Document:

EXHIBIT 10.19

 

 

CREDIT AGREEMENT

 

 

dated as of

 

 

February 17, 2004

 

 

among

 

 

PLIANT CORPORATION,

as Parent Borrower,

 

 

UNIPLAST INDUSTRIES CO.,

as Canadian Subsidiary Borrower,

 

 

The Domestic Subsidiary Borrowers Party
Hereto,

 

 

The Lenders Party Hereto,

 

 

CREDIT SUISSE FIRST BOSTON,

as Administrative Agent and

Documentation Agent,

 

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Collateral Agent,

 

 

GENERAL ELECTRIC CAPITAL CORPORATION,

as Co-Collateral Agent,

 

 

and

 

 

JPMORGAN CHASE BANK,

as Syndication Agent

 

 

JPMORGAN SECURITIES INC. and 

CREDIT SUISSE FIRST BOSTON,

as Joint Lead Arrangers and

Joint Bookrunners

 

[6701-373]

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I

  
	
   

  
	
  Definitions

  
	
   

  
	
  SECTION 1.01.

  	
  Defined Terms

  	
   

  
	
  SECTION 1.02.

  	
  Classification of Loans and Borrowings

  	
   

  
	
  SECTION 1.03.

  	
  Terms Generally

  	
   

  
	
  SECTION 1.04.

  	
  Accounting Terms; GAAP

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  
	
  The
  Credits

  
	
   

  
	
  SECTION 2.01.

  	
  Commitments; Loans Outstanding on Effective
  Date

  	
   

  
	
  SECTION 2.02.

  	
  Loans and Borrowings

  	
   

  
	
  SECTION 2.03.

  	
  Requests for Borrowings

  	
   

  
	
  SECTION 2.04.

  	
  Swingline Loans

  	
   

  
	
  SECTION 2.05.

  	
  Letters of Credit

  	
   

  
	
  SECTION 2.06.

  	
  Funding of Borrowings

  	
   

  
	
  SECTION 2.07.

  	
  Interest Elections

  	
   

  
	
  SECTION 2.08.

  	
  Termination and Reduction of Commitments

  	
   

  
	
  SECTION 2.09.

  	
  Repayment of Loans; Evidence of Debt

  	
   

  
	
  SECTION 2.10.

  	
  Prepayment of Loans

  	
   

  
	
  SECTION 2.11.

  	
  Fees

  	
   

  
	
  SECTION 2.12.

  	
  Interest

  	
   

  
	
  SECTION 2.13.

  	
  Alternate Rate of Interest

  	
   

  
	
  SECTION 2.14.

  	
  Increased Costs

  	
   

  
	
  SECTION 2.15.

  	
  Break Funding Payments

  	
   

  
	
  SECTION 2.16.

  	
  Taxes

  	
   

  
	
  SECTION 2.17.

  	
  Payments Generally; Pro Rata Treatment;
  Sharing of Setoffs

  	
   

  
	
  SECTION 2.18.

  	
  Mitigation Obligations; Replacement of
  Lenders

  	
   

  
	
   

  
	
  ARTICLE III

  
	
   

  
	
  Representations and Warranties

  
	
   

  
	
  SECTION 3.01.

  	
  Organization; Powers

  	
   

  
	
  SECTION 3.02.

  	
  Authorization; Enforceability

  	
   

  

 

 

	
  SECTION 3.03.

  	
  Governmental Approvals; No Conflicts

  	
   

  
	
  SECTION 3.04.

  	
  Financial Condition; No Material Adverse
  Change

  	
   

  
	
  SECTION 3.05.

  	
  Properties

  	
   

  
	
  SECTION 3.06.

  	
  Litigation and Environmental Matters

  	
   

  
	
  SECTION 3.07.

  	
  Compliance with Laws and Agreements

  	
   

  
	
  SECTION 3.08.

  	
  Investment and Holding Company Status

  	
   

  
	
  SECTION 3.09.

  	
  Taxes

  	
   

  
	
  SECTION 3.10.

  	
  ERISA

  	
   

  
	
  SECTION 3.11.

  	
  Disclosure

  	
   

  
	
  SECTION 3.12.

  	
  Subsidiaries

  	
   

  
	
  SECTION 3.13.

  	
  Insurance

  	
   

  
	
  SECTION 3.14.

  	
  Labor Matters

  	
   

  
	
  SECTION 3.15.

  	
  Solvency

  	
   

  
	
  SECTION 3.16.

  	
  Security Documents

  	
   

  
	
  SECTION 3.17.

  	
  Federal Reserve Regulations

  	
   

  
	
  SECTION 3.18.

  	
  Senior Secured Obligations

  	
   

  
	
   

  
	
  ARTICLE IV

  
	
   

  
	
  Conditions

  
	
   

  
	
  SECTION 4.01.

  	
  Effective Date

  	
   

  
	
  SECTION 4.02.

  	
  Each Credit Event

  	
   

  
	
   

  
	
  ARTICLE V

  
	
   

  
	
  Affirmative Covenants

  
	
   

  
	
  SECTION 5.01.

  	
  Financial Statements and Other Information

  	
   

  
	
  SECTION 5.02.

  	
  Notices of Material Events

  	
   

  
	
  SECTION 5.03.

  	
  Information Regarding Collateral

  	
   

  
	
  SECTION 5.04.

  	
  Existence; Conduct of Business

  	
   

  
	
  SECTION 5.05.

  	
  Payment of Obligations; Compliance with
  Leases

  	
   

  
	
  SECTION 5.06.

  	
  Maintenance of Properties

  	
   

  
	
  SECTION 5.07.

  	
  Insurance

  	
   

  
	
  SECTION 5.08.

  	
  Casualty and Condemnation

  	
   

  
	
  SECTION 5.09.

  	
  Books and Records; Inspection and Audit
  Rights

  	
   

  
	
  SECTION 5.10.

  	
  Compliance with Laws

  	
   

  
	
  SECTION 5.11.

  	
  Use of Proceeds and Letters of Credit

  	
   

  
	
  SECTION 5.12.

  	
  Additional Subsidiaries

  	
   

  
	
  SECTION 5.13.

  	
  Further Assurances

  	
   

  

 

2

 

	
  ARTICLE VI

  
	
   

  
	
  Negative Covenants

  
	
   

  
	
  SECTION 6.01.

  	
  Indebtedness

  	
   

  
	
  SECTION 6.02.

  	
  Certain Equity Securities

  	
   

  
	
  SECTION 6.03.

  	
  Liens

  	
   

  
	
  SECTION 6.04.

  	
  Fundamental Changes

  	
   

  
	
  SECTION 6.05.

  	
  Investments, Loans, Advances, Guarantees
  and Acquisitions

  	
   

  
	
  SECTION 6.06.

  	
  Asset Sales

  	
   

  
	
  SECTION 6.07.

  	
  Sale and Lease-Back Transactions

  	
   

  
	
  SECTION 6.08.

  	
  Swap Agreements

  	
   

  
	
  SECTION 6.09.

  	
  Restricted Payments; Certain Payments of
  Indebtedness

  	
   

  
	
  SECTION 6.10.

  	
  Transactions with Affiliates

  	
   

  
	
  SECTION 6.11.

  	
  Restrictive Agreements

  	
   

  
	
  SECTION 6.12.

  	
  Amendment of Material Documents

  	
   

  
	
  SECTION 6.13.

  	
  Designated Senior Debt

  	
   

  
	
  SECTION 6.14.

  	
  Cash Held by Foreign Subsidiaries

  	
   

  
	
   

  
	
  ARTICLE VII

  
	
   

  
	
  Events of Default

  
	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  The
  Agents

  
	
   

  
	
  ARTICLE IX

  
	
   

  
	
  Collection Allocation Mechanism

  
	
   

  
	
  SECTION 9.01.

  	
  Implementation of CAM

  	
   

  
	
  SECTION 9.02.

  	
  Letters of Credit

  	
   

  
	
   

  
	
  ARTICLE X

  
	
   

  
	
  Miscellaneous

  
	
   

  
	
  SECTION 10.01.

  	
  Notices

  	
   

  
	
  SECTION 10.02.

  	
  Waivers; Amendments

  	
   

  
	
  SECTION 10.03.

  	
  Expenses; Indemnity; Damage Waiver; Joint
  and Several Obligations

  	
   

  

 

3

 

	
  SECTION 10.04.

  	
  Successors and Assigns

  	
   

  
	
  SECTION 10.05.

  	
  Survival

  	
   

  
	
  SECTION 10.06.

  	
  Counterparts; Integration; Effectiveness

  	
   

  
	
  SECTION 10.07.

  	
  Severability

  	
   

  
	
  SECTION 10.08.

  	
  Right of Setoff

  	
   

  
	
  SECTION 10.09.

  	
  Governing Law; Jurisdiction; Consent to
  Service of Process

  	
   

  
	
  SECTION 10.10.

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  SECTION 10.11.

  	
  Headings

  	
   

  
	
  SECTION 10.12.

  	
  Confidentiality

  	
   

  
	
  SECTION 10.13.

  	
  Conversion of Currencies

  	
   

  
	
  SECTION 10.14.

  	
  Interest Rate Limitation

  	
   

  

 

 

	
  SCHEDULES:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1.01(a)

  	
  —

  	
  Mortgaged Properties

  	
   

  
	
  Schedule 1.01(b)

  	
  —

  	
  Existing Letters of Credit

  	
   

  
	
  Schedule 1.01(c)

  	
  —

  	
  Domestic Subsidiary Borrowers

  	
   

  
	
  Schedule 1.01(d)

  	
  —

  	
  Excluded Subsidiaries

  	
   

  
	
  Schedule 2.01(a)

  	
  —

  	
  Domestic Commitments

  	
   

  
	
  Schedule 2.01(b)

  	
  —

  	
  Canadian Commitments

  	
   

  
	
  Schedule 3.05

  	
  —

  	
  Owned or Leased Property

  	
   

  
	
  Schedule 3.12

  	
  —

  	
  Subsidiaries

  	
   

  
	
  Schedule 3.13

  	
  —

  	
  Insurance

  	
   

  
	
  Schedule 3.16(d)

  	
  —

  	
  Mortgage Filing Offices

  	
   

  
	
  Schedule 4.01

  	
  —

  	
  Foreign Jurisdictions

  	
   

  
	
  Schedule 5.07

  	
  —

  	
  Insurance Levels

  	
   

  
	
  Schedule 6.01

  	
  —

  	
  Existing Indebtedness

  	
   

  
	
  Schedule 6.03

  	
  —

  	
  Existing Liens

  	
   

  
	
  Schedule 6.05

  	
  —

  	
  Existing Investments

  	
   

  
	
  Schedule 6.05(h)

  	
  —

  	
  Existing Joint Ventures

  	
   

  
	
  Schedule 6.06

  	
  —

  	
  Asset Sales

  	
   

  
	
  Schedule 6.10

  	
  —

  	
  Affiliate Transactions

  	
   

  
	
  Schedule 6.11

  	
  —

  	
  Existing Restrictions

  	
   

  

 

 

	
  EXHIBITS:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  —

  	
  Form of Assignment and Assumption

  	
   

  
	
  Exhibit B-1

  	
  —

  	
  Form of Opinion of Borrower’s Counsel

  	
   

  
	
  Exhibit B-2

  	
  —

  	
  Form of Opinion of Borrower’s Utah Counsel

  	
   

  
	
  Exhibit B-3

  	
  —

  	
  Form of Opinion of Borrower’s Canadian Counsel

  	
   

  
	
  Exhibit C

  	
  —

  	
  Form of Guarantee Agreement

  	
   

  
	
  Exhibit D

  	
  —

  	
  Form of Indemnity, Subrogation and Contribution Agreement

  	
   

  
	
  Exhibit E-1

  	
  —

  	
  Form of Domestic Pledge Agreement

  	
   

  

 

4

 

	
  Exhibit E-2

  	
  —

  	
  Form of Canadian Pledge Agreement

  	
   

  
	
  Exhibit F-1

  	
  —

  	
  Form of Domestic Security Agreement

  	
   

  
	
  Exhibit F-2

  	
  —

  	
  Form of Canadian Security Agreement

  	
   

  
	
  Exhibit G

  	
  —

  	
  Form of Borrowing Base Certificate

  	
   

  

 

5

 

CREDIT
AGREEMENT dated as of February 17, 2004, among PLIANT CORPORATION, a Utah
corporation, UNIPLAST INDUSTRIES CO., a Nova Scotia corporation, the DOMESTIC
SUBSIDIARY BORROWERS party hereto, the LENDERS party hereto, CREDIT SUISSE
FIRST BOSTON, acting through its Cayman Islands Branch, as Administrative Agent
and Documentation Agent, DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral
Agent, GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Collateral Agent, and
JPMORGAN CHASE BANK, as Syndication Agent.

 

The parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01.  Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:

 

“ABR”, when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.

 

“Account” shall have the meaning assigned to such term in the
New York Uniform Commercial Code and shall also include any right to payment
for goods sold or leased, or for services rendered, whether or not earned by
performance.

 

“Account Debtor” means any Person who is, or may be, obligated
to any Loan Party under, with respect to or on account of an Account.

 

“Accumulated Investment Balance” means, at any time, the
aggregate amount of investments, loans, advances and Indebtedness required to
be added to the “Accumulated Investment Balance” pursuant to
Sections 6.05(c)(ii), (d)(ii), (e)(ii), (g), (h) and (l) that remain
outstanding at such time.

 

 

“Adjusted Eligible Accounts Receivable” means, on any date, the
amount of Eligible Accounts Receivable on such date, minus the Dilution Reserve
on such date.

 

“Adjusted Eligible Finished Goods” means, on any date, the
amount of Eligible Finished Goods on such date, minus the Inventory Reserves
with respect to such Eligible Finished Goods on such date.

 

“Adjusted Eligible Raw Materials” means, on any date, the amount
of Eligible Raw Materials on such date, minus the Inventory Reserves with
respect to such Eligible Raw Materials on such date.

 

“Adjusted Eligible Work in Process” means, on any date, the
amount of Eligible Work in Process on such date, minus the Inventory Reserves
with respect to such Eligible Work in Process on such date.

 

“Adjusted LIBO Rate” means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.

 

“Administrative Agent” means Credit Suisse First Boston, acting
through its Cayman Islands Branch, in its capacity as administrative agent for
the Lenders hereunder.

 

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

 

“Affiliate” means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.  For purposes of
Section 2.17(c), each of JPMorgan Chase & Co., JPMorgan Chase
Bank and Chase Lincoln First Commercial Corporation shall be deemed not to be
an Affiliate of any Borrower.

 

“Alternate Base Rate” means, for any day, a rate per annum equal
to the greater of (a) the Prime Rate in effect on such day and
(b) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of
1%.  Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from

 

2

 

and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.

 

“Applicable Percentage” means, (a) with respect to any
Domestic Lender, the percentage of the total amount of the Domestic Commitments
represented by such Domestic Lender’s Domestic Commitment and (b) with
respect to any Canadian Lender, the percentage of the total amount of the
Canadian Commitments represented by such Canadian Lender’s Canadian Commitment.  If the Commitments of any Class have
terminated or expired, the Applicable Percentages shall be determined based
upon the Commitments of such Class most recently in effect, giving effect to
any assignments.

 

“Applicable Rate” means, for any day with respect to any ABR
Loan or Eurodollar Loan, as the case may be, the applicable rate per annum set
forth below under the caption “ABR Spread” or “Eurodollar Spread”, as the case
may be, based upon the Availability Amount for such day (calculated as of the
end of such day):

 

	
  Availability Amount

  	
   

  	
  ABR Spread

  	
   

  	
  Eurodollar
  Spread

  	
   

  
	
  Category 1

  Less than $25,000,000

  	
   

  	
  1.75

  	
  %

  	
  2.75

  	
  %

  
	
  Category 2

  Greater than or equal to $25,000,000

  	
   

  	
  1.50

  	
  %

  	
  2.50

  	
  %

  

 

Notwithstanding the foregoing, (a) the Applicable Rate with
respect to any Loan will be determined by reference to Category 1
(i) at any time prior to and including the date of satisfaction of the
Cash Collateral Security Requirement, (ii) at any time that an Event of
Default has occurred and is continuing, (iii) during any Weekly Reporting
Period or Daily Reporting Period or (iv) if the Parent Borrower fails to
deliver any Borrowing Base Certificate required to be delivered by it pursuant
to Section 5.01(g), during the period from the expiration of the time for
delivery thereof until the Parent Borrower delivers such Borrowing Base
Certificate.

 

“Approved Fund” has the meaning assigned to such term in
Section 10.04.

 

“Arrangers” means J.P. Morgan Securities Inc. and Credit Suisse
First Boston, acting through its Cayman Islands Branch, as arrangers for the
Loans.

 

3

 

“Assignment and Assumption” means an assignment and assumption
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.04), and accepted by the Administrative
Agent, in the form of Exhibit A or any other form approved by the
Administrative Agent.

 

“Availability Amount” means, at any time, an amount equal to
(a) the lesser of (i) the total amount of the Commitments at such
time and (ii) the Borrowing Base in effect at such time minus (b) the
total Revolving Exposures at such time.

 

“Availability Cap Period” means the period commencing on the
Effective Date and ending on the later of (a) the date of satisfaction of the
Cash Collateral Security Requirement and (b) the first date after the Effective
Date on which the Parent Borrower delivers to the Collateral Agent a Borrowing
Base Certificate that calculates the Borrowing Base (other than the Pro Forma
Opening Borrowing Base) as of the last day of the most recently completed
fiscal month of the Parent Borrower relative to such date, and that otherwise
satisfies the requirements of this Agreement.

 

“Bailee Letter” means a written agreement reasonably acceptable
to the Collateral Agent, pursuant to which a bailee of Inventory of any Loan
Party agrees to hold such Inventory for the benefit of the Collateral Agent, to
waive or subordinate its rights and claims as bailee in such Inventory,
including warehouseman’s liens, processor’s liens, rights of levy and distraint
for rent, grant access to the Collateral Agent for the repossession and sale of
such Inventory and make other agreements relative thereto.

 

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

 

“Borrower” means the Parent Borrower, any Domestic Subsidiary
Borrower or the Canadian Subsidiary Borrower.

 

“Borrowing” means (a) Loans of the same Class and Type
made, converted or continued on the same date and, in the case of Eurodollar
Loans, as to which a single Interest Period is in effect or (b) a
Swingline Loan.

 

4

 

“Borrowing Base” means, at any time of determination, an amount
equal to the sum, without duplication, of (a) 85% of Adjusted Eligible
Accounts Receivable, plus (b) the lesser of (i) 65% of Adjusted
Eligible Finished Goods and (ii) the product of (A) 85% of the
Adjusted Eligible Finished Goods multiplied by (B) the Recovery Rate with
respect to Adjusted Eligible Finished Goods, plus (c) the lesser of
(i) 25% of Adjusted Eligible Raw Materials and (ii) the product of
(A) 85% of the Adjusted Eligible Raw Materials multiplied by (B) the
Recovery Rate with respect to Adjusted Eligible Raw Materials, plus (d) the
lesser of (i) 25% of Adjusted Eligible Work in Process and (ii) the
product of (A) 85% of the Adjusted Eligible Work in Process multiplied by
(B) the Recovery Rate with respect to Adjusted Eligible Work in Process,
minus (e) the Rent Reserve, minus (f) the Priority Payables Reserve,
minus (g) the Secured Obligations Reserve, in each case of the Loan
Parties.  The Borrowing Base at any time
shall be determined by reference to the most recent Borrowing Base Certificate
delivered to the Administrative Agent pursuant to this Agreement.  Standards of eligibility and reserves and
advance rates of the Borrowing Base may be revised and adjusted from time to
time solely at the discretion of the Consenting Agents, with any changes in
such standards to be effective three Business Days after delivery of notice
thereof to the Parent Borrower.  For
purposes of calculating the Borrowing Base on any date, all amounts reflected
or outstanding in Canadian Dollars shall be translated into dollars at the exchange
rate in effect on such date, as determined in good faith by the Parent
Borrower.

