights owned or licensed by the Parent,
the Company or any of the other Subsidiaries. 
As of the date hereof, all filings,

 

36

 

assignments,
pledges and deposits of documents or instruments have been made, and all other
actions have been taken, that are necessary or advisable under applicable law
and are required to be made or taken on or prior to the date of closing under
the provisions of this Agreement and the other Transaction Documents to create
and perfect a security interest in the Collateral in favor of the Collateral
Agent to secure the Notes, the Company’s obligations under the Credit Agreement
and each Guarantor’s obligations under its Guaranty Agreement, subject to no
Liens other than Liens permitted under paragraph 6C.  The Collateral and the Collateral Agent’s
rights with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses (except any such setoff, claim or defense which
could not, individually or in the aggregate, materially impair the rights of
the Collateral Agent with respect to the Collateral).  The Parent, the Company or another Subsidiary
is the owner of the Collateral described in the Collateral Documents free from
any Lien, security interest, encumbrance and any other claim or demand, except
for Liens permitted under paragraph 6C.

 

8R.                             Foreign
Assets Control Regulations, Etc.

 

(i)            Neither the sale of the Notes by the Company hereunder
nor its use of the proceeds thereof will violate the Trading with the Enemy
Act, as amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating thereto.

 

(ii)           Neither the Parent, nor the Company nor any other
Subsidiary (i) is a Person described or designated in the Specially
Designated Nationals and Blocked Persons List of the Office of Foreign Assets
Control or in Section 1 of the Anti-Terrorism Order or (ii) engages
in any dealings or transactions with any such Person.  The Company and its Subsidiaries are in
compliance, in all material respects, with the USA Patriot Act.

 

(iii)          No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order
to obtain, retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of 1977, as
amended, assuming in all cases that such Act applies to the Company.

 

8S.                              Disclosure.  Neither this
Agreement, any other Transaction Document nor any other document, certificate
or statement furnished to any Purchaser by or on behalf of the Parent, the
Company or any Subsidiary in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not
misleading.  There is no fact or
facts  peculiar to the Parent, the
Company or any of the other Subsidiaries which materially adversely affects or
in the future may (so far as the Parent or the Company can now reasonably
foresee), individually or in the aggregate, reasonably be expected to
materially adversely affect the business, property or assets, or financial
condition of the Parent, the Company or any of the other Subsidiaries and which
has not been set forth in this Agreement or in the other documents,
certificates and statements furnished to each Purchaser by or on behalf of the
Parent prior to the date hereof in connection with the transactions
contemplated hereby.  Any financial
projections delivered to

 

37

 

any
Purchaser on or prior to the date hereof are reasonable based on the
assumptions stated therein and the best information available to the officers
of the Company.

 

8T.                              Labor Matters.  Except as
set forth on Schedule 8T, neither the Parent, nor the Company nor any other
Subsidiary is subject to any labor or collective bargaining agreement. There
are no existing or threatened strikes, lockouts or other labor disputes
involving the Parent, the Company or any other Subsidiary that singly or in the
aggregate could reasonably be expected to have a Material Adverse Effect. Hours
worked by and payment made to employees of the Parent, the Company and the
other Subsidiaries are not in material violation of the Fair Labor Standards
Act or any other applicable law, rule or regulation dealing with such
matters.

 

8U.                              Related Agreements, etc.

 

(a)           The Company has heretofore furnished
the Purchasers a true and correct copy of the Related Agreements;

 

(b)           The Parent, the Company and each
other Subsidiary and, to the Company’s knowledge, each other party to the
Related Agreements, has duly taken all necessary corporate, partnership or
other organizational action to authorize the execution, delivery and
performance of the Related Agreements and the consummation of transactions
contemplated thereby;

 

(c)           The Related Transactions will comply
in all material respects with all applicable legal requirements, and all
necessary governmental, regulatory, creditor, shareholder, partner and other
material consents, approvals and exemptions required to be obtained by the
Parent, the Company and the other Subsidiaries and, to the Parent’s and the
Company’s knowledge, each other party to the Related Agreements in connection
with the Related Transactions will be, prior to consummation of the Related
Transactions, duly obtained and will be in full force and effect. As of the
date of the Related Agreements, all applicable waiting periods with respect to
the Related Transactions will have expired without any action being taken by
any competent governmental authority which restrains, prevents or imposes
material adverse conditions upon the consummation of the Related Transactions;

 

(d)           The execution and delivery of the
Related Agreements did not, and the consummation of the Related Transactions
will not, violate any statute or regulation of the United States (including any
securities law) or of any state or other applicable jurisdiction, or any order,
judgment or decree of any court or governmental body binding on the Parent, the
Company or any other Subsidiary or, to the Parent’s and the Company’s
knowledge, any other party to the Related Agreements, or result in a breach of,
or constitute a default under, any material agreement, indenture, instrument or
other document, or any judgment, order or decree, to which the Parent, the
Company or any other Subsidiary is a party or by which the Parent, the Company
or any other Subsidiary is bound or, to the Parent’s or the Company’s
knowledge, to which any other party to the Related Agreements is a party or by
which any such party is bound; and

 

38

 

(e)           No statement or representation made
in the Related Agreements by the Parent, the Company or any other Subsidiary
or, to the Parent’s or the Company’s knowledge, any other Person, contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading.

 

8V.                             Casualty, Etc.  Except as set forth on Schedule
8V, neither the businesses nor the properties of the Parent, the Company or any
other Subsidiary are affected by any fire, explosion, accident, strike, lockout
or other labor dispute, drought, storm, hail, earthquake, embargo, act of God
or of the public enemy or other casualty (whether or not covered by insurance)
that, either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

 

8W.                         Material
Contracts.  Schedule 8W lists, as of the date of closing,
each Material Contract to which the Parent, the Company or any other Subsidiary
is a party, by which either of them or their respective properties is bound or
to which either of them is subject.  As
of the date of closing, except as set forth on Schedule 8W, (a) each
Material Contract is in full force and effect and is enforceable by the Parent,
the Company and each other Subsidiary party thereto in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws, statutes or rules of
general application affecting the enforcement of creditor’s rights or general
principles of equity, and (b) neither the Parent, nor the Company nor any
other Subsidiary, nor, to the knowledge of the Parent, the Company and the
other Subsidiaries, any other party thereto, is in breach of or default under
any Material Contract in any material respect or has given notice of
termination or cancellation of any Material Contract.

 

8X.                             Kraft
Acquisition Documents.  With respect to each of the Kraft Acquisition
Documents, (i) all representations made by the Parent, the Company or any
other Subsidiary in the Kraft Acquisition Documents are complete, true and
correct in all material respects as of the date of closing; (ii) the
execution and delivery by the Parent, the Company or any other Subsidiary of
the Kraft Acquisition Documents and the consummation of the transactions
therein contemplated or the compliance with the provisions thereof will not
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Parent, the Company or such other Subsidiary or any of the
provisions of the organizational documents of the Parent, the Company or any
other Subsidiary or any of the provisions of any indenture, agreement,
document, instrument or undertaking to which the Parent, the Company or any other
Subsidiary is a party or subject, or by which the Parent, the Company or any
other Subsidiary or any property of the Parent, the Company or any other
Subsidiary is bound, or conflict with or constitute a default thereunder or
result in the creation or imposition of any Lien pursuant to the terms of any
such indenture, agreement, document, instrument or undertaking, except to the
extent such violation, conflict or default would not reasonably be likely to
result in a Material Adverse Effect; (iii) no material order, consent,
approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental, regulatory,
administrative or public body or authority, or any subdivision thereof, or any
other Person is required to authorize, or is required in connection with, the
execution, delivery or performance of, or the legality, validity, binding
effect or enforceability of, any of the Kraft Acquisition 

 

39

 

Documents
except those which have already been obtained or given; and (iv) upon the
effectiveness of this Agreement, all conditions to effectiveness of the Mead
Purchase Agreement have been satisfied.

 

9.                                      REPRESENTATIONS OF EACH PURCHASER.  Each Purchaser represents as follows:

 

9A.                             Nature of Purchase.  Such
Purchaser is not acquiring the Notes to be purchased by it hereunder with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act, provided that the disposition of such Purchaser’s
property shall at all times be and remain within its control.

 

9B.                             Source of Funds.  At
least one of the following statements is an accurate representation as to each
source of funds (a “Source”) to be
used by such Purchaser to pay the purchase price of the Notes to be purchased
by such Purchaser hereunder:

 

(i)            the Source is an “insurance company general account” (as
that term is defined in the United States Department of Labor’s Prohibited
Transaction Exemption (“PTE”)
95-60) in respect of which the reserves and liabilities (as defined by the
annual statement for life insurance companies approved by the National
Association of Insurance Commissioners (the “NAIC
Annual Statement”)) for the general account contract(s) held by
or on behalf of any employee benefit plan together with the amount of the
reserves and liabilities for the general account contract(s) held by or on
behalf of any other employee benefit plans maintained by the same employer (or
affiliate thereof as defined in PTE 95-60) or by the same employee organization
in the general account do not exceed 10% of the total reserves and liabilities
of the general account (exclusive of separate account liabilities) plus surplus
as set forth in the NAIC Annual Statement filed with such Purchaser’s state of
domicile; or

 

(ii)           the Source is a separate account that is maintained solely
in connection with such Purchaser’s fixed contractual obligations under which
the amounts payable, or credited, to any employee benefit plan (or its related
trust) that has any interest in such separate account (or to any participant or
beneficiary of such plan (including any annuitant)) are not affected in any
manner by the investment performance of the separate account; or

 

(iii)          the Source is either (a) an insurance company pooled
separate account, within the meaning of PTE 90-1, or (b) a bank collective
investment fund, within the meaning of the PTE 91-38 and, except as disclosed
by such Purchaser to the Company in writing pursuant to this clause (iii), no
employee benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets allocated
to such pooled separate account or collective investment fund; or

 

(iv)          the Source constitutes assets of an “investment fund”
(within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset
manager” or “QPAM” (within the meaning of Part V of the QPAM 

 

40

 

Exemption),
no employee benefit plan’s assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established
or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of “control” in Section V(e) of the
QPAM Exemption) owns a 5% or more interest in the Company and (a) the
identity of such QPAM and (b) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the Company
in writing pursuant to this clause (iv); or

 

(v)           the Source constitutes assets of a “plan(s)” (within the
meaning of Section IV of PTE 96-23 (the “INHAM
Exemption”)) managed by an “in-house asset manager” or “INHAM”
(within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a),
(g) and (h) of the INHAM Exemption are satisfied, neither the INHAM
nor a person controlling or controlled by the INHAM (applying the definition of
“control” in Section IV(h) of the INHAM Exemption) owns a 5% or more
interest in the Company and (a) the identity of such INHAM and (b) the
name(s) of the employee benefit plan(s) whose assets constitute the
Source have been disclosed to the Company in writing pursuant to this clause
(v); or

 

(vi)          the Source is a governmental plan; or

 

(vii)         the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to this
clause (vii); or

 

(viii)        the Source does not include assets of
any employee benefit plan, other than a plan exempt from the coverage of ERISA.

 

As used in this paragraph
9B, the terms “employee benefit plan”,
“governmental plan”, and “separate account” shall have the
respective meanings assigned to such terms in Section 3 of ERISA.

 

10.                               DEFINITIONS; ACCOUNTING MATTERS.  For the purpose of this Agreement, the terms
defined in paragraphs 10A and 10B (or within the text of any other paragraph)
shall have the respective meanings specified therein and all accounting matters
shall be subject to determination as provided in paragraph 10C.

 

10A.                      Yield-Maintenance Terms.

 

“Called
Principal” shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4A(2), 4B or 4E or is
declared to be or otherwise becomes due and payable pursuant to paragraph 7A,
as the context requires.

 

“Discounted
Value” shall mean, with respect to the Called Principal of any Note, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such 

 

41

 

Called
Principal from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial
practice and at a discount factor (as converted to reflect the periodic basis
on which interest on such Note is payable, if interest is payable other than on
a semi-annual basis) equal to the Reinvestment Yield with respect to such
Called Principal.

 

“Reinvestment
Yield” shall mean, with respect to the Called Principal of any Note, 0.50%
over the yield to maturity implied by (i) the yields reported as of 10:00 a.m.
(New York City local time) on the Business Day next preceding the Settlement
Date with respect to such Called Principal for the most recent actively traded
on the run U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date on the display
designated as “Page PX1” on Bloomberg Financial Markets (or such other
display as may replace Page PX1 on Bloomberg Financial Markets or, if
Bloomberg Financial Markets shall cease to report such yields or shall cease to
be Prudential Capital Group’s customary source of information for calculating
yield-maintenance amounts on privately placed notes, then such source as is
then Prudential Capital Group’s customary source of such information), or (ii) if
such yields shall not be reported as of such time or the yields reported as of
such time shall not be ascertainable (including by way of interpolation), the
Treasury Constant Maturity Series yields reported, for the latest day for
which such yields shall have been so reported as of the Business Day next
preceding the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (or any comparable successor publication) for
U.S. Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date.  In the case of each determination under
clause (i) or (ii) of the preceding sentence, such implied yield
shall be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the applicable
U.S. Treasury security with the maturity closest to and greater than such
Remaining Average Life and (2) the applicable U.S. Treasury security with
the maturity closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to
that number of decimal places as appears in the coupon of the applicable Note.

 

“Remaining
Average Life” shall mean, with respect to the Called Principal of
any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number
of years (calculated to the nearest one-twelfth year) which will elapse between
the Settlement Date with respect to such Called Principal and the scheduled due
date of such Remaining Scheduled Payment.

 

“Remaining
Scheduled Payments” shall mean, with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that would
be due on or after the Settlement Date with respect to such Called Principal if
no payment of such Called Principal were made prior to its scheduled due date.

 

“Settlement Date” shall mean,
with respect to the Called Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to paragraph 4A(2), 4B or 4E 

 

42

 

or
is declared to be or otherwise becomes due and payable pursuant to paragraph
7A, as the context requires.

 

“Yield-Maintenance Amount” shall mean,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Called Principal of such Note over the sum of (i) such
Called Principal plus (ii) interest accrued thereon as of (including
interest due on) the Settlement Date with respect to such Called
Principal.  The Yield-Maintenance Amount
shall in no event be less than zero.

 

10B.                      Other Terms.

 

“Account Debtor” has the meaning set forth in the Security
Agreement.

 

“Account or Accounts” has the meaning set forth in the UCC.

 

“Acquisition” shall mean any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of all or
substantially all of any business or division of a Person, (b) the
acquisition of in excess of 50% of the Capital Securities of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is already a Subsidiary).

 

“Adjusted Working Capital” shall mean the remainder of: (a) (i) the
consolidated current assets of the Company and its Subsidiaries minus (ii) the
amount of cash and cash equivalents included in such consolidated current
assets; minus (b) (i) consolidated current liabilities of the
Company and its Subsidiaries minus (ii) the amount of short-term
Debt (including current maturities of long-term Debt) of the Company and its
Subsidiaries included in such consolidated current liabilities.

 

“Affiliate” shall mean (i) with
respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such first
Person, and (ii) with respect to Prudential, shall include any managed
account, investment fund or other vehicle for which Prudential or any Affiliate
of Prudential then acts as investment advisor or portfolio manager.  A Person shall be deemed to control a
corporation or other entity if such Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such corporation or entity, whether through the ownership of voting securities,
by contract or otherwise.

 

“Anti-Terrorism Order” means
Executive Order No. 13,224 of September 24, 2001, Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or
Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.

 

“Asset
Disposition” shall mean the sale, lease, assignment or other
transfer for value (each, a “Disposition”)
by the Parent, the Company or any other Subsidiary to any Person (other than
the Company or a Guarantor) of any asset or right of the Parent, the Company or
such other Subsidiary (including, the loss, destruction or damage of any portion
thereof or any actual or threatened (in writing to the Parent, the Company or
any other Subsidiary) condemnation, 

 

43

 

confiscation, requisition,
seizure or taking thereof) other than (a) the sale or lease of inventory
in the ordinary course of business and (b) other Dispositions in any
fiscal year the Net Proceeds of which do not in the aggregate exceed
$5,000,000.

 

“Bank Agent” shall mean
Bank of America, N.A., as agent for the Banks under the Credit Agreement, and
its successors and assigns in that capacity.

 

“Banks” shall mean the
institutions from time to time party to the Credit Agreement as lenders, and
their respective successors and assigns.

 

“BONY Documents” shall mean (a) Acknowledgment of Assignment
of Indebtedness and Related Liens dated contemporaneously with the date of
closing, executed by The Bank of New York and addressed to the Seller, Cogen
South L.L.C. and Oak Acquisition, LLC, (b) Assignment of Mortgage and
Assignment of Rents and Assignment and Security Agreement dated
contemporaneously with the date of closing, executed by The Bank of New York
for the benefit of Oak Acquisition, LLC, (c) the Resignation of
Agent/Appointment of New Agent letter dated contemporaneously with the date of
closing, executed by The Bank of New York and addressed to the Seller, Cogen
South L.L.C. and Oak Acquisition, LLC, and (d) the Letter Agreement
relating to the assignment of Collateral from the Bank of New York to Oak
Acquisition, LLC.

 

“Business” has the meaning given such term in the Mead
Purchase Agreement.

 

“Business
Day” shall mean any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are required or authorized to be closed.

 

“Capital Expenditures” shall mean
all expenditures which, in accordance with GAAP, would be required to be
capitalized and shown on the consolidated balance sheet of the Parent,
including expenditures in respect of Capital Leases, but excluding any such
expenditures for which the Company has been reimbursed by the Seller pursuant
to the Kraft Acquisition Documents and expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (a) from
insurance proceeds (or other similar recoveries) paid on account of the loss of
or damage to the assets being replaced or restored or (b) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.

 

“Capital
Securities” shall mean, with respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the date of closing, including common shares,
preferred shares, membership interests in a limited liability company, limited
or general partnership interests in a partnership, interests in a trust,
interests in other unincorporated organizations, warrants, options or other
rights for the purchase or acquisition from such Person of shares of capital
stock of (or other ownership or profit interests in) such Person or warrants,
rights or options for the purchase or acquisition from such Person of such
shares (or such other interests) or any other equivalent of such ownership
interest.

 

44

 

“Capital
Lease” shall mean, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on
the balance sheet of such Person.

 

“Cash
Equivalent Investment” shall mean, at any time, (a) any
evidence of Debt, maturing not more than one year after such time, issued or
guaranteed by the United States Government or any agency thereof, (b) commercial
paper, maturing not more than one year from the date of issue, or corporate
demand notes, in each case rated at least A-l by S&P or P-l by Moody’s, (c) any
certificate of deposit, time deposit or banker’s acceptance, maturing not more
than one year after such time, or any overnight federal funds transaction that
is issued or sold by a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and undivided
profits of not less than $500,000,000, (d) any repurchase agreement entered
into with any commercial banking institution of the nature referred to in clause
(c)  which (i) is secured by a fully perfected security interest
in any obligation of the type described in any of clauses (a) through
(c) above and (ii) has a market value at the time such
repurchase agreement is entered into of not less than 100% of the repurchase
obligation of such commercial banking institution thereunder and (e) money
market accounts or mutual funds which invest exclusively in assets satisfying
the foregoing requirements, and (f) other short term liquid investments
approved in writing by the Required Holders.

 

“Cash Management Agreement” shall mean any agreement to
provide cash management services, including treasury, depository, overdraft,
credit or debit card, credit card processing, purchase card, ACH transactions,
electronic funds transfer and other cash management arrangements.