 

“Borrowing Base Certificate” means a certificate substantially
in the form of Exhibit G (with such changes therein as may be required by
the Consenting Agents, to reflect the components of, and reserves against, the
Borrowing Base as provided for hereunder from time to time), executed and
certified as accurate and complete by a Financial Officer of the Parent
Borrower, which certificate shall include appropriate exhibits, schedules,
supporting documentation and reports as reasonably requested by the Consenting
Agents.

 

“Borrowing Request” means a request by a Borrower for a
Borrowing in accordance with Section 2.03.

 

“Business Day” means any day that is not a Saturday, Sunday or
other day on which commercial banks in

 

5

 

New York City are authorized or required
by law to remain closed; provided that, (a) when used in connection
with a Eurodollar Loan, the term “Business Day” shall also exclude any
day on which banks generally are not open for dealings in dollar deposits in
the London interbank market and (b) when used in connection with any
Canadian Revolving Loan, the term “Business Day” shall also exclude any
day on which banks are not open for deposits in Toronto.

 

“CAM” shall mean the mechanism established under Article IX
for the allocation and exchange of the Lenders’ interests in, and collections
under, the Loan Documents.

 

“CAM Exchange” shall mean the exchange of the Lenders’ interests
provided for in Section 9.01.

 

“CAM Exchange Date” shall mean the first date on which
(a) any event referred to in clause (h)or (i) of Article VII
shall occur in respect of any Loan Party or (b) any acceleration of the
maturity of any Loans occurs under Article VII.

 

“CAM Percentage” shall mean, as to each Lender, a fraction,
expressed as a decimal, of which (a) the numerator shall be the sum of
(i) the aggregate principal and interest on the Loans owed to such Lender,
(ii) the LC Exposure of such Lender, (iii) the Swingline Exposure of
such Lender and (iv) the aggregate amount of any other Obligations
otherwise owed to such Lender, in each case immediately prior to the CAM
Exchange Date, and (b) the denominator shall be the sum of (i) the
aggregate principal and interest on the Loans owed to all the Lenders,
(ii) the aggregate LC Exposure of all the Lenders, (iii) the
aggregate Swingline Exposure of all the Lenders and (iv) the aggregate
amount of any other Obligations owed to any of the Lenders, in each case immediately
prior to such CAM Exchange Date.

 

“Canadian Commitment” means, with respect to each Canadian
Lender, the commitment of such Canadian Lender to make Canadian Revolving
Loans, expressed as an amount representing the maximum aggregate amount of such
Canadian Lender’s Canadian Revolving Exposure hereunder, as such commitment may
be (a) reduced from time to time pursuant to Section 2.08 and
(b) reduced or increased from time to time pursuant to assignments by or
to such Canadian Lender pursuant to Section 10.04.  The initial amount of each Canadian Lender’s
Canadian Commitment is set forth on

 

6

 

Schedule 2.01(b), or in the Assignment
and Assumption pursuant to which such Canadian Lender shall have assumed its
Canadian Commitment, as applicable.  The
initial aggregate amount of the Canadian Lenders’ Canadian Commitments is
$30,000,000.

 

“Canadian Dollars” or “Cdn$” refers to lawful money of
Canada.

 

“Canadian Lender” means the Persons listed on
Schedule 2.01(b) and any other Person that shall have become a party
hereto as a Canadian Lender pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.

 

“Canadian Lending Office” means, as to any Canadian Lender,
the applicable branch, office or Affiliate of such Canadian Lender designated
by such Canadian Lender to make Canadian Revolving Loans to the Canadian
Subsidiary Borrower.

 

“Canadian Perfection Certificate” shall have the meaning
assigned to the term “Perfection Certificate” in the Canadian Security
Agreement.

 

“Canadian Pledge Agreement” means the Canadian Pledge Agreement,
substantially in the form of Exhibit E-2, among the Canadian Subsidiary
Borrower, each other Loan Party organized under the laws of Canada or any
province thereof and the Collateral Agent.

 

“Canadian Revolving Exposure” means, with respect to any
Canadian Lender at any time, the sum of the outstanding principal amount of
such Canadian Lender’s Canadian Revolving Loans.

 

“Canadian Revolving Loan” means a Loan made by a Canadian Lender
pursuant to Section 2.01(b).  Each
Canadian Revolving Loan shall be a Eurodollar Loan or an ABR Loan.

 

“Canadian Security Agreement” means the Canadian Security
Agreement, substantially in the form of Exhibit F-2, among the Canadian
Subsidiary Borrower, each other Loan Party organized under the laws of Canada
or any province thereof and the Collateral Agent.

 

7

 

“Canadian Subsidiary Borrower” means Uniplast Industries Co., a
Nova Scotia corporation.

 

“Capital Expenditures” means, for any period, without
duplication, (a) the additions to property, plant and equipment and other
capital expenditures of the Parent Borrower and the Subsidiaries that are (or
would be) set forth in a consolidated statement of cash flows of the Parent
Borrower and the Subsidiaries for such period prepared in accordance with GAAP
and (b) Capital Lease Obligations incurred by the Parent Borrower and the
Subsidiaries during such period.

 

“Capital Lease Obligations” of any Person means the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“Cash Amount” has the meaning assigned to such term in
Section 2.10(f).

 

“Cash Collateral Security Requirement” means the execution and
delivery of deposit control, blocked account or other similar agreements with
respect to each Deposit Account (as defined in the New York Uniform Commercial
Code) of each Loan Party, and the establishment of procedures with respect to
the Cash Deposit Accounts and the Cash Collection Accounts, in each case in
form and substance reasonably satisfactory to the Administrative Agent and the
Collateral Agent, as required by the terms of the Security Documents.

 

“Cash Collection Account” shall have the meaning assigned to
such term in the Domestic Security Agreement.

 

“Cash Collection Triggering Event” shall have the meaning
assigned to such term in the Domestic Security Agreement.

 

“Cash Deposit Account” shall have the meaning assigned to such
term in the Domestic Security Agreement.

 

8

 

“Cash Interest Expense” means, for any period, Consolidated
Interest Expense for such period excluding any portion thereof in respect of
interest not required to be paid in cash during such period or within one year
thereafter.  Cash Interest Expense shall
be $18,155,782 for each of the fiscal quarters ended March 31, 2003, June 30,
2003, September 30, 2003 and December 31, 2003, respectively.  For the fiscal quarter ending March 31,
2004, Cash Interest Expense shall be equal to the product of (a) the
quotient of (i) Cash Interest Expense attributable to the period from and
including the Effective Date to and including March 31, 2004 (the
“Adjustment Period”) divided by (ii) the number of calendar days in the
Adjustment Period multiplied by (b) the number of calendar days in the
fiscal quarter ending March 31, 2004.

 

“Cash Management Arrangement” means any arrangement pursuant to
which any financial institution provides any Loan Party with treasury,
depositary or cash management services or automated clearinghouse transfers of
funds.

 

“Cash Management Obligations” shall have the meaning assigned to
the term “Senior Lender Cash Management Obligations” in the Intercreditor
Agreement.

 

“CERCLA” means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.

 

“Change in Control” means, at any time, (a) prior to an
IPO, the failure by the Control Group to own, directly or indirectly,
beneficially and of record, Equity Interests in the Parent Borrower
representing at least a majority of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests in the Parent
Borrower; (b) after an IPO, the failure by the Control Group to own,
directly or indirectly, beneficially and of record, Equity Interests in the
Parent Borrower representing 25% of the aggregate voting power represented by
the issued and outstanding Equity Interests in the Parent Borrower;
(c) after an IPO, the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the SEC thereunder as in
effect on the Effective Date) other than the Control Group, of Equity Interests
in the Parent Borrower representing more than 35% of the aggregate

 

9

 

ordinary voting power represented by the
issued and outstanding Equity Interests in the Parent Borrower; provided
that the Control Group owns beneficially and of record, in the aggregate, a
lesser percentage of such voting power; (d) occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Parent
Borrower by Persons who were neither (i) nominated by members of the
Control Group or the board of directors of the Parent Borrower nor
(ii) appointed by directors so nominated; (e) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person
other than the Parent Borrower (or a Wholly Owned Subsidiary of the Parent
Borrower that is a Loan Party) of any Equity Interests in any Domestic Subsidiary
Borrower or the Canadian Subsidiary Borrower; (e) the occurrence of a
“Change of Control” as defined under the Senior First Lien Note Documents, the
Senior Second Lien Note Documents, the Senior Subordinated Note Documents or
the terms of the Existing Preferred Stock. 
If, at any time, any of the members of the board of directors of the
Parent Borrower shall have more than one vote per Person, then any
determination of a majority of the board of directors shall be based on a
majority of the voting power of the members thereof rather than a majority of
the members or seats.

 

“Change in Law” means (a) the adoption of any law, rule or
regulation after the Effective Date, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the Effective Date or (c) compliance by any Lender or the
Issuing Bank (or, for purposes of Section 2.14(b), by any lending office
of such Lender or by such Lender’s or the Issuing Bank’s holding company, if
any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the Effective Date.

 

“Class”, when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Domestic
Revolving Loans, Canadian Revolving Loans or Swingline Loans.  “Class”, when used in reference to
any Lender, refers to whether such Lender has a Loan or Commitment with respect
to a particular Class.

 

“Class of Eligible Inventory” means each of Eligible Finished
Goods, Eligible Raw Materials and Eligible Work in Process.

 

10

 

“Co-Collateral Agent” means General Electric Capital
Corporation, in its capacity as co-collateral agent for the Lenders hereunder.

 

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

 

“Collateral” means any and all “Collateral”, as defined in any
applicable Security Document.

 

“Collateral Agent” means Deutsche Bank Trust Company Americas,
in its capacity as collateral agent for the Secured Parties under the Security
Documents.

 

“Commitment” means a Domestic Commitment or a Canadian
Commitment.

 

“Consenting Agents” means (a) at any time that the total
amount of the Commitments of the Administrative Agent is greater than or equal
to $7,500,000, (i) the Administrative Agent and (ii) at least one of
the Collateral Agent and the Co-Collateral Agent and (b) at any other
time, at least two of the Administrative Agent, the Collateral Agent and the
Co-Collateral Agent.

 

“Consolidated EBITDA” means, for any period, Consolidated Net
Income for such period, plus, without duplication and to the extent deducted
from revenues in determining Consolidated Net Income, the sum of (a) the
aggregate amount of Consolidated Interest Expense for such period, (b) the
aggregate amount of income tax expense for such period, (c) all amounts
attributable to depreciation, amortization and other non-cash charges or losses
for such period (but excluding any such charge that requires an accrual of, or
a cash reserve for, anticipated cash charges for any future period); provided
that any non-cash charges or losses that are added-back to Consolidated Net
Income pursuant to this clause (c) shall be treated as cash charges or
losses in any subsequent period during which cash disbursements attributable
thereto are made; (d) non-cash expenses resulting from the grant of stock
options or other equity-related incentives to any director, officer or employee
of the Parent Borrower or any Subsidiary pursuant to a written plan or
agreement, (e) all non-recurring transaction and financing expenses
resulting from the Transactions, (f) all losses during such period
resulting from the sale or other disposition of any asset of the Parent
Borrower or any Subsidiary outside the ordinary

 

11

 

course of business and (g) any Excluded
Charges during such period, and minus, without duplication and to the extent
added to revenues in determining Consolidated Net Income for such period,
(a) all extraordinary gains during such period and (b) all gains
during such period resulting from the sale or other disposition of any asset of
the Parent Borrower or any Subsidiary outside the ordinary course of business,
all as determined on a consolidated basis with respect to the Parent Borrower
and the Subsidiaries in accordance with GAAP. 
If the Parent Borrower or any Subsidiary has made any Permitted
Acquisition or any sale, transfer, lease or other disposition of assets outside
of the ordinary course of business permitted by Section 6.06 during the
relevant period for determining Consolidated EBITDA, Consolidated EBITDA for
the relevant period shall be calculated after giving pro forma effect thereto,
as if such Permitted Acquisition or sale, transfer, lease or other disposition
of assets (and any related incurrence, repayment or assumption of Indebtedness,
with any new Indebtedness being deemed to be amortized over the relevant period
in accordance with its terms, and assuming that any Loans borrowed in
connection with such acquisition are repaid with excess cash balances when
available) had occurred on the first day of the relevant period for determining
Consolidated EBITDA.  Any such pro forma
calculations may include operating and other expense reductions and other
synergistic benefits for such period resulting from any Permitted Acquisition
that is being given pro forma effect to the extent that such operating and
other expense reductions and other synergistic benefits would be permitted
pursuant to Article XI of Regulation S-X under the Securities Act of
1933.  Consolidated EBITDA shall be
$32,100,000, $28,200,000, $23,600,000 and $16,200,000 for the fiscal quarters
ended March 31, 2003, June 30, 2003, September 30, 2003 and
December 31, 2003, respectively.

 

“Consolidated Interest Expense” means, for any period, the
interest expense, both expensed and capitalized (including the interest
component in respect of Capital Lease Obligations), accrued by the Parent
Borrower and the Subsidiaries during such period (net of payments made or
received under interest rate protection agreements and net of interest income),
determined on a consolidated basis in accordance with GAAP; provided
that “Consolidated Interest Expense” shall not include non-cash interest
expense in respect of the Senior Subordinated Notes arising because

 

12

 

(i) the Senior Subordinated Notes and
the Warrants were issued at a discount to their face value or (ii) a
portion of the issue price of the Senior Subordinated Notes and the Warrants
was allocated to the Warrants.

 

“Consolidated Net Income” means, for any period, net income or
loss of the Parent Borrower and the Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP; provided that there shall
be excluded (a) the income of any unconsolidated Subsidiary and any Person
in which any other Person (other than the Parent Borrower or any of the
Subsidiaries or any director holding qualifying shares in compliance with
applicable law or any other third party holding a de minimus number of shares
in order to comply with other similar requirements) has an Equity Interest,
except to the extent of the amount of dividends or other distributions actually
paid by such Subsidiary or other Person during such period to the Parent
Borrower or any other Subsidiary that is not subject to the restrictions set
forth in clause (a) or (b) hereof (provided that the Parent
Borrower’s or any other Subsidiary’s equity in the net loss of any such
Subsidiary or Person for such period shall be included in determining
Consolidated Net Income), (b) the income (but not the loss) of any
Subsidiary to the extent that such Subsidiary is contractually or legally
prohibited from paying dividends, except to the extent of the amount of
dividends or other distributions actually paid by such Subsidiary during such
period to the Parent Borrower or any other Subsidiary that is not subject to
the restrictions set forth in clause (a) or (b) hereof and (c) the
income (or loss) of any Person accrued prior to the date it becomes (or, for
pro forma purposes, is deemed to have become) a Subsidiary or is merged into or
consolidated with the Parent Borrower or any of the Subsidiaries or the date
that Person’s assets are acquired by the Parent Borrower or any of the
Subsidiaries.

 

“Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.

 

“Control Group” means collectively the Sponsor and all Persons
Controlled by the Sponsor (other than any operating company Controlled by the
Sponsor).

 

13

 

“Daily Reporting Period” means the period commencing upon the
date of any Daily Reporting Trigger Event and terminating upon the date of the
first Daily Reporting Termination Event following such Daily Reporting Trigger
Event.

 

“Daily Reporting Termination Event” means the last Business Day
in any period of five consecutive Business Days on which the total Revolving
Exposures at all times during each Business Day is less than 90% of the lesser
of (a) the total amount of the Commitments at the end of such Business Day
and (b) the Borrowing Base in effect at the end of such Business Day.

 

“Daily Reporting Trigger Event” means the last Business Day in
any period of two consecutive Business Days on which the total Revolving
Exposures at any time during each Business Day is equal to or greater than 90%
of the lesser of (a) the total amount of the Commitments at the end of
such Business Day and (b) the Borrowing Base in effect at the end of such
Business Day.

 

“Default” means any event or condition that constitutes an Event
of Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.

 

“Dilution Factors” means, without duplication, with respect to
any period, the aggregate amount of all deductions, credit memos, returns,
adjustments, allowances, bad debt write-offs and other non-cash credits that
are recorded to reduce accounts receivable of the Loan Parties in a manner consistent
with current and historical accounting practices of the Parent Borrower or the
Canadian Subsidiary Borrower, as applicable.

 

“Dilution Ratio” means, at any date, (a) the amount
(expressed as a percentage) equal to (i) the aggregate amount of the applicable
Dilution Factors for the 12 most recently ended fiscal months of the
Parent Borrower divided by (ii) total gross sales of the Loan Parties for
the 12 most recently ended fiscal months of the Parent Borrower, minus
(b) 5%; provided that the Dilution Ratio shall not be less than
zero.

 

“Dilution Reserve”  means, at any date, the Dilution Ratio on
such date multiplied by the amount of Eligible Accounts Receivable on such
date.

 

14

 

“Documentation Agent” means Credit Suisse First Boston, acting
through its Cayman Islands Branch, in its capacity as documentation agent for
the Lenders hereunder.

 

“dollars” or “$” refers to lawful money of the
United States of America.

 

“Domestic Commitment” means, with respect to each Domestic
Lender, the commitment of such Domestic Lender to make Domestic Revolving Loans
and to acquire participations in Letters of Credit and Swingline Loans
hereunder, expressed as an amount representing the maximum aggregate amount of
such Domestic Lender’s Domestic Revolving Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant
to assignments by or to such Domestic Lender pursuant to Section 10.04.  The initial amount of each Domestic Lender’s
Domestic Commitment is set forth on Schedule 2.01(a), or in the Assignment
and Assumption pursuant to which such Domestic Lender shall have assumed its
Domestic Commitment, as applicable.  The
initial aggregate amount of the Domestic Lenders’ Domestic Commitments is
$70,000,000.

 

“Domestic Lender” means the Persons listed on
Schedule 2.01(a) and any other Person that shall have become a party
hereto as a Domestic Lender pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.  Unless the context
otherwise requires, the term “Domestic Lenders” includes the Swingline Lender.

 

“Domestic Perfection Certificate” shall have the meaning
assigned to the term “Perfection Certificate” in the Domestic Security
Agreement.

 

“Domestic Pledge Agreement” means the Domestic Pledge Agreement,
substantially in the form of Exhibit E-1, among each Loan Party (other
than the Canadian Subsidiary Borrower and any other Loan Party that is a
Foreign Subsidiary) and the Collateral Agent.

 

“Domestic Revolving Exposure” means, with respect to any
Domestic Lender at any time, the sum of the outstanding principal amount of
such Domestic Lender’s Domestic Revolving Loans and its LC Exposure and
Swingline Exposure at such time.

 

15

 

“Domestic Revolving Loan” means a Loan made by a Domestic Lender
pursuant to Section 2.01(a).  Each
Domestic Revolving Loan shall be a Eurodollar Loan or an ABR Loan.

 

“Domestic Security Agreement” means the Domestic Security
Agreement, substantially in the form of Exhibit F-1, among each Loan Party
(other than the Canadian Subsidiary Borrower and any other Loan Party that is a
Foreign Subsidiary) and the Collateral Agent.

 

“Domestic Subsidiary Borrower” means each Subsidiary of the
Parent Borrower listed on Schedule 1.01(c).

 

“Effective Date” means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with
Section 10.02).

 

“Eligible Accounts Receivable” means, at any time of
determination, the aggregate of the amounts (determined as provided in the
second succeeding sentence) for each Account of the Loan Parties that satisfies
the following criteria at the time of creation and continues to meet the same
at such time of determination:  such
Account (i) has been invoiced to, and represents the bona fide amounts due
to any Loan Party from, the purchaser of goods or services, in each case originated
in the ordinary course of business of such Loan Party, and (ii) is not
ineligible for inclusion in the calculation of the Borrowing Base pursuant to
any of clauses (a) through (t) below or otherwise deemed, solely at the
discretion of the Consenting Agents, to be ineligible for inclusion in the
calculation of the Borrowing Base. 
Without limiting the foregoing, to qualify as Eligible Accounts
Receivable, an Account shall indicate no Person other than a Loan Party as
payee or remittance party.  The amount
to be so included in Eligible Accounts Receivable at any time with respect to
Accounts shall be the face amount of Accounts, reduced by, without duplication
and to the extent not reflected in such face amount, (i) the amount of all
accrued and actual discounts, claims, credits or credits pending, debit memos,
promotional program allowances, price adjustments, finance charges or other
allowances (including any amount that the applicable Loan Party may be
obligated to rebate to a customer pursuant to the terms of any agreement or
understanding (written or oral)), (ii) the aggregate amount of all limits
and deductions provided for in this definition and elsewhere in this Agreement,
(iii) the 

 

16

 

aggregate amount of all cash received in
respect of such Account but not yet applied by the applicable Loan Party to
reduce the amount of such Account and (iv) with respect to an Account of
the Canadian Subsidiary Borrower or any Subsidiary of the Canadian Subsidiary
Borrower that is a Loan Party, the amount of all goods and services taxes,
harmonized taxes and sales taxes payable in respect of such Account.  Standards of eligibility may be fixed from
time to time solely at the discretion of the Consenting Agents, acting jointly,
with any changes in such standards to be effective three Business Days after
delivery of notice thereof to the Parent Borrower.  Unless otherwise approved from time to time in writing by the
Consenting Agents, no Account shall be an Eligible Account Receivable if:

 

(a)
the applicable Loan Party does not have sole lawful and absolute title
to such Account; or

 

(b)
such Account (i) is unpaid more than 90 days from the original
date of invoice or 60 days from the original due date or (ii) has
been written off the books of the applicable Loan Party or has been otherwise
designated on such books as uncollectible; or

 

(c)
more than 50% in face amount of all Accounts of the Account Debtor with
respect to such Account are ineligible pursuant to clause (b) above; or

 

(d)
the Account Debtor with respect to such Account is insolvent or the
subject of any bankruptcy case or insolvency proceeding of any kind; or

 

(e)
such Account is not payable in dollars or the applicable Account Debtor
is either not organized under the laws of the United States of America or any
State thereof or the District of Columbia or is located or has its principal
place of business or substantially all its assets outside the United States; provided
that, with respect to an Account of the Canadian Subsidiary Borrower or any
Subsidiary of the Canadian Subsidiary Borrower that is a Loan Party, such
Account may be payable in Canadian Dollars and the applicable Account Debtor
may be organized under the laws of Canada or any province thereof and be
located or have its principal place of business or substantially all its assets
in Canada; or

 

17

 

(f)
the applicable Account Debtor is the United States of America or Canada
or any department, agency or instrumentality thereof, unless the relevant Loan
Party duly assigns its rights to payment of such Account to the Administrative
Agent pursuant to the Assignment of Claims Act of 1940, as amended, or the
Financial Administration Act (Canada), as amended, as applicable, which
assignment and related documents and filings shall be in form and substance
satisfactory to the Collateral Agent; or

 

(g)
such Account is subject to any adverse security deposit, progress
payment, retainage or other similar advance made by or for the benefit of the
applicable Account Debtor, in each case to the extent thereof; or

 

(h)
such Account is not subject to a valid and perfected first-priority Lien
in favor of the Collateral Agent for the benefit of the Secured Parties to
secure the Obligations, subject to no other Liens, other than Liens described
under clauses (a) and (e) of the definition of “Permitted Encumbrances”;
or

 

(i)
(A) such Account was invoiced (1) in advance of goods or
services provided or (2) twice or more or (B) income associated with
such Account has not been earned; or

 

(j)
such Account is a non-trade Account, or relates to payments for
interest; or

 

(k)
the sale to the applicable Account Debtor in respect of such Account is
on a bill-and-hold, guarantee sale, sale-and-return, ship-and-return, sale on
approval, extended terms or consignment or other similar basis or made pursuant
to any other agreement providing for repurchase or return of any merchandise
that has been claimed to be defective or otherwise unsatisfactory; or

 

(l)
the goods giving rise to such Account have not been shipped or title has
not been transferred to the applicable Account Debtor, or such Account
represents a progress-billing or otherwise does not represent a complete sale; provided
that, for purposes hereof, “progress-billing” means any invoice for goods

 

18

 

sold or leased or services rendered under a contract or agreement
pursuant to which such Account Debtor’s obligation to pay such invoice is
conditioned upon the applicable Loan Party’s completion of any further
performance under the contract or agreement; or

 

(m)
such Account arises out of a sale made by the applicable Loan Party to
an employee, officer, agent, director, stockholder, subsidiary or Affiliate of
any Loan Party; or

 

(n)
such Account was created as a new receivable for the unpaid portion of
an outstanding Account (including chargebacks, debit memos or other adjustments
for unauthorized deductions);

 

(o)
the applicable Account Debtor (i) is a creditor of any Loan Party,
(ii) has, or has asserted, a right of set-off against any Loan Party
(unless such Account Debtor has entered into a written agreement reasonably
acceptable to the Collateral Agent to waive such set-off rights) or
(iii) has disputed its liability (whether by chargeback or otherwise) or
made any asserted or unasserted claim with respect to such Account or any other
Account of any Loan Party that has not been resolved, in each case, without
duplication, to the extent of (A) the amount owed by such Loan Party to
such Account Debtor, (B) the amount of such actual or asserted right of
set-off or (C) the amount of such dispute or claim, as the case may be; or

 

(p)
such Account does not comply in all material respects with the
requirements of all applicable laws and regulations, whether Federal, state,
local or foreign, including the Federal Consumer Credit Protection Act, the
Federal Truth in Lending Act and Regulation Z of the Board; or

 

(q)
as to all or any part of such Account, a check, promissory note, draft,
trade acceptance or other Instrument for the payment of money has been
received, presented for payment and returned uncollected for any reason; or

 

(r)
such Account is for goods that have been sold under a purchase order or
pursuant to the terms of a contract or other agreement or understanding
(written

 

19

 

or oral) that indicates that any Person other than the applicable Loan
Party has or has had or has purported to have or have had an ownership interest
in such goods; or

 

(s)
such Account is an extended terms account that is due and payable more
than 60 days from the original date of invoice; or

 

(t)
such Account is created on cash in advance terms.

 

Notwithstanding the forgoing, all Accounts of any single Account Debtor
and its Affiliates that, in the aggregate, exceed (i) 20% in respect of an
Account Debtor whose securities are rated Investment Grade or (ii) 10% in
respect of all other Account Debtors, in either case of the total amount of all
Accounts of the Loan Parties at any time of determination, shall be deemed not
to be Eligible Accounts Receivable to the extent of such excess.  For purposes of clause (b) above, in
determining the aggregate amount from the same Account Debtor that is unpaid
more than 90 days from the original date of invoice or more than
60 days from the original due date, there shall be excluded the amount of
any net credit balances relating to Accounts due from an Account Debtor with
invoice dates more than 90 days from the original date of invoice or more than
60 days from the original due date.

 

“Eligible Finished Goods”  means, on any date, the amount of Eligible
Inventory defined as Finished Goods by the Parent Borrower or the Canadian
Subsidiary Borrower, as applicable, on such date as shown on its perpetual
inventory records in accordance with its current and historical accounting
practices.

 

“Eligible Inventory”  means, at any time of determination,
without duplication, the Inventory Value of the Inventory of the Loan Parties
at such time that is not ineligible for inclusion in the calculation of the
Borrowing Base pursuant to any of clauses (a) through (o) below or
otherwise deemed, at the sole discretion of the Consenting Agents, to be
ineligible for inclusion in the calculation of the Borrowing Base.  Without limiting the foregoing, to qualify
as “Eligible Inventory”, no Person other than a Loan Party shall have any
direct or indirect ownership, interest or title to such Inventory and no Person
other than a Loan Party shall be indicated on any

 

20

 

purchase order or invoice with respect to
such Inventory as having or purporting to have an interest therein.  Standards of eligibility may be fixed from
time to time solely at the discretion of the Consenting Agents with any changes
in such standards to be effective three Business Days after delivery of notice
thereof to the Parent Borrower.  Unless
otherwise from time to time approved in writing by the Consenting Agents, no
Inventory shall be deemed Eligible Inventory if:

 

(a)
such Inventory is not owned solely by a Loan Party or a Loan Party does
not have sole and good, valid and unencumbered title thereto; or

 

(b)
such Inventory is not located in the United States or Canada; or

 

(c)
such Inventory is not either (i) located in a third party warehouse
or in another location not owned by a Loan Party and either (A) covered by
a Landlord Lien Waiver or Bailee Letter, as applicable, in each case in form
and substance acceptable to the Collateral Agent, or (B) a Rent Reserve
has been taken with respect to such Inventory or (ii) located on property
owned by a Loan Party; or

 

(d)
such Inventory constitutes goods returned or rejected due to quality
issues by a customer of the applicable Loan Party, or constitutes goods in
transit to third parties; or

 

(e)
such Inventory constitutes operating supplies, packaging or shipping
materials, cartons, repair parts, labels or miscellaneous spare parts or other
such materials not considered for sale in the ordinary course of business; or

 

(f)
such Inventory is not subject to a valid and perfected first-priority
Lien in favor of the Collateral Agent, subject to no other Liens, other than
Liens described under clauses (a), (b) and (e) of the definition of
“Permitted Encumbrances”; or

 

(g)
such Inventory is consigned or at a customer location but still
accounted for in the perpetual inventory balance of the Parent Borrower or the
Canadian Subsidiary Borrower, as applicable; or

 

21

 

(h)
such Inventory is being processed offsite at a third party location or
outside processor, or is in transit to or from the such third party location or
outside processor, or is located at a closed facility; or

 

(i)
such Inventory is seconds or thirds or stale or is scrap, obsolete or
slow moving or unmerchantable or is identified as overstock or excess by the
Parent Borrower or the Canadian Subsidiary Borrower, as applicable; or

 

(j)
such Inventory is used as a sample or prototype, displays or display
items, not first-quality or non-saleable in the ordinary course of business or
has been returned by a customer; or

 

(k)
such Inventory is a discontinued product or component thereof; or

 

(l)
any portion of the Inventory Value of such Inventory is attributable to
intercompany profit between any Loan Party and any of its Affiliates; or

 

(m)
such Inventory is damaged, returned or marked for return to vendor; or

 

(n)
such Inventory is not in good condition, does not meet all material
standards imposed by any Governmental Authority having regulatory authority
over it, is repair or replacement parts for machinery and equipment, is
rejected, defective or undergoing quality review.

 

“Eligible Raw Materials”  means, on any date, the amount of Eligible
Inventory defined as Raw Materials by the Parent Borrower or the Canadian
Subsidiary Borrower, as applicable, on such date as shown on its perpetual
inventory records in accordance with its current and historical accounting
practices.

 

“Eligible Work in Process” means, on any date, the amount of
Eligible Inventory defined as Work in Process by the Parent Borrower or the
Canadian Subsidiary Borrower, as applicable, on such date as shown on its
perpetual inventory records in accordance with its current and historical
accounting practices.

 

22

 

“Environmental Laws” means all laws (including common law),
rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions,
notices or binding agreements issued, promulgated or entered into by or with
any Governmental Authority, relating in any way to the environment,
preservation or reclamation of natural resources, handling, treatment, storage,
disposal, Release or threatened Release of any Hazardous Material or to health
and safety matters.

 

“Environmental Liability” means any liability, obligation,
claim, action, suit, judgment or order, contingent or otherwise (including, but
not limited to, any liability for damages, natural resource damage, costs of
environmental remediation, administrative oversight costs, fines, penalties or
indemnities), of the Parent Borrower or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

 

“Equity Interests” means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.

 

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

 

“ERISA Affiliate” means any trade or business (whether or not
incorporated) that, together with the Parent Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.

 

“ERISA Event” means (a) any “reportable event”, as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect
to a Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an 

 

23

 

“accumulated funding deficiency” (as defined
in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by the
Parent Borrower or any of its ERISA Affiliates of any liability under
Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Parent Borrower or any ERISA Affiliate from the
PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(f) the incurrence by the Parent Borrower or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by the Parent Borrower or
any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan
from the Parent Borrower or any ERISA Affiliate of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA.

 

“Eurodollar”, when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

 

“Event of Default” has the meaning assigned to such term in
Article VII.

 

“Excluded Charges” means non-recurring charges incurred in
respect of restructurings, plant closings, headcount reductions or other
similar actions, including severance charges in respect of employee
terminations; provided that the aggregate amount of Excluded Charges
shall not exceed (a) $15,000,000 during the term of this Agreement and
(b) $7,500,000 during any one fiscal year.

 

“Excluded Subsidiaries” means the Subsidiaries of the Canadian
Subsidiary Borrower set forth on Schedule 1.01(d); provided, however,
that any Subsidiary shall cease to be a Excluded Subsidiary at such time as
such Subsidiary (a) engages in any business or business activity, other
than activities incidental to the liquidation or dissolution of such Subsidiary
in accordance with applicable law or (b) has total assets with an

 

24

 

aggregate book value or fair market value in
excess of $100,000.

 

“Excluded Taxes” means, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment to be
made by or on account of any obligation of any Borrower hereunder,
(a) income or franchise taxes imposed on (or measured by) its net
income  by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction described in clause (a) above and
(c) in the case of a Foreign Lender with respect to any Borrower (other
than an assignee pursuant to a request by the Parent Borrower under
Section 2.18(b) or by operation of the CAM), any withholding tax that is
imposed on amounts payable by such Borrower to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender’s failure to comply
with Section 2.16(e), except to the extent that such Foreign Lender (or
its assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from such Borrower with
respect to such withholding tax pursuant to Section 2.16(a).

 

“Existing Credit Agreement” means the Amended and Restated
Credit Agreement dated as of May 31, 2000, as amended to the date of this
Agreement, among the Parent Borrower (formerly known as Huntsman Packaging
Corporation), Aspen Industrial, S.A. de C.V., as Mexico Borrower, the lenders
party thereto, Deutsche Bank Trust Company Americas (formerly known as Bankers
Trust Company), as administrative agent and collateral agent, JPMorgan Chase
Bank (formerly known as The Chase Manhattan Bank), as syndication agent, and
The Bank of Nova Scotia, as documentation agent.

 

“Existing Letters of Credit” means the letters of credit issued
under the Existing Credit Agreement and outstanding as of the Effective Date,
which are listed on Schedule 1.01(b).

 

“Existing Preferred Stock” means the Series A Cumulative
Exchangeable Redeemable Preferred Stock of the

 

25

 

Parent Borrower outstanding on the Effective
Date and having the terms specified in the Parent Borrower’s Third Amended and
Restated Articles of Incorporation as in effect on the Effective Date.

 

“Federal Funds Effective Rate” means, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.

 

“Financial Officer” means the chief financial officer, principal
accounting officer, treasurer, assistant treasurer or controller of the Parent
Borrower.

 

“Finished Goods”  means completed goods that require no
additional processing or manufacturing to be sold to customers (other than
customers that are Affiliates of any Loan Party) by a Loan Party in the
ordinary course of business.

 

“First-Priority Assets” means (a) at all times prior to the
2004 Notes First Lien Transition Date (as defined in the Intercreditor
Agreement), the assets referred to in clauses (a)(i) through (xi) of the
definition of the term “Senior Lender First Lien Collateral” in the
Intercreditor Agreement, and (b) at all times on and after the 2004 Notes
First Lien Termination Date, any assets.

 

“First-Priority Collateral” shall have the meaning assigned to
the term “Senior Lender First Lien Collateral” in the Intercreditor Agreement.

 

“Fixed Charge Coverage Ratio” means, as of the end of any period
of four consecutive fiscal quarters of the Parent Borrower, the ratio of
(a) Consolidated EBITDA for such period to (b) the sum of
(i) the aggregate amount of scheduled principal or similar payments made
during such period in respect of Long-Term Indebtedness of the Parent Borrower
and the Subsidiaries (other than (A) payments made by the Parent Borrower
or any Subsidiary to the Parent Borrower or a Subsidiary, (B) payments
made by the Parent

 

26

 

Borrower or a Subsidiary in respect of loans
under the Existing Credit Agreement and (C) payments made by the Parent
Borrower or a Subsidiary in respect of any of the Loans) plus (ii) the
aggregate amount of payments made during such period in respect of Long-Term
Indebtedness of the Parent Borrower and the Subsidiaries, to the extent that
such payments reduced any scheduled principal or similar payments referred to
in clause (i) above that would have become due within one year after the
date of the applicable payment, plus (iii) Cash Interest Expense during
such period plus (iv) cash dividends or other distributions paid by the
Parent Borrower in respect of its Equity Interests during such period, plus
(v) the aggregate amount of Taxes paid in cash during such period, plus
(vi) Capital Expenditures made during such period (excluding Capital
Expenditures funded with the Net Proceeds from any sale, transfer or
disposition of assets pursuant to Section 6.06(a), (d), (e), (f) or (g) (other
than a sale, transfer or disposition of inventory pursuant to
Section 6.06(a), all as determined on a consolidated basis with respect to
the Parent Borrower and the Subsidiaries in accordance with GAAP.  For purposes of calculating the Fixed Charge
Coverage Ratio for any period, if the Parent Borrower has made an election to
make cash interest payments in respect of the Senior First Lien Notes on or
prior to June 15, 2007, the Fixed Charge Coverage Ratio as of the last day
of such period shall be calculated on a pro forma basis as if all interest
accruing in respect of the Senior First Lien Notes since the beginning of such
period, to the extent not already accrued as cash interest, had instead been
paid in cash.

 

“Foreign Assets” means the assets of or shares or other
ownership interests in the Foreign Subsidiaries (other than any Foreign
Subsidiary that is a Loan Party).

 

“Foreign Lender” means, (a) with respect to the Parent
Borrower or any Domestic Subsidiary Borrower, any Lender that is organized
under the laws of a jurisdiction other than the United States of America, any
State thereof or the District of Columbia and (b) with respect to the
Canadian Subsidiary Borrower, any Lender that is a non-resident of Canada for
Canadian tax purposes and not an “authorized foreign bank” under Section 2
of the Bank
Act (Canada).

 

“Foreign Subsidiary” means any Subsidiary that is organized
under the laws of a jurisdiction other than the

 

27

 

United States of America or any State
thereof or the District of Columbia.

 

“GAAP” means, subject to Section 1.04, generally accepted
accounting principles in the United States of America.

 

“Governmental Authority” means the government of the
United States of America or Canada, any other nation or 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.

 

“Guarantee” of or by any Person (the “guarantor”) means
any obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of the guarantor, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to purchase
(or to advance or supply funds for the purchase of) any security for the
payment thereof, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness or other obligation
of the payment thereof, (c) to maintain working capital, equity capital or
any other financial statement condition or liquidity of the primary obligor so
as to enable the primary obligor to pay such Indebtedness or other obligation
or (d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; provided
that the term “Guarantee” shall not include endorsements for collection or
deposit in the ordinary course of business.

 

“Guarantee Agreement” means the Guarantee Agreement,
substantially in the form of Exhibit C, among each Loan Party (other than
a Foreign Subsidiary that is not organized under the laws of Canada or any
province thereof) and the Collateral Agent.

 

“Hazardous Materials” means all explosive, radioactive,
hazardous or toxic substances, wastes or other pollutants, including petroleum
or petroleum distillates,

 

28

 

asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes, and all
other substances or wastes of any nature regulated pursuant to any
Environmental Law, including any material listed as a hazardous substance under
Section 101(14) of CERCLA.