 

“Change of Control”
shall mean the occurrence of any of the following events: (a) any “person”
or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of
such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such
plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, except that a person or group shall
be deemed to have “beneficial ownership” of all Capital Securities that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time (such right, an “option right”)),
directly or indirectly, of more than 35% of the Capital Securities of the
Parent entitled to vote for members of the board of directors or equivalent
governing body of the Parent on a fully diluted basis (and taking into account
all such securities that such person or group has the right to acquire pursuant
to any option right); provided that the acquisition by any one or more
Exempt Persons (as defined below) (acting singly or in concert) of the “beneficial
ownership” of 35% or more of the Capital Securities of the Parent entitled to
vote for members of the board of directors or equivalent governing body of the
Parent on a fully diluted basis (and taking into account all such securities
that such person or group has the right to acquire pursuant to any option
right) shall not be a Change of Control; (b) a majority of the members of
the Board of Directors of the Parent shall cease to be Continuing Members (as
defined below); (c) the Parent shall cease to own and control 100% of each
class of the outstanding Capital Securities of the Company; (d) the
Company shall cease to, directly or indirectly, own and control 100% of each
class of the outstanding Capital Securities of each Subsidiary (other than the
Company); or (e) all of Roger W. Stone (or a replacement reasonably
satisfactory to the Required Holders), 

 

45

 

Matthew
Kaplan (or a replacement reasonably satisfactory to the Required Holders) and
Timothy Keneally (or a replacement reasonably satisfactory to the Required
Holders) shall cease at any time to be employed full time by the Parent  in a position at least equivalent to their current
respective positions; provided, however, such an event under this
clause (e) shall not constitute a Change of Control for up to 135 days if
the Parent is diligently working to replace such Person(s) with a
reasonably qualified candidate (or candidates) to perform the same or similar
duties as such Person(s).  For purposes
of the foregoing, (x) “Continuing Member”
shall mean a member of the Board of Directors of Parent who either (i) was
a member of Parent’s Board of Directors on the day before the date of closing
and has been such continuously thereafter or (ii) became a member of such
Board of Directors after the day before the date of closing and whose election
or nomination for election by the stockholders of Parent was approved by a vote
of the majority of the Continuing Members then members of Parent’s Board of
Directors and (y) “Exempt Person”
shall mean each member of the class consisting of:  (i) Roger Stone, (ii) Matthew
Kaplan and (iii) so long as voting control is retained by such Person, any
spouse, lineal descendant, parent or sibling of such Person, or any trust or
similar estate planning entity controlled by such Person or whose beneficiaries
or owners are solely comprised of such Person’s spouse, lineal descendant,
parent or sibling.

 

“closing” or “date of closing” shall have the meaning
given in paragraph 2 hereof.

 

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

 

“Cogen Junior Notes” shall mean the subordinated promissory
note from Cogen JV to the Company dated October 22, 2001 in the original
principal amount of $9,500,000 and the subordinated promissory note from Cogen
JV to the Company dated December 31, 2004 in the original principal amount
of $57,500,000.

 

“Cogen JV” shall mean Cogen South LLC, a Delaware limited
liability company.

 

“Cogen Loan Agreement” shall mean that certain Amended and
Restated Construction and Term Loan Agreement of Cogen JV dated as of December 15,
1996, as amended or assigned, and all documents executed in connection
therewith.

 

“Cogen Notes” shall mean the Cogen Senior Notes and the Cogen
Junior Notes.

 

“Cogen Senior Notes” shall mean all indebtedness outstanding
under the Cogen Loan Agreement, including those certain Replacement Promissory
Notes dated as of December 31, 1998 executed by Cogen JV in favor of the
Company in the principal amounts of $50,000,000 and $8,039,721.92,
respectively.

 

“Collateral” shall mean all
of the “Collateral” and “Mortgaged
Property” referred to in the Collateral Documents and all of the
other property that is or is intended under the terms of the Collateral
Documents to be subject to Liens in favor of the Collateral Agent for the
benefit of the Banks and the holders of the Notes.

 

46

 

“Collateral
Agent” shall mean Bank of America, N.A., in its capacity as collateral agent
under the Intercreditor Agreement, and its successor and assigns in that
capacity.

 

“Collateral
Documents” shall mean the Security Agreements, the Mortgages,
the Deposit Account Control Agreements, the Securities Account Control
Agreements, the estoppel and consent agreements, and any other agreement,
document or instrument in effect on the date of closing or executed by the
Parent or any Subsidiary after the date of closing under which the Parent or
such Subsidiary has granted a lien upon or security interest in any property or
assets to the Collateral Agent to secure all or any part of the obligations of
the Company under this Agreement or the Notes or of any Guarantor under any Guaranty
Agreement, and all financing statements, certificates, documents and
instruments relating thereto or executed or provided in connection therewith,
each as amended, restated, supplemented or otherwise modified from time to
time.

 

“Consolidated Net Income”
shall mean, with respect to the Parent and its Subsidiaries for any period, the
net income (or loss) of the Parent and its Subsidiaries for such period, excluding
any gains from Asset Dispositions, any extraordinary gains and any gains from
discontinued operations.

 

“Contingent
Liability” shall mean, with respect to any Person, each obligation
and liability of such Person and all such obligations and liabilities of such
Person incurred pursuant to any agreement, undertaking or arrangement by which
such Person: (a) guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, dividend, obligation or other liability of any other Person in
any manner (other than by endorsement of instruments in the course of
collection), including any indebtedness, dividend or other obligation which may
be issued or incurred at some future time; (b) guarantees the payment of
dividends or other distributions upon the Capital Securities of any other
Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to
purchase, repurchase, or otherwise acquire any indebtedness, obligation or
liability of any other Person or any property or assets constituting security
therefor, (ii) to advance or provide funds for the payment or discharge of
any indebtedness, obligation or liability of any other Person (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain solvency, assets, level of income, working capital or other
financial condition of any other Person, or (iii) to make payment to any
other Person other than for value received; (d) agrees to lease property
or to purchase securities, property or services from such other Person with the
purpose or intent of assuring the owner of such indebtedness or obligation of
the ability of such other Person to make payment of the indebtedness or
obligation; (e) induces the issuance of any letter of credit for the
benefit of such other Person; or (f) undertakes or agrees otherwise to
assure a creditor against loss. The amount of any Contingent Liability which is
in the form of a guaranty of Debt shall (subject to the limitation set forth
below and any other limitation set forth herein) be deemed to be the
outstanding principal amount (or maximum permitted principal amount, if larger)
of the indebtedness, obligation or other liability guaranteed or supported
thereby.  The amount of any Contingent
Liability which is not in the form of a guaranty of Debt shall be equal to the
reasonably anticipated maximum amount of such Contingent Liability as
determined by such Person in good faith.

 

47

 

“Credit
Agreement” shall mean the “Credit Agreement”, dated as of June 12,
2008, between the Parent, the Company, the Bank Agent and the Banks, as
amended, restated, supplemented or otherwise modified from time to time.

 

“Cumulative Available Excess Cash Flow” shall mean, as of any
date of determination, the sum of Available Excess Cash Flow (as defined below)
for each of the fiscal years ended prior to such date of determination for
which audited financial statements of the Parent and its Subsidiaries have been
delivered to each Significant Holder in accordance with paragraph 5A(iii) (commencing
with the 2008 fiscal year). “Available Excess Cash Flow”
shall mean (a) with respect to the 2008 fiscal year, 50% of Excess Cash
Flow for the period commencing the date of closing through the end of such
fiscal year, (b) with respect to the 2009 fiscal year, 50% of Excess Cash
Flow for such fiscal year and (c) with respect to the 2010 fiscal year and
each fiscal year thereafter, (i) if as of such date of determination the
Total Leverage Ratio is greater than or equal to 2.0:1.0, 50% of Excess Cash
Flow for such fiscal year and (ii) if as of such date of determination the
Total Leverage Ratio is less than 2.0:1.0, 100% of Excess Cash Flow for such
fiscal year.

 

“Debt”
of any Person shall mean, without duplication, (a) all indebtedness of
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee
under Capital Leases which have been or should be recorded as liabilities on a
balance sheet of such Person in accordance with GAAP, (c) all obligations
of such Person to pay the deferred purchase price of property or services
(excluding trade accounts payable in the ordinary course of business but
including the Earn-Out Obligations), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness shall
have been assumed by such Person; provided that if such Person has not
assumed or otherwise become liable for such indebtedness, such indebtedness
shall be measured at the fair market value of such property securing such
indebtedness at the time of determination, (e) all obligations, contingent
or otherwise, with respect to the face amount of all letters of credit (whether
or not drawn), bankers’ acceptances and similar obligations issued for the
account of such Person (including the Letters of Credit), (f) all Hedging
Obligations of such Person, (g) all Contingent Liabilities of such Person,
(h) all Debt of any partnership of which such Person is a general partner,
(i) the principal portion of all obligations of such Person under
Synthetic Lease Obligations and other Off-Balance Sheet Liabilities (excluding
Operating Leases to the extent they would otherwise be included) and (j) any
Capital Securities or other equity instrument, whether or not mandatorily
redeemable, that under GAAP is characterized as debt, whether pursuant to
financial accounting standards board issuance No. 150 or otherwise.

 

“Debt to be Repaid” shall mean Debt listed on Schedule 6B(g).

 

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

 

“Default” shall mean any
of the events specified in paragraph 7A, whether or not any requirement for
such event to become an Event of Default has been satisfied.

 

48

 

“Default
Rate” shall mean a rate per annum from time to time equal to the greater of (i) 10.30%
or (ii) 2.00% over the rate of interest publicly announced by JPMorgan
Chase Bank from time to time as its “prime rate.”

 

“Deposit
Account Control Agreement” shall mean an agreement, among the
Company or a Guarantor, a depository institution, and the Collateral Agent,
which agreement is in a form acceptable to the Collateral Agent and which
provides the Collateral Agent with “control” (as such term is used in Article 9
of the Uniform Commercial Code) over the deposit account(s) described
therein, as the same may be amended, modified, extended, restated, replaced, or
supplemented from time to time.

 

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

 

“Earn-Out
Obligations” shall mean the Company’s payment obligations under
Sections 1.11 and 1.12 of the International Paper Purchase Agreement.

 

“EBITDA” shall
mean, for any period, Consolidated Net Income for such period plus, to
the extent deducted in determining such Consolidated Net Income for such period
(without duplication), (a) Interest Expense, (b) income tax expense, (c) depreciation
and amortization, (d) extraordinary losses (or less gains), net of related
tax effects, (e) other non-cash charges or losses (or less gains or
income) for which no cash outlay (or cash receipt) is foreseeable, (f) “cold
mill” maintenance outage costs in an aggregate amount of up to $7,500,000 for
the term of this Agreement (it being understood that such add-back shall only
be permitted in connection with one such outage until all of the Notes have
been repaid in full) but only to the extent that (i) the aggregate amount
of such costs for such period exceeds the actual expense allocable to such
outage during such period and (ii) any such resulting add-back is applied
to reduce EBITDA in the future periods to which such expenses actually relate
on a dollar for dollar basis and (g) expenses and fees incurred to
consummate the transactions contemplated by the Transaction Documents in an
aggregate amount for all periods not exceeding $13,500,000. For purposes of
calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio, (i) EBITDA
shall be deemed to be:  $38,877,600  for the fiscal quarter ending September 30, 2007,  $39,298,700  for the fiscal
quarter ending December 31, 2007 and  $33,475,400  for the fiscal quarter ending March 31, 2008 and (ii) EBITDA
for the period from April 1, 2008 to the date of closing shall be determined
in a manner consistent with clause (i) above.

 

“Environmental
Claims” shall mean all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law,
or for release or injury to the environment.

 

“Environmental
Laws” shall mean all present or future federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative or judicial orders, consent agreements, directed
duties, requests, licenses, authorizations and permits of, and agreements with,
any Governmental Authority, in each case relating to any matter arising out of
or relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the 

 

49

 

presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, emission, release, threatened release, control or cleanup of any
Hazardous Substance.

 

“Environmental Liability” shall mean any liability,
contingent or otherwise (including any liability for damages, costs of
environmental remediation, fines, penalties or indemnities), of the Parent, the
Company or any of their respective Subsidiaries directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Substances, (c) exposure to any Hazardous Substances, (d) the
release or threatened release of any Hazardous Substances into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the foregoing.

 

“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA
Affiliate” shall mean any corporation which is a member of the
same controlled group of corporations as the Parent or the Company within the
meaning of section 414(b) of the Code, or any trade or business which is
under common control with the Company within the meaning of section 414(c) of
the Code.

 

“Event of Default” shall mean any
of the events specified in paragraph 7A, provided that there has been satisfied
any requirement in connection with such event for the giving of notice, or the
lapse of time, or the happening of any further condition, event or act.

“Excess Cash Flow” shall mean, for any
period, (a) EBITDA for such period, minus (b) scheduled
repayments of principal of the Term Loans (as defined in the Credit Agreement)
made during such period, minus (c) voluntary prepayments of the
Term Loans (as defined in the Credit Agreement) during such period, minus
(d) scheduled or voluntary prepayments of the Notes during such period, minus
(e) cash payments made in such period with respect to Capital Expenditures
(to the extent such cash payments are unfinanced), minus (f) all
income taxes paid in cash by the Company and the Guarantors during such period,
minus (g) cash Interest Expense of the Company and the Guarantors
during such period, minus (h) any cash losses (and plus any
cash gains) from extraordinary items to the extent excluded from the calculation
of EBITDA, minus (i) any increase in Adjusted Working Capital for
such period.

 

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Existing Credit Agreement”
shall have the same meaning given in paragraph 3J hereof

 

“Extraordinary Receipt”
shall mean any cash received by or paid to or for the account of any Person not
in the ordinary course of business, including tax refunds, pension plan
reversions, proceeds of insurance (other than proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost
earnings), condemnation awards (and payments in lieu thereof), indemnity
payments and any purchase price adjustments.

 

50

 

“FILOT Lease”
shall mean, collectively, (i) the lease agreement to be entered into on or
before the date of closing between Charleston County, South Carolina and
KapStone Charleston Kraft LLC and (ii) the lease agreement to be entered
into on or before the date of closing between Charleston County, South Carolina
and Cogen South LLC.

 

“Fixed Charge Coverage Ratio” shall mean, as of the last day
of any fiscal quarter, for the period of four consecutive fiscal quarters
ending in such date, the ratio of (a) the total for such period of (i) EBITDA
minus (ii) the sum of income taxes paid in cash by the Parent and
its Subsidiaries minus (iii) cash dividends paid during such period
minus (iv) all unfinanced Capital Expenditures to (b) the
sum for such period of (i) cash Interest Expense plus (ii) required
payments of principal of Funded Debt (including the Notes and the Term Loans
(as defined in the Credit Agreement) but excluding the Revolving Credit Loans
(as defined in the Credit Agreement) and the Intercompany Subordinated Debt); provided,
with respect to each of clauses (a)(ii), (a)(iii), (a)(iv), (b)(i) and (b)(ii) above,
for any fiscal quarter ending during the first three full fiscal quarters
following the date of closing, the relevant amount shall be determined not by
taking the actual amount for such four consecutive fiscal quarter period but
instead by dividing (x) the actual amount of such item from the date of
closing to such fiscal quarter end by (y) the number of days from (and
including) the date of closing to (and including) such fiscal quarter end and
multiplying the quotient by 365.

 

“Foreign Subsidiary” shall mean any Subsidiary that is not a
Domestic Subsidiary.

 

“Funded Debt”
shall mean, as to any Person, all Debt for borrowed money of such Person that
matures more than one year from the date of its creation (or is renewable or
extendible, at the option of such Person, to a date more than one year from
such date).

 

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

 

“Hedging
Obligation” shall mean, with respect to any Person, any liability of
such Person under any Swap Contract.

 

“Guarantor” shall mean the
Parent and each Domestic Subsidiary of the Company in existence as of the date
of closing and each other Person which may from time to time execute a Guaranty
Agreement.

 

“Guaranty
Agreement” and “Guaranty
Agreements” shall have the same meaning given in paragraph 3A (iii) hereof.

 

“including” shall mean,
unless the context clearly requires otherwise, “including without limitation”,
whether or not so stated.

 

51

 

“Institutional
Investor” shall mean any insurance company, commercial,
investment or merchant bank, finance company, mutual fund, registered money or
asset manager, savings and loan association, credit union, registered
investment advisor, pension fund, investment company, licensed broker or dealer,
“qualified institutional buyer” (as such term is defined under Rule 144A
promulgated under the Securities Act) or “accredited investor” (as such term is
defined in Regulation D promulgated under the Securities Act).

 

“Intercompany
Subordinated Debt” shall mean unsecured Debt of the Company to
Parent in respect of the loan made by Parent to the Company pursuant to the
Intercompany Subordinated Note.

 

“Intercompany
Subordinated Note” shall mean that certain Subordinated Promissory
Note dated as of the date of closing by the Company in favor of Parent.

 

“Intercompany
Subordination Agreement” shall mean that certain Subordination and
Intercreditor Agreement dated as of the date hereof by and among Parent,
Company, the Bank Agent and the holders of the Notes, as amended, restated or
otherwise modified from time to time pursuant to the terms thereof.

 

“Intercreditor
Agreement” shall have the meaning given in paragraph 3A(ii) hereof.

 

“Interest
Expense” shall mean for any period the consolidated interest expense
of the Parent and its Subsidiaries for such period (including all imputed
interest on Capital Leases).

 

“International
Paper Purchase Agreement” shall mean that certain Purchase Agreement
dated as of June 23, 2006 among the Parent, the Company and International
Paper Company, as amended from time to time.

 

“Investment”
shall mean, with respect to any Person, any investment in another Person,
whether by acquisition of any Debt or Capital Security, by making any loan or
advance, by becoming obligated with respect to a Contingent Liability in
respect of obligations of such other Person (other than travel and similar
advances to employees in the ordinary course of business) or by making an
Acquisition.

 

“Kraft Acquisition” shall have the meaning given  in paragraph 3K.

 

“Kraft Acquisition Documents” shall have the meaning
given  in paragraph 3K.

 

“Lien” shall mean,
with respect to any Person, any interest granted by such Person in any real or
personal property, asset or other right owned or being purchased or acquired by
such Person (including an interest in respect of a Capital Lease) which secures
payment or performance of any obligation and shall include any mortgage, lien,
encumbrance, title retention lien, charge or other security interest of any
kind, whether arising by contract, as a matter of law, by judicial process or
otherwise.

 

52

 

“Material
Adverse Effect” shall mean (a) a material adverse change in,
or a material adverse effect upon, the financial condition, operations, assets,
business or properties of the Company and the Guarantors taken as a whole, (b) a
material impairment of the ability of the Company or any Guarantor to perform
any of its respective obligations under this Agreement the Notes or any other
Transaction Document or (c) a material adverse effect upon any substantial
portion of the collateral under the Collateral Documents or upon the legality,
validity, binding effect or enforceability against the Company or any Guarantor
of any Transaction Document.

 

“Material Contract” shall mean, with respect to any Person, (a) each
contract or other agreement, written or oral, to which such Person is a party
involving aggregate consideration payable to or by such Person of $10,000,000
or more and (b) any other contract, agreement, permit or license, written
or oral, to which such Person is a party as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto could
reasonably be expected to have a Material Adverse Effect.

 

“Mead Purchase Agreement” shall have the
meaning given in paragraph 3K hereof.

 

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

 

“Mortgage” and “Mortgages” shall have the meaning given in
paragraph 3A(v) hereof.

 

“Multiemployer
Plan” shall mean any Plan which is a “multiemployer plan” (as such term is
defined in section 4001(a)(3) of ERISA).

 

“Net Cash Proceeds”
shall mean:

 

(a)           with
respect to any Asset Disposition, the aggregate cash proceeds (including cash
proceeds received pursuant to policies of insurance or by way of deferred
payment of principal pursuant to a note, installment receivable or otherwise,
but only as and when received) received by the Company or any Guarantor
pursuant to such Asset Disposition net of (i) the direct costs relating to
such sale, transfer or other disposition (including sales commissions and
legal, accounting and investment banking fees), (ii) taxes paid or
reasonably estimated by the Company to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and (iii) amounts required to be applied to the repayment of
any Debt secured by a Lien on the asset subject to such Asset Disposition
(other than the Senior Debt);

 

(b)           with
respect to any issuance or exercise of Capital Securities (including, without
limitation, the Warrants), the aggregate cash proceeds received by the Company
or any Guarantor pursuant to such issuance or exercise, net of the direct costs
relating to such issuance or exercise (including sales and underwriters’
commissions); and

 

53

 

(c)           with
respect to any issuance of Debt, the aggregate cash proceeds received by the
Parent, the Company or any other Subsidiary pursuant to such issuance, net of
the direct costs of such issuance (including up-front, underwriters’ and
placement fees).

 

“Notes” shall have the
meaning given in paragraph 1 hereof.

 

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

 

“Officer’s Certificate” shall mean a certificate
signed in the name of the Parent or the Company, as applicable, by its
President, one of its Vice Presidents or its Treasurer.

 

“Operating
Lease” shall mean any lease of (or other agreement conveying the
right to use) any real or personal property by the Company or any Guarantor, as
lessee, other than any Capital Lease and obligations in respect of the FILOT
Lease.

 

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

 

54

 

organization
and, if applicable, any certificate or articles of formation or organization of
such entity.

 

“PBGC” shall mean the
Pension Benefit Guaranty Corporation, or any successor or replacement entity
thereto under ERISA.

 

“Person” shall mean and
include an individual, a partnership, a joint venture, a corporation, a trust,
a limited liability company, an unincorporated organization and a government or
any department or agency thereof.

 

“Permitted
Acquisition” shall mean any Proposed Acquisition which is either (a) approved
in writing by the Required Holders or (b) which satisfies each of the
following conditions:

 

(i)            Other than Debt permitted under
paragraph 6B, neither the Parent, nor the Company nor any other Subsidiary
shall incur or assume any Debt or other liabilities in connection with such
Proposed Acquisition except for ordinary course trade payables and accrued
expenses. No earn-out or similar payment obligations shall be incurred in
connection with such Proposed Acquisition unless approved in writing by the
Required Holders ;

 

(ii)           Before and after giving effect to
such Proposed Acquisition, no Default or Event of Default shall have occurred
and be continuing;

 

(iii)          The aggregate amount payable in
connection with, and other consideration for (in each case, including all
transaction costs and all Debt, liabilities and Contingent Liabilities incurred
or assumed in connection therewith or otherwise reflected in a consolidated
balance sheet of the Parent and such acquired Person) such Proposed Acquisition
and all other Permitted Acquisitions under clause (b) of this definition
shall not exceed $60,000,000;

 

(iv)          After giving effect to such Proposed
Acquisition, the Parent shall be in compliance on a pro forma basis with the
financial covenants set forth in paragraph 6A, recomputed for the most recent
fiscal quarter for which financial statements have been delivered;

 

(v)           Upon consummation of such Proposed
Acquisition, the Collateral Agent shall have a perfected first priority Lien
upon all assets acquired in connection therewith, subject only to Permitted
Liens;

 

(vi)          Not less than twenty (20) Business
Days prior to consummating such Proposed Acquisition, the Company shall deliver
to the holders of the Notes an acquisition summary with respect to such
Proposed Acquisition, such summary to include (A) a reasonably detailed
description of the business to be acquired (including financial information)
and operating results (including financial statements in form and substance
reasonably satisfactory to the Required Holders), (B) the terms and
conditions, including economic terms, of the Proposed Acquisition, and (C) pro
forma financial projections for 

 

55

 

the Parent and its
Subsidiaries for the four fiscal quarters following the date of such Proposed
Acquisition, together with a calculation of the Parent’s compliance on a Pro
Forma Basis with the financial covenants set forth in paragraph 6A for such
period, in each case in form and substance reasonably satisfactory to the
Required Holders;

 

(vii)         The holders of the Notes shall have
been furnished with copies of the Company’s business, legal and environmental
due diligence with respect to the proposed business and assets to be acquired,
with results reasonably satisfactory to the Required Holders; and

 

(viii)        Prior to consummating such Proposed
Acquisition, the Company shall provide the holders of the Notes with all
acquisition documents relating thereto and such other information (including
officer’s certificates and opinions of counsel) as the Required Holders shall
reasonably request in order to confirm that the conditions set forth herein
have been satisfied.

 

“Permitted Lien” shall mean a Lien expressly permitted
hereunder pursuant to paragraph 6C.

 

“Permitted Parent Dividends” shall mean the
dividend the Company is permitted to pay to the Parent in an aggregate amount
not to exceed (a) (i) from the date of closing through the fiscal
year ending December 31, 2009, 50% of Cumulative Available Excess Cash
Flow and (ii) thereafter, 100% of Cumulative Available Excess Cash Flow
plus (b) an aggregate amount of up to $500,000 in connection with the
redemption of the Warrants pursuant to the terms thereof and in connection with
the obligations of the Parent pursuant to the Underwriting Agreement, if
applicable.

 

“Plan” shall mean any
“employee pension benefit plan” (as such term is defined in section 3 of ERISA)
which is or has been established or maintained, or to which contributions are
or have been made, by the Company or any ERISA Affiliate.

 

“Pro Forma
Basis” shall mean, with respect to any determination for any period
and any Pro Forma Transaction, that such determination shall be made by giving
pro forma effect to each such Pro Forma Transaction, as if each such Pro Forma
Transaction had been consummated on the first day of such period.

 

“Pro Forma
Transaction” shall mean any transaction consummated as part of any
Permitted Acquisition, together with each other transaction relating thereto
and consummated in connection therewith, including any incurrence or repayment
of Debt.

 

“Proposed
Acquisition” shall mean (a) any proposed acquisition that is
consensual and approved by the board of directors of such Proposed Acquisition
Target, of all or substantially all of the assets or Capital Securities of any
Proposed Acquisition Target by the Company or any Subsidiary of the Company or (b) any
proposed merger of any Proposed Acquisition Target with or into the Company or
any Subsidiary of the Company (and, in the case of a merger with the Company,
with the Company being the surviving corporation).

 

56

 

“Proposed
Acquisition Target” shall mean any Person or any brand, line of
business, division, branch, operating division or other unit operation of any
Person.

 

“Proposed
Prepayment Date” shall have the meaning given in paragraph 4E(4) hereof.

 

“Prudential” shall mean The
Prudential Insurance Company of America.

 

“Purchasers” shall have the
meaning given in the introductory paragraph hereof.

 

“Ratable Portion”
shall mean, as of any date of determination, with respect to the Notes of any
holder of the Notes that has accepted an offer to prepay the Notes upon a
Senior Debt Prepayment Event pursuant to paragraph 4E, an amount equal to the
product of (a) the Net Cash Proceeds required under the Credit Agreement
to be applied to the prepayment of any Senior Debt in connection with such
Senior Debt Prepayment Event multiplied by (b) a fraction, the numerator
of which is (x) the then aggregate outstanding principal amount of the
Notes held by such holder (y) the denominator of which is the then
aggregate outstanding principal amount of all Senior Debt to which such Net
Cash Proceeds are so required to be applied.

 

“Related
Agreements” shall mean the Kraft Acquisition Documents and all
agreements and instruments entered into or delivered in connection therewith,
including without limitation all supply agreements and transitional services
agreements with Seller.

 

“Related
Transactions” shall mean the transactions contemplated by the
Related Agreements.

 

“Reportable
Event” shall mean a reportable event as defined in Section 4043
of ERISA and the regulations issued thereunder as to which the PBGC has not
waived the notification requirement of Section 4043(a), or the failure of
a Plan to meet the minimum funding standards of Section 412 of the Code
(without regard to whether the Plan is a plan described in Section 4021(a)(2) of
ERISA) or under Section 302 of ERISA.

 

“Required
Holder(s)” shall mean the holder or holders of more than 50%
of the aggregate principal amount of the Notes from time to time outstanding.

 

“Responsible
Officer” shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any Guarantor or any other officer of the Parent or the Company or
any Guarantor involved principally in its financial administration or its
controllership function.

 

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

 

“SCANA Side Letters” shall mean those certain letter
agreements dated as of April 3, 2008 and April 4, 2008, among
MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, SCANA Corporation,
South Carolina Electric and Gas Company, Cogen South L.L.C., the Parent and Oak
Acquisition LLC.

 

57

 

“Securities Account
Control Agreements” shall have the meaning given in the Security
Agreement.

 

“Securities
Act” shall mean the Securities Act of 1933, as amended.

 

“Security
Agreement” and “Security
Agreements” shall have the meaning given in paragraph 3A(iv) hereof.

 

“Seller” shall mean a collective reference to MeadWestvaco
Corporation and MeadWestvaco South Carolina LLC.

 

“Senior Debt” shall mean the Notes and the “Loans” (as
defined in the Credit Agreement).

 

“Senior Debt Prepayment
Event” shall mean any event giving rise to the requirement to make a
prepayment of Senior Debt pursuant to Section 2.05(b)(i), (ii), (iii),
(iv), (v) or (vi) of the Credit Agreement as in effect on the date of
closing.

 

“Significant
Holder” shall mean (i) each Purchaser, so long as such Purchaser or any
of its Affiliates shall hold (or be committed under this Agreement to purchase)
any Note, or (ii) any other Person which, together with its Affiliates, is
the holder of at least 5% of the aggregate principal amount of the Notes from
time to time outstanding.

 

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

 

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

 

58

 

a
“Master Agreement”),
including any such obligations or liabilities under any Master Agreement.

 

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

 

“Teachers” shall mean Teachers Insurance and Annuity
Association of America.

 

“Termination Event” shall mean,
with respect to a Plan that is subject to Title IV of ERISA, (a) a
Reportable Event, (b) the withdrawal of the Company or any ERISA Affiliate
from such Plan during a plan year in which the Company or any ERISA Affiliate
was a “substantial employer” as defined in Section 4001(a)(2) of
ERISA or was deemed such under Section 4068(f) of ERISA, (c) the
termination of such Plan, the filing of a notice of intent to terminate the
Plan or the treatment of an amendment of such Plan as a termination under Section 4041
of ERISA, (d) the institution by the PBGC of proceedings to terminate such
Plan or (e) any event or condition that might constitute grounds under Section 4042
of ERISA for the termination of, or appointment of a trustee to administer,
such Plan.

 

“Total Debt”
shall mean all Debt of the Parent  and its
Subsidiaries, determined on a consolidated basis, excluding (a) contingent
obligations in respect of Contingent Liabilities (except to the extent
constituting Contingent Liabilities in respect of Debt of a Person other than
the Company or any Guarantor or in respect of Letters of Credit (as defined in
the Credit Agreement)), (b) Hedging Obligations, (c) Debt of the
Parent  to Subsidiaries and Debt of
Subsidiaries to the Parent or to other Subsidiaries and (d) the Earn-Out
Obligations.

 

“Total Leverage Ratio”
shall mean, as of the last day of any fiscal quarter, the ratio of (a) Total
Debt as of such day to (b) EBITDA for the period of four consecutive
fiscal quarters ending on such day.

 

“Total Plan Liability” shall mean, at
any time, the present value of all vested and unvested accrued benefits under
all Pension Plans, determined as of the then most recent valuation date for
each Plan, using PBGC actuarial assumptions for single employer plan
terminations.

 

“Transaction
Documents” shall mean this Agreement, the Notes, the
Intercreditor Agreement, the Guaranty Agreements, the Collateral Documents, the
Intercompany Note Subordination Agreement and the other agreements, documents,
certificates and instruments now or hereafter executed or delivered by the
Company or any Subsidiary or Affiliate in connection with this Agreement.

 

“Transferee” shall mean any
direct or indirect transferee of all or any part of any Note purchased by any
Purchaser under this Agreement.

 

59

 

“UCC” shall mean the
Uniform Commercial Code as in effect in the State of Illinois; provided
that, if perfection or the effect of perfection or non-perfection or the
priority of any security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
Illinois, “UCC” shall mean the Uniform Commercial Code as in effect from
time to time in such other jurisdiction for purposes of the provisions hereof
relating to such perfection, effect of perfection or non-perfection or
priority.

 

“Underwriting Agreement” shall mean the Underwriting
Agreement dated on or about August 15, 2005 between Stone Arcade
Acquisition Corporation, Morgan Joseph & Co., Inc., as
Representative, and the other Underwriters identified therein, as in effect on
the date of closing.

 

“Unfunded Liability” shall mean the amount (if
any) by which the present value of all vested and unvested accrued benefits
under all Plans exceeds the fair market value of all assets allocable to those
benefits, all determined as of the then most recent valuation date for each
Plan, using PBGC actuarial assumptions for single employer plan terminations.

 

“USA Patriot Act” shall mean
United States Public Law 107-56, Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT) Act of 2001, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.

 

“Warrants” shall mean those certain warrants to purchase
40,000,000 shares of common stock of the Parent at an exercise price of $5.00
per share dated on or about August 15, 2005.

 

“Wholly-Owned Subsidiary” shall mean any Subsidiary of the
Company all of the outstanding capital stock or other equity interests of every
class of which is owned by the Company or another Wholly-Owned Subsidiary of
the Company.

 

10C.       Accounting Principles, Terms and
Determinations.  All
references in this Agreement to “generally accepted accounting principles” or “GAAP”
shall be deemed to refer to generally accepted accounting principles in effect
in the United States at the time of application thereof. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all unaudited financial statements and certificates and reports as to financial
matters required to be furnished hereunder shall be prepared, in accordance
with generally accepted accounting principles, applied on a basis consistent
with the most recent audited consolidated financial statements of the Company
and its Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or,
if no such statements have been so delivered, the most recent audited financial
statements referred to in clause (i) of paragraph 8B.  Notwithstanding the foregoing, if at any time
any change in GAAP or in accounting practices as permitted under paragraph 6N
hereof would affect the computation of any financial ratio or requirement set
forth in any Transaction Document, and either the Company or the Required
Holders shall so request, the holders of the Notes and the 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 accounting practices
(subject to the approval of the Required Holders); provided that, until
so amended, (i) such ratio or requirement shall continue 

 

60

 

to
be computed in accordance with GAAP or past accounting practices prior to such
change therein and (ii) the Company shall provide to the holders of the
Notes financial statements and other documents required under this Agreement or
as reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect
to such change in GAAP or accounting practices, as appropriate.  Any reference herein to any specific
citation, section or form of law, statute, rule or regulation shall refer
to such new, replacement or analogous citation, section or form should such
citation, section or form be modified, amended or replaced.  All references herein to consolidated
financial statements of the Parent and its Subsidiaries or to the determination
of any amount for the Parent and its Subsidiaries on a consolidated basis or
any similar reference shall, in each case, be deemed to include each variable
interest entity that the Parent is required to consolidate pursuant to FASB
Interpretation No. 46 — Consolidation of Variable Interest Entities: an
interpretation of ARB No. 51 (January 2003) as if such variable
interest entity were a Subsidiary as defined herein.

 

11.          MISCELLANEOUS.

 

11A.       Note Payments.  The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of, interest
on and any Yield-Maintenance Amount payable with respect to such Note, which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to such Purchaser’s account or accounts as specified in the
Purchaser Schedule attached hereto, or such other account or accounts in the
United States as such Purchaser may from time to time designate in writing,
notwithstanding any contrary provision herein or in any Note with respect to
the place of payment.  Each Purchaser
agrees that, before disposing of any Note, such Purchaser will make a notation
thereon (or on a schedule attached thereto) of all principal payments previously
made thereon and of the date to which interest thereon has been paid.  The Company agrees to afford the benefits of
this paragraph 11A to any Transferee which shall have made the same agreement
as each Purchaser has made in this paragraph 11A.  No holder shall be required to present or
surrender any Note or make any notation thereon, except that upon the written
request of the Company made concurrently with or reasonably promptly after the
payment or prepayment in full of any Note, the applicable holder shall
surrender such Note for cancellation, reasonably promptly after such request,
to the Company at its principal office.

 

11B.       Expenses.  Whether or not the transactions contemplated
hereby shall be consummated, the Company shall pay, and save each Purchaser and
any Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including:

 

(i)            (a) all stamp and documentary taxes and similar
charges, (b) costs of obtaining a private placement number from Standard
and Poor’s Ratings Group for the Notes and (c) fees and expenses of
brokers, agents, dealers, investment banks or other intermediaries or placement
agents, in each case as a result of the execution and delivery of this
Agreement or the other Transaction Documents or the issuance of the Notes;

 

61

 

(ii)           document production and duplication charges and the
reasonable fees and expenses of any special counsel engaged by such Purchaser
or such Transferee in connection with (a) this Agreement, any of the other
Transaction Documents and the transactions contemplated hereby or thereby and (b) any
subsequent proposed waiver, amendment or modification of, or proposed consent
under, this Agreement or any other Transaction Document, whether or not such
proposed waiver, amendment, modification or consent shall be effected or
granted;

 

(iii)          the costs and expenses, including attorneys’ and financial
advisory fees, incurred by such Purchaser or such Transferee in enforcing (or
determining whether or how to enforce or cause the Collateral Agent to enforce)
any rights under this Agreement, the Notes or any other Transaction Document
(including, without limitation, to protect, collect, lease, sell, take
possession of, release or liquidate any of the Collateral) or in responding to
any subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or any other Transaction Document or the
transactions contemplated hereby or thereby or by reason of your or such
Transferee’s having acquired any Note, including without limitation costs and
expenses incurred in any workout, restructuring or renegotiation proceeding or
bankruptcy case;

 

(iv)          all costs and expenses, including without limitation
reasonable attorneys’ fees, preparing, recording and filing all financing
statements, instruments and other documents to create, perfect and fully
preserve and protect the Liens granted in the Collateral Documents and the
rights of the holders of the Notes or of the Collateral Agent for the benefit
of the holders of the Notes; and

 

(v)           any judgment, liability, claim, order, decree, cost, fee,
expense, action or obligation resulting from the consummation of the
transactions contemplated hereby, including the use of the proceeds of the
Notes by the Company, except to the extent resulting from the gross negligence
or willful misconduct of the holders of the Notes.

 

The Company also will
promptly pay or reimburse each Purchaser or holder of a Note (upon demand, in
accordance with each such Purchaser’s or holder’s written instruction) for all
fees and costs paid or payable by such Purchaser or holder to the Securities
Valuation Office of the National Association of Insurance Commissioners in
connection with the initial filing of this Agreement and all related documents
and financial information, and all subsequent annual and interim filings of
documents and financial information related to this Agreement, with such
Securities Valuation Office or any successor organization acceding to the
authority thereof.

 

The obligations of the
Company under this paragraph 11B shall survive the transfer of any Note or
portion thereof or interest therein by any Purchaser or Transferee and the
payment of any Note.

 

11C.       Consent to Amendments.  This Agreement may be amended, and the Parent
and Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Parent and the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holder(s) except that, without the written consent of the holder
or holders of all Notes at the time outstanding, no amendment to this 

 

62

 

Agreement
shall change the maturity of any Note, or change the principal of, or the rate,
method of computation  or time of payment
of interest on or any Yield-Maintenance Amount payable with respect to any
Note, or affect the time, amount or allocation of any  prepayments, or change the proportion of the
principal amount of the Notes required with respect to any consent, amendment,
waiver or declaration.  Each holder of
any Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. 
No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of any Note.  Without limiting the generality of the
foregoing, no negotiations or discussions in which any holder of any Note may
engage regarding any possible amendments, consents or waivers with respect to
this Agreement or any other Transaction Document shall constitute a waiver of
any Default or Event of Default, any term of this Agreement or any other
Transaction Documents or any rights of any such holder under this Agreement or
any other Transaction Document.  As used
herein and in the Notes, the term “this Agreement” and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.