 

“Indebtedness” of any Person means, without duplication,
(a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(d) all obligations of such Person in respect of the deferred purchase
price of property or services (excluding accounts payable incurred in the
ordinary course of business that are not overdue by more than 90 days,
unless the payment thereof is being contested in good faith) (it being
understood that “deferred purchase price” in connection with any purchase of
property or assets shall include only that portion of the purchase price that shall
be deferred beyond the date on which the purchase is actually consummated),
(e) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (f) all Guarantees by such
Person of Indebtedness of others, (g) all Capital Lease Obligations of
such Person, (h) all obligations, contingent or otherwise, of such Person
as an account party in respect of letters of credit and letters of guaranty and
(i) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances.  The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.  Notwithstanding the foregoing,
“Indebtedness” shall not include (i) deferred taxes or (ii) unsecured
indebtedness of the Parent Borrower or any Subsidiary to finance insurance
premiums in a principal amount not in excess of the casualty and other
insurance premiums to be paid by the Parent Borrower or any Subsidiary for a
three-year

 

29

 

period beginning on the date of any
incurrence of such indebtedness.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnity, Subrogation and Contribution Agreement” means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among each Loan Party (other than a Foreign Subsidiary that is
not organized under the laws of Canada or any province thereof) and the
Collateral Agent.

 

“Information Memorandum” means the Confidential Information
Memorandum dated January 2004 relating to the Parent Borrower and the
Transactions.

 

“Instrument” shall have the meaning assigned to such term in the
New York Uniform Commercial Code.

 

“Intercreditor Agreement” means the intercreditor agreement
entered into among the Parent Borrower, the Collateral Agent, the Senior First
Lien Note Trustee and the Senior Second Lien Note Trustee (or any other trustee
or agent to which Liens are granted under the Senior First Lien Security
Documents or the Senior Second Lien Security Documents), providing for, among
other things, (a) the relative priorities of the Liens granted pursuant to
the Security Documents, the Senior First Lien Security Documents and the Senior
Second Lien Security Documents and (b) restrictions on the exercise of
remedies under the Security Documents, the Senior First Lien Security Documents
and the Senior Second Lien Security Documents.

 

“Interest Election Request” means a request by a Borrower to
convert or continue a Revolving Borrowing in accordance with Section 2.07.

 

“Interest Payment Date” means (a) with respect to any ABR
Loan (including any Swingline Loan), the last Business Day of each March, June,
September and December and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period.

 

30

 

“Interest Period” means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the calendar month that is one, two, three
or six months (or with the consent of each Lender, nine or twelve months)
thereafter, as the applicable Borrower may elect; provided, that
(i) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.

 

“Inventory” shall have the meaning assigned to such term in
Article 9 of the New York Uniform Commercial Code.

 

“Inventory Reserves”  means reserves against Inventory equal to
the sum of the following (with each reserve (other than the reserve described
in clause (h) below) determined by the Parent Borrower but subject to
adjustment solely at the discretion of the Consenting Agents:

 

(a)  a reserve for shrink that arises from
discrepancies between the perpetual accounting system of the Parent Borrower or
the Canadian Subsidiary Borrower, as applicable, and physical counts of the
Inventory pertaining to inventory quantities on hand; and

 

(b)  a reserve for royalties; and

 

(c)  a reserve for Inventory that is
designated to be returned to vendors or that is recognized as damaged,
off-quality or not to customer specifications by the applicable Loan Party; and

 

(d)  to the extent not included in the
calculation of Inventory Value, a revaluation reserve

 

31

 

whereby
capitalized favorable variances shall be deducted from Eligible Inventory and
unfavorable variances shall not be added to Eligible Inventory; and

 

(e)  a lower of the cost or market reserve
for any differences between the applicable Loan Party’s actual cost to produce
versus its selling price to third parties determined on a product line basis;
and

 

(f)  a reserve for prepaid freight; and

 

(g)  a reserve for vendor rebates; and

 

(h)  any other reserve as deemed
appropriate from time to time.

 

“Inventory Value” means, with respect to any Inventory of any
Loan Party at any time of determination, the standard cost of such Inventory as
shown on the perpetual inventory records of the Parent Borrower or the Canadian
Subsidiary Borrower, as applicable, stated on a basis consistent with its
current and historical accounting practices, in dollars, determined in
accordance with the standard cost method of accounting, less (a) any
markup on such Inventory from an Affiliate and (b) in the event variances
under the standard cost method (i) are capitalized, favorable variances
shall be deducted from Eligible Inventory, and unfavorable variances shall not
be added to Eligible Inventory, and (ii) are expensed, a reserve shall be
established by the Parent Borrower (but shall be subject to adjustment at the
sole discretion of the Consenting Agents) as appropriate in order to adjust the
standard cost of Eligible Inventory to approximate actual cost.

 

“Investment Grade” means, in the case of S&P, a rating of
BBB- or better and, in the case of Moody’s, a rating of Baa3 or better.

 

“IPO” means the issuance by the Parent Borrower of shares of its
common stock to the public pursuant to a bona fide underwritten public
offering.

 

“Issuing Bank” means Deutsche Bank Trust Company Americas, in
its capacity as the issuer of Letters of Credit hereunder, and its successors
in such capacity as provided in Section 2.05(i) and such other financial
institutions as may become Issuing Banks as provided in

 

32

 

Section 2.05(i).  The Issuing Bank may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of the
Issuing Bank, subject to the consent of the Parent Borrower which shall not be
unreasonably withheld or delayed, in which case the term “Issuing Bank” shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.  In the event that there is
more than one Issuing Bank at any time, references herein and in the other Loan
Documents to the Issuing Bank shall be deemed to refer to the Issuing Bank in
respect of the applicable Letter of Credit or to all Issuing Banks, as the
context requires.

 

“Joint Venture” means, as to a Person, any corporation,
partnership or other legal entity or arrangement in which such Person has any
direct or indirect equity interest and that is not a subsidiary of such Person.

 

“Landlord Lien Waiver” means a written agreement reasonably
acceptable to the Collateral Agent, pursuant to which a Person shall waive or
subordinate its rights and claims as landlord in any Inventory of the
applicable Loan Party for unpaid rents, grant access to the Collateral Agent
for the repossession and sale of such Inventory and make other agreements
relative thereto.

 

“LC Availability Period” means the period from and including the
Effective Date to but excluding the earlier of (a) the date that is five
Business Days prior to the Maturity Date and (b) the date of termination
of the Domestic Commitments.

 

“LC Disbursement” means a payment made by the Issuing Bank
pursuant to a Letter of Credit.

 

“LC Exposure” means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet
been reimbursed by or on behalf of the Parent Borrower at such time.  The LC Exposure of any Domestic Lender
at any time shall be its Applicable Percentage of the total LC Exposure at
such time.

 

“Lenders” means the Domestic Lenders and the Canadian Lenders.

 

33

 

“Letter of Credit” means any letter of credit issued pursuant to
this Agreement.

 

“LIBO Rate” shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, the rate per annum determined by the Administrative
Agent at approximately 11:00 a.m., London time, on the date that is two
Business Days prior to the commencement of such Interest Period by reference to
the British Bankers’ Association Interest Settlement Rates for deposits in
dollars (as set forth by any service selected by the Administrative Agent that
has been nominated by the British Bankers’ Association as an authorized
information vendor for the purpose of displaying such rates) for a period equal
to such Interest Period; provided that, to the extent that an interest
rate is not ascertainable pursuant to the foregoing provisions of this
definition, the “LIBO Rate” shall be the interest rate per annum determined by
the Administrative Agent to be the average of the rates per annum at which
deposits in dollars are offered for such relevant Interest Period to major
banks in the London interbank market in London, England by the Administrative
Agent at approximately 11:00 a.m., London time, on the date that is two
Business Days prior to the beginning of such Interest Period.

 

“Lien” means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.

 

“Loan Documents” means this Agreement, the Guarantee Agreement,
the Indemnity, Subrogation and Contribution Agreement, the Intercreditor
Agreement and the Security Documents.

 

“Loan Parties” means the Parent Borrower, the Domestic
Subsidiary Borrowers, the Canadian Subsidiary Borrower and the other Subsidiary
Loan Parties.

 

“Loans” means the loans made by the Lenders to the Borrowers
pursuant to this Agreement.

 

34

 

“Long-Term Indebtedness” means any Indebtedness that, in
accordance with GAAP, constitutes (or, when incurred, constituted) a long-term
liability.

 

“Margin Stock” shall have the meaning assigned to such term in
Regulation U.

 

“Mark-to-Market Value” shall have the meaning assigned to such
term in the Intercreditor Agreement.

 

“Material Adverse Effect” means a material adverse effect on
(a) the business, operations, properties, assets, condition (financial or
otherwise) or contingent or other liabilities of the Parent Borrower and the
Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to
perform any material obligations under any Loan Document or (c) the rights
of or benefits available to the Lenders under any Loan Document.

 

“Material Indebtedness” means Indebtedness (other than the Loans
and Letters of Credit), or obligations in respect of one or more Swap
Agreements, of any one or more of the Parent Borrower and the Subsidiaries in
an aggregate principal or similar amount exceeding $10,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of the Parent Borrower
or any Subsidiary in respect of any Swap Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Parent Borrower or such Subsidiary would be required to pay if such Swap
Agreement were terminated at such time.

 

“Maturity Date” means February 17, 2009.

 

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

 

“Mortgage” means a mortgage, deed of trust, assignment of leases
and rents, leasehold mortgage or other security document, including any
amendment thereto, granting a Lien on any Mortgaged Property to secure the
Obligations.  Each Mortgage shall be
reasonably satisfactory in form and substance to the Collateral Agent.

 

“Mortgaged Property” means, initially, each parcel of real
property and the improvements thereto owned by a Loan Party and identified on
Schedule 1.01(a), and includes each other parcel of real property and 

 

35

 

improvements thereto with respect to which a
Mortgage is granted pursuant to Section 5.12 or 5.13.

 

“Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

 

“Net Proceeds” means, with respect to any event (a) the cash
proceeds received by the Parent Borrower and the Subsidiaries in respect of
such event including (i) any cash received in respect of any non-cash
proceeds (excluding interest payments), but only as and when received,
(ii) in the case of a casualty, insurance proceeds, and (iii) in the
case of a condemnation or similar event, condemnation awards and similar
payments, net of (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid by the Parent Borrower and the Subsidiaries to
third parties (other than to the Parent Borrower or a Subsidiary) in connection
with such event, (ii) in the case of a sale, transfer or other disposition
of an asset (including pursuant to a sale and leaseback transaction or a
casualty or other insured damage or condemnation or similar proceeding), the
amount of all payments required to be made by the Parent Borrower and the
Subsidiaries as a result of such event to repay Indebtedness (other than Loans)
secured by such asset or otherwise subject to mandatory prepayment as a result
of such event (including in order to obtain any consent required therefor),
(iii) the amount of all taxes paid (or reasonably estimated to be payable)
by the Parent Borrower and the Subsidiaries, and the amount of any reserves
established by the Parent Borrower and the Subsidiaries to fund contingent
liabilities reasonably estimated to be payable, and that are directly
attributable to such event (as determined reasonably and in good faith by the
chief financial officer of the Parent Borrower) and (iv) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or Joint Ventures as a result of such event (provided that
such distribution or payment is proportionate to such minority interest
holders’ share of net income (or dividends and distribution made in respect of
the capital stock or other equity interests) of such Subsidiary or Joint
Venture as provided in the certificate of incorporation or other governing
documents of such Subsidiary or Joint Venture).  In the case of Net Proceeds denominated in a currency other than
dollars, the amount of such Net Proceeds shall be the dollar equivalent thereof
based upon the exchange rates

 

36

 

prevailing at the time of the transaction
giving rise to such Net Proceeds.

 

“Obligations” shall have the meaning assigned to the term
“Obligations” in the Guarantee Agreement.

 

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

 

“Parent Borrower” means Pliant Corporation, a Utah corporation.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.

 

“Perfection Certificate” means the Domestic Perfection
Certificate or the Canadian Perfection Certificate.

 

“Permitted Acquisition” means any acquisition by the Parent
Borrower or a Subsidiary of all or substantially all the assets of, or all the
Equity Interests in, a Person or a division, line of business or other business
unit of a Person if (a) no Default has occurred and is continuing or would
result therefrom, (b) all transactions related thereto are consummated in
all material respects in accordance with applicable laws, (c) immediately
after giving effect thereto, each Subsidiary formed for the purpose of or
resulting from such acquisition shall be a Subsidiary and all the Equity
Interests of each such Subsidiary shall be owned directly by the Parent
Borrower or a Subsidiary and all actions required to be taken with respect to
such acquired or newly formed Subsidiary under Sections 5.12 and 5.13 have
been taken and (d) the Parent Borrower has delivered to the Administrative
Agent an officer’s certificate to the effect set forth in clauses (a), (b)
and (c) above, together with all relevant financial information for the Person
or assets to be acquired.

 

37

 

“Permitted Encumbrances” means:

 

(a)
Liens imposed by law for Taxes that are not yet due or are being
contested in compliance with Section 5.05;

 

(b)
carriers’, warehousemen’s, mechanics’, materialmen’s, processors’,
landlords’, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 60 days or are being contested in compliance with
Section 5.05;

 

(c)
pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;

 

(d)
deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

 

(e)
judgment liens in respect of judgments that do not constitute an Event of
Default under clause (k) of Article VII;

 

(f)
Liens of a collection bank arising in the ordinary course of business
under § 4-208 of the Uniform Commercial Code in effect in the relevant
jurisdiction;

 

(g)
Liens disclosed on title policies delivered to the Administrative Agent
prior to the Effective Date in respect of any Mortgaged Property and easements,
zoning restrictions, rights-of-way and similar restrictions and encumbrances
(including minor title and survey defects) on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Parent
Borrower or any Subsidiary; and

 

(h)
Liens in respect of real property that become Mortgaged Property after
the Effective Date pursuant to Section 5.13 to the extent such Lien is
permitted

 

38

 

by the applicable Mortgage and reasonably acceptable to the Collateral
Agent;

 

provided that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Investments” means: (i) a marketable obligation,
maturing within two years after issuance thereof, issued or guaranteed by the
United States of America or an instrumentality or agency thereof,
(ii) a certificate of deposit or banker’s acceptance, maturing within one
year after issuance thereof, issued by any Lender, or a national or state bank
or trust company or a European, Canadian or Japanese bank in each case having
capital, surplus and undivided profits of at least $100,000,000 and whose
long-term unsecured debt has a rating of “A” or better by S&P or A2 or
better by Moody’s or the equivalent rating by any other nationally recognized
rating agency (provided that the aggregate face amount of all investments in
certificates of deposit or banker’s acceptances issued by the principal offices
of or branches of such European or Japanese banks located outside the United States
shall not at any time exceed 33-1/3% of all investments described in this
definition), (iii) open market commercial paper, maturing within
270 days after issuance thereof, which has a rating of A1 or better by
S&P or P1 or better by Moody’s, or the equivalent rating by any other
nationally recognized rating agency, (iv) repurchase agreements and
reverse repurchase agreements with a term not in excess of one year with any
financial institution that has been elected a primary government securities dealer
by the Federal Reserve Board or whose securities are rated AA-or better by
S&P or Aa3 or better by Moody’s or the equivalent rating by any other
nationally recognized rating agency relating to marketable direct obligations
issued or unconditionally guaranteed by the United States of America or
any agency or instrumentality thereof and backed by the full faith and credit
of the United States of America, (v) ”money market” preferred stock
maturing within six months after issuance thereof or municipal bonds issued by
a corporation organized under the laws of any state of the United States,
which has a rating of “A” or better by S&P or Moody’s or the equivalent
rating by any other nationally recognized rating agency, (vi) tax exempt
floating rate option tender bonds backed by letters of credit issued by a
national or state bank whose long-term unsecured debt has a rating of AA or
better by S&P or Aa2

 

39

 

or better by Moody’s or the equivalent rating
by any other nationally recognized rating agency, (vii) ”money market”
funds that invest in the investments specified in clauses (i) through (vi)
above and (viii) demand deposit accounts with commercial banks.

 

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

 

“Plan” means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA,
Section 412 of the Code or Section 302 of ERISA, and in respect of
which the Parent Borrower or any ERISA Affiliate is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an
“employer” as defined in Section 3(5) of ERISA.

 

“Pledge Agreements” means the Domestic Pledge Agreement and the
Canadian Pledge Agreement.

 

“Prime Rate” means the rate of interest per annum publicly
announced from time to time by Credit Suisse First Boston as its prime rate in
effect at its principal office in New York City; each change in the Prime
Rate shall be effective from and including the date such change is publicly
announced as being effective.

 

“Priority Payables Reserve” means, with respect to any Person at
any time, any amount payable by such Person that is secured by a Lien in favor
of a Governmental Authority that ranks or is capable of ranking prior to or pari
passu with the Liens created by the Security Documents in respect of any
Eligible Accounts Receivable or Eligible Inventory, including, if applicable,
amounts owing for wages, vacation pay, severance pay, employee deductions,
sales tax, excise tax, Taxes payable pursuant to Part IX of the Excise Tax
Act (Canada) (net of GST input credits), income tax, workers
compensation, government royalties, pension fund obligations, overdue rents or
Taxes, and other statutory or other claims.

 

“Pro Forma Opening Borrowing Base” means the Borrowing Base,
calculated as of January 31, 2004; provided that (a) for purposes of
determining Adjusted Eligible Accounts Receivable, (i) the aggregate amount of
Accounts shall be determined based upon the accounts receivable

 

40

 

aging of the Loan Parties as of
January 31, 2004, (ii) the aggregate amount of Accounts that do not
constitute Eligible Accounts Receivable shall be deemed to be the amount of
such Accounts as of November 30, 2003, as set forth in the
November Field Report (other than Accounts that do not constitute Eligible
Accounts Receivable pursuant to clause (b)(i) of the definition of “Eligible
Accounts Receivable”, which Accounts shall be determined based upon the
accounts receivable aging of the Loan Parties as of January 31, 2004) and
(iii) the Dilution Reserve shall be deemed to be the Dilution Reserve as of
November 30, 2003, as set forth in the November Field Report, (b) for
purposes of determining Adjusted Eligible Finished Goods, Adjusted Eligible Raw
Materials and Adjusted Eligible Work-in-Process, and the Recovery Rate with
respect to any of the foregoing, (i) the aggregate amount of Inventory shall be
determined based upon the inventory perpetual records of the Loan Parties as of
January 31, 2004, and (ii) the aggregate amount of Inventory that does not
constitute Eligible Inventory shall be deemed to be the amount of such
Inventory as of November 30, 2003, as set forth in the November Field
Report, (c) the Rent Reserve and the Priority Payables Reserve shall be
deemed to be the Rent Reserve and Priority Payables Reserve as of November 30,
2003, as set forth in the November Field Report and (d) the Secured
Obligations Reserve shall be determined as of January 31, 2004.

 

“Qualified Preferred Stock” means, with respect to any Person,
any preferred Equity Interest that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable) or upon the happening of any event does not
(a) (i) mature or becomes mandatorily redeemable pursuant to a
sinking fund obligation or otherwise; (ii) become convertible or
exchangeable at the option of the holder thereof for Indebtedness or preferred
stock that is not Qualified Preferred Stock; or (iii) become redeemable at
the option of the holder thereof (other than as a result of a change of control
event), in whole or in part, in each case on or prior to the first anniversary
of the Maturity Date and (b) provide holders thereunder with rights upon
the occurrence of a “change of control” event or have other terms relating to
“change of control” events that are less favorable to the Lenders than the
applicable terms set forth in the Existing Preferred Stock.  Notwithstanding

 

41

 

anything to the contrary, the Existing
Preferred Stock shall be deemed to be Qualified Preferred Stock.

 

“Qualifying Foreign Subsidiary” means any Foreign Subsidiary
other than (a) a Foreign Subsidiary that is treated as a corporation for
U.S. federal income tax purposes or (b) any direct or indirect subsidiary
of a Foreign Subsidiary described in clause (a).  The Canadian Subsidiary Borrower is a Qualifying Foreign
Subsidiary.

 

“Raw Materials”  means items or materials used or consumed
in the manufacturing of goods to be sold by the applicable Loan Party in the
ordinary course of business.

 

“Recovery Rate” means, with respect to any Class of Eligible
Inventory, (a) the estimated net recovery of all Eligible Inventory of the
Loan Parties of such Class of Eligible Inventory stated in dollars as
determined on a net orderly liquidation basis by the most recent analysis
conducted by outside inventory consultants/appraisers retained or approved by
the Consenting Agents and disclosed to the Parent Borrower divided by
(b) the Inventory Value of all Eligible Inventory of the Loan Parties of
such Class of Eligible Inventory, as of the date of such most recent analysis.