 

11D.       Form, Registration, Transfer and Exchange
of Notes; Lost Notes.  The
Notes are issuable as registered notes without coupons in denominations of at
least $100,000, except as may be necessary to (i) reflect any principal
amount not evenly divisible by $100,000 or (ii) enable the registration of
transfer by a holder of its entire holding of Notes; provided, however, that no
such minimum denomination shall apply to Notes issued upon transfer by any
holder of the Notes to Prudential or any of Prudential’s Affiliates or to any
other entity or group of Affiliates with respect to which the Notes so issued
or transferred shall be managed by a single entity.  The Company shall keep at its principal
office a register in which the Company shall provide for the registration of Notes
and of transfers of Notes.  Upon surrender
for registration of transfer of any Note at the principal office of the
Company, the Company shall, at its expense, execute and deliver one or more new
Notes of like tenor and of a like aggregate principal amount, registered in the
name of such transferee or transferees. 
At the option of the holder of any Note, such Note may be exchanged for
other Notes of like tenor and of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Note to be exchanged at the
principal office of the Company. 
Whenever any Notes are so surrendered for exchange, the Company shall,
at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive.  Every
Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder’s attorney duly authorized in
writing.  Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange.  Upon receipt
of written notice from the holder of any Note of the loss, theft, destruction
or mutilation of such Note and, in the case of any such loss, theft or
destruction, upon receipt of such holder’s unsecured indemnity agreement, or in
the case of any such mutilation upon surrender and cancellation of such Note,
the Company will make and deliver a new Note, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Note.

 

63

 

11E.        Persons Deemed Owners; Participations.  Prior to due presentment for registration of
transfer, the Company may treat the Person in whose name any Note is registered
as the owner and holder of such Note for the purpose of receiving payment of
principal of, interest on and any Yield-Maintenance Amount payable with respect
to such Note and for all other purposes whatsoever, whether or not such Note
shall be overdue, and the Company shall not be affected by notice to the
contrary.  Subject to the preceding
sentence, the holder of any Note may from time to time grant participations in
such Note to any Person on such terms and conditions as may be determined by
such holder in its sole and absolute discretion, but the Company shall be
entitled to deal directly with such holder notwithstanding the sale of any such
participation.

 

11F.        Survival of Representations and
Warranties; Entire Agreement.  All representations and warranties contained
herein or in any other Transaction Documents or made in writing by or on behalf
of the Company or any Guarantor in connection herewith or therewith shall
survive the execution and delivery of this Agreement, the other Transaction
Documents and the Notes, the transfer by any Purchaser of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon
by any Transferee, regardless of any investigation made at any time by or on
behalf of any Purchaser or any Transferee. 
Subject to the preceding sentence, this Agreement, the other Transaction
Documents and the Notes embody the entire agreement and understanding between
the Purchasers, the Parent and the Company with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter.

 

11G.       Successors and Assigns.  All covenants and other agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether so expressed or not.

 

11H.       Independence of Covenants.  All covenants hereunder and in the other
Transaction Documents shall be given independent effect so that if a particular
action or condition is prohibited by any one of such covenants, the fact that
it would be permitted by an exception to, or otherwise be in compliance within
the limitations of,  another covenant
shall not (i) avoid the occurrence of a Default or Event of Default if
such action is taken or such condition exists or (ii) in any way prejudice
an attempt by the holder of any Note to prohibit through equitable action or
otherwise the taking of any action by the Parent or any Subsidiary which would
result in a Default or Event of Default.

 

11I.         Notices.  All written communications provided for
hereunder shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (i) if to any Purchaser, addressed to
such Purchaser at the address specified for such communications in the
Purchaser Schedule attached hereto, or at such other address as such Purchaser
shall have specified to the Company in writing, (ii) if to any other
holder of any Note, addressed to such other holder at such address as such
other holder shall have specified to the Company in writing or, if any such
other holder shall not have so specified an address to the Company, then
addressed to such other holder in care of the last holder of such Note which
shall have so specified an address to the Company, and (iii) if to the
Parent or the Company, addressed to it at 1101 Skokie Boulevard, Suite 300,
Northbrook, Illinois, 60062, Attention: Andrea K. Tarbox, or 

 

64

 

at
such other address as the Company shall have specified to the holder of each
Note in writing; provided, however, that any such communication to the Company
may also, at the option of the holder of any Note, be delivered by any other
means either to the Company at its address specified above or to any officer of
the Company.

 

11J.        Payments Due on Non-Business Days.  Anything in this Agreement or the Notes to
the contrary notwithstanding, any payment of principal of, interest on or
Yield-Maintenance Amount payable with respect to any Note that is due on a date
other than a Business Day shall be made on the next succeeding Business Day
without including the additional days elapsed in the computation of the
interest payable on such next succeeding Business Day.

 

11K.       Satisfaction Requirement.  If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any Purchaser, to any holder of a Note or to the
Required Holder(s), the determination of such satisfaction shall be made by
such Purchaser, such holder or the Required Holder(s), as the case may be, in
the sole and exclusive judgment (exercised in good faith) of the Person or
Persons making such determination.

 

11L.        GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES
WHICH WOULD OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN
ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF
ANY OTHER JURISDICTION).

 

11M.       SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.  ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER TRANSACTION
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS IN COOK
COUNTY, ILLINOIS, OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARENT AND THE
COMPANY HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.  EACH OF THE PARENT AND THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
PARAGRAPH 11I OR TO CT CORPORATION SYSTEM AT 208 SOUTH LASALLE STREET, CHICAGO,
ILLINOIS  60604, SUCH SERVICE TO BECOME
EFFECTIVE UPON RECEIPT.  EACH OF THE
PARENT AND THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO 

 

65

 

COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
PARENT AND/OR THE COMPANY IN ANY OTHER JURISDICTION.  EACH OF THE PARENT AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS BROUGHT
IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT THE PARENT OR THE COMPANY
HAS OR MAY HEREAFTER ACQUIRE IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE WITH RESPECT
TO ITSELF OR ITS PROPERTY), EACH OF THE PARENT AND THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS. 
EACH OF THE PARENT AND THE COMPANY AND EACH PURCHASER HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY.

 

11N.       Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

11O.       Descriptive Headings; Advice of Counsel;
Interpretation; Time of the Essence.  The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. 
Each party to this Agreement represents to the other parties to this
Agreement that such party has been represented by counsel in connection with
this Agreement and the other Transaction Documents, that such party has
discussed this Agreement and the other Transaction Documents with its counsel
and that any and all issues with respect to this Agreement and the other
Transaction Documents have been resolved as set forth herein and therein.  No provision of this Agreement or any other
Transaction Document shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured,
drafted or dictated such provision.  Time
is of the essence in the performance of this Agreement and the other
Transaction Documents.

 

11P.        Counterparts; Facsimile or Electronic
Signatures.  This
Agreement may be executed in any number of counterparts (or counterpart
signature pages), each of which counterparts shall be an original but all of
which together shall constitute one instrument. 
Delivery of an executed counterpart of a signature page to this
Agreement by facsimile or 

 

66

 

electronic
transmission shall be effective as delivery of a manually executed counterpart
of this Agreement.

 

11Q.       Severalty of Obligations.  The sales of Notes to the Purchasers are to
be several sales, and the obligations of the Purchasers under this Agreement
are several obligations.  No failure by
any Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and no
Purchaser shall be responsible for the obligations of, or any action taken or
omitted by, any other Purchaser hereunder.

 

11R.       Independent Investigation.  Each Purchaser represents to and agrees with
each other Purchaser that it has made its own independent investigation of the
condition (financial and otherwise), prospects and affairs of the Parent and
its Subsidiaries in connection with its purchase of the Notes hereunder and has
made and shall continue to make its own appraisal of the creditworthiness of
the Company.  No holder of Notes shall
have any duties or responsibility to any other holder of Notes, either
initially or on a continuing basis, to make any such investigation or appraisal
or to provide any credit or other information with respect thereto.  No holder of Notes is acting as agent or in
any other fiduciary capacity on behalf of any other holder of Notes.

 

11S.        Directly or Indirectly.  Where any provision in this Agreement refers
to actions to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.

 

11T.        Confidential Information.  For the purposes of
this paragraph 11T, “Confidential Information” means information delivered
to any Purchaser by or on behalf of the Parent or any Subsidiary in connection
with the transactions contemplated by or otherwise pursuant to this Agreement
that is proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified when received by such Purchaser as being
confidential information of the Parent or such Subsidiary, provided that such
term does not include information that (a) was publicly known or otherwise
known to such Purchaser prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by such Purchaser or any
person acting on such Purchaser’s behalf, (c) otherwise becomes known to
such Purchaser other than through disclosure by the Parent or any Subsidiary or
(d) constitutes financial statements delivered to such Purchaser
under paragraph 5A that are otherwise publicly available, provided that
financial statements posted to a website to satisfy the delivery requirements
of paragraph 5A shall not be deemed to be publicly available unless such
financial statements, on such website or otherwise, are publicly
available.  Each Purchaser will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by such Purchaser in good faith to protect confidential
information of third parties delivered to such Purchaser, provided that such
Purchaser may deliver or disclose Confidential Information to (i) its
directors, officers, employees, attorneys, trustees and affiliates (to the
extent such disclosure reasonably relates to the administration of such
Purchasers’ investments), (ii) its financial advisors, agents and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this paragraph
11T, (iii) any other holder of any securities of the Company or the Parent
(if such holder has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of 

 

67

 

this paragraph
11T), (iv) any Institutional Investor to which it sells or offers to sell
any securities of the Company or the Parent or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of
this paragraph 11T), (v) any Person from which it offers to purchase
any security of the Company or the Parent (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this paragraph 11T), (vi) any federal or state
regulatory authority having jurisdiction over such Purchaser, (vii) the
National Association of Insurance Commissioners or the Securities Valuation
Office or, in each case, any similar organization, or any nationally recognized
rating agency that requires access to information about such Purchaser’s
investment portfolio, or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with
any law, rule, regulation or order applicable to such Purchaser, (x) in
response to any subpoena or other legal process, (y) in connection with
any litigation to which such Purchaser is a party or (z) if an Event of
Default has occurred and is continuing, to the extent such Purchaser may
reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under such Purchaser’s Notes, this Agreement or any other Transaction
Document.  Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this paragraph 11T as though it were a party
to this Agreement.  On reasonable request
by the Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this paragraph 11T.

 

11U.        Transaction
References.  Each of the
Parent and the Company agrees that Prudential Financial Management, Inc.
or any of its Affiliates may (a) refer to its role in originating the
purchase of the Notes from the Company, as well as the identity of the Parent
and the Company and the aggregate principal amount and issue date of the Notes,
on its internet site or in marketing materials, press releases, published “tombstone”
announcements or any other print or electronic medium and (b) display the
Parent’s and/or the Company’s corporate logo in conjunction with any such
reference.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT

BLANK.  SIGNATURES ON THE FOLLOWING
PAGE.]

 

68

 

11V.       Binding Agreement.  When this Agreement is executed and delivered
by the Company, the Parent and each of the Purchasers it shall become a binding
agreement between the Company, the Parent and each of the Purchasers.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  KAPSTONE PAPER AND PACKAGING

  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Roger W. Stone

  
	
   

  	
   

  	
  Name:

  	
  Roger W. Stone

  
	
   

  	
   

  	
  Title:

  	
  Chairman and CEO

  
	
   

  	
   

  
	
   

  	
  KAPSTONE KRAFT PAPER CORPORATION  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Roger W. Stone

  
	
   

  	
   

  	
  Name:

  	
  Roger W. Stone

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
					

 

69

 

The foregoing Agreement is

hereby accepted as of the

date first above written.

 

	
  THE
  PRUDENTIAL INSURANCE COMPANY

    OF AMERICA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ G. Anthony Coletta

  	
   

  	
   

  
	
   

  	
  Vice President

  	
   

  	
   

  
					

 

 

PURCHASER SCHEDULE

 

	
   

  	
   

  	
   

  	
   

  	
  Aggregate

  Principal

  Amount of

  Notes

  to be Purchased

  	
   

  	
  Note

  Denomination(s)

  	
   

  
	
   

  	
   

  	
  THE
  PRUDENTIAL INSURANCE COMPANY OF AMERICA

  	
   

  	
  $

  	
  40,000,000.00

  	
   

  	
  $

  	
  20,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  20,000,000.00

  	
   

  
	
  (1)

  	
   

  	
  All
  payments on account of Notes held by such purchaser shall be made by wire
  transfer of immediately available funds for credit to:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  Name: Prudential Managed Portfolio

  Account No.: P86188 (please do not include spaces) (in the case of payments
  on account of one of the Notes originally issued in the principal amount of
  $20,000,000.00)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  Name: Privest Plus

  Account No.: P86288 (please do not include spaces) (in the case of payments
  on account of the other Note originally issued in the principal amount of
  $20,000,000.00)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMorgan
  Chase Bank

  New York, NY

  ABA No.: 021-000-021

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Each
  such wire transfer shall set forth the name of the Company, a reference to
  “8.30% Senior Secured Notes due July 1, 2015, Security
  No. INV11062, PPN 48563# AA2” and the due date and application (as among
  principal, interest and Yield-Maintenance Amount) of the payment being made.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  Address
  for all notices relating to payments:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Prudential Insurance Company of America

  c/o Investment Operations Group

  Gateway Center Two, 10th Floor

  100 Mulberry Street

  Newark, NJ 07102-4077

  	
   

  	
   

  	
   

  	
   

  	
   

  
										

 

1

 

	
   

  	
   

  	
  Attention:
  Manager, Billings and Collections

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (3)

  	
   

  	
  Address
  for all other communications and notices:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Prudential Insurance Company of America

  c/o Prudential Capital Group

  Two Prudential Plaza

  180 North Stetson, Suite 5600

  Chicago, IL 60601-6716

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:
  Managing Director

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (4)

  	
   

  	
  Recipient
  of telephonic prepayment notices:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Manager,
  Trade Management Group

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:
  (973) 367-3141

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:
  (888) 889-3832

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (5)

  	
   

  	
  Address
  for Delivery of Notes and Closing Sets:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Send
  physical security by nationwide overnight

  delivery service to: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Prudential
  Capital Group

  Two Prudential Plaza

  180 North Stetson, Suite 5600

  Chicago, IL 60601-6716

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:
  Wiley S. Adams 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:
  (312) 540-4204

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (6)

  	
   

  	
  Tax
  Identification No.: 22-1211670

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2

 

 

EXHIBIT A

 

[FORM OF NOTE]

 

KAPSTONE KRAFT PAPER CORPORATION

 

8.30% SENIOR SECURED NOTE DUE JULY 1, 2015

 

	
  No.        

  $          

  	
   

  	
   

  	
   

  	
  [Date]

  PPN 48563# AA2

  

 

FOR VALUE RECEIVED, the
undersigned, KAPSTONE KRAFT PAPER CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (herein called the “Company”), hereby
promises to pay to                                                                                           ,
or registered assigns, the principal sum of                                                       
DOLLARS on July 1, 2015, with interest (computed on the basis of a 360-day
year—30-day month) (a) on the unpaid balance thereof at the rate of 8.30%
per annum (or, during any period when an Event of Default shall be in
existence, at the election of the Required Holder(s) at the Default Rate
(as defined below)) from the date hereof, payable quarterly on the first day of
October, January, April and July in each year, commencing with the October 1,
January 1, April 1 or July 1 next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) on
any overdue payment (including any overdue prepayment) of principal, any
overdue payment of Yield-Maintenance Amount (as defined in the Agreement) and,
to the extent permitted by applicable law, any overdue payment of interest,
payable quarterly as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the Default
Rate.  The “Default Rate” shall mean a
rate per annum from time to time equal to the greater of (i) 10.30% or (ii) 2.00%
over the rate of interest publicly announced by JPMorgan Chase Bank, National
Association, from time to time as its “prime rate”.

 

Payments of principal of,
interest on and any Yield-Maintenance Amount payable with respect to this Note
are to be made at the main office of JPMorgan Chase Bank, National Association,
in New York City or at such other place as the holder hereof shall designate to
the Company in writing, in lawful money of the United States of America.

 

This Note is one of a series
of Senior Secured Notes (herein called the “Notes”) issued pursuant to a Note
Purchase Agreement, dated as of July 1, 2008 (herein called the “Agreement”),
among the Company, Kapstone Paper and Packaging Corporation, a Delaware
corporation, and the original purchasers of the Notes named in the Purchaser
Schedule attached thereto and is entitled to the benefits thereof.

 

This Note is a registered
Note and, as provided in the Agreement, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or such holder’s
attorney duly authorized in writing, a new Note for a like principal amount
will be issued to, and registered in the name 

 

A-1

 

of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

 

The Company agrees to make
required prepayments of principal on the dates and in the amounts specified in
the Agreement.  This Note is also subject
to optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.

 

This Note is secured by, and
entitled to the benefits of, the Collateral Documents and is guaranteed
pursuant to one or more Guaranty Agreements executed by certain
guarantors.  Reference is made to the
Collateral Documents for a statement concerning the terms and conditions
governing the collateral security for the obligations of the Company hereunder
and reference is made to such Guaranty Agreements for a statement concerning
the terms and conditions governing such guarantee of the obligations of the
Company hereunder.

 

The Company and any and all
endorsers, guarantors and sureties severally waive grace, demand, presentment
for payment, notice of dishonor or default, notice of intent to accelerate,
notice of acceleration (except to the extent required in the Agreement),
protest and diligence in collecting in connection with this Note, whether now
or hereafter required by applicable law.

 

In case an Event of Default
shall occur and be continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner and with the effect provided in
the Agreement.

 

Capitalized terms used
herein which are defined in the Agreement and not otherwise defined herein
shall have the meanings as defined in the Agreement.

 

THIS NOTE
IS INTENDED TO BE PERFORMED IN THE STATE OF ILLINOIS AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE (EXCLUDING ANY CONFLICTS OF
LAW RULES WHICH WOULD OTHERWISE CAUSE THIS NOTE TO BE CONSTRUED OR ENFORCED IN
ACCORDANCE WITH THE LAWS OF ANY OTHER JURISDICTION).

 

	
   

  	
  KAPSTONE
  KRAFT PAPER CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

A-2

 

EXHIBIT B

 

[FORM OF DISBURSEMENT
DIRECTION LETTER]

 

[On Company Letterhead - place on one page]

 

July 1, 2008

 

The Prudential Insurance
Company of America

c/o Prudential Capital Group

Two Prudential Plaza

Chicago, Illinois 60601

 

Re:          8.30% Senior Secured Notes due July 1, 2015 (the “Notes”)

 

Ladies and Gentlemen:

 

Reference is made to that
certain Note Purchase Agreement (the “Note Agreement”), dated July 1,
2008, among Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”),
Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”),
and you.  Capitalized terms used herein
shall have the meanings assigned to such terms in the Note Agreement.

 

You are hereby irrevocably authorized
and directed to disburse the $40,000,000 purchase price of the Notes by wire
transfer of immediately available funds to [bank name and address], ABA #                  ,
for credit to the account of the                         ,
account no.                        .

 

Disbursement when so made
shall constitute payment in full of the purchase price of the Notes and shall
be without liability of any kind whatsoever to you.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  KAPSTONE KRAFT PAPER
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

B-1

 

EXHIBIT C

 

[FORM OF GUARANTY
AGREEMENT]

 

GUARANTY AGREEMENT

 

This GUARANTY AGREEMENT (the “Guaranty”), dated as of July 1, 2008,
is made by the guarantors named in the Guarantor Schedule attached hereto and
each guarantor that may become a party to this Guaranty by executing a joinder
hereto (herein referred to, individually, as a “Guarantor” and, collectively, as “Guarantors”), in favor of the holders of the Notes (as
defined below) from time to time (the “Holders”).

 

WITNESSETH:

 

WHEREAS, Kapstone Kraft
Paper Corporation, a Delaware corporation (the “Company”)
and Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”), have entered into that certain Note Purchase
Agreement dated as of July 1, 2008 (as amended, restated, supplemented or
otherwise modified from time to time, the “Note Agreement”)
among the Company, the Parent, and the Purchasers named on the Purchaser
Schedule attached thereto, pursuant to which the Company issued and sold and
the Company’s 8.30% Senior Secured Notes due July 1, 2015 (as amended,
restated, supplemented or otherwise modified from time to time, the “Notes”); and

 

WHEREAS, the Company is
a direct Wholly-Owned Subsidiary of the Parent, 
each Guarantor other than the Parent (each such Guarantor a “Subsidiary Guarantor”) is a direct or indirect Wholly-Owned
Subsidiary of the Company and each Guarantor derives substantial value and
benefit from the issuance of the Notes pursuant to the Note Agreement; and

 

WHEREAS, as a condition
to the obligation of the Purchasers to purchase the Notes under the Note
Agreement, each Purchaser has required that the Guarantors execute and deliver
this Guaranty for the benefit of the Holders.

 

NOW
THEREFORE, for value received, to satisfy one of the
conditions precedent to the effectiveness of the Note Agreement, to induce the
Purchasers to purchase the Notes under the Note Agreement, for the reasons set
forth above and set forth in the Note Agreement, for and in consideration of
the premises and mutual covenants herein contained, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Guarantor, intending to be legally bound, does hereby
covenant and agree as follows:

 

1.             DEFINITIONS; RECITALS.  Capitalized terms that are used in this
Guaranty and not defined in this Guaranty shall have the meaning ascribed to
them in the Note Agreement.  The recitals
in this Guaranty are incorporated into this Guaranty.

 

C-1

 

2.             THE GUARANTY.

 

2A.          Guaranty of Payment and Performance of
Obligations.  Each
Guarantor, jointly and severally with each other Guarantor, absolutely,
unconditionally and irrevocably guarantees the full and prompt payment in
United States currency when due (whether at maturity, a stated prepayment date
or earlier by reason of acceleration or otherwise) and at all times thereafter,
and the due and punctual performance, of all of the indebtedness, obligations
and liabilities existing on the date hereof or arising from time to time
hereafter, whether direct or indirect, joint or several, actual, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, of the Company
to any Holder under or in respect of the Note Agreement, the Notes, the other
Transaction Documents or any other agreements, documents, certificates and
instruments now or hereafter executed or delivered by the Company, any
Guarantor or any other guarantor in connection with the Note Agreement,
including, without limitation, the principal of and interest (including,
without limitation, interest accruing before, during or after any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, liquidation or
dissolution proceeding, and, if interest ceases to accrue by operation of law
by reason of any such proceeding, interest which otherwise would have accrued
in the absence of such proceeding, whether or not allowed as a claim in such
proceeding) on the Notes and any Yield-Maintenance Amount with respect to any
of the Notes (collectively, the “Guarantied
Obligations”).  This is a
continuing guaranty of payment and performance and not of collection.  Notwithstanding the foregoing, the aggregate
amount of any Subsidiary Guarantor’s liability under this Guaranty shall not
exceed the maximum amount that such Subsidiary Guarantor can guaranty without
violating, or causing this Guaranty or such Subsidiary  Guarantor’s obligations under this Guaranty
to be void, voidable or otherwise rendered unenforceable under, any fraudulent
conveyance or fraudulent transfer law, including Section 548(a)(2) of
the Bankruptcy Code.  Each Guarantor
hereby agrees to pay and to indemnify and save each Holder harmless from and
against any damage, loss, cost or expense (including attorneys’ fees and
expenses) which such Holder may incur or be subject to as a consequence of
endeavoring to enforce this Guaranty or to collect all or any part of the
Guarantied Obligations from, or in pursuing any action against the Company or
any other Guarantor or enforcing any rights of any Holder in any security for
the Guarantied Obligations or the liabilities of any Guarantor hereunder,
including, without limitation the Collateral, and any taxes, fees or penalties
which may be paid or payable in connection therewith.  Notwithstanding any provision of this
Guaranty, all covenants, obligations, waivers and agreements of the Guarantors
under this Guaranty shall be joint and several.

 

Upon an Event of Default,
any Holder may, at its sole election and without notice, proceed directly and
at once against any Guarantor to seek and enforce performance of, and to
collect and recover, the Guarantied Obligations, or any portion thereof,
without first proceeding against the Company, any other Guarantor, any other
guarantor of the Guarantied Obligations or any other Person or the Collateral,
or any other security for the Guarantied Obligations or for the liability of any
such other Person or any Guarantor hereunder. 
Each Holder shall have the exclusive right to determine the application
of payments and credits, if any, from any Guarantor, the Company or from any
other Person on account of the Guarantied Obligations or otherwise.  This Guaranty and all covenants and
agreements of each Guarantor contained herein shall 

 

C-2

 

continue
in full force and effect and shall not be discharged until such a time as all
of the Guarantied Obligations shall be indefeasibly paid in full in cash.

 

2B.          Obligations Unconditional.  The obligations of each Guarantor under this
Guaranty shall be continuing, absolute and unconditional, irrespective of (i) the
invalidity or unenforceability of the Note Agreement, the Notes, the other
Transaction Documents or any other agreements, documents, certificates and
instruments now or hereafter executed or delivered by the Company, any other
Guarantor or any other Person in connection with the Note Agreement or any
other Transaction Document or any provision thereof; (ii) the absence of
any attempt by any Holder to collect the Guarantied Obligations or any portion
thereof from the Company, any other Guarantor, any other guarantor of any
portion of the Guarantied Obligations or any other Person or other action to
enforce the same; (iii) any action taken by any Holder whether or not
authorized by this Guaranty; (iv) any failure by any Holder or the
Collateral Agent to acquire, perfect or maintain any security interest or lien
in, or take any steps to preserve its rights to, the Collateral or any other
security for the Guarantied Obligations or any portion thereof or for the
liability of such Guarantor hereunder or the liability of any other Guarantor
or any other Person or any or all of the Guarantied Obligations; (v) any
defense arising by reason of any disability or other defense (other than a
defense of payment, unless the payment on which such defense is based was or is
subsequently invalidated, declared to be fraudulent or preferential, otherwise
avoided and/or required to be repaid to the Company or any Guarantor, as the
case may be, or the estate of any such party, a trustee, receiver or any other
Person under any bankruptcy law, state or federal law, common law or equitable
cause, in which case there shall be no defense of payment with respect to such
payment) of the Company or any other Person liable on the Guarantied
Obligations or any portion thereof; (vi) any Holder’s election, in any
proceeding instituted under Chapter 11 of Title 11 of the Federal Bankruptcy
Code (11 U.S.C. §101 et seq.) (the “Bankruptcy Code”),
of the application of Section 1111(b)(2) of the Bankruptcy Code; (vii) any
borrowing or grant of a security interest to any Holder or the Collateral Agent
by the Company as debtor-in-possession, or extension of credit, under Section 364
of the Bankruptcy Code; (viii) the disallowance or avoidance of all or any
portion of any Holder’s claim(s) for repayment of the Guarantied
Obligations under the Bankruptcy Code or any similar state law or the
avoidance, invalidity or unenforceability of any Lien securing the Guarantied
Obligations or the liability of any Guarantor hereunder or under any of the
other Transaction Documents or of the Company or any other guarantor of all or
any part of the Guarantied Obligations; (ix) any amendment to, waiver or
modification of, or consent, extension, indulgence or other action or inaction
under or in respect of the Note Agreement, the Notes, the other Transaction Documents
or any other agreements, documents, certificates and instruments now or
hereafter executed or delivered by the Company or any Guarantor or any other
guarantor in connection with the Note Agreement (including, without limitation,
the issuance of Notes from time to time under the Note Agreement and any
increase in the interest rate on the Notes); (x) any change in any
provision of any applicable law or regulation; (xi) any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign, binding on or affecting any Guarantor, the Company or any other
guarantor or any of their assets; (xii) the articles of incorporation,
certificate of formation or other formation document, or the by-laws, limited
liability company agreement, partnership agreement or similar formation
documents of any Guarantor, the Company or any other guarantor; (xiii) any
mortgage, indenture, lease, contract, or other agreement (including without
limitation any agreement with stockholders, partners or members of such
Guarantor, as applicable), instrument or undertaking 

 

C-3

 

to
which any Guarantor or the Company is a party or which purports to be binding
on or affect any such Person or any of its assets; (xiv) any bankruptcy,
insolvency, readjustment, composition, liquidation or similar proceeding with
respect to the Company, any Guarantor or any other guarantor of all or any
portion of any Guarantied Obligations or any such Person’s property and any
failure by any Holder to file or enforce a claim against any Guarantor or any
such other Person in any such proceeding; (xv) any failure on the part of the
Company for any reason to comply with or perform any of the terms of any other
agreement with any Guarantor; or (xvi) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.

 

2C.          Obligations Unimpaired.  Each Holder is authorized, without demand or
notice, which demand and notice are hereby waived, and without discharging or
otherwise affecting the obligations of any Guarantor hereunder (which shall
remain absolute and unconditional notwithstanding any such action or omission
to act), from time to time to (i) renew, extend, accelerate or otherwise
change the time for payment of, or other terms relating to, the Guarantied
Obligations or any portion thereof, or otherwise modify, amend or change the
terms of the Note Agreement, the Notes, any other Transaction Documents or any
other agreements, documents, certificates and instruments now or hereafter
executed or delivered by the Company. any Guarantor or any other guarantor of
all or any of the Guarantied Obligations in connection with the Note Agreement;
(ii) accept partial payments on the Guarantied Obligations; (iii) take
and hold security for the Guarantied Obligations or any portion thereof or any
other liabilities of the Company, the obligations of any Guarantor under this
Guaranty and the obligations under any other guaranties and sureties of all or
any of the Guarantied Obligations, and exchange, enforce, waive, release, sell,
transfer, assign, abandon, fail to perfect, subordinate or otherwise deal with
any such security (including, without limitation, the Collateral); (iv) apply
such security and direct the order or manner of sale thereof as any Holder may
determine in its sole discretion; (v) settle, release, compromise, collect
or otherwise liquidate the Guarantied Obligations or any portion thereof and
any security therefor or guaranty thereof in any manner; (vi) extend
additional loans, credit and financial accommodations to the Company or any
other Guarantor and otherwise create additional Guarantied Obligations,
including, without limitation, by the purchase of Notes from time to time under
the Note Agreement; (vii) waive strict compliance with the terms of the
Note Agreement, the Notes, any other Transaction Document or any other
agreements, documents, certificates and instruments now or hereafter executed
or delivered by the Company, any Guarantor or any other guarantor of all or any
of the Guarantied Obligations in connection with the Note Agreement and
otherwise forbear from asserting any Holder’s rights and remedies thereunder; (viii) take
and hold additional guaranties or sureties and enforce or forbear from
enforcing any guaranty or surety of any other guarantor or surety of the
Guarantied Obligations, any portion thereof or release or otherwise take any
action (or omit to take any action) with respect to any such guarantor or surety;
(ix) assign this Guaranty in part or in whole in connection with any
assignment of the Guarantied Obligations or any portion thereof; (x) exercise
or refrain from exercising any rights against the Company or any Guarantor; and
(xi) apply any sums, by whomsoever paid or however realized, to the payment of
the Guarantied Obligations as any Holder in its sole discretion may determine.

 

2D.          Waivers of Guarantors.  Each Guarantor waives for the benefit of the
Holders:

 

C-4

 

(i)            any right to require any Holder, as a condition of
payment or performance by such Guarantor or otherwise to (a) proceed
against the Company, any  Guarantor, any
other guarantor of the Guarantied Obligations or any other Person, (b) proceed
against or exhaust any security given to or held by any Holder or the
Collateral Agent in connection with the Guarantied Obligations or any other
guaranty, or (c) pursue any other remedy available to any Holder
whatsoever;

 

(ii)           any defense arising by reason of (a) the incapacity,
lack of authority or any disability or other defense of the Company, including,
without limitation, any defense based on or arising out of the lack of validity
or the unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto, (b) the cessation of the liability of the
Company from any cause other than indefeasible payment in full of the
Guarantied Obligations in cash or (c) any act or omission of any Holder or
the Collateral Agent or any other Person which directly or indirectly, by
operation of law or otherwise, results in or aids the discharge or release of
the Company or any security given to or held by any Holder or the Collateral
Agent in connection with the Guarantied Obligations or any other guaranty;

 

(iii)          any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal;

 

(iv)          any defense based upon any Holder’s errors or omissions in
the administration of the Guarantied Obligations;

 

(v)           (a) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this Guaranty
and any legal or equitable discharge of such Guarantor’s obligations hereunder,
(b) the benefit of any statute of limitations affecting the Guarantied
Obligations or such Guarantor’s liability hereunder or the enforcement hereof, (c) any
rights to set-offs, recoupments and counterclaims, and (d) promptness,
diligence and any requirement that any Holder or the Collateral Agent protect,
maintain, secure, perfect or insure any Lien or any property subject thereto;

 

(vi)          notices (a) of nonperformance or dishonor, (b) of
acceptance of this Guaranty by any Holder or by such Guarantor, (c) of
default in respect of the Guarantied Obligations or any other guaranty, (d) of
the existence, creation or incurrence of new or additional indebtedness,
arising either from additional loans extended to the Company or otherwise,
including without limitation, as a result of the issuance of any Notes, (e) that
the principal amount, or any portion thereof, and/or any interest on any
document or instrument evidencing all or any part of the Guarantied Obligations
is due, (f) of any and all proceedings to collect from the Company, any
Guarantor or any other guarantor of all or any part of the Guarantied
Obligations, or from anyone else, (g) of exchange, sale, surrender or
other handling of any security or collateral given to any Holder or the
Collateral Agent to secure payment of the Guarantied Obligations or any
guaranty therefor, (h) of renewal, extension or modification of any of the
Guarantied Obligations, (i) of assignment, sale or other transfer of any
Note to a Transferee, or (j) of any of the matters referred to in
paragraph 2B and any right to consent to any thereof;

 

C-5

 

(vii)         presentment, demand for payment or performance and protest
and notice of protest with respect to the Guarantied Obligations or any
guaranty with respect thereto; and

 

(viii)        any defenses or benefits that may be
derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, or which may conflict with the terms of this Guaranty.

 

Each Guarantor agrees that
neither any Holder nor the Collateral Agent shall be under any obligation to
marshall any assets in favor of such Guarantor or against or in payment of any
or all of the Guarantied Obligations.

 

No Guarantor will exercise
any rights which it may have acquired by way of subrogation under this
Guaranty, by any payment made hereunder or otherwise, or accept any payment on
account of such subrogation rights, or any rights of exoneration, reimbursement
or indemnity or contribution or any rights or recourse to any security for the
Guarantied Obligations or this Guaranty unless at the time of such Guarantor’s
exercise of any such right there shall have been performed and indefeasibly
paid in full in cash all of the Guarantied Obligations.

 

2E.          Revival.  Each Guarantor agrees that, if any payment
made by the Company or any other Person is applied to the Guarantied
Obligations and is at any time annulled, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be refunded
or repaid, or the proceeds of Collateral or any other security are required to
be returned by any Holder to the Company, its estate, trustee, receiver or any
other Person, including, without limitation, any Guarantor, under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or repayment, such Guarantor’s liability hereunder
(and any lien, security interest or other collateral securing such liability)
shall be and remain in full force and effect, as fully as if such payment had
never been made, or, if prior thereto this Guaranty shall have been canceled or
surrendered (and if any lien, security interest or other collateral securing
such Guarantor’s liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender), this Guaranty (and such lien,
security interest or other collateral) shall be reinstated and returned in full
force and effect, and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of any Guarantor
in respect of the amount of such payment (or any lien, security interest or
other collateral securing such obligation).

 

2F.          Obligation to Keep Informed.  Each Guarantor shall be responsible for
keeping itself informed of the financial condition of the Company and any other
Persons primarily or secondarily liable on the Guarantied Obligations or any
portion thereof, and of all other circumstances bearing upon the risk of
nonpayment of the Guarantied Obligations or any portion thereof, and each
Guarantor agrees that no Holder shall have any duty to advise such Guarantor of
information known to such Holder regarding such condition or any such
circumstance.  If any Holder, in its
discretion, undertakes at any time or from time to time to provide any such
information to any Guarantor, no Holder shall be under any obligation (i) to
undertake any investigation, whether or not a part of its regular business
routine, (ii) to disclose any information which such Holder wishes to
maintain confidential, or (iii) to make any other or future disclosures of
such information or any other information to any Guarantor.

 

C-6

 

2G.         Bankruptcy.  If any Event of Default specified in clauses
(viii), (ix) or (x) of paragraph 7A of the Note Agreement shall occur
and be continuing, then each Guarantor agrees to immediately pay to the Holders
the full outstanding amount of the Guarantied Obligations without notice.

 

3.             REPRESENTATIONS AND WARRANTIES.

 

Each Guarantor represents,
covenants and warrants as follows:

 

3A.          Organization.  Such Guarantor is duly organized and existing
in good standing under the laws of its state of formation and is qualified to
do business and in good standing in every jurisdiction where the ownership of
its property or the nature of the business conducted by it makes such
qualification necessary and in which the failure to be so qualified could be
reasonably likely to result in a material adverse effect.

 

3B.          Power and Authority.  Such Guarantor and each Subsidiary of such
Guarantor has all requisite power to conduct its business as currently
conducted and as currently proposed to be conducted.  Such Guarantor has all requisite power to
execute, deliver and perform its obligations under this Guaranty and the other
Transaction Documents to which it is a party. 
The execution, delivery and performance of this Guaranty and the other
Transaction Documents to which it is a party have been duly authorized by all
requisite action and this Guaranty and the other Transaction Documents to which
it is a party have been duly executed and delivered by authorized officers of
such Guarantor and are valid obligations of such Guarantor, legally binding
upon and enforceable against such Guarantor in accordance with their terms,
except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

3C.          Conflicting Agreements and Other
Matters.  The
execution and delivery of this Guaranty and the other Transaction Documents to
which it is a party, the offering, issuance and sale of the Notes, and the
fulfillment of or the compliance with the terms and provisions hereof will not
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of such Guarantor or
any of its Subsidiaries pursuant to, the certificate of incorporation or
certificate of formation or similar formation document, the by-laws,
partnership agreement, limited liability company agreement or similar
organizational document of such Guarantor or any of its Subsidiaries, any award
of any arbitrator or any agreement (including any agreement with stockholders,
members or partners of such Guarantor or Persons with direct or indirect
ownership interests in stockholders, members or partners of such Guarantor),
instrument, order, judgment, decree, statute, law, rule or regulation to
which such Guarantor or any of its Subsidiaries is subject.  Neither such Guarantor nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing any Debt of such Guarantor or such Subsidiary, any
agreement relating thereto or any other contract or agreement (including its
charter, bylaws, partnership agreement or operating agreement) which limits the
amount of, or otherwise imposes restrictions on the incurring of,

 

C-7

 

 

obligations
of such Guarantor of the type to be evidenced by this Guaranty, other than the
Credit Agreement.

 

3D.          ERISA.  The execution and delivery of this Guaranty
will be exempt from, or will not involve any transaction which is subject to,
the prohibitions of section 406 of ERISA and will not involve any transaction
in connection with which a penalty could be imposed under section 502(i) of
ERISA or a tax could be imposed pursuant to section 4975 of the Code.

 

3E.          Governmental Consent.  Neither the nature of such Guarantor or of
any Subsidiary of such Guarantor nor any of their respective businesses or
properties, nor any relationship between such Guarantor or any Subsidiary of
such Guarantor and any other Person, nor any circumstance in connection with
the execution, delivery and performance of this Guaranty, nor the offering,
issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (excluding routine
filings after the closing date with the Securities and Exchange Commission
and/or state Blue Sky authorities and filings and recordings necessary to
perfect the Liens in the Collateral intended to be created by the Collateral
Documents).

 

3F.          Regulatory Status.  Neither such Guarantor nor any Subsidiary of
such Guarantor is (i) an “investment company” or a company “controlled” by
an “investment company” within the meaning of the Investment Company Act of
1940, as amended, (ii) a “holding company” or a “subsidiary company” or an
“affiliate” of a “holding company” or a “subsidiary company” of a “holding
company”, within the meaning of the Energy Policy Act of 2005, as amended, or (iii) a
“public utility” within the meaning of the Federal Power Act, as amended.

 

3G.          Actions by the Guarantor and its
Subsidiaries.  Each
Guarantor covenants that it will not take any action that would directly or
indirectly result in an Event of Default or Default.