 

“Reduced Availability Amount” means, at any time, 75% of the
lesser of (a) the total amount of the Commitments at such time and
(b) the Borrowing Base in effect at such time.

 

“Reduced Availability Period” means each period commencing on
the last day of a fiscal quarter of the Parent Borrower as of which the Fixed
Charge Coverage Ratio was less than 1.10 to 1.00 and ending on the next date of
delivery of financial statements of the Parent Borrower pursuant to
Section 5.01(a) or (b) and the related certificate of a Financial Officer
pursuant to section 5.01(c) demonstrating that the Fixed Charge Coverage
Ratio as of the last day of the fiscal period to which such financial
statements relate is greater than or equal to 1.10 to 1.00.

 

“Register” has the meaning set forth in Section 10.04.

 

42

 

“Regulation U” shall mean Regulation U of the Board as
from time to time in effect and all official rulings and interpretations
thereunder or thereof.

 

“Regulation X” shall mean Regulation X of the Board as
from time to time in effect and all official rulings and interpretations
thereunder or thereof.

 

“Regulation Z” shall mean Regulation Z of the Board as
from time to time in effect and all official rulings and interpretations
thereunder or thereof.

 

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

 

“Release” means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into or through the environment.

 

“Rent Reserve” means, with respect to any location that is not
owned by a Loan Party where any Inventory (to the extent subject to Liens
arising by operation of law or otherwise to secure rent, warehousing fees or
similar payment obligations payable by any Loan Party in respect of such location)
is located and with respect to which no Landlord Lien Waiver or Bailee Letter,
as applicable, is in effect, a reserve equal to three months’ rent, warehousing
fees or similar payment obligations at such location.

 

“Required Canadian Lenders” means, at any time, Canadian Lenders
having Canadian Revolving Exposures and unused Canadian Commitments
representing more than 50% of the sum of the total Canadian Revolving Exposures
and unused Canadian Commitments at such time.

 

“Required Domestic Lenders” means, at any time, Domestic Lenders
having Domestic Revolving Exposures and unused Domestic Commitments
representing more than 50% of the sum of the total Domestic Revolving Exposures
and unused Domestic Commitments at such time.

 

“Required Lenders” means, at any time, Lenders having Revolving
Exposures and unused Commitments 

 

43

 

representing more than 50% of the sum of the
total Revolving Exposures and unused Commitments at such time.

 

“Restricted Payment” means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in the Parent Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancelation or termination of any such Equity Interests in the Parent Borrower
or any Subsidiary or any option, warrant or other right to acquire any such
Equity Interests in the Parent Borrower or any Subsidiary.  For the avoidance of doubt, the receipt by
the Parent Borrower of its Equity Interests in settlement of any claim made by
the Parent Borrower pursuant to the Uniplast Purchase Agreement as in effect on
June 15, 2001, shall not be a Restricted Payment.

 

“Revolving Availability Period” means the period from and
including the Effective Date to but excluding the earlier of the Maturity Date
and the date of termination of the Commitments.

 

“Revolving Exposure” means, with respect to any Lender at any
time, the sum of the Domestic Revolving Exposure of such Lender and the
Canadian Revolving Exposure of such Lender at such time.

 

“Revolving Loan” means a Domestic Revolving Loan or a Canadian
Revolving Loan.

 

“S&P” means Standard & Poor’s Ratings Group, a
division of The McGraw-Hill Companies, Inc.

 

“SEC” means the Securities and Exchange Commission.

 

“Second-Priority Collateral” shall have the meaning assigned to
the term “2004 Notes First Lien Collateral” in the Intercreditor Agreement.

 

“Secured Obligations Reserve” means, at any time, the sum of
(a) the Mark-to-Market Value of the Secured Swap Obligations of the Loan
Parties that constitute Senior Lender Claims (as defined in the Intercreditor
Agreement) at such time and (b) if, at such time, any Cash Management
Arrangement is in effect that could give rise to Cash

 

44

 

Management Obligations that would constitute
Senior Lender Claims (as defined in the Intercreditor Agreement), the greater
of (i) $5,000,000 and (ii) the actual amount of Cash Management Obligations
that constitute Senior Lender Claims (as defined in the Intercreditor
Agreement) at such time; provided that the maximum amount of the Secured
Obligations Reserve shall not exceed $8,500,000 at any time.

 

“Secured Parties” means the “Secured Parties” as defined in the
Domestic Security Agreement.

 

“Secured Swap Obligations” shall have the meaning assigned to
the term “Senior Lender Hedging Obligations” in the Intercreditor Agreement.

 

“Security Agreements” means the Domestic Security Agreement and
the Canadian Security Agreement.

 

“Security Documents” means the Security Agreements, the Pledge
Agreements, the Mortgages and each other security agreement or other instrument
or document executed and delivered pursuant to Section 5.12 or 5.13 to
secure any of the Obligations.

 

“Senior First Lien Note Documents” means the Senior First Lien
Notes, the Senior First Lien Note Indenture, the Senior First Lien Security
Documents, the Intercreditor Agreement and all other instruments, agreements
and documents evidencing, guaranteeing or otherwise governing the terms of the
Senior First Lien Notes.

 

“Senior First Lien Note Indenture” means the indenture dated as
of February 17, 2004, pursuant to which the Senior First Lien Notes are
issued.

 

“Senior First Lien Notes” means the senior secured discount
notes to be issued by the Parent Borrower on or prior to the Effective Date and
the Indebtedness to be represented thereby.

 

“Senior First Lien Note Trustee” means the trustee under the
Senior First Lien Note Indenture, or any successor thereto.

 

“Senior First Lien Security Documents” means any and all
security agreements, pledge agreements, mortgages

 

45

 

and other agreements and documents pursuant
to which any Liens are granted to secure any Indebtedness or other obligations
in respect of the Senior First Lien Notes.

 

“Senior Second Lien Note Documents” means the Senior Second Lien
Notes, the Senior Second Lien Note Indenture, the Senior Second Lien Security
Documents, the Intercreditor Agreement and all other instruments, agreements
and documents evidencing, guaranteeing or otherwise governing the terms of the
Senior Second Lien Notes.

 

“Senior Second Lien Note Indenture” means the indenture dated as
of May 30, 2003, between the Parent Borrower and Wilmington Trust Company,
as trustee, pursuant to which the Senior Second Lien Notes were issued.

 

“Senior Second Lien Notes” means the $250,000,000 aggregate
principal amount of 11 1/8%
senior secured notes due 2009 of the Parent Borrower outstanding on the
Effective Date.

 

“Senior Second Lien Note Trustee” means the trustee under the
Senior Second Lien Note Indenture, or any successor thereto.

 

“Senior Second Lien Security Documents” means any and all
security agreements, pledge agreements, mortgages and other agreements and
documents pursuant to which any Liens are granted to secure any Indebtedness or
other obligations in respect of the Senior Second Lien Notes.

 

“Senior Subordinated Note Documents” means the Senior
Subordinated Notes, the Senior Subordinated Note Indenture and all other
instruments, agreements and documents evidencing, guaranteeing or otherwise
governing the terms of the Senior Subordinated Notes.

 

“Senior Subordinated Note Indenture” means the indenture dated
as of May 31, 2000, between the Parent Borrower and The Bank of
New York, as trustee, pursuant to which the Senior Subordinated Notes were
issued.

 

“Senior Subordinated Notes” means the $312,000,000 aggregate
principal amount of 13% senior subordinated notes due 2010 of the Parent
Borrower outstanding on the Effective Date.

 

46

 

“Sponsor” means J.P. Morgan Partners, LLC.

 

“Statutory Reserve Rate” means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Board).  Such reserve percentages
shall include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation.  The Statutory
Reserve Rate shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.

 

“Stockholders Agreement” means the Stockholders Agreement dated
as of May 31, 2000, among Huntsman Packaging Corporation, a Utah
corporation, and the stockholders party thereto.

 

“subsidiary” means, with respect to any Person (the “parent”)
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or, in the case of a partnership, more than 50% of the general
partnership interests are, as of such date, owned, controlled or held.

 

“Subsidiary” means any subsidiary of the Parent Borrower.

 

“Subsidiary Loan Party” means any Subsidiary of the Parent
Borrower; provided that (a) Pliant Investment Inc., a Utah
corporation, shall not be a Subsidiary Loan

 

47

 

Party and (b) a Foreign Subsidiary shall
not be a Subsidiary Loan Party unless such Foreign Subsidiary is a Qualifying
Foreign Subsidiary.

 

“Swap Agreement” means any agreement with respect to any swap,
spot, forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial
or pricing indices or measures of economic, financial or pricing risk or value
or any similar transaction or any combination of these transactions; provided
that no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Parent Borrower or the Subsidiaries shall be a Swap
Agreement.

 

“Swingline Exposure” means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender at any
time shall be its Applicable Percentage of the total Swingline Exposure at such
time.

 

“Swingline Lender” means Credit Suisse First Boston, in its
capacity as lender of Swingline Loans hereunder.

 

“Swingline Loan” has the meaning set forth in Section 2.04.

 

“Syndication Agent” means JPMorgan Chase Bank, in its capacity
as syndication agent for the Lenders.

 

“Taxes” means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.

 

“Transactions” means (a) the execution, delivery and
performance by each Loan Party of the Loan Documents to which it is to be a
party, the borrowing of Loans, the use of the proceeds thereof and the issuance
of Letters of Credit hereunder, (b) the execution, delivery and
performance by each Loan Party of the Senior First Lien Note Documents to which
it is to be a party, the issuance of the Senior First Lien Notes and the use of
the proceeds thereof, (c) the termination of the Existing Credit
Agreement, and the payment in full of all loans, interest

 

48

 

and other amounts accrued or owing thereunder
(other than in respect of the Existing Letters of Credit, which will be fully
cash collateralized on or prior to the Effective Date) and (d) the payment
of the Transaction Costs.

 

“Transaction Costs” means the fees and expenses incurred by, or
required to be reimbursed or paid by, the Parent Borrower and the Subsidiaries
in connection with the Transactions.

 

“Type”, when used in reference to any Loan or Borrowing, refers
to whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.

 

“USA Patriot Act” means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
Patriot Act) Act of 2001.

 

“US Lending Office”  means, as to any Canadian
Lender, the applicable branch, office or Affiliate of such Canadian Lender
designated by such Canadian Lender to make Canadian Revolving Loans to the
Parent Borrower or any Domestic Subsidiary Borrower.

 

“Warrants” means the warrants of the Parent Borrower to acquire
common stock of the Parent Borrower issued as units with the Senior
Subordinated Notes.

 

“Weekly Reporting Period” means the period commencing upon the
date of any Weekly Reporting Trigger Event and terminating upon the date of the
first Weekly Reporting Termination Event following such Weekly Reporting
Trigger Event.

 

“Weekly Reporting Termination Event” means the last Business Day
in any period of five consecutive Business Days on which the total Revolving
Exposures at all times during each Business Day is less than 80% of the lesser
of (a) the total amount of the Commitments at the end of such Business Day
and (b) the Borrowing Base in effect at the end of such Business Day.

 

“Weekly Reporting Trigger Event” means the last Business Day in
any period of five consecutive Business Days on which the total Revolving
Exposures at any time

 

49

 

during each Business Day is equal to or greater
than 80% of the lesser of (a) the total amount of the Commitments at the
end of such Business Day and (b) the Borrowing Base in effect at the end
of such Business Day.

 

“Wholly Owned Subsidiary” means a Subsidiary of which securities
(except for directors’ qualifying shares or other de minimus shares) or other
ownership interests representing 100% of the equity are at the time owned,
directly or indirectly, by the Parent Borrower.

 

“Withdrawal Liability” means liability of the Parent Borrower or
any ERISA Affiliate to a Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as such terms are defined in
Part I of Subtitle E of Title IV of ERISA.

 

“Work in Process” means items that require additional processing
or manufacturing to be sold to customers (other than customers that are
Affiliates of any Loan Party) by a Loan Party in the ordinary course of its
business, other than Raw Materials.

 

SECTION 1.02.  Classification of Loans and
Borrowings.  For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a
“Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and
Type (e.g., a “Eurodollar Revolving Loan”).  Borrowings also may be classified and referred to by Class (e.g.,
a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or
by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

 

SECTION 1.03.  Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter
forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any

 

50

 

reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and
(e) the words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

 

SECTION 1.04.  Accounting Terms; GAAP.  Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if
the Parent Borrower notifies the Administrative Agent that the Parent Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Parent Borrower that the Required Lenders request an amendment to any provision
hereof for such purpose), regardless of whether any such notice is given before
or after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have
been withdrawn or such provision amended in accordance herewith.

 

ARTICLE II

 

The Credits

 

SECTION 2.01.  Commitments; Loans Outstanding on
Effective Date.  (a)  Subject to the terms and conditions set
forth herein, each Domestic Lender agrees to make loans in dollars to the
Parent Borrower and the Domestic Subsidiary Borrowers from time to time during
the Revolving Availability Period in an aggregate principal amount that will
not result in (i) such Lender’s Domestic Revolving Exposure exceeding such
Lender’s Domestic Commitment (after giving effect to the application of any
proceeds being applied contemporaneously with the advance of such Domestic Revolving
Loans), (ii) the total Domestic Revolving Exposures’ exceeding the total
amount of the Domestic

 

51

 

Commitments,
(iii) the total Revolving Exposures’ exceeding the lesser of (A) the
total amount of the Commitments and (B) the Borrowing Base then in effect,
(iv) at any time during the Availability Cap Period, the total Revolving
Exposures’ exceeding $45,000,000 and (v) at any time during a Reduced
Availability Period, the total Revolving Exposures’ exceeding the Reduced
Availability Amount at such time.

 

(b)  Subject to the terms and conditions
set forth herein, each Canadian Lender agrees to make loans in dollars from its
US Lending Office to the Parent Borrower and the Domestic Subsidiary Borrowers
and from its Canadian Lending Office to the Canadian Subsidiary Borrower, in
each case from time to time during the Revolving Availability Period in an
aggregate principal amount that will not result in (i) such Lender’s
Canadian Revolving Exposure exceeding such Lender’s Canadian Commitment (after
giving effect to the application of any proceeds being applied
contemporaneously with the advance of such Canadian Revolving Loans),
(ii) the total Canadian Revolving Exposures’ exceeding the total amount of
the Canadian Commitments, (iii) the total Revolving Exposures’ exceeding
the lesser of (A) the total amount of the Commitments and (B) the
Borrowing Base then in effect, (iv) at any time during the Availability
Cap Period, the total Revolving Exposures’ exceeding $45,000,000 and
(v) at any time during a Reduced Availability Period, the total Revolving
Exposures’ exceeding the Reduced Availability Amount at such time.

 

(c)  Notwithstanding anything in this
Agreement to the contrary, no Lender shall make any Loan to any Domestic
Subsidiary Borrower unless (i) immediately after giving effect to such
Loan (after giving effect to the application of any proceeds being applied
contemporaneously with the advance of such Loan), the aggregate amount of Loans
made to all Domestic Subsidiary Borrowers does not exceed $9,400,000 and
(ii) such Loan constitutes “Permitted Debt” under Section 4.03(b)(iv)
of each of the Senior Second Lien Notes Indenture and the Senior Subordinated
Notes Indenture.

 

(d)  Within the foregoing limits and subject
to the terms and conditions set forth herein, the Parent Borrower, the Domestic
Subsidiary Borrowers and the Canadian Borrower may borrow, prepay and reborrow
Revolving Loans during the Revolving Availability Period.

 

52

 

SECTION 2.02.  Loans and Borrowings.  (a) 
Each Domestic Revolving Loan shall be made as part of a Borrowing
consisting of Domestic Revolving Loans of the same Type made by the Domestic
Lenders (or their Affiliates as provided in paragraph (b) below) ratably
in accordance with their respective Domestic Commitments.  Each Canadian Revolving Loan shall be made
as part of a Borrowing consisting of Canadian Revolving Loans of the same Type
made by the Canadian Lenders (or their Affiliates as provided in
paragraph (b) below) ratably in accordance with their respective Canadian
Commitments.  The failure of any Lender
to make any Loan required to be made by it shall not relieve any other Lender
of its obligations hereunder; provided that the Commitments of the
Lenders are several and no Lender shall be responsible for any other Lender’s
failure to make Loans as required.

 

(b)  Subject to Section 2.13, each
Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar
Loans as the Parent Borrower may request in accordance herewith.  Each Swingline Loan shall be an ABR
Loan.  Each Lender at its option may
make any Canadian Revolving Loan or any Eurodollar Loan by causing any branch
or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of any Borrower to
repay such Loan in accordance with the terms of this Agreement and shall not
result in any increased costs under Section 2.14 or any obligation by any
Borrower to make any payment under Section 2.16 in excess of the amounts,
if any, that such Lender would be entitled to claim under Section 2.14 or
2.16, as applicable, without giving effect to such change in lending office.

 

(c)  At the commencement of each Interest
Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than
$5,000,000.  At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount
that is an integral multiple of $500,000 and not less than $1,000,000; provided
that an ABR Revolving Borrowing of any Class may be in an aggregate amount that
is equal to the entire unused balance of the total amount of the Commitments of
such Class or that is equal to the amount required to finance the reimbursement
of an LC Disbursement as contemplated by Section 2.05(e).  Each Swingline Loan shall be in an amount
that is an

 

53

 

integral
multiple of $100,000 and not less than $500,000.  Borrowings of more than one Type and Class may be outstanding at
the same time; provided that there shall not at any time be more than a
total of eight Eurodollar Borrowings outstanding.

 

(d)  Notwithstanding any other provision
of this Agreement, no Borrower shall be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Maturity Date.

 

SECTION 2.03.  Requests for Borrowings.  To request a Revolving Borrowing, the Parent
Borrower shall notify the Administrative Agent (on behalf of itself or another
Borrower) of such request by telephone (a) in the case of a Eurodollar
Borrowing, not later than 12:00 noon, New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing, not later than 1:00 p.m., New York City
time, one Business Day before the date of the proposed Borrowing; provided
that any such notice of an ABR Revolving Borrowing to finance the reimbursement
of an LC Disbursement as contemplated by Section 2.05(e) may be given not
later than 10:00 a.m., New York City time, on the date of the
proposed Borrowing.  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Parent
Borrower (on behalf of itself or another Borrower).  Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.02:

 

(i) whether the Parent Borrower is requesting such Borrowing on behalf
of itself or for another Borrower (and, if on behalf of another Borrower, the
identity of such Borrower);

 

(ii) whether the requested Borrowing is a Domestic Revolving Borrowing
or a Canadian Revolving Borrowing;

 

(iii) the aggregate amount of such Borrowing;

 

(iv) the date of such Borrowing, which shall be a Business Day;

 

54

(v) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

 

(vi) in the case of a Eurodollar Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the
definition of the term “Interest Period”; and

 

(vii) the location and number of the relevant Borrower’s account to
which funds are to be disbursed, which shall comply with the requirements of
Section 2.06.

 

If no election
as to the Type of Borrowing is specified, then the requested Borrowing shall be
an ABR Borrowing.  If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Parent Borrower shall be deemed to have selected (on behalf of itself or
the applicable Borrower) an Interest Period of one month’s duration.  Promptly following receipt of a Borrowing
Request with respect to a Borrowing of any Class in accordance with this
Section, the Administrative Agent shall advise each Lender with respect to such
Class of the details thereof and of the amount of such Lender’s Loan to be made
as part of the requested Borrowing.