 

4.             MISCELLANEOUS.

 

4A.          Successors, Assigns and Participants.  This Guaranty shall be binding upon each
Guarantor and its successors and assigns and shall inure to the benefit of each
Holder and their respective successors, transferees and assigns; all references
herein to each Guarantor shall be deemed to include its successors and assigns,
and all references herein to any Holder shall be deemed to include their
respective successors and assigns.  This
Guaranty shall be enforceable by each Holder and any of Holder’s successors,
assigns and participants, and any such successors and assigns shall have the
same rights and benefits with respect to each Guarantor under this Guaranty as
such Holder hereunder.

 

4B.          Consent to Amendments.  This Guaranty may be amended, and each
Guarantor may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if such Guarantor shall obtain the
written consent to such amendment, action or omission to act, of the Required
Holder(s) of the Notes, except that, without the written 

 

C-8

 

consent
of all of the Holders, (i) no amendment to or waiver of the provisions of
this Guaranty shall change or affect the provisions of this paragraph 4B
insofar as such provisions relate to proportions of the principal amount of the
Notes, or the rights of any individual Holder, required with respect to any
consent, (ii) no Guarantor shall be released from this Guaranty, and (iii) no
amendment, consent or waiver with respect to paragraph 2A or the definition of “Guarantied
Obligations” (except to add additional obligations of the Companies) shall be
effective.  Each Holder at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 4B, whether or not the Notes held by such Holder shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. 
No course of dealing between any Guarantor and any Holder, nor any delay
in exercising any rights hereunder or under any Note shall operate as a waiver
of any rights of any Holder.  As used
herein, the term “this Guaranty” and references thereto shall mean this
Guaranty as it may from time to time be amended or supplemented.  Notwithstanding the foregoing, this Guaranty
may be amended by the addition of additional Guarantors pursuant to a Guaranty
Joinder in the form of Exhibit A hereto without any consent by any
Guarantor or any Holder.

 

4C.          Survival of Representations and
Warranties; Entire Agreement.  All representations and warranties contained
herein or made in writing by or on behalf of each Guarantor in connection
herewith shall survive the execution and delivery of this Guaranty, the
transfer by any Holder of any Note or portion thereof or interest therein and
the payment of any Note, and may be relied upon by any Transferee, regardless
of any investigation made at any time by or on behalf of any Holder or any
Transferee.  Subject to the two preceding
sentences, this Guaranty and the other Transaction Documents embody the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to the subject matter hereof.

 

4D.          Notices.  All written communications provided for
hereunder shall be sent by first class mail or telegraphic notice or nationwide
overnight delivery service (with charges prepaid) or by hand delivery or
telecopy and addressed:

 

(i)            in the case of
any Guarantor, to:

 

c/o Kapstone Kraft Paper
Corporation

1101 Skokie Boulevard, Suite 300

Northbrook, Illinois  60062

 

Attention:  Andrea K.
Tarbox

 

Phone:  (847)
239-8812

Fax:  (847) 919-3833

 

(ii)           in the case of
any Holder, to the address specified for notices to such Holder under the Note
Agreement;

 

or, in either case, at such
other address as shall be designated by such Person in a written notice to the
other parties hereto.

 

C-9

 

4E.          Descriptive Headings;  Advice of Counsel; Interpretation.  The descriptive headings of the several
sections of this Guaranty are inserted for convenience only and do not
constitute a part of this Guaranty.  Each
Guarantor represents to the Holders that such Guarantor has been represented by
counsel in connection with this Guaranty, that such Guarantor has discussed
this Guaranty with its counsel and that any and all issues with respect to this
Guaranty have been resolved as set forth herein.  No provision of this Guaranty shall be
construed against or interpreted to the disadvantage of any Holder by any court
or other governmental or judicial authority by reason of such Holder having or
being deemed to have structured, drafted or dictated such provision.

 

4F.          Satisfaction Requirement.  If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Guaranty
required to be satisfactory to any Holder or the Required Holder(s) of the
Notes, the determination of such satisfaction shall be made by such Holder or such
Required Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.

 

4G.          Governing Law.  THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD
OTHERWISE CAUSE THIS GUARANTY TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH,
OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).

 

4H.          Counterparts; Facsimile Signatures.  This Guaranty may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same agreement. 
It shall not be necessary in making proof of this Guaranty to produce or
account for more than one such counterpart. 
Delivery of an executed counterpart of a signature page to this
Guaranty by facsimile or electronic transmission shall be effective as delivery
of a manually executed counterpart of this Guaranty.

 

4I.           Counsel’s
Opinion.  Each Guarantor
requests directs the counsel referred to in paragraph 3C of the Note Agreement
to deliver the opinion referred to in such paragraph.

 

4J.          SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR THE
OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
ILLINOIS IN COOK COUNTY, ILLINOIS, OR OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS AND, BY EXECUTION AND DELIVERY OF THIS
GUARANTY, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR
PROCEEDING.  EACH GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
PARAGRAPH 4D(i), 

 

C-10

 

SUCH
SERVICE TO BECOME EFFECTIVE UPON RECEIPT. 
EACH GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY GUARANTOR IN ANY
OTHER JURISDICTION.  EACH GUARANTOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING
OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT IN ANY OF THE AFORESAID
COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM
IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GUARANTOR HAS
OR MAY HEREAFTER ACQUIRE IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE WITH RESPECT
TO ITSELF OR ITS PROPERTY, SUCH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY
IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.  EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED THEREBY.

 

4K.          Independence of Covenants.  All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited by
any one of such covenants, the fact that it would be permitted by an exception
to, or otherwise be in compliance within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or such condition exists.

 

4L.          Severability.  Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

4M.         Contribution with Respect to Guaranty Obligations. 
At all times when there is more than one Guarantor party hereto, each
Guarantor party hereto agrees as follows:

 

(i)                 To
the extent any Guarantor shall make a payment of all or any of the Guarantied
Obligations (a “Guarantor Payment”) that exceeds
the amount that such Guarantor would otherwise have paid, taking into account
all other Guarantor Payments then previously or concurrently made by any other
Guarantor, if each Guarantor had paid the aggregate Guarantied Obligations
satisfied by all such Guarantor Payments in the same proportion that such
Guarantor’s Allocable Amount (as determined immediately 

 

C-11

 

prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of all Guarantors (as determined immediately prior to such Guarantor
Payment), then, after the Guarantied Obligations shall be indefeasibly paid in
full in cash and no Holder shall have any commitment under the Note Agreement,
such Guarantor shall be entitled to receive contribution and indemnification
payments from and be reimbursed by each other Guarantor for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment.

 

(ii)                As
of any date of determination, the “Allocable Amount” of any Guarantor shall be
equal to the maximum amount of the claim that could then be recovered from such
Guarantor under this Section 4M without rendering such claim void,
voidable or otherwise unenforceable under, any fraudulent conveyance or
fraudulent transfer law, including Section 548 of the Bankruptcy Code.

 

(iii)               This
Section 4M is intended only to define the relative rights of Guarantors,
and nothing in this Section 4M is intended to or shall impair the
obligations of Guarantors, jointly and severally, to pay any amounts as and
when the same shall become due and payable in accordance with this Guaranty.

 

(iv)               The
rights of contribution and indemnification hereunder shall constitute assets of
the Guarantor to which such contribution and indemnification is owing.

 

(v)                The
rights of the indemnifying Guarantors against other Guarantors under this Section 4M
shall be exercisable once the Guarantied Obligations shall be indefeasibly paid
in full in cash and no Holder shall have any commitment under the Note
Agreement.

 

[signature pages follow]

 

C-12

 

IN WITNESS
WHEREOF, each Guarantor has caused this Guaranty Agreement
to be duly executed as of the date first above written.

 

 

	
   

  	
  KAPSTONE
  PAPER AND PACKAGING

  CORPORATION, a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  KAPSTONE
  CHARLESTON KRAFT LLC,

  
	
   

  	
  a Delaware limited liability
  company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  COGEN
  SOUTH LLC, a Delaware limited

  liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

C-13

 

GUARANTOR SCHEDULE

 

KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation

 

KAPSTONE CHARLESTON KRAFT LLC, a Delaware limited
liability company

 

C-14

 

EXHIBIT A

[FORM OF JOINDER
AGREEMENT TO GUARANTY AGREEMENT]

 

JOINDER AGREEMENT NO.      
TO GUARANTY AGREEMENT

 

RE: KAPSTONE KRAFT PAPER
CORPORATION

 

This Joinder Agreement is
made as of                        ,
in favor of the Holders (as such term is defined in the Guaranty, as
hereinafter defined).

 

A.            Reference is made to the Guaranty
Agreement made as of July 1, 2008 (as such guarantee may be supplemented,
amended, restated or consolidated from time to time, the “Guaranty”)
by certain Persons in favor of Prudential and the Holders, under which such
Persons have guaranteed to Prudential and the Holders the due payment and
performance by Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”) of the Guarantied Obligations (as defined in the
Guaranty).

 

B.            Capitalized terms used but not
otherwise defined in this Joinder Agreement have the respective meanings given
to such terms in the Guaranty, including the definitions of terms incorporated
in the Guaranty by reference to other agreements.

 

C.            Section 4B of the Guaranty
provides that additional Persons may from time to time after the date of the
Guaranty become Guarantors under the Guaranty by executing and delivering to
the Holders a supplemental agreement to the Guaranty in the form of this
Joinder Agreement.

 

For valuable consideration,
each of the undersigned (each a “New
Guarantor”)  severally (and not
jointly, or jointly and severally) agrees as follows:

 

1.             Each of the New Guarantors has received a copy of, and
has reviewed, the Guaranty and the Transaction Documents in existence on the
date of this Joinder Agreement and is executing and delivering this Joinder
Agreement to the Holders pursuant to paragraph 4B of the Guaranty.

 

2.             Effective from and after the date this Joinder Agreement
is executed and delivered to the Holders by any one of the New Guarantors (and
irrespective of whether this Joinder Agreement has been executed and delivered
by any other Person), such New Guarantor is, and shall be deemed for all
purposes to be, a Guarantor under the Guaranty with the same force and effect,
and subject to the same agreements, representations, guarantees, indemnities,
liabilities and obligations, as if such New Guarantor was, effective as of the
date of this Joinder Agreement, an original signatory to the Guaranty as a
Guarantor.  In furtherance of the
foregoing, each of the New Guarantors jointly and severally guarantees to the
Holders in accordance with the provisions of the Guaranty the due and punctual
payment and performance in full of each of the Guarantied Obligations as each
such Guarantied Obligation becomes due from time to time (whether because of
maturity, default, demand, acceleration or otherwise) and understands, agrees and  confirms
that the Holders may enforce the Guaranty and this Joinder Agreement against
such New Guarantor for the benefit of the Holders up to the full amount  of                                                                                

 

C-15

 

the
Guarantied Obligations without proceeding against any other Guarantor, the
Company, any other Person, or
any collateral securing the Guarantied Obligations.  The terms and provisions of the Guaranty are
incorporated by reference in this Joinder Agreement.

 

3.             Upon this Joinder Agreement bearing the signature of any
Person claiming to have authority to bind any New Guarantor coming into the
hands of any Holder, and irrespective of whether this Joinder Agreement or the
Guaranty has been executed by any other Person, this Joinder Agreement will be
deemed to be finally and irrevocably executed and delivered by, and be
effective and binding on, and enforceable against, such New Guarantor free from
any promise or condition affecting or limiting the liabilities of such New
Guarantor and such New Guarantor shall be, and shall be deemed for all purposes
to be, a Guarantor under the Guaranty. 
No statement, representation, agreement or promise by any officer,
employee or agent of any Holder forms any part of this Joinder Agreement or the
Guaranty or has induced the making of this Joinder Agreement or the Guaranty by
any of the New Guarantors or in any way affects any of the obligations or
liabilities of any of the New Guarantors in respect of the Guarantied
Obligations.

 

4.             This Joinder Agreement may be executed in
counterparts.  Each executed counterpart
shall be deemed to be an original and all counterparts taken together shall
constitute one and the same Joinder Agreement. 
Delivery of an executed counterpart of a signature page to this
Joinder Agreement by facsimile or electronic transmission shall be effective as
delivery of a manually executed counterpart of this Joinder Agreement.

 

5.             This Joinder Agreement is a contract made under, and
will for all purposes be governed by and interpreted and enforced according to,
the internal laws of the State of Illinois excluding any conflict of laws rule or
principle which might refer these matters to the laws of another jurisdiction.

 

6.             This Joinder Agreement and the Guaranty shall be binding
upon each of the New Guarantors and the successors of each of the New
Guarantors.   None of the New Guarantors
may assign any of its obligations or liabilities in respect of the Guarantied
Obligations.

 

IN WITNESS
OF WHICH this Joinder Agreement has been duly executed and
delivered by each of the New Guarantors as of the date indicated on the first page of
this Joinder Agreement.

 

	
   

  	
  [NEW GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

C-16

 

 

EXHIBIT D

 

[FORM OF
OPINION OF COMPANY’S AND GUARANTORS’ COUNSEL]

 

[Letterhead of Sonnenschein Nath & Rosenthal LLP]

 

July 1,
2008

The Prudential Insurance
Company of America

c/o Prudential Capital Group

Two Prudential Plaza, Suite 5600

Chicago, Illinois 60601

 

Ladies and Gentlemen:

 

We have acted as counsel for
Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”) and Kapstone Paper and Packaging Corporation, a
Delaware corporation (the “Parent”) in
connection with the Note Purchase Agreement, dated as of  July 1, 2008, among the Parent, the
Company and you (the “Note Agreement”), pursuant to which the Company has
issued to you today the 8.30% Senior Secured Notes due July 1, 2015 of the
Company in the aggregate principal amount of $40,000,000.  All terms used herein that are defined in the
Note Agreement have the respective meanings specified in the Note
Agreement.  This letter is being
delivered to you in satisfaction of the condition set forth in paragraph 3C of
the Note Agreement and with the understanding that you are purchasing the Notes
in reliance on the opinions expressed herein.

 

In this connection, we have
examined such certificates of public officials, certificates of officers of the
Company and copies certified to our satisfaction of corporate documents and
records of the Company and of other papers, and have made such other
investigations, as we have deemed relevant and necessary as a basis for our
opinion hereinafter set forth.  We have
relied upon such certificates of public officials and of officers of the
Company with respect to the accuracy of material factual matters contained
therein which were not independently established; nothing, however, has come to
our attention to cause us to believe that any such factual matters are
untrue.  With respect to the opinion
expressed in paragraph 3 below, we have also relied upon the representation
made by each of you in paragraph 9A of the Note Agreement.

 

Based on the foregoing, it
is our opinion that:

 

1.             The Parent, the Company and each other Subsidiary is a
corporation duly organized and validly existing in good standing under the laws
of the State of its organization. The Parent, the Company and each other
Subsidiary is duly qualified to transact business and is in good standing in
each jurisdiction where the ownership of property by it or the nature of the
business conducted by it makes such qualification necessary. The Parent, the
Company and each 

 

D-1-1

 

other
Subsidiary has all requisite corporate power to conduct its business as
currently conducted and as currently proposed to be conducted.

 

2.             The Parent, the Company and each other Subsidiary has
all requisite corporate power to execute, deliver and perform its obligations
under the Note Agreement, the Notes and the other Transaction Documents to
which it is a party.  The Note Agreement,
the Notes and the other Transaction Documents have been duly authorized by all
requisite corporate action on the part of the Parent, the Company and each
other Subsidiary which is a party thereto and duly executed and delivered by
authorized officers of the Parent, the Company and each such other Subsidiary,
and are valid obligations of the Parent, the Company and each such other
Subsidiary, legally binding upon and enforceable against the Parent, the
Company and each such other Subsidiary in accordance with their respective
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

3.             It is not necessary in connection with the offering,
issuance, sale and delivery of the Notes under the circumstances contemplated
by the Note Agreement to register the Notes under the Securities Act or to
qualify an indenture in respect of the Notes under the Trust Indenture Act of
1939, as amended.

 

4.             The extension, arranging and obtaining of the credit
represented by the Notes do not result in any violation of Regulation T, U or X
of the Board of Governors of the Federal Reserve System.

 

5.             The execution and delivery of the Note Agreement, the
Notes and the other Transaction Documents, the offering, issuance and sale of
the Notes and fulfillment of and compliance with the respective provisions of
the Note Agreement, the Notes and the other Transaction Documents do not
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien (other than the Liens in the Collateral under the
Collateral Documents) upon any of the properties or assets of the Parent or any
of its Subsidiaries pursuant to, or require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court,
administrative or governmental body or other Person (other than routine filings
after the date hereof with the Securities and Exchange Commission and/or state
Blue Sky authorities and other than the filings and recordings to perfect the
Liens in the Collateral intended to be created by the Collateral Documents)
pursuant to, the charter or by-laws of the Parent or any of its Subsidiaries,
any applicable law (including any securities or Blue Sky law), statute, rule or
regulation or (insofar as is known to us after having made due inquiry with
respect thereto) any agreement (including, without limitation, any agreement
listed in Schedule 8G to the Note Agreement), instrument, order, judgment or
decree to which the Parent or any of its Subsidiaries is a party or otherwise
subject.

 

6.             Neither the Parent nor the Company is (a) an “investment
company” or a company “controlled” by an “investment company” within the
meaning of the Investment Company Act of 1940, as amended, or an “investment
adviser” within the meaning of the Investment Advisers Act of 1940, as amended,
(b) a “holding company” of a “public utility 

 

D-1-2

 

company”
of an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding
company”, within the meaning of the Public Utility Holding Company Act of 2005,
or (c) a “public utility” within the meaning of the Federal Power Act, as
amended.

 

7.             The Security Agreement creates in favor of the
Collateral Agent for the benefit of the holders of the Notes a valid and
enforceable security interest in the Collateral described therein to the extent
that the Uniform Commercial Code as currently in effect in the States of
Illinois, Delaware or                             
(the “UCCs”) is applicable thereto (the “Security Interest”).  The financing statements listed on Attachment
A hereto (the “Financing Statements”) are in proper form for filing in the
offices listed on Attachment A.  The
Financing Statements have been duly filed in such offices and such filing
creates a valid and duly perfected security interest in favor of the Collateral
Agent for the benefit of the holders of the Notes in those items and types of
the Collateral described in the Security Agreement in which a security interest
may be created and perfected under the UCCs by the filing of a financing
statement.  No filing or recording, other
than the filing of the Financing Statements in the offices described on
Attachment A hereto, is necessary for the perfection of the Security Interest
to the extent the filing of a financing statement under the UCCs is effective
to perfect the Security Interest.  For
the purposes of rendering our opinion in this paragraph 7 with respect to other
than the UCC as in effect in the State of                             ,
we have, with your permission, reviewed and relied solely upon the UCCs in the
States of                           ,
                          ,
                                    
and                             
as reported in the Secured  Transactions  Guide, Commerce
Clearing House (            ),
as updated through                             ,
without reference to case law or other interpretations of such UCCs or any
other laws of such States.

 

8.             Assuming that (a) the Collateral Agent at all times
relevant possesses the certificates representing the Pledged Equity (as defined
in the Security Agreement), and (b) each of the Collateral Agent, the Bank
and you is entering into the Loan Documents (as defined in the Credit
Agreement) and Transaction Documents to which it is a party in good faith and
without notice of any adverse claim to the Pledged Equity or knowledge that the
Pledged Equity are subject to a security interest other than that created by
the Security Agreement, the Collateral Agent holds a perfected pledge of and
perfected security interest in the Pledged Equity subject to no lien or adverse
claim.

 

[Add opinions relating to
other security interests, such as Mortgages and account control agreement, as
applicable.]

 

9.             To our knowledge, there are no actions, suits or
proceedings pending or threatened against or affecting the Parent or any of its
Subsidiaries or any property of the Parent or any of its Subsidiaries in any
court or before any arbitrator of any kind or before or by any governmental
authority either (i) with respect to the Note Agreement, the Notes or the
other Transaction Documents, or (ii) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

We acknowledge that the
Company and each Guarantor has requested that this opinion letter be rendered
to each of you and to any Transferee, that this opinion letter is rendered with
the intention that each of you and any Transferee may rely on this opinion
letter, and that each of you and any Transferee may rely on this opinion
letter.

 

D-1-3

 

Very truly yours,

 

D-1-4

 

EXHIBIT D-2

 

[FORM OF
OPINION OF COMPANY’S AND GUARANTORS’ LOCAL COUNSEL]

 

[See
attached]

 

D-2-1

 

SCHEDULES

 

	
  SCHEDULE
  3A

  	
   

  	
  —

  	
   

  	
  EXCLUDED
  ESTOPPEL AND CONSENT AGREEMENTS

  
	
  SCHEDULE
  3H

  	
   

  	
  —

  	
   

  	
  MATERIAL
  ADVERSE EFFECT

  
	
  SCHEDULE
  6B(f)

  	
   

  	
  —

  	
   

  	
  EXISTING
  DEBT

  
	
  SCHEDULE
  6B(g)

  	
   

  	
  —

  	
   

  	
  DEBT
  TO BE REPAID

  
	
  SCHEDULE
  6C

  	
   

  	
  —

  	
   

  	
  EXISTING
  LIENS

  
	
  SCHEDULE
  6I

  	
   

  	
  —

  	
   

  	
  UNCONDITIONAL
  PURCHASE OBLIGATIONS

  
	
  SCHEDULE
  6L

  	
   

  	
  —

  	
   

  	
  INVESTMENTS

  
	
  SCHEDULE
  6R

  	
   

  	
  —

  	
   

  	
  HOLDING
  COMPANY CONTRACTS

  
	
  SCHEDULE
  8A(1)

  	
   

  	
  —

  	
   

  	
  SUBSIDIARIES

  
	
  SCHEDUL
  8C

  	
   

  	
  —

  	
   

  	
  ACTONS
  PENDING

  
	
  SCHEDULE
  8F

  	
   

  	
  —

  	
   

  	
  TAXES

  
	
  SCHEDULE
  8G

  	
   

  	
  —

  	
   

  	
  LIST
  OF AGREEMENTS RESTRICTING INDEBTEDNESS

  
	
  SCHEDULE
  8K

  	
   

  	
  —

  	
   

  	
  FILINGS
  AND RECORDINGS

  
	
  SCHEDULE
  8Q

  	
   

  	
  —

  	
   

  	
  INFORMATION
  REGARDING THE PARENT AND SUBSIDIARIES

  
	
  SCHEDULE
  8T

  	
   

  	
  —

  	
   

  	
  LABOR
  MATTERS

  
	
  SCHEDULE
  8V

  	
   

  	
  —

  	
   

  	
  CASUALTY

  
	
  SCHEDULE 8W

  	
   

  	
  —

  	
   

  	
  MATERIAL CONTRACTS

  

 

 

[To be provided by the Company]

 

1

 

Schedule 3A

 

Excluded Estoppel and Consent
Agreements

 

	
  Location of Leased Property

  	
   

  	
  Landlord’s Name and Address

  
	
   

  	
   

  	
   

  
	
  KapStone
  Paper and Packaging Corporation  

  1101 Skokie Blvd., Suite 300  

  Northbrook, IL 60062

  	
   

  	
  PCS
  Administration (USA), Inc.  

  1101 Skokie Blvd., Suite 400  

  Northbrook, IL 60062

  
	
   

  	
   

  	
   

  
	
  KapStone
  Kraft Paper Corporation  

  300 S. Edgar Street  

  Fordyce, AR 71742

  	
   

  	
  City
  of Fordyce, Arkansas
  

  City Hall, 101 South Main  

  Fordyce, AR 71742  

  Attention: Mayor

  

 

 

Schedule 3H

 

Material Adverse Effect

 

1.               On January 8, 2008, an electrical fire occurred
in ECR 82.  The fire was extinguished
quickly, but resulted in loss of power resulting in approximately 8 hours of
down time at the waste and water treatment plants.  The Business will incur additional costs in
2008 to repair the resulting damage.  The
current estimate to repair damage in connection with the assets acquired under
the Mead Purchase Agreement is approximately $5,300,000, of which approximately
$2,600,000 shall be paid by Sellers through the working capital adjustment
under such agreement.

 

 

6B(f)

 

Existing Debt

 

	
  (i)

  	
  All Contingent
  Liabilities arising under the Purchase Agreement dated as of June 23,
  2006, by and between International Paper Company, Stone Arcade Acquisition
  Corporation, and KapStone Kraft Paper Corporation (as amended).

  
	
   

  	
   

  
	
  (ii)

  	
  Contingent Liabilities
  arising under the Asset Purchase Agreement dated as of April 4, 2008 (as
  amended), among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation,
  KapStone Paper and Packaging Corporation and Oak Acquisition LLC (as
  amended), together with the Additional Documents as defined therein.

  
	
   

  	
   

  
	
  (iii)

  	
  Contingent Liabilities
  arising under the FILOT Agreement dated on or about July 1, 2008, among
  MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone
  Charleston Kraft LC, KapStone Paper and Packaging Corporation and Cogen South
  L.L.C.

  
	
   

  	
   

  
	
  (iv)

  	
  Contingent Liabilities
  under the Underwriting Agreement dated on or about August 15, 2005,
  among Stone Arcade Acquisition Corporation, Morgan Joseph &
  Co., Inc., as Representative, and the other Underwriters identified
  therein.

  
	
   

  	
   

  
	
  (v)

  	
  Contingent Liabilities
  under Warrant Agreement dated on or about August 15, 2005, by and
  between Stone Arcade Acquisition Corporation and Continental Stock Transfer &
  Trust Company.

  
	
   

  	
   

  
	
  (vi)

  	
  The debt (other than
  Debt to be Repaid) reflected on KapStone Paper and Packaging Corporation’s
  most recent audited financial statements as of December 31, 2007.

  
	
   

  	
   

  
	
  (vii)

  	
  Contingent Liabilities
  arising under the contracts identified on Schedule 5.25 which is hereby
  incorporated by reference herein.

  
	
   

  	
   

  
	
  (viii)

  	
  Debt secured by Liens listed on Schedule 6C.

  

 

 

Schedule 6B(g)

 

Debt To Be Repaid

 

1.               Credit Agreement dated as of January 2,
2007 among KapStone Kraft Paper Corporation, the Lenders identified therein and
LaSalle Bank National Association, as Administrative Agent.(1)

 

2.     Obligations in respect of the following
filing:

 

	
  The Bank of New York, as Agent, as successor in interest to
  NationsBank, N.A., as Agent - assignment(2)

  	
   

  	
  52386358

  

  52419902

  	
   

  	
  8/2/05

  

  8/4/05

  	
   

  	
  All rights, title and interests in Cogen South LLC  

  

  Assignment to The Bank of New York, N.A.

  

 

(1) To be repaid and terminated on Commitment Effective Date as
provided in payoff letter.

(2) To be assigned to the Borrower on the Commitment Effective
Date and terminated in connection herewith.

 

 

Schedule 6C

 

Existing Liens

 

1.               The following Liens:

 

KapStone Paper and Packaging Corporation

 

	
  Secured Party

  	
   

  	
  Filing Number

  	
   

  	
  Filing 

  Date

  	
   

  	
  Collateral

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Astenjohnson, Inc.

  	
   

  	
  70412469

  	
   

  	
  2/1/07

  	
   

  	
  Goods and Inventory on consignment and proceeds thereof

  

 

KapStone Kraft Paper Corporation

 

	
  Secured Party

  	
   

  	
  Filing Number

  	
   

  	
  Filing 

  Date

  	
   

  	
  Collateral

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric Capital Corporation

  	
   

  	
  73536439

  	
   

  	
  9/19/07

  	
   

  	
  Equipment: 2002 Hyster S100XM Cushioned Diesel Lift Truck, serial
  number E004V02027Z

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minority Alliance Capital, LLC

  	
   

  	
  80434348

  	
   

  	
  2/5/08

  	
   

  	
  Equipment: Yale Model GLC080VXNGSF084, serial numbers E818V02224E and
  E818VO2227E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  First Independence Bank

  	
   

  	
  80533339

  	
   

  	
  2/13/08

  	
   

  	
  Equipment: New Yale Model GLC080VXNGSF084, serial numbers:
  E818V02224E and E818V02227E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leasenet Group LLC

  	
   

  	
  80663003

  	
   

  	
  2/25/08

  	
   

  	
  Equipment described in Schedule KS-003 to Master Equipment Lease
  KS-01 dated May 5, 2007. UCC filed for informational purposes only.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minority Alliance Capital, LLC

  	
   

  	
  80665669

  	
   

  	
  2/25/08

  	
   

  	
  Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and
  E818VO2357E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  First Independence Bank

  	
   

  	
  81375326

  	
   

  	
  4/21/08

  	
   

  	
  Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and
  E818VO2357E

  

 

 

MeadWestvaco
Corporation

 

	
  Secured Party

  	
   

  	
  Filing Number

  	
   

  	
  Filing 

  Date

  	
   

  	
  Collateral

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Atel Leasing Corporation

  	
   

  	
  41875824

  	
   

  	
  7/6/04

  	
   

  	
  Equipment and Related Software under Lease Agreement
  No. MEAD1 

  Precautionary filing

  
	
  - partial assignment

  	
   

  	
  503363193

  	
   

  	
  2/2/05

  	
   

  	
  Assignment to Atel Capital Equipment Fund IX, LLC

  
	
  - partial assignment

  	
   

  	
  41875824

  	
   

  	
  5/7/07

  	
   

  	
  Assignment to Atel Capital Equipment Fund IX, LLC

  
	
  - partial assignment

  	
   

  	
  41875824

  	
   

  	
  5/7/07

  	
   

  	
  Assignment to Atel Capital Equipment Fund X, LLC

  
	
  - partial assignment

  	
   

  	
  41875824

  	
   

  	
  5/7/07

  	
   

  	
  Assignment to Atel Capital Equipment Fund XI, LLC

  
	
  - partial assignment

  	
   

  	
  41875824

  	
   

  	
  5/8/07

  	
   

  	
  Assignment to Atel Capital Equipment Fund IX, LLC

  
	
  - partial assignment

  	
   

  	
  41875824

  	
   

  	
  5/8/07

  	
   

  	
  Assignment to Atel Capital Equipment Fund X, LLC

  
	
  - amendment

  	
   

  	
  41875824

  	
   

  	
  3/14/08

  	
   

  	
  Amended Debtor’s address 

  
	
  - partial assignment

  	
   

  	
  41875824

  	
   

  	
  5/19/08

  	
   

  	
  Assignment to Atel Capital Equipment Fund X, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eplus Group, Inc.

  	
   

  	
  51580548

  	
   

  	
  5/23/05

  	
   

  	
  Equipment on Schedule 371 of an Equipment Lease Agreement, dated
  1/28/92  

  Filed for informational purposes only

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Banc of America Leasing & Capital, LLC

  	
   

  	
  61267731

  	
   

  	
  4/16/07

  	
   

  	
  Equipment: Case 41 Skid Steer Loader  

  *Precautionary lease notice filing

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Banc of America Leasing & Capital, LLC

  	
   

  	
  63425691

  	
   

  	
  9/15/06

  	
   

  	
  Equipment subject to schedule no. 017 to Lease Agreement, dated
  8/3/06  

  *Precautionary lease notice filing

  

 

1.               Lien pursuant to Sublease Agreement by and between
Royal Bank of Scotland and KapStone Charleston Kraft LLC.

2.               Lien pursuant to Sublease Agreement by and between
Bank of America and KapStone Charleston Kraft LLC.

3.               Lien pursuant to Lease Agreement by and between PHH
Vehicle Management Services, LLC and KapStone Paper and Packaging Corporation.

4.               Lien pursuant to Railroad Equipment Lease Agreement by
and between Wells Fargo and KapStone Charleston Kraft LLC.

 

 

Schedule 6I

 

Unconditional Purchase
Obligations

 

1.                                       Long-Term Fiber Supply Agreement dated on
or about July 1, 2008 by and between MeadWestvaco Forestry, LLC and
KapStone Charleston Kraft LLC.

 

 

Schedule 6L

 

Investments

 

None.

 

 

Schedule 6R

 

Holding Company Contracts

 

1.               Lease Agreement dated as of January 1,
1997 by and between the City of Fordyce, Arkansas and International Paper
Company.

 

2.               Registration Rights Agreement dated on or
about August 15, 2005 by and among Stone Arcade Acquisition Corporation,
Roger W. Stone, Matthew Kaplan, Jonathan R. Furer, John M. Chapman and Muhit U.
Rhaman  (each an “Initial Stockholder”
and collectively the “Initial Stockholders”).

 

3.               Letter Agreement dated on or about August 15,
2005 by and between Stone-Kaplan Investments LLC and Stone Arcade Acquisition
Corporation regarding administrative support.

 

4.               Investment Management Trust Agreement
dated on or about  August 15, 2005
by and between Stone Arcade Acquisition Corporation and Continental Stock
Transfer & Trust Company.

 

5.               Letter Agreements among Stone Arcade
Acquisition Corporation, Morgan Joseph & Co. Inc. and each of the
Initial Stockholders dated on or about August 15, 2005.

 

6.               Purchase Agreement dated as of June 23,
2006 by and between International Paper Company, Stone Arcade Acquisition
Corporation and KapStone Kraft Paper Corporation.

 

7.               Inter-Company Loan Agreement dated as of January 2,
2007 by and between KapStone Paper and Packaging Corporation and KapStone Kraft
Paper Corporation.

 

8.               Asset Purchase Agreement dated April 4,
2008 among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone
Paper and Packaging Corporation and Oak Acquisition LLC.

 

9.               KapStone Paper and Packaging Corporation
2006 Incentive Plan dated December 15, 2006, as amended April 10,
2008.

 

10.         Indemnity Agreement dated on or about July 1,
2008 among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone
Charleston Kraft LLC, KapStone Paper and Packaging Corporation and Cogen South
L.L.C. re: FILOT Arrangement.

 

11.         KapStone Paper and Packaging Corporation’s
Guaranty of Service Agreement dated February 2, 2005 by and between Cogen
South, L.L.C. and South Carolina Electric & Gas Company.

 

12.         KapStone Paper and Packaging Corporation’s
Guaranty of Purchase and Supply Agreement dated January 1, 2008 by and
between KapStone Charleston Kraft LLC and Old World Industries, Inc.

 

 

Schedule 8A(1)

 

Subsidiaries

 

1.               KapStone Paper and Packaging Corporation:

 

a.               KapStone Kraft Paper Corporation, a Delaware corporation
and wholly-owned subsidiary.

 

1.               KapStone Kraft Paper Corporation:

a.               KapStone Charleston Kraft LLC, a Delaware
limited liability company and wholly-owned subsidiary.

b.              KapStone Asia Limited, a Hong Kong
limited liability company and wholly-owned subsidiary.

c.               KapStone Europe SPRL, a Belgium limited liability
company.  KapStone Kraft Paper
Corporation holds a 99% interest in KapStone Europe SPRL.

 

2.               KapStone Charleston Kraft LLC:

a.               KapStone Europe SPRL, a Belgium limited
liability company.  KapStone Charleston
Kraft LLC holds a 1% interest in KapStone Europe SPRL.

b.              Cogen South L.L.C., a Delaware limited
liability company and wholly-owned subsidiary.(1)

 

(1) Cogen South L.L.C. will become a Subsidiary
after funding of the Notes and upon consummation of the Kraft Acquisition.

 

 

Schedule 8C

 

Actions Pending

 

None

 

 

Schedule
8F

 

Taxes

 

1.               The October 2006 South Carolina sales and use tax
return for Cogen South L.L.C. was filed late as a result of an error by the
group to which the tax return filing process had been outsourced.  (This was the first month that the
outsourcing engagement was in place.)  A
notice sent by South Carolina regarding this issue was resolved in 2007.  Penalties and interest ($37.17) were paid by
the outsourcing firm.

 

2.               Certain Fee-in-Lieu of Tax (“FILOT”)
schedules of assets submitted to the South Carolina Department of Revenue
contained errors, the net result of which appears to have been the
overreporting of assets held by approximately $400,000.  Additionally, within the classification of
assets between Seller’s Chemicals Business and North Charleston Mill
facilities, certain transfers and administrative assets were not reflected, and
certain assets were reported twice.  As a
consequence of this, assets associated with the North Charleston Mill facility
were overstated by approximately $10 million and assets associated with the
Chemicals Business facility were understated by approximately $10 million;
since both facilities are comprehended under the FILOT Arrangements, a misclassification
of assets between the facilities does not affect total assets reported with
respect to the particular FILOT Arrangement. 
Finally, certain dispositions of assets were not reflected on the FILOT
schedules of assets for the Chemicals Business facility, the North Charleston
Mill and for Cogen South L.L.C.. 
Modified reports are being prepared and will be filed with the South
Carolina Department of Revenue, which has been consulted regarding the
appropriate reporting.  It is expected
that the cumulative tax effect of these matters will be minor.

 

 

Schedule 8G

 

List of Agreements Restricting
Indebtedness

 

1.               Credit Agreement dated as of June 12, 2008, among
KapStone Kraft Paper Corporation, KapStone Paper and Packaging Corporation, the
Lenders identified therein and Bank of America, N.A.

 

 

Schedule 8K

 

Filings and Recordings(1)

 

	
  Grantor

  	
   

  	
  Filing Requirement or Other

  Action

  	
   

  	
  Filing Office

  
	
  KapStone Kraft Paper
  Corporation

  	
   

  	
  Filing of UCC-1
  Financing Statement

  	
   

  	
  Delaware Secretary of
  State

  
	
  KapStone Paper and
  Packaging Corporation

  	
   

  	
  Filing of UCC-1
  Financing Statement

  	
   

  	
  Delaware Secretary of
  State

  
	
  KapStone Charleston
  Kraft LLC

  	
   

  	
  Filing of UCC-1
  Financing Statement

  	
   

  	
  Delaware Secretary of
  State

  
	
  KapStone Kraft Paper
  Corporation

  	
   

  	
  Control Agreement with
  PNC Bank, National Association

  	
   

  	
  Not applicable

  
	
  KapStone Paper and
  Packaging Corporation

  	
   

  	
  Possession of
  Certificated Securities

  	
   

  	
  Not applicable

  
	
  KapStone Kraft Paper
  Corporation

  	
   

  	
  Possession of
  Certificated Securities

  	
   

  	
  Not applicable

  
	
  KapStone Kraft Paper Corporation

  	
   

  	
  Filing of Notice of
  Grant of Security Interest in Patents

  	
   

  	
  United States Patent
  and Trademark Office

  
	
  KapStone Kraft Paper
  Corporation

  	
   

  	
  Filing of Notice of
  Grant of Security Interest in Trademarks

  	
   

  	
  United States Patent
  and Trademark Office

  
	
  KapStone Charleston
  Kraft LLC

  	
   

  	
  Possession of Bond

  	
   

  	
  Not applicable

  

 

(1) This schedule does not address (a) real property,
(b) collateral subject to a certificate of title law or (c) foreign
intellectual property, filing and recordings in connection with which shall be
as determined by the Collateral Agent.

 

 

Schedule 8Q

 

Information Regarding the Parent
and the Subsidiaries

 

(i)            Organizational Information

 

1.               Schedule 8A(1) is incorporated
herein by reference.

 

2.               Organizational Identification Numbers

 

a.               KapStone Paper and Packaging Corporation:
3955792

 

b.              KapStone Kraft Paper Corporation: 4165052

 

c.               KapStone Charleston Kraft LLC: 4525470

 

d.              KapStone Asia Limited:
39430822-000-06-08-1

 

e.               KapStone Europe SPRL: [to be provided]

 

f.                 Cogen South L.L.C.:2589777

 

(ii)        Unregistered Orgaizations

 

1.               KapStone Europe SPRL:

c/o Arendt & Medernach

Rue D’Arlon 92

1040 Brussels,

Belgium

 

2.               KapStone Asia Limited:

Level 28

Three Pacific Place

1 Queen’s Road East

Hong Kong

 

 

(iii)    Real Property(1)

 

	
  

  Location

  	
   

  	
  Leased/Owned

  	
   

  	
  Landlord’s Name and Address

  
	
  KapStone Paper
  and Packaging Corporation 

  1101 Skokie Blvd., Suite 300 

  Northbrook, IL 60062

  	
   

  	
  Leased

  	
   

  	
  PCS
  Administration (USA), Inc. 