 

SECTION 2.04.  Swingline Loans.  (a) 
Subject to the terms and conditions set forth herein, the Swingline
Lender agrees to make loans (“Swingline Loans”) to the Parent Borrower
from time to time during the Revolving Availability Period, in an aggregate
principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swingline Loans exceeding $5,000,000,
(ii) the total Domestic Revolving Exposures’ exceeding the total amount of
the Domestic Commitments, (iii) the total Revolving Exposures’ exceeding
the lesser of (A) the total amount of the Commitments and (B) the
Borrowing Base then in effect, (iv) at any time during the Availability
Cap Period, the total Revolving Exposures’ exceeding $45,000,000 and
(v) at any time during a Reduced Availability Period, the total Revolving
Exposures’ exceeding the Reduced Availability Amount at such time; provided
that the Swingline Lender shall not be required to make a Swingline Loan to
refinance an outstanding Swingline Loan. 
Within the foregoing limits and subject to the terms and conditions set
forth herein, the Parent Borrower may borrow, prepay and reborrow Swingline
Loans.

 

55

 

(b)  To request a Swingline Loan, the
Parent Borrower shall notify the Administrative Agent of such request by
telephone (confirmed by telecopy), not later than 12:00 noon,
New York City time, on the day of a proposed Swingline Loan.  Each such notice shall be irrevocable and
shall specify the requested date (which shall be a Business Day), the amount of
the requested Swingline Loan and the wire transfer instructions for the account
of the Parent Borrower to which the proceeds of such Swingline Loan should be
transferred.  The Administrative Agent
will promptly advise the Swingline Lender of any such notice received from the
Parent Borrower.  The Swingline Lender
shall make each Swingline Loan available to the Parent Borrower by wire
transfer to the account specified by the Parent Borrower in the request for
such Swingline Loan (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.05(e),
by remittance to the Issuing Bank) by 2:00 p.m., New York City time,
on the requested date of such Swingline Loan.

 

(c)  The Swingline Lender may by written
notice given to the Administrative Agent not later than 10:00 a.m.,
New York City time, on any Business Day require the Domestic Lenders to
acquire participations on such Business Day in all or a portion of the
Swingline Loans outstanding.  Such
notice shall specify the aggregate amount of Swingline Loans in which Domestic
Lenders will participate.  Promptly upon
receipt of such notice, the Administrative Agent will give notice thereof to
each Domestic Lender, specifying in such notice such Domestic Lender’s
Applicable Percentage of such Swingline Loan or Loans.  Each Domestic Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Domestic
Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each Domestic Lender acknowledges and agrees
that its obligation to acquire participations in Swingline Loans pursuant to
this paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Domestic Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.  Each Domestic Lender shall
comply with its obligation under this paragraph by making a wire transfer to
the Administrative Agent for the

 

56

 

benefit of the
Swingline Lender of immediately available funds, in the same manner as provided
in Section 2.06 with respect to Domestic Revolving Loans made by such
Domestic Lender (and Section 2.06 shall apply, mutatis  mutandis,
to the payment obligations of the Domestic Lenders), and the Administrative
Agent shall promptly pay to the Swingline Lender the amounts so received by it
from the Lenders.  The Administrative
Agent shall notify the Parent Borrower of any participations in any Swingline
Loan acquired pursuant to this paragraph, and thereafter payments in respect of
such Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender.  Any amounts received
by the Swingline Lender from the Parent Borrower (or other party on behalf of
the Parent Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Domestic Lenders that shall have made their payments pursuant to this
paragraph and to the Swingline Lender, as their interests may appear.  The purchase of participations in a
Swingline Loan pursuant to this paragraph shall not relieve the Parent Borrower
of any default in the payment thereof.

 

SECTION 2.05.  Letters of Credit.  (a)  General.  Subject to the terms and conditions set
forth herein, the Parent Borrower may request the issuance of Letters of Credit
for its own account or the account of any other Loan Party (provided
that the Parent Borrower shall be a co-applicant with respect to each Letter of
Credit issued for the account of or in favor of such other Loan Party, and the
issuance of any such Letter of Credit shall constitute a Guarantee by the
Parent Borrower of Indebtedness of such Loan Party pursuant to
Section 6.05(e)), in a form reasonably acceptable to the Administrative
Agent and the Issuing Bank, at any time and from time to time during the LC
Availability Period.  All Letters of
Credit shall be denominated in U.S. dollars. 
In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Parent Borrower to, or entered
into by the Parent Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.

 

57

 

(b)  Notice of Issuance, Amendment,
Renewal, Extension; Certain Conditions. 
To request the issuance of a Letter of Credit (or the amendment, renewal
or extension of an outstanding Letter of Credit), the Parent Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the
name and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Issuing Bank, the Parent
Borrower also shall submit a letter of credit application on the Issuing Bank’s
standard form in connection with any request for a Letter of Credit.  A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit the Parent Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $15,000,000, (ii) the
total Domestic Revolving Exposures shall not exceed the total amount of the
Domestic Commitments and (iii) the total Revolving Exposures shall not
exceed (A) the lesser of the total amount of the Commitments and the
Borrowing Base then in effect, (B) at any time during the Availability Cap
Period, $45,000,000 or (C) at any time during a Reduced Availability Period,
the Reduced Availability Amount at such time.

 

(c)  Expiration Date.  Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year
after the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the Maturity Date.

 

(d)  Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing

 

58

 

the amount
thereof) and without any further action on the part of the Issuing Bank or the
Lenders, the Issuing Bank hereby grants to each Domestic Lender, and each
Domestic Lender hereby acquires from the Issuing Bank, a participation in such
Letter of Credit equal to such Domestic Lender’s Applicable Percentage of the
aggregate amount available to be drawn under such Letter of Credit.  In consideration and in furtherance of the
foregoing, each Domestic Lender hereby absolutely and unconditionally agrees to
pay to the Administrative Agent, for the account of the Issuing Bank, such
Domestic Lender’s Applicable Percentage of each LC Disbursement made by
the Issuing Bank and not reimbursed by the Parent Borrower on the date due as
provided in paragraph (e) of this Section, or of any reimbursement payment
required to be refunded to the Parent Borrower for any reason.  Each Domestic Lender acknowledges and agrees
that its obligation to acquire participations pursuant to this paragraph in
respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.

 

(e)  Reimbursement.  If the Issuing Bank shall make any
LC Disbursement in respect of a Letter of Credit, the Parent Borrower
shall reimburse such LC Disbursement by paying to the Administrative Agent
an amount equal to such LC Disbursement not later than 12:00 noon,
New York City time, on the date that such LC Disbursement is made, if
the Parent Borrower shall have received notice of such LC Disbursement
prior to 10:00 a.m., New York City time, on such date, or, if such
notice has not been received by the Parent Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on
(i) the Business Day that the Parent Borrower receives such notice, if
such notice is received prior to 10:00 a.m., New York City time, on
the day of receipt, or (ii) the Business Day immediately following the day
that the Parent Borrower receives such notice, if such notice is not received
prior to such time on the day of receipt; provided that, if the Parent
Borrower does not otherwise elect by notice to the Administrative Agent to make
such payment, the Parent Borrower shall be deemed to have requested in
accordance with Section 2.03 (but without regard to the minimum

 

59

 

borrowing
amounts specified in Section 2.02) that such LC Disbursement be
financed with an ABR Domestic Revolving Borrowing in an amount equal to such
LC Disbursement, the Administrative Agent shall notify the Domestic
Lenders thereof, the Domestic Lenders shall (subject to the conditions to
borrowing herein) advance their respective ABR Domestic Revolving Loans (which
shall be applied to reimburse such LC Disbursement) and, to the extent
such ABR Domestic Revolving Loans are so advanced and applied, the Parent
Borrower’s obligation to make such payment shall be deemed discharged as of the
date due and replaced by the resulting ABR Domestic Revolving Loans.  If and to the extent that the Parent
Borrower’s obligation to make such payment is not fully discharged and replaced
by ABR Domestic Revolving Loans as aforesaid (whether as a result of the
failure to satisfy any condition to borrowing or otherwise) and if the Parent
Borrower otherwise fails to make such payment when due, the Administrative
Agent shall notify each Domestic Lender of the applicable LC Disbursement,
the payment then due from the Parent Borrower in respect thereof and such
Domestic Lender’s Applicable Percentage thereof.  Promptly following receipt of such notice, each Domestic Lender
shall pay to the Administrative Agent its Applicable Percentage of the payment
then due from the Parent Borrower, in the same manner as provided in
Section 2.06 with respect to Domestic Loans made by such Domestic Lender
(and Section 2.06 shall apply, mutatis  mutandis, to the
payment obligations of the Domestic Lenders), and the Administrative Agent
shall promptly pay to the Issuing Bank the amounts so received by it from the
Domestic Lenders.  Promptly following
receipt by the Administrative Agent of any payment from the Parent Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Domestic Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Bank, then to such
Domestic Lenders and the Issuing Bank as their interests may appear.  Any payment made by a Domestic Lender
pursuant to this paragraph to reimburse the Issuing Bank for any
LC Disbursement (other than the funding of ABR Domestic Revolving Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Parent Borrower of its obligation to reimburse such LC Disbursement.

 

(f)  Obligations Absolute.  The Parent Borrower’s obligation to
reimburse LC Disbursements as provided in paragraph (e) of this
Section shall be absolute,

 

60

 

unconditional
and irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement under any and all circumstances whatsoever and irrespective
of (i) any lack of validity or enforceability of any Letter of Credit or
this Agreement, or any term or provision therein, (ii) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iii) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or other document that does not comply with the
terms of such Letter of Credit or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of,
or provide a right of setoff against, the Parent Borrower’s obligations
hereunder.  Neither the Administrative
Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties,
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Issuing Bank; provided
that nothing in this Section 2.05 shall be construed to excuse the Issuing
Bank from liability to the Parent Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Parent Borrower to the extent permitted by applicable law)
suffered by the Parent Borrower that are caused by the Issuing Bank’s failure
to exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in
the absence of gross negligence or willful misconduct on the part of the
Issuing Bank, the Issuing Bank shall be deemed to have exercised care in each
such determination.  In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented that appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may,

 

61

 

in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

(g)  Disbursement Procedures.  The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit.  The
Issuing Bank shall promptly notify the Administrative Agent and the Parent
Borrower by telephone (confirmed by telecopy) of such demand for payment and
whether the Issuing Bank has made or will make an LC Disbursement
thereunder; provided that any failure to give or delay in giving such
notice shall not relieve the Parent Borrower of its obligation to reimburse the
Issuing Bank and the Domestic Lenders with respect to any such
LC Disbursement.

 

(h)  Interim Interest.  If the Issuing Bank shall make any
LC Disbursement, then, unless the Parent Borrower shall reimburse such
LC Disbursement in full on the date such LC Disbursement is made, the
unpaid amount thereof shall bear interest, for each day from and including the
date such LC Disbursement is made to but excluding the date that the
Parent Borrower reimburses such LC Disbursement, at the rate per annum
then applicable to ABR Domestic Revolving Loans; provided that, if the
Parent Borrower fails to reimburse such LC Disbursement when due pursuant
to paragraph (e) of this Section, then Section 2.12(c) shall
apply.  Interest accrued pursuant to
this paragraph shall be for the account of the Issuing Bank, except that
interest accrued on and after the date of payment by any Domestic Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such Lender to the extent of such payment.

 

(i)  Replacement of the Issuing Bank;
Additional Issuing Banks.  The
Issuing Bank may be replaced at any time by written agreement among the Parent
Borrower, the Administrative Agent, the replaced Issuing Bank and the successor
Issuing Bank.  One or more Domestic Lenders
may be appointed as additional Issuing Banks by written agreement among the
Parent Borrower, the Administrative Agent (whose consent will not be
unreasonably withheld) and the Domestic Lender that is to be so appointed.  The Administrative Agent shall notify the
Domestic Lenders of

 

62

 

any such
replacement of the Issuing Bank or any such additional Issuing Bank.  At the time any such replacement shall
become effective, the Parent Borrower shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.11(b).  From and after the effective date of any
such replacement or addition, as applicable, (i) the successor or additional
Issuing Bank shall have all the rights and obligations of the Issuing Bank
under this Agreement with respect to Letters of Credit to be issued thereafter
and (ii) references herein to the term “Issuing Bank” shall be deemed to
refer to such successor or such addition or to any previous Issuing Bank, or to
such successor or such addition and all previous Issuing Banks, as the context
shall require.  After the replacement of
an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations of an Issuing
Bank under this Agreement with respect to Letters of Credit issued by it prior
to such replacement, but shall not be required to issue additional Letters of
Credit.  If at any time there is more
than one Issuing Bank hereunder, the Parent Borrower may, in its discretion,
select which Issuing Bank is to issue any particular Letter of Credit.

 

(j)  Cash Collateralization.  If any Event of Default shall occur and be
continuing, on the Business Day that the Parent Borrower receives notice from
the Administrative Agent or the Required Lenders (or, if the maturity of the
Loans has been accelerated, Domestic Lenders with LC Exposure representing
greater than 50% of the total LC Exposure) demanding the deposit of cash
collateral pursuant to this paragraph, the Parent Borrower shall deposit in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Domestic Lenders, an amount in cash equal to 105% of
the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the occurrence
of any Event of Default with respect to the Parent Borrower described in
clause (h) or (i) of Article VII. 
The Parent Borrower also shall deposit cash collateral pursuant to this
paragraph as and to the extent required by Section 2.10(b), and any such cash
collateral so deposited and held by the Administrative Agent hereunder shall
constitute part of the Borrowing Base for purposes of

 

63

 

determining
compliance with Section 2.10(b). 
Each such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Parent
Borrower under this Agreement.  The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account.  Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Administrative Agent and at the Parent Borrower’s risk and expense, such
deposits shall not bear interest. 
Interest or profits, if any, on such investments shall accumulate in
such account.  Moneys in such account
shall be applied by the Administrative Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent
not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Parent Borrower for the LC Exposure at such time or, if
the maturity of the Loans has been accelerated (but subject to the consent of Domestic
Lenders with LC Exposure representing greater than 50% of the total
LC Exposure), be applied to satisfy other obligations of the Parent
Borrower under this Agreement.  If the
Parent Borrower is required to provide an amount of cash collateral hereunder
as a result of the occurrence of an Event of Default, such amount (to the
extent not applied as aforesaid) shall be returned to the Parent Borrower
within three Business Days after all Events of Default have been cured or
waived.  If the Parent Borrower is required
to provide an amount of cash collateral hereunder pursuant to
Section 2.10(b), such amount (to the extent not applied as aforesaid)
shall be returned to the Parent Borrower as and to the extent that, after
giving effect to such return, the Parent Borrower would remain in compliance
with Section 2.10(b) and no Default shall have occurred and be continuing.

 

SECTION 2.06.  Funding of Borrowings.  (a) 
Each Lender shall make each Loan of any Class to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds by
12:00 noon, New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose for such Class by notice
to the Lenders; provided that Swingline Loans shall be made as provided
in Section 2.04.  The
Administrative Agent will make such Loans available to the applicable Borrower
by promptly transferring the amounts so received, in like funds, to the account
of such Borrower

 

64

 

designated by
the Parent Borrower in the applicable Borrowing Request; provided that
ABR Domestic Revolving Loans made to finance the reimbursement of an
LC Disbursement as provided in Section 2.05(e) shall be remitted by
the Administrative Agent to the Issuing Bank.

 

(b)  Unless the Administrative Agent shall
have received notice from a Lender prior to the proposed date of any Borrowing
that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may, in its sole
discretion, assume that such Lender has made such share available on such date
in accordance with paragraph (a) of this Section and may, in reliance upon
such assumption, make available to the applicable Borrower a corresponding
amount.  In such event, if a Lender has
not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the applicable Borrower
severally agree to pay to the Administrative Agent forthwith on demand such
corresponding amount with interest thereon, for each day from and including the
date such amount is made available to such Borrower to but excluding the date
of payment to the Administrative Agent, at (i) in the case of such Lender,
the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation or (ii) in the case of any Borrower, the interest rate
applicable to ABR Loans.  If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender’s Loan included in such Borrowing.

 

SECTION 2.07.  Interest Elections.  (a) 
Each Revolving Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.  Thereafter, the Parent Borrower may elect
(on behalf of itself or another Borrower) to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this
Section.  The Parent Borrower (on behalf
of itself or another Borrower) may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising

 

65

 

each such
portion shall be considered a separate Borrowing.  This Section shall not apply to Swingline Loans, which may not be
converted or continued.

 

(b)  To make an election pursuant to this
Section, the Parent Borrower shall notify the Administrative Agent of such
election by telephone by the time that a Borrowing Request would be required
under Section 2.03 if the Parent Borrower were requesting a Revolving
Borrowing of the Class and Type resulting from such election to be made on the
effective date of such election.  Each
such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of
a written Interest Election Request in a form approved by the Administrative
Agent and signed by the Parent Borrower.

 

(c)  Each telephonic and written Interest
Election Request shall specify the following information in compliance with
Section 2.02:

 

(i) the Borrowing (including the identity of the applicable Borrower)
to which such Interest Election Request applies and, if different options are
being elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information to
be specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);

 

(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;

 

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and

 

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”.

 

If any such
Interest Election Request requests a Eurodollar Borrowing but does not specify
an Interest Period, then the Parent Borrower (on behalf of itself or the
applicable Borrower) shall be deemed to have selected an Interest Period of one
month’s duration.

 

66

 

(d)  Promptly following receipt of an
Interest Election Request, the Administrative Agent shall advise each Lender of
the details thereof and of such Lender’s portion of each resulting Borrowing.

 

(e)  If the Parent Borrower fails to
deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Parent Borrower, then, so long as an Event of Default is continuing (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.

 

SECTION 2.08.  Termination and Reduction of
Commitments.  (a)  Unless previously terminated, the
Commitments shall terminate on the Maturity Date.

 

(b)  The Parent Borrower may at any time
terminate, or from time to time reduce, the Commitments of any Class; provided
that (i) each reduction of the Commitments of any Class shall be in an
amount that is an integral multiple of $1,000,000 and not less than $5,000,000
and (ii) the Parent Borrower shall not terminate or reduce the Commitments
of any Class if (i) the total Domestic Revolving Exposures would exceed
the total amount of the Domestic Commitments, (ii) the total Canadian
Revolving Exposures would exceed the total amount of the Canadian Commitments
or (iii) the total Revolving Exposures would exceed the total amount of
the Commitments.

 

(c)  The Parent Borrower shall notify the
Administrative Agent of any election to terminate or reduce the Commitments of
any Class under paragraph (b) of this Section at least three Business Days
prior to the effective date of such termination or reduction, specifying such
election and the effective date thereof. 
Promptly following receipt of any notice, the Administrative Agent shall
advise the Lenders with respect to such Class of Commitments of the contents
thereof.  Each notice delivered by the
Parent Borrower pursuant to this Section shall be

 

67

 

irrevocable; provided
that a notice of termination of the Commitments of any Class delivered by the
Parent Borrower under paragraph (b) of this Section may state that such
notice is conditioned upon the effectiveness of other borrowings or the
completion of the sale or issuance of stock of the Parent Borrower or the sale of
assets of the Parent Borrower, in which case such notice may be revoked by the
Parent Borrower (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied.  Any termination or reduction of the Commitments
of any Class shall be permanent.  Each
reduction of the Commitments of any Class shall be made ratably among the
Lenders in accordance with their respective Commitments of such Class.

 

SECTION 2.09.  Repayment of Loans; Evidence of
Debt.  (a)  Each Borrower, jointly and severally, hereby unconditionally
promises to pay (i) to the Administrative Agent for the account of each
Lender the then unpaid principal amount of each Revolving Loan of such Lender
on the Maturity Date and (ii) to the Swingline Lender the then unpaid
principal amount of each Swingline Loan on the Maturity Date.

 

(b)  Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.

 

(c)  The Administrative Agent shall
maintain accounts in which it shall record (i) the amount of each Loan
made hereunder, the Class and Type thereof and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or
to become due and payable from each Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.

 

(d)  The entries made in the accounts
maintained pursuant to paragraph (b) or (c) of this Section shall be
conclusive evidence (absent manifest error) of the existence and amounts of the
obligations recorded therein; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of

 

68

 

any Borrower
to repay the Loans in accordance with the terms of this Agreement.

 

(e)  Any Lender may request that Loans
made by it be evidenced by a promissory note. 
In such event, the applicable Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
customary form approved by the Administrative Agent and the Parent Borrower.  Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 10.04) be represented by one or more
promissory notes in such form payable to the order of the payee named therein
(or, if such promissory note is a registered note, to such payee and its
registered assigns).

 

SECTION 2.10.  Prepayment of Loans.  (a) 
The Borrowers shall have the right at any time and from time to time to
prepay any Borrowing in whole or in part, subject to the requirements of this
Section.

 

(b)  If (i) at any time (A) the
total Domestic Revolving Exposures exceed the total amount of the Domestic
Commitments, (B) the total Canadian Revolving Exposures exceed the total
amount of the Canadian Commitments, (C) the total Revolving Exposures
exceed the lesser of (1) the total amount of the Commitments at such time
and (2) the Borrowing Base then in effect or (D) the total
outstanding principal amount of Loans made to Domestic Subsidiary Borrowers by
all Lenders exceeds $9,400,000, (ii) at any time during the Availability
Cap Period, the total Revolving Exposures exceed $45,000,000 or (iii) at
any time during a Reduced Availability Period, the total Revolving Exposures
exceed the Reduced Availability Amount, then in any such case the Borrowers
shall immediately prepay first, Swingline Loans and second, Revolving Loans,
without demand or notice of any kind, to the extent necessary to eliminate such
excess.  If any such excess remains after
all Revolving Borrowings and Swingline Loans are prepaid, the Borrowers shall
deposit cash collateral pursuant to Section 2.05(j) in an amount equal to
such remaining excess.

 

(c)  On each Business Day following a Cash
Collection Triggering Event, the Administrative Agent will, as and to the
extent required by the terms of the Domestic

 

69

 

Security
Agreement and the Canadian Security Agreement, apply cash deposited in the
Collateral Proceeds Account on such Business Day to prepay, first, Swingline
Loans and second, Revolving Borrowings. 
Unless otherwise directed by the Parent Borrower, the Administrative
Agent will apply any prepayment of Revolving Borrowings made pursuant to this
clause (c) to each Class of Revolving Borrowings on a pro rata basis, with
each prepayment of Revolving Borrowings within any Class applied to prepay ABR
Borrowings before any other Borrowings, with any excess prepayment amount
applied to prepay Eurodollar Borrowings in order of expiration of their
respective Interest Periods (and applied on a pro rata basis in respect of
Eurodollar Borrowings with Interest Periods expiring on the same date).

 

(d)  Prior to any optional or mandatory
prepayment of Borrowings hereunder (other than a mandatory prepayment made
pursuant to clause (c) above), the Parent Borrower shall, subject to the
requirements of clause (b) above, select the Borrowing or Borrowings to be
prepaid and shall specify such selection in the notice of such prepayment
pursuant to paragraph (e) of this Section; provided that
(i) the Parent Borrower may elect not to provide notice, or select the
Borrowing or Borrowings to be prepaid, in connection with a mandatory
prepayment pursuant to clause (b) above and, in such an event,
(A) such prepayment shall be applied to outstanding Borrowings in such
manner as the Administrative Agent deems appropriate to comply with the terms
of such clause and (B) to the extent the terms of clause (b) do not
require any prepayment to be allocated to any specific Class of Borrowings, the
Administrative Agent shall apply such prepayment to each Class of Revolving
Borrowings on a pro rata basis, and (ii) each prepayment of Revolving
Borrowings within any Class shall be applied to prepay ABR Borrowings before
any other Borrowings, with any excess prepayment amount applied to prepay
Eurodollar Borrowings in order of expiration of their respective Interest
Periods (and applied on a pro rata basis in respect of Eurodollar Borrowings
with Interest Periods expiring on the same date).

 

(e)  The Parent Borrower shall notify the
Administrative Agent (and, in the case of prepayment of a Swingline Loan, the
Swingline Lender) by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in

 

70

 

the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of prepayment,
(ii) in the case of prepayment of an ABR Borrowing, not later than
11:00 a.m., New York City time, one Business Day before the date of
prepayment or (iii) in the case of prepayment of a Swingline Loan, not
later than 12:00 noon, New York City time, on the date of
prepayment.  Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or portion thereof to be prepaid and, in the case of a mandatory
prepayment, a reasonably detailed calculation of the amount of such prepayment;
provided that (A) no notice shall be required in respect of any
mandatory prepayment made pursuant to clause (c) above, (B) in the
event the Parent Borrower elects to provide notice of a mandatory prepayment
pursuant to clause (b) above to identify the Borrowings to be prepaid in
connection therewith, such notice shall be given to the Administrative Agent on
the same day that the applicable prepayment is required to be made pursuant to
such clause, it being understood that any failure or delay on the part of the
Parent Borrower in providing such notice to the Administrative Agent shall not
affect the obligations of the Parent Borrower to make such prepayment, and
(C) if a notice of optional prepayment is given in connection with a
conditional notice of termination of the Commitments of any Class as
contemplated by Section 2.08, then such notice of prepayment may be
revoked if such notice of termination is revoked in accordance with
Section 2.08.  Promptly following
receipt of any such notice (other than a notice relating solely to Swingline
Loans), the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any
Borrowing shall be in an amount such that the remaining amount of such
Borrowing not so prepaid would be permitted in the case of an advance of a
Borrowing of the same Type as provided in Section 2.02, except as
necessary to apply fully the required amount of a mandatory prepayment.  Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.12.

 

(f)  If, at 3:00 p.m., New York
City time, on any Business Day the amount, determined reasonably and in good
faith by the Parent Borrower (the “Cash Amount”), equal to (i) the
aggregate amount of “cash and cash equivalents” and 

 

71

 

“marketable
securities” of the Loan Parties, in each case that would be required to be
reflected on a consolidated balance sheet of the Parent Borrower and the
Subsidiaries prepared as of such time in accordance with GAAP (excluding any
such “cash” that is not available funds), minus (ii) the aggregate
amount of payments in such cash and cash equivalents that will be made (and
will reduce such cash and cash equivalents) on such Business Day, minus
(iii) the lesser of (A) $5,000,000 and (B) the aggregate amount
of cash and cash equivalents held in Canadian Dollars by the Canadian
Subsidiary Borrower at such time, is more than $5,000,000, then on such
Business Day the Parent Borrower shall, to the extent (but only to the extent)
that any Revolving Borrowings and Swingline Loans are then outstanding, prepay
Revolving Borrowings and Swingline Loans to the extent necessary so that, after
giving effect to such prepayment and the receipt by the Parent Borrower of the
proceeds of any Revolving Borrowings and Swingline Loans made or to be made on
such Business Day, the Cash Amount will not exceed $5,000,000.  For purposes of any calculation required by
this clause (f), Section 4.02(c) and Section 6.14, the amount of
any cash and cash equivalents and marketable securities held by the Parent
Borrower or any Subsidiary at any time and denominated in a currency other than
dollars shall be deemed to be the dollar equivalent thereof determined in good
faith by the Parent Borrower based upon prevailing exchange rates at such time.

 

SECTION 2.11.  Fees.  (a) 
The Parent Borrower agrees to pay to the Administrative Agent for the
account of the office (or Affiliate) of each Lender from which such Lender
would make Loans of any Class to the Borrowers hereunder (which office or
Affiliate shall be specified by each Lender for each Class of such Lender’s
Commitments in a notice to the Administrative Agent prior to the initial
payment to such Lender under this paragraph) a commitment fee, which shall
accrue at a per annum rate of 0.50% on the average daily unused amount of each
Commitment of such Lender during the period from and including the Effective
Date to but excluding the date on which such Commitment terminates.  Accrued commitment fees with respect to each
Commitment shall be payable in arrears on the last Business Day of March, June,
September and December of each year and on the date on which such Commitment
terminates, commencing on the first such date to occur after the date
hereof.  All commitment fees shall be
computed on the basis of a year of

 

72

 

360 days
and shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).  For
purposes of determining the unused amount of the Commitment of any Class of
each Lender for purposes of computing commitment fees with respect to
Commitments, a Commitment of a Lender shall be deemed to be used to the extent
of the outstanding Revolving Loans and, in the case of the Domestic
Commitments, LC Exposure of such Lender (and the Swingline Exposure of such
Lender shall be disregarded for such purpose).

 

(b)  The Parent Borrower agrees to pay
(i) to the Administrative Agent for the account of each Domestic Lender a
participation fee with respect to its participations in Letters of Credit,
which shall accrue at the Applicable Rate used to determine the interest rate
applicable to Eurodollar Revolving Loans on the average daily amount of such Domestic
Lender’s LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Domestic
Lender’s Domestic Commitment terminates and the date on which such Domestic
Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a
fronting fee, which shall accrue at the rate or rates per annum separately
agreed upon between the Parent Borrower and the Issuing Bank on the average
daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Domestic Commitments and the date on which there ceases to
be any LC Exposure, as well as the Issuing Bank’s standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of
Credit or processing of drawings thereunder. 
Participation fees and fronting fees accrued through and including the
last Business Day of March, June, September and December of each year shall be
payable on such last Business Day, commencing on the first such date to occur
after the Effective Date; provided that all such fees shall be payable
on the date on which the Domestic Commitments terminate and any such fees
accruing after the date on which the Domestic Commitments terminate shall be
payable on demand.  Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
10 days after demand.  All
participation fees and fronting fees shall be computed on the basis of a year
of 360 days and shall be payable for

 

73

 

the actual
number of days elapsed (including the first day but excluding the last day).

 

(c)  The Parent Borrower agrees to pay to
each of the Administrative Agent and the Collateral Agent, for its own account,
fees payable in the amounts and at the times separately agreed upon between the
Parent Borrower and the Administrative Agent or the Collateral Agent, as
applicable.

 

(d)  All fees payable hereunder shall be
paid on the dates due, in immediately available funds, to the Administrative
Agent (or to the Issuing Bank or the Collateral Agent, as applicable, in the
case of fees payable to it) for distribution, in the case of commitment fees
and participation fees, to the Lenders entitled thereto.  Fees paid shall not be refundable under any
circumstances.

 

SECTION 2.12.  Interest.  (a) 
The Loans comprising each ABR Borrowing (including each Swingline
Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

 

(b)  The Loans comprising each Eurodollar
Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period
in effect for such Borrowing plus the Applicable Rate.

 

(c)  Notwithstanding the foregoing, if any
principal of or interest on any Loan or any fee or other amount payable by any
Borrower hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as
well as before judgment, at a rate per annum equal to (i) in the case of
overdue principal of any Loan, 2% plus the rate otherwise applicable to such
Loan as provided in the preceding paragraphs of this Section or (ii) in
the case of any other amount, 2% plus the rate applicable to ABR Revolving
Loans as provided in paragraph (a) of this Section.

 

(d)  Accrued interest on each Loan shall
be payable in arrears on each Interest Payment Date for such Loan and, in the
case of Domestic Revolving Loans and Canadian Revolving Loans, upon termination
of the Domestic Commitments or Canadian Commitments, as the case may be; provided
that (A) interest accrued pursuant to

 

74

 

paragraph (c)
of this Section shall be payable on demand, (B) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Revolving Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (C) in the event of any conversion of
any Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.

 

(e)  All interest hereunder shall be
computed on the basis of a year of 360 days, except that interest computed
by reference to the Alternate Base Rate at times when the Alternate Base Rate
is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).  The applicable
Alternate Base Rate or Adjusted LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent
manifest error.  Solely for purposes of
the Interest
Act (Canada), (i) whenever interest is to be computed or expressed
at any rate (the “Specified Rate”) on the basis of a year of 360 days
hereunder, the annual rate of interest to which each such Specified Rate is
equal is such Specified Rate multiplied by a fraction, the numerator of which
is the actual number of days in the relevant year and the denominator of which
is 360; (ii) the principle of deemed reinvestment of interest shall not apply
to any interest calculation hereunder; and (iii) the rates of interest
stipulated herein are intended to be nominal rates and not effective rates or
yields.

 

SECTION 2.13.  Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a Eurodollar Borrowing:

 

(a)
the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

 

(b)
the Administrative Agent is advised by the Required Domestic Lenders or
the Required Canadian Lenders that the Adjusted LIBO Rate for such Interest
Period will not adequately and fairly reflect the cost

 

75

 

to such
Lenders (or Lender) of making or maintaining their Loans (or its Loan) included
in such Borrowing for such Interest Period;

 

then the
Administrative Agent shall give notice thereof to the Parent Borrower and the
Domestic Lenders or the Canadian Lenders, as applicable, by telephone or
telecopy as promptly as practicable thereafter and, until the Administrative
Agent notifies the Parent Borrower and such Lenders that the circumstances
giving rise to such notice no longer exist, (i) any Interest Election
Request that requests the conversion of any Domestic Revolving Borrowing or
Canadian Revolving Borrowing, as applicable, to, or continuation of any such
Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any
Borrowing Request with respect to any Domestic Revolving Borrowing or Canadian
Revolving Borrowing, as applicable, requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

 

SECTION 2.14.  Increased Costs.  (a) 
If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected
in the Adjusted LIBO Rate) or the Issuing Bank; or

 

(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans made by
such Lender or any Letter of Credit or participation therein;

 

and the result
of any of the foregoing shall be to increase the cost to such Lender of making
or maintaining any Eurodollar Loan (or of maintaining its obligation to make
any such Loan) or to increase the cost to such Lender or the Issuing Bank of
participating in, issuing or maintaining any Letter of Credit or to reduce the
amount of any sum received or receivable by such Lender or the Issuing Bank
hereunder (whether of principal, interest or otherwise), then the Borrowers
will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate (on an after-tax

 

76

 

basis) such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.

 

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

 

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

 

(d)  Failure or delay on the part of any
Lender or the Issuing Bank to demand compensation pursuant to this Section
shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to
demand such compensation; provided that the Borrowers shall not be
required to compensate a Lender or the Issuing Bank pursuant to this Section
for any increased costs or reductions incurred more than 180 days prior to
the date that such Lender or the Issuing Bank, as the case may be, notifies the
Parent Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or the Issuing Bank’s intention to claim
compensation therefor; provided

 

77

 

further
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.

 

SECTION 2.15.  Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any Eurodollar Loan other than on the last day of
the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.10(e) and is revoked in accordance therewith), or
(d) the assignment of any Eurodollar Loan other than on the last day of
the Interest Period applicable thereto as a result of a request by the Parent
Borrower pursuant to Section 2.18 or the CAM Exchange, then, in any such
event, the Borrowers shall compensate each Lender for the loss, cost and
expense attributable to such event.  In
the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall
be deemed to include an amount reasonably determined by such Lender to be the
excess, if any, of (i) the amount of interest that would have accrued on
the principal amount of such Loan had such event not occurred, at the Adjusted
LIBO Rate that would have been applicable to such Loan, for the period from the
date of such event to the last day of the then current Interest Period therefor
(or, in the case of a failure to borrow, convert or continue, for the period
that would have been the Interest Period for such Loan), over (ii) the
amount of interest that would accrue on such principal amount for such period
at the interest rate that such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market.  A certificate of any Lender setting forth any amount or amounts
that such Lender is entitled to receive pursuant to this Section (and setting
forth the underlying calculations) shall be delivered to the Parent Borrower
and shall be conclusive absent manifest error. 
The Borrowers shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.

 

SECTION 2.16.  Taxes.  (a) 
Any and all payments by or on account of any obligation of the Borrowers

 

78

 

hereunder or
under any other Loan Document shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if any
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Borrower shall
make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

 

(b)  In addition, the Borrowers shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

 

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

 

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

 

79

 

(e)  Any Foreign Lender that is entitled
to an exemption from or reduction of withholding Tax under the laws of the
jurisdiction in which a Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement made by
such Borrower, shall deliver to the Parent Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Parent Borrower as will permit such payments to be
made without withholding or at a reduced rate. 
Notwithstanding any other provision of this Section 2.16, no such
Foreign Lender shall be required to deliver any form pursuant to this
Section 2.16(e) that such Foreign Lender is not legally able to deliver.

 

(f)  If the Administrative Agent or a
Lender (or transferee) determines, in its reasonable discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by a Borrower or with respect to which a Borrower has paid
additional amounts pursuant to this Section 2.16, it shall pay over such
refund to such Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.16 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender (or
transferee) and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, however,
that the Borrowers, upon the request of the Administrative Agent or such Lender
(or transferee), agree to repay the amount paid over to such Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority), to the Administrative Agent or such Lender (or transferee) in the
event the Administrative Agent or such Lender (or transferee) is required to
repay such refund to such Governmental Authority.  Nothing contained in this Section 2.16(f) shall require the Administrative
Agent or any Lender to make available its Tax returns (or any other information
relating to its Taxes which it deems confidential) to any Borrower or any other
Person.

 

SECTION 2.17.  Payments Generally; Pro Rata
Treatment; Sharing of Setoffs. 
(a)  Each Borrower shall make
each payment required to be made by it hereunder or under any other Loan
Document (whether of principal,

 

80

 

interest, fees
or reimbursement of LC Disbursements, or of amounts payable under
Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon,
New York City time, on the date when due, in immediately available funds,
without setoff or counterclaim.  Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices at Eleven Madison Avenue, New York,
New York, except payments to be made directly to the Issuing Bank, Swingline
Lender or Collateral Agent as expressly provided herein and except that
payments pursuant to Sections 2.14, 2.15, 2.16 and 10.03 shall be made
directly to the Persons entitled thereto and payments pursuant to other Loan
Documents shall be made to the Persons specified therein.  The Administrative Agent shall distribute
any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof.  If any payment under any Loan Document shall
be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension.  All payments under each Loan
Document shall be made in dollars.

 

(b)  If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal and unreimbursed
LC Disbursements then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal and unreimbursed
LC Disbursements then due to such parties.

 

(c)  If any Lender shall, by exercising
any right of set-off or counterclaim or otherwise, obtain payment in respect of
any principal of or interest on any of its Domestic Revolving Loans, Canadian
Revolving Loans or participations in LC Disbursements or Swingline Loans
resulting in such Lender receiving payment of a greater

 

81

 

proportion of
the aggregate amount of its Domestic Revolving Loans, Canadian Revolving Loans
and participations in LC Disbursements and Swingline Loans and accrued
interest thereon than the proportion received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Domestic Revolving Loans, Canadian Revolving Loans
and participations in LC Disbursements and Swingline Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Domestic Revolving Loans,
Canadian Revolving Loans and participations in LC Disbursements and
Swingline Loans; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
made by any Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to a
Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of
this paragraph shall apply).  Each
Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may exercise against any Borrower rights of
setoff and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Borrower in the amount of such
participation.

 

(d)  Unless the Administrative Agent shall
have received notice from the Parent Borrower prior to the date on which any
payment is due to the Administrative Agent for the account of the Lenders or
the Issuing Bank hereunder that the applicable Borrower will not make such
payment, the Administrative Agent may assume, in its sole discretion, that such
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due.  In
such event, if no Borrower has in fact made such payment, then each of

 

82

 

the Lenders or
the Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.

 

(e)  If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or
(e), 2.06(b), 2.17(d) or 10.03(c), then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.

 

SECTION 2.18.  Mitigation Obligations;
Replacement of Lenders.  (a)  If any Lender requests compensation under
Section 2.14, or if any Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.16, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates (provided that, if such compensation or
additional amounts relate to a particular Class of Loans, such designation or
assignment may relate only to such Class of Loans), if, in the reasonable
judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as
the case may be, in the future and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender.  Each Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

(b)  If any Lender requests compensation
under Section 2.14, or if any Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.16, or if any Lender defaults in its
obligation

 

83

 

to fund Loans
hereunder, then the Parent Borrower may, at its sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 10.04), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Parent Borrower shall have
received the prior written consent of the Administrative Agent, the Issuing
Bank and Swingline Lender, which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements
and Swingline Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the
case of all other amounts), (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.14 or payments
required to be made pursuant to Section 2.16, such assignment will result
in a reduction in such compensation or payments and (iv) with respect to
compensation or additional amounts (but not defaults) in respect of a
particular Class of Loans, such assignment may be limited to such Class of
Loans.  A Lender shall not be required
to make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the Parent
Borrower to require such  assignment and
delegation cease to apply.