  1101 Skokie Blvd., Ste. 400 

  Northbrook, IL 60062

  
	
  KapStone Kraft
  Paper Corporation 

  100 Gaston Road 

  Roanoke Rapids, NC 27870

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone Kraft
  Paper Corporation 

  Airstrip Property (as defined in Attachment 1 to Schedule 8Q)

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone Kraft
  Paper Corporation 

  300 S. Edgar Street 

  Fordyce, AR 71742 

  (“Fordyce Property”)

  	
   

  	
  Leased

  	
   

  	
  City of Fordyce,
  Arkansas 

  City Hall, 101 S. Main 

  Fordyce, AR 71742

  
	
  KapStone
  Charleston Kraft LLC(2) 

  5600 Virginia Avenue 

  North Charleston, SC 29406

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone
  Charleston Kraft LLC 

  309 N. Maple Street 

  Summerville, SC 29483

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone
  Charleston Kraft LLC 

  707 Whitehead Road 

  Elgin, SC 29045

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone
  Charleston Kraft LLC 

  1382 Elm Street 

  Hampton, SC 29924

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone
  Charleston Kraft LLC 

  28026 U.S. Highway 76 

  Kinards, SC 29355

  	
   

  	
  Owned

  	
   

  	
   

  

 

(1) For purposed of Paragraph 8E, neither Parent, Company nor any
of their Subsidiaries makes any representation or warranty with respect to the
state of title of the Fordyce Property, the Beech Hill Chip Mill or the Badham
Chip Mill.

(2) KapStone Charleston Kraft LLC does not own the entire property
located at this address.  Pursuant to the
Kraft Acquisition, excluded is all the real property primarily related to or
primarily used by MeadWestvaco Corporation and its Subsidiaries in the Seller’s
Chemicals Business.  KapStone Charleston
Kraft LLC also leases the Berkeley County portion of the property which is in
the process of being subdivided from the Retained Park Property (as defined in
Attachment 1 to Schedule 8Q).  The
Express Map for this location required to be delivered pursuant to Section 4.02(a)(iv) of
the Credit Agreement will be delivered to the Collateral Agent within 7 days of
the Closing Date.

 

 

	
  KapStone
  Charleston Kraft LLC 

  Harvey Tract Landfill 

  Highway 16 

  Summerville, SC 29483

  	
   

  	
  Owned

  	
   

  	
   

  
	
  KapStone
  Charleston Kraft LLC(3)

  665 Chip Mill Road  

  Andrews, SC 29510

  	
   

  	
  Leased

  	
   

  	
   

  
	
  KapStone
  Charleston Kraft LLC 

  391 Rosom Hill Extension 

  Ridgeville, SC 29472 

  (“Beech Hill Chip Mill”)

  	
   

  	
  Leased

  	
   

  	
  MeadWestvaco
  Forestry, LLC 

  PO Box 118005 

  Charleston, SC 29423-8005

  
	
  KapStone
  Charleston Kraft LLC(4) 

  665 Chip Mill Road 

  Andrews, SC 29510

  	
   

  	
  Leased

  	
   

  	
  MeadWestvaco
  Forestry, LLC 

  PO Box 118005 

  Charleston, SC 29423-8005

  
	
  KapStone
  Charleston Kraft LLC 

  107 Motel Drive 

  St. George, SC 29477

  	
   

  	
  Leased

  	
   

  	
  MeadWestvaco
  Forestry, LLC 

  PO Box 118005 

  Charleston, SC 29423-8005

  
	
  KapStone
  Charleston Kraft LLC 

  7 miles west of Givans Town and 4 

  miles west of Givans Ferry Bridge Badham, 

  SC (“Badham Chip Mill”)

  	
   

  	
  Leased

  	
   

  	
  MeadWestvaco
  Forestry, LLC 

  PO Box 118005 

  Charleston, SC 29423-8005

  
	
  KapStone
  Charleston Kraft LLC 

  Water Leases 

  Tracts 21-24 

  Tract 17 

  Charleston, SC

  	
   

  	
  Leased

  	
   

  	
  Commissioners of
  Public Works of the City of Charleston, SC 

  PO Box B 

  Charleston, SC 29402

  

 

(3) KapStone Charleston Kraft LLC owns the imporovements only,
consisting of the chip mill facility and related improvements (excluding the
approximately 2,200 square foot office building owned by MW Forestry, LLC, and
leased to KapStone Charleston Kraft LLC).

(4) KapStone Charleston Kraft LLC owns only the improvements and
leases the ground site and the office building.

 

 

(iv)       Intellectual Property

 

1.     KAPSTONE CHARLESTON KRAFT LLC U.S. PATENTS

 

Issued Patents

 

	
  Description

  	
   

  	
  Patent No.

  	
   

  	
  Issued

  
	
  Alkaline Scrubber for
  Condensate Stripper off-gasses

  	
   

  	
  5450892

  	
   

  	
  9/19/95

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  5443902

  	
   

  	
  8/22/95

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  5837376

  	
   

  	
  11/17/98

  

 

Pending
Applications

 

	
  Description

  	
   

  	
  Patent No.

  	
   

  	
  Issued

  
	
  Method of Releasing
  Laminated Materials

  	
   

  	
  11386954

  	
   

  	
  3/22/06

  
	
  A New Way To Produce
  Phenolic Treated Kraft Paper

  	
   

  	
  60957264

  	
   

  	
  8/22/07

  
	
  Sound Attenuating Floor
  Systems

  	
   

  	
  60971283

  	
   

  	
  9/9/07

  
	
  Structural Sheathing
  with Integrating Water Drainage Channels

  	
   

  	
  60984764

  	
   

  	
  11/2/07

  
	
  Building Panels
  Reinforced with Paperboard

  	
   

  	
  61020844

  	
   

  	
  1/14/08

  
	
  Improved Coefficient of
  Friction for Paper Overlaid OSB for Roofing and Wall Sheathing Applications

  	
   

  	
  61004066

  	
   

  	
  4/11/08

  

 

2.     KAPSTONE CHARLESTON KRAFT
LLC FOREIGN PATENTS

 

Issued Patents

 

	
  Description

  	
   

  	
  Country

  	
   

  	
  Patent No.

  	
   

  	
  Issued

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Canada

  	
   

  	
  2153035

  	
   

  	
  12/16/03

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Brazil

  	
   

  	
  PI95030488

  	
   

  	
  1/2/07

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Finland

  	
   

  	
  117749

  	
   

  	
  2/15/07

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Germany

  	
   

  	
  EP0740020

  	
   

  	
  7/30/03

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Italy

  	
   

  	
  EP0740020

  	
   

  	
  7/30/03

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Japan

  	
   

  	
  2774949

  	
   

  	
  4/24/98

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Mexico

  	
   

  	
  215805

  	
   

  	
  8/15/03

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Spain

  	
   

  	
  EP0740020

  	
   

  	
  7/30/03

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Sweden

  	
   

  	
  EP0740020

  	
   

  	
  7/30/03

  

 

Pending
Applications

 

	
  Description

  	
   

  	
  Country

  	
   

  	
  Patent No.

  	
   

  	
  Issued

  
	
  Method of Releasing
  Laminated Materials

  	
   

  	
  Canada

  	
   

  	
  2465484

  	
   

  	
  1/11/02

  
	
  Method of Releasing
  Laminated Materials

  	
   

  	
  EPO

  	
   

  	
  02707418.6

  	
   

  	
  1/11/02

  
	
  Method of Releasing
  Laminated Materials

  	
   

  	
  Japan

  	
   

  	
  2003544262

  	
   

  	
  1/11/02

  
	
  Method of Releasing
  Laminated Materials

  	
   

  	
  South Korea

  	
   

  	
  1020047007267

  	
   

  	
  1/11/02

  
	
  Postforming Decorative
  Laminates

  	
   

  	
  Indonesia

  	
   

  	
  P951251

  	
   

  	
  6/30/95

  

 

 

3.                    KAPSTONE KRAFT PAPER CORPORATION
U.S. TRADEMARKS

 

Registered Marks

 

	
  Mark

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
  GATORHIDE

  	
   

  	
  2134345

  	
   

  	
  2/3/98

  	
   

  
	
  RIDE
  RITE

  	
   

  	
  1045454

  	
   

  	
  8/3/76

  	
   

  

 

4.                    KAPSTONE KRAFT PAPER CORPORATION
FOREIGN TRADEMARKS

 

	
  Mark

  	
   

  	
  Country

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
  RIDE
  RITE

  	
   

  	
  European
  Community

  	
   

  	
  153155

  	
   

  	
  6/15/98

  	
   

  
	
  RIDE
  RITE

  	
   

  	
  France

  	
   

  	
  201221

  	
   

  	
  10/24/75

  	
   

  
	
  RIDE
  RITE

  	
   

  	
  United Kingdom

  	
   

  	
  B1054243

  	
   

  	
  10/31/75

  	
   

  

 

5.                    KAPSTONE CHARLESTON KRAFT LLC
U.S. TRADEMARKS

 

Registered Marks

 

	
  Mark

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
  CORFORM

  	
   

  	
  2114324

  	
   

  	
  11/18/97

  	
   

  
	
  DURASORB

  	
   

  	
  1474154

  	
   

  	
  1/26/88

  	
   

  
	
  KRAFTPAK

  	
   

  	
  1178128

  	
   

  	
  11/17/81

  	
   

  

 

Pending Application

 

	
  Mark

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
  HIPEX

  	
   

  	
  77283609

  	
   

  	
  9/19/07

  	
   

  

 

6.                    KAPSTONE CHARLESTON KRAFT LLC
FOREIGN TRADEMARK

 

Pending Application

 

	
  Mark

  	
   

  	
  Country

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
  HIPEX

  	
   

  	
  Canada

  	
   

  	
  136692

  	
   

  	
  10/10/07

  	
   

  

 

 

Schedule 8T

 

Labor Matters

 

(i)                        Labor Agreement between International
Paper Ride Rite Fordyce and Paper, Allied-Industrial, Chemical and Energy Workers
International Union and Local 5-368.

 

(ii)                    Letter Agreement between Harry Johnson
and International Paper Company dated December 10, 2004.

 

(iii)                Letter Agreement between Paul Evans and
International Paper Company dated March 21, 2006.

 

(iv)                   Agreement between Ideal Technical
Services and Jesse Windred Whiddon, Jr., dated August 20, 2001.

 

(v)                       Agreement between KapStone Kraft Paper
Corporation and United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied-International and Service Workers Union, AFL-CIO, CLC, Local
9-425 effective February 1, 2007.

 

(vi)                   Staffing Agreement between Employers
Staffing of America, Inc., and International Paper dated September 13,
2005.

 

(vii)               Labor Agreement effective July 2,
2006, by and between the Charleston, South Carolina, plant of MeadWestvaco and
the International Association of Machinists and Aerospace Workers and its
Charleston Lodge No. 183.

 

(viii)           Labor Agreement effective July 2,
2006, by and between the Charleston, South Carolina plant of MeadWestvaco and
the Local Union No. 1753 of the International Brotherhood of Electrical
Workers.

 

(ix)                  Labor Agreement effective July 2,
2006, by and between the Charleston, South Carolina, plant of MeadWestvaco and
the Paper, Allied-Industrial, Chemical and Energy Workers International Union
and its Local Unions 3-0508 and 3-1435.

 

 

Schedule 8V

 

Casualty

 

1.               On January 8, 2008, an electrical fire occurred
in ECR 82.  The fire was extinguished
quickly, but resulted in loss of power resulting in approximately 8 hours of
down time at the waste and water treatment plants.  The Business will incur additional costs in
2008 to repair the resulting damage.  The
current estimate to repair damage in connection with the assets acquired under
the Mead Purchase Agreement is approximately $5,300,000, of which approximately
$2,600,000 shall be paid by Sellers through the working capital adjustment
under such agreement.

 

2.               In April 2008, a smelt water explosion in the
Recovery Boiler caused the boiler and a paper machine to shut down for 6
days.  All damages have been repaired and
both machines are now operating normally.

 

 

Schedule 8W

 

Material Contracts

 

Roanoke Rapids

 

	
  Customer

  	
   

  	
  Address

  	
   

  	
  Term of
  Contract

  
	
  Graphic Packaging

  	
   

  	
  450 East North Avenue

  Carol Stream, IL 60188

  	
   

  	
  Expires 12/11/08

  
	
  Exopack

  	
   

  	
  3070 Southport Road

  Spartanburg, SC 29302

  	
   

  	
  Expires 12/31/08

  
	
  Hood Packaging

  	
   

  	
  25 Woodgreen Place

  Madison, MS 39110

  	
   

  	
  Expires 8/31/09

  
	
  Ampac

  	
   

  	
  18 Neil Court

  Oceanside, NY 11572

  	
   

  	
  Expires 12/31/08

  
	
  Bancroft Bag

  	
   

  	
  425 Bancroft blvd

  West Monroe, LA 71292

  	
   

  	
  Expires 3/31/09

  
	
  Arizona Chemical

  Company

  	
   

  	
  4600 Touchton Road
  East,

  Suite 500

  Jacksonville, FL

  	
   

  	
  Expires 1/1/26

  

 

	
  Supplier

  	
   

  	
  Address

  	
   

  	
  Term of
  contract

  
	
  CSXT

  	
   

  	
  Jacksonville, FL

  	
   

  	
  Expires June 30,
  2008

  
	
  Dominion Power

  	
   

  	
  Portsmouth VA

  	
   

  	
  Expires 01-07 unless renewed

  
	
  PPG

  	
   

  	
  Pittsburgh, PA

  	
   

  	
  Expires 1/31/09

  
	
  West Fraser Timber

  	
   

  	
  1900 Exeter Rd.,
  Suite 105 Germantown, TN 38138

  	
   

  	
  13.5 years remaining on
  a

  15 year contract

  
	
  Broad Arrow Timber Company

  	
   

  	
  15 Piedmont Center,
  Suite 1250

  Atlanta, GA 30350

  	
   

  	
  13.5 years remaining on
  a

  15 year contract*

  

 

[*Additional 5 years are
in place for ROFO on thinnings.  This is
not included in the aggregated purchase customer-supplier contracts.]

 

 

Charleston

 

	
  Supplier

  	
   

  	
  Address

  	
   

  	
  Term of Contract

  
	
  CSXT — Coal
  inbound only

  	
   

  	
  500 Water Street
  - J865

  Jacksonville, FL 32202

  	
   

  	
  November 1,
  2005 to

  December 31, 2010

  
	
  Old World
  Trading — caustic soda

  	
   

  	
  4065 Commercial
  Avenue

  Northbrook, IL 60062

  	
   

  	
  January 1,
  2008 to

  December 31, 2009

  
	
  SCE&G —
  electric power — E9096103

  	
   

  	
  SCE&G

  Columbia, SC 29218

  	
   

  	
  January 1,
  1999 to

  December 31, 2018

  
	
  Hess
  Corporation— fuel oil

  	
   

  	
  1 Hess Plaza

  Woodbridge, NJ 07095

  	
   

  	
  August 9,
  2006 to

  August 31, 2008

  
	
  Nalco Chemical
  Co

  	
   

  	
  1601 W. Diehl
  Road

  Naperville, IL 60563

  	
   

  	
  August 1,
  2003 to

  December 31, 2008

  
	
  Massey Industrial Sales
  - coal

  	
   

  	
  4 North Fourth Street

  Richmond, VA

  	
   

  	
  January 1, 2008 to

  December 31, 2009

  
	
  Godfrey Lumber Company, Inc.

  	
   

  	
  P.O. Box 615

  Statesville, NC 28687

  	
   

  	
  Start 1-6-08 and ends

  1-5-11. 3-year agreement

  
	
  Williams Brothers Trucking, Inc.

  	
   

  	
  P.O. Box 188

  Hazlehurst, GA 31539

  	
   

  	
  Start 11-14-05 and ends

  11-14-15. 10-year agreement

  
	
  National City Leasing

  	
   

  	
  101 South 5th Street

  Louisville, KY 40202

  	
   

  	
  Start Dec-1995 and ends

  December 2015. 20-year lease

  
	
  MeadWestvaco Forestry,
  LLC

  	
   

  	
  P.O. Box 118005

  Charleston, SC 29423-8005

  	
   

  	
  Start July 1, 2008
  and ends

  July 1, 2023. 15-year agreement

  
	
  Key Container

  	
   

  	
  P.O. Box 2370 

  21 Campbell Street

  Pawtucket, RI 02861-2370

  	
   

  	
  September 1, 2006
  through September 1, 2011

  
	
  New England Woodenware

  	
   

  	
  205 School Street

  Gardner, MA 01440

  	
   

  	
  July 1, 2007
  through July 1, 2012

  

 

Purchase
Agreement dated as of June 23, 2006, by and between International Paper
Company, Stone Arcade Acquisition Corporation and KapStone Kraft Paper
Corporation (as amended).

 

Asset Purchase Agreement dated as of April 4, 2008, among
MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and
Packaging Corporation and Oak Acquisition LLC (as amended).

 

Registration Rights Agreement dated on or about August 15, 2005,
by and among Stone Arcade Acquisition Corporation, Roger W. Stone, Matthew
Kaplan, Jonathan R. Furer, John M. Chapman and Muhit U. Rahman  (each an “Initial Stockholder” and
collectively the “Initial Stockholders”).

 

Letter Agreement dated on
or about August 15, 2005, by and between Stone-Kaplan Investments LLC and
Stone Arcade Acquisition Corporation regarding administrative support.

 

Investment Management
Trust Agreement dated on or about  August 15,
2005, by and between Stone Arcade Acquisition Corporation and Continental Stock
Transfer & Trust Company.

 

Letter Agreements among
Stone Arcade Acquisition Corporation, Morgan Joseph & Co. Inc. and
each of the Initial Stockholders dated on or about August 15, 2005.

 

 

Inter-Company Loan Agreement dated as of January 2, 2007, by and
between KapStone Paper and Packaging Corporation and KapStone Kraft Paper
Corporation.

 

KapStone Paper and
Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as
amended April 10, 2008.

 

Pulpwood Supply Agreement
dated as of January 1, 2007, between International Paper Company and
KapStone Kraft Paper Corporation;

 

Residual Chip Agreement
dated as of January 1, 2007, between International Paper Company and
KapStone Kraft Paper Corporation.

 

Reciprocal Plant
Operating Agreement dated on or about July 1, 2008, between KapStone
Charleston Kraft LLC and MeadWestvaco South Carolina LLC.

 

Air Permit Modeling
Agreement dated on or about July 1, 2008, among KapStone Charleston Kraft
LLC, Cogen South L.L.C. and MeadWestvaco South Carolina LLC.

 

Long-Term Fiber Supply
Agreement dated on or about July 1, 2008, by and between MeadWestvaco
Forestry, LLC and KapStone Charleston Kraft LLC.

 

Amended and Restated
Lease Agreement dated as of December 1, 1998, by and between Charleston
County, South Carolina and Cogen South L.L.C.

 

Amended and Restated
Lease Agreement dated as of July 1, 2008, by and between Charleston
County, South Carolina and KapStone Charleston Kraft LLC.

 

Generator Site Sublease
dated as of June 1, 1996, between South Carolina Electric & Gas
Company and Cogen South L.L.C.

 

Shaft Horsepower
Agreement dated as of June 1, 1996, between Cogen South L.L.C. and South
Carolina Electric & Gas Company.

 

Service Agreement dated February 2,
2005, by and between Cogen South, L.L.C. and South Carolina Electric &
Gas Company.

 

Contract for Electric
Service dated June 11, 2008, between KapStone Charleston Kraft LLC and
South Carolina Electric & Gas Company.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}]]