 

ARTICLE III

 

Representations
and Warranties

 

The Parent
Borrower represents and warrants to the Lenders that:

 

SECTION 3.01.  Organization; Powers.  Each of the Parent Borrower and the
Subsidiaries is duly organized, validly existing and, where applicable, in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is

 

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qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.

 

SECTION 3.02.  Authorization; Enforceability.  The Transactions entered into and to be
entered into by each Loan Party are within such Loan Party’s corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action.  This Agreement has
been duly executed and delivered by each Borrower and constitutes, and each
other Loan Document to which any Loan Party is to be a party, when executed and
delivered by such Loan Party, will constitute, a legal, valid and binding
obligation of such Borrower or such Loan Party (as the case may be),
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

 

SECTION 3.03.  Governmental Approvals; No
Conflicts.  The Transactions
(a) do not require any consent or approval of, registration or filing
with, or any other action by, any Governmental Authority, except such as have
been obtained or made and are in full force and effect or, if not obtained or
made, would not, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect and except filings necessary to perfect Liens created
under the Loan Documents, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Parent Borrower or any of the Subsidiaries or any order of any Governmental
Authority, except, with respect to any violation of applicable law or
regulation or any order of any Governmental Authority, to the extent any such
violation would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect, (c) will not violate or result in a
default under any material indenture, agreement or other instrument binding
upon the Parent Borrower or any of the Subsidiaries or its assets, except to
the extent any such violation, default or right would not, individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect, or give
rise to a right thereunder to require any payment to be made by the Parent
Borrower or any of the Subsidiaries, and (d) will not result in the creation
or imposition of any Lien on any asset of the Parent Borrower or any of the
Subsidiaries,

 

85

 

except Liens
created under the Loan Documents, the Senior First Lien Security Documents and
the Senior Second Lien Security Documents.

 

SECTION 3.04.  Financial Condition; No Material
Adverse Change.  (a)  The Parent Borrower has heretofore furnished
to the Lenders its consolidated balance sheet and statements of income,
stockholders’ equity and cash flows (i) as of and for the fiscal years
ended December 31, 2000 and 2001, reported on by Arthur Andersen LLP,
independent public accountants, (ii) as of and for the fiscal year ended
December 31, 2002, reported on by Ernst & Young LLP, independent
public accountants and (iii) as of and for the fiscal year ended
December 31, 2003, certified by its chief financial officer.  Such financial statements present fairly, in
all material respects, the financial position and results of operations and
cash flows of the Parent Borrower and its consolidated Subsidiaries, as of such
dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements referred
to in clause (iii) above.

 

(b)  The Parent Borrower has heretofore
made available to the Lenders its pro forma consolidated balance sheet as of
December 31, 2003, prepared giving effect to the Transactions as if the
Transactions had occurred on such date. 
Such pro forma consolidated balance sheet (i) has been prepared in
good faith based on the same assumptions used to prepare the applicable pro
forma financial statements, which were simultaneously made available to the
Lenders (which assumptions are believed by the Parent Borrower to be
reasonable), (ii) is based on the best information available to the Parent
Borrower after due inquiry, (iii) accurately reflects all material
adjustments necessary to give effect to the Transactions and (iv) presents
fairly, in all material respects, the pro forma financial position of the
Parent Borrower and its consolidated Subsidiaries as of December 31, 2003,
as if the Transactions had occurred on such date.

 

(c)  Except as disclosed in the financial
statements referred to above or the notes thereto, after giving effect to the
Transactions, none of the Parent Borrower or any of the Subsidiaries has, as of
the Effective Date, any material contingent liabilities, unusual long-term
commitments or unrealized losses.

 

86

 

(d)  Since December 31, 2002, there
has been no material adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or contingent or other liabilities
of the Parent Borrower and the Subsidiaries, taken as a whole.

 

SECTION 3.05.  Properties.  (a) 
Each of the Parent Borrower and the Subsidiaries has good title to, or
valid leasehold interests in, all its real and personal property material to
its business (including its Mortgaged Properties), except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes
and other Permitted Encumbrances.

 

(b)  Each of the Parent Borrower and the
Subsidiaries owns, or is licensed or otherwise permitted to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to the business of the Parent Borrower and the Subsidiaries, taken as
a whole, and the use thereof by the Parent Borrower and the Subsidiaries does
not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

 

(c)  Schedule 3.05 sets forth the
address of each real property that is owned or leased by the Parent Borrower or
any of the Subsidiaries as of the Effective Date.

 

(d)  As of the Effective Date, neither the
Parent Borrower nor any of the Subsidiaries has received notice of, or has
knowledge of, any pending or contemplated condemnation proceeding affecting any
Mortgaged Property or any sale or disposition thereof in lieu of
condemnation.  Neither any Mortgaged
Property nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such Mortgaged Property or
interest therein held by any Person, other than the Parent Borrower or any
Subsidiary Loan Party.

 

SECTION 3.06.  Litigation and Environmental
Matters.  (a)  There are no actions, suits or proceedings
by or before any arbitrator or Governmental Authority pending against or, to
the knowledge of the Parent Borrower, threatened against or affecting the
Parent Borrower or any of the Subsidiaries (i) as to which there

 

87

 

is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve any of the Loan
Documents or the Transactions.

 

(b)  Except with respect to any matters
that, individually or in the aggregate, would not be reasonably  likely to result in a Material Adverse
Effect, neither the Parent Borrower nor any of the Subsidiaries (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental
Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

 

SECTION 3.07.  Compliance with Laws and
Agreements.  Each of the Parent
Borrower and the Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.  No Default has occurred and is continuing.

 

SECTION 3.08.  Investment and Holding Company
Status.  Neither the Parent Borrower
nor any of the Subsidiaries is (a) an “investment company” as defined in,
or subject to regulation under, the Investment Company Act of 1940 or
(b) a “holding company” as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.

 

SECTION 3.09.  Taxes.  Each of the Parent Borrower and the
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Parent Borrower
or such Subsidiary, as applicable, has set aside on its books adequate reserves
or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.

 

88

 

SECTION 3.10.  ERISA.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.  The present value of all accumulated benefit obligations under
each Plan individually (based on the assumptions used for purposes of Statement
of Financial Accounting Standards No. 87) did not, as of the date of the
most recent audited financial statements reflecting such amounts, exceed by
more than $33,500,000 the fair market value of the assets of such Plan
individually, and the present value of all accumulated benefit obligations of
all underfunded Plans (based on the assumptions used for purposes of Statement
of Financial Accounting Standards No. 87) did not, as of the date of the
most recent audited financial statements reflecting such amounts, exceed by
more than $38,000,000 the fair market value of the assets of all such underfunded
Plans.

 

SECTION 3.11.  Disclosure.  The Parent Borrower has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to
which the Parent Borrower or any of the Subsidiaries is subject, and all other
matters known to any of them, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  The Information Memorandum and the other
reports, financial statements, certificates and other written information
furnished by or on behalf of any Loan Party to the Administrative Agent, either
Arranger or any Lender in connection with the negotiation of this Agreement or
any other Loan Document or delivered hereunder or thereunder (as modified or
supplemented by other information so furnished), when made or delivered, did
not contain any material misstatement of fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Parent Borrower represents
only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time.

 

SECTION 3.12.  Subsidiaries.  Schedule 3.12 sets forth the name of, the
jurisdiction of organization of, and the direct or indirect ownership interest
of the Parent Borrower in, each Subsidiary of the Parent Borrower and

 

89

 

identifies
each Subsidiary that is a Loan Party, in each case as of the Effective Date.

 

SECTION 3.13.  Insurance.  Schedule 3.13 sets forth a description
of all insurance maintained by or on behalf of the Parent Borrower and the
Subsidiaries as of the Effective Date. 
As of the Effective Date, all premiums that are due and payable in
respect of such insurance have been paid. 
The Parent Borrower believes that the insurance maintained by or on
behalf of the Parent Borrower and the Subsidiaries is adequate.

 

SECTION 3.14.  Labor Matters.  As of the Effective Date, there are no
strikes, lockouts or slowdowns against the Parent Borrower or any Subsidiary
pending or, to the knowledge of the Parent Borrower, threatened that could
reasonably be expected to result in a Material Adverse Effect.  All material payments due from the Parent
Borrower or any Subsidiary, or for which any claim may be made against the
Parent Borrower or any Subsidiary, on account of wages and employee health and
welfare insurance and other benefits, have been paid or accrued as a liability
on the books of the Parent Borrower or such Subsidiary.  The consummation of the Transactions will
not give rise to any right of termination or right of renegotiation on the part
of any union under any collective bargaining agreement to which the Parent Borrower
or any Subsidiary is bound.

 

SECTION 3.15.  Solvency.  Immediately after the consummation of the
Transactions to occur on the Effective Date and immediately following the
making of each Loan (if any) made on the Effective Date and after giving effect
to the application of the proceeds of such Loans, (a) the fair value of
the assets of each Loan Party, at a fair valuation, will exceed its debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the property of each Loan Party will be greater than the
amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each Loan Party will be
able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) each
Loan Party will not have unreasonably small capital with which to conduct the
business in which it is engaged as such

 

90

 

business is
now conducted and is proposed to be conducted following the Effective Date.

 

SECTION 3.16.  Security Documents.  (a) 
The Pledge Agreements are effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable security interest in the Collateral described therein (and the
proceeds thereof) and, when such Collateral is delivered to the Collateral Agent,
the Collateral Agent shall have a fully perfected first-priority Lien on, and
security interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof as security for the Obligations, as
applicable, in each case prior and superior in right to any other Person.

 

(b)  The Security Agreements are effective
to create in favor of the Collateral Agent, for the ratable benefit of the
applicable Secured Parties, a legal, valid and enforceable security interest in
the Collateral described therein (and the proceeds thereof) and, when financing
statements (and/or other filings, notices and registrations, in the case of
Collateral under the Canadian Security Agreement) in appropriate form are filed
with the appropriate offices in each relevant jurisdiction (including those
specified on Schedule 6 to the Domestic Perfection Certificate and those
specified on Schedule 6 to the Canadian Perfection Certificate), the
Collateral Agent shall have a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in such Collateral (other
than the Intellectual Property (as defined in the Domestic Security Agreement)
and, subject to Section 9-315 of the New York Uniform Commercial Code
(and the equivalent legislation in other jurisdictions), the proceeds thereof,
as security for the Obligations, in each case prior and superior in right to
any other Person, other than with respect to Liens expressly permitted by
Section 6.03.

 

(c)  When the Domestic Security Agreement
(or a summary thereof) is filed in the United States Patent and Trademark
Office and the United States Copyright Office, the Collateral Agent shall
have a fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in the Intellectual Property (as defined in the
Domestic Security Agreement) in which a security interest may be perfected by
filing, recording or registering a security agreement, financing statement or

 

91

 

analogous
document in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, in each case prior and
superior in right to any other Person (it being understood that subsequent
recordings in the United States Patent and Trademark Office and the
United States Copyright Office may be necessary to perfect a lien on
registered trademarks, trademark applications and copyrights acquired by the
Loan Parties after the Effective Date), other than with respect to Liens
permitted by Section 6.03.

 

(d)  The Mortgages are effective to
create, subject to the exceptions listed in each title insurance policy
covering such Mortgage, in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable Lien on all of
the Loan Parties’ right, title and interest in and to the Mortgaged Properties
thereunder and the proceeds thereof, and when the Mortgages are filed in the
offices specified on Schedule 3.16(d), the Collateral Agent shall have a
fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in such Mortgaged Properties and, to the extent
applicable, subject to Section 9-315 of the New York Uniform
Commercial Code (and the equivalent legislation in other jurisdictions), the
proceeds thereof, in each case prior and superior in right to any other Person,
other than with respect to the rights of Persons pursuant to Liens expressly
permitted by Section 6.03.

 

SECTION 3.17.  Federal Reserve Regulations.  (a) 
Neither the Parent Borrower nor any of the Subsidiaries is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.

 

(b)  No part of the proceeds of any Loan
or any Letter of Credit will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately, (i) to purchase or carry
Margin Stock or any security convertible into or exchangeable for Margin Stock,
or extend credit to others for the purpose of purchasing or carrying Margin
Stock or any security convertible into or exchangeable for Margin Stock, or to
refund Indebtedness originally incurred for such purpose, or (ii) for any
purpose that entails a violation of the provisions of the Regulations of the
Board, including Regulation U or Regulation X.

 

92

 

SECTION 3.18.  Senior Secured Obligations.  All the Obligations constitute
(a) ”Credit Agreement Obligations” under and as defined in the Senior
First Lien Note Indenture and the Senior Second Lien Note Indenture (in each
case with respect to the First-Priority Collateral), (b) ”Second-Priority
Obligations” under and as defined in the Senior First Lien Note Indenture and
“Other Second-Lien Obligations” under and as defined in the Senior Second Lien
Note Indenture (in each case with respect to the Second-Priority Collateral)
and (c) ”Senior Indebtedness” and “Designated Senior Indebtedness” under
and as defined in the Senior Subordinated Note Indenture.  The Liens granted pursuant to the Security
Documents (a) in respect of the First-Priority Collateral, are prior to
the Liens granted pursuant to the Senior First Lien Note Documents and the
Senior Second Lien Note Documents in respect of such Collateral and (b) in
respect of the Second-Priority Collateral, are equal in priority to the Liens
granted pursuant to the Senior Second Lien Note Documents in respect of such
Collateral.

 

ARTICLE IV

 

Conditions

 

SECTION 4.01.  Effective Date.  The obligations of the Lenders to make Loans
and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 10.02):

 

(a) The Administrative Agent (or its counsel) shall have received from
the Parent Borrower, the Domestic Subsidiary Borrowers, the Canadian Subsidiary
Borrower and each Lender, either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to
the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.

 

(b) The Administrative Agent and the Syndication Agent shall have
received a favorable written opinion (addressed to the Administrative Agent,
the Syndication Agent and the Lenders and dated the Effective Date) of each of
(i) Sonnenschein, Nath &

 

93

 

Rosenthal LLP,
counsel for the Parent Borrower and the Domestic Subsidiary Borrowers,
substantially addressing the matters set forth in Exhibit B-1,
(ii) Stoel Rives LLP, Utah counsel for the Parent Borrower, substantially
in the form of Exhibit B-2, (iii) Fasken Martineau DuMoulin LLP,
counsel for the Canadian Subsidiary Borrower, substantially in the form of
Exhibit B-3, (iv) to the extent requested by the Administrative
Agent, local counsel in each jurisdiction where a Mortgaged Property is located,
substantially in a form agreed to by the Administrative Agent, and
(v) foreign counsel in each jurisdiction listed on Schedule 4.01,
substantially in a form agreed to by the Administrative Agent, and, in the case
of each such opinion required by this paragraph, covering such other matters
relating to the Loan Parties, the Loan Documents or the Transactions as the
Administrative Agent or the Syndication agent shall reasonably request.  Each Borrower hereby requests such counsel
to deliver such opinions.

 

(c) The Administrative Agent and the Syndication Agent shall have
received such documents and certificates as the Administrative Agent, the
Syndication Agent or their counsel may reasonably request relating to the
organization, existence and good standing of each Loan Party, the authorization
of the Transactions and any other legal matters relating to the Loan Parties,
the Loan Documents or the Transactions, all in form and substance satisfactory
to the Administrative Agent and its counsel.

 

(d) The Administrative Agent and the Syndication Agent shall have
received a certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of the Parent Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.

 

(e) The Administrative Agent and the Syndication Agent, as applicable,
shall have received all fees and other amounts due and payable on or prior to
the Effective Date, including, to the extent invoiced, reimbursement or payment
of all out-of-pocket expenses required to be reimbursed or paid by any Loan
Party hereunder or under any other Loan Document.

 

94

 

(f) The Collateral Agent shall have received counterparts of the Domestic
Pledge Agreement signed on behalf of each Loan Party (other than the Canadian
Subsidiary Borrower) and the Canadian Pledge Agreement signed on behalf of the
Canadian Subsidiary Borrower  (and, if
requested by the Collateral Agent, the Loan Party that holds the Equity
Interests in Pliant Corporation of Canada Ltd.), together with certificates (if
any) representing all the outstanding Equity Interests of each Subsidiary owned
by or on behalf of any Loan Party as of the Effective Date after giving effect
to the Transactions (except that such delivery of certificates representing
Equity Interests of a Foreign Subsidiary that is not a Loan Party may be
limited to 65% of the outstanding voting Equity Interests of such Foreign
Subsidiary and, to the extent that delivery of such certificates on the
Effective Date is not reasonably practical, such certificates may be delivered
within 60 days after the Effective Date), promissory notes evidencing all
intercompany Indebtedness owed to any Loan Party by the Parent Borrower or any
Subsidiary as of the Effective Date after giving effect to the Transactions and
stock powers and instruments of transfer, endorsed in blank, with respect to
such certificates and promissory notes.

 

(g) The Collateral Agent shall have received counterparts of the
Domestic Security Agreement signed on behalf of each Loan Party (other than the
Canadian Subsidiary Borrower) and the Canadian Security Agreement signed on
behalf of the Canadian Subsidiary Borrower, together with the following:

 

(i)
all documents and instruments, including Uniform Commercial Code (or
equivalent) financing statements, required by law or reasonably requested by
the Administrative Agent to be filed, registered or recorded to create or
perfect the Liens intended to be created under the Security Agreements;

 

(ii)
completed Perfection Certificates dated the Effective Date and signed by
an executive officer or Financial Officer of the Parent Borrower or the
Canadian Subsidiary Borrower, as applicable, together with all attachments
contemplated thereby, including the

 

95

 

results of a search of the Uniform Commercial Code (or equivalent)
filings made with respect to the Loan Parties in the jurisdictions contemplated
by the Perfection Certificates and copies of the financing statements (or
similar documents) disclosed by such search and evidence reasonably
satisfactory to the Administrative Agent that the Liens indicated by such
financing statements (or similar documents) are permitted by Section 6.03
or have been released;

 

(iii)
counterparts of a Mortgage with respect to each Mortgaged Property
signed on behalf of the record owner of such Mortgaged Property;

 

(iv)
a policy or policies of title insurance issued by a nationally recognized
title insurance company, insuring the Lien of each such Mortgage as a valid
first Lien on the Mortgaged Property described therein, free of any other Liens
except as permitted by Section 6.03, in form and substance reasonably
acceptable to the Collateral Agent, together with such endorsements,
coinsurance and reinsurance as the Collateral Agent or the Required Lenders may
reasonably request;

 

(v)
copies of all existing surveys and such other information and documents
with respect to the Mortgaged Properties as shall be necessary for the
aforesaid title insurance policies to be issued without a survey exception; and

 

(vi)
such other customary documentation with respect to the Mortgaged
Properties as the Administrative Agent may reasonably require.

 

(h) The Administrative Agent shall have received (i) a counterpart
of the Guarantee Agreement signed on behalf of each Loan Party and (ii) a
counterpart of the Indemnity, Subrogation and Contribution Agreement signed on
behalf of each Loan Party.

 

(i) The Lenders shall have received the financial statements described
in Section 3.04, which financial statements shall not be materially
inconsistent with

 

96

 

the financial
statements or forecasts previously provided to the Lenders.

 

(j) The Lenders shall have received projections of the Parent Borrower
and the Subsidiaries through the fiscal year ending December 31, 2008,
presented on a quarterly basis through December 31, 2004, which
projections shall not be materially inconsistent with the projections
previously provided to the Agents and the Arrangers.

 

(k) The Administrative Agent and the Syndication Agent each shall have
received evidence satisfactory to it that the insurance required by
Section 5.07 is in effect.

 

(l) The Parent Borrower shall have received gross cash proceeds of not
less than $225,000,000 from the issuance of the Senior First Lien Notes and the
Administrative Agent shall have received copies of the Senior First Lien Note
Documents, certified by a Financial Officer as complete and correct.  The Administrative Agent and the Syndication
Agent shall have received from each of the Senior First Lien Note Trustee and
the Senior Second Lien Note Trustee either (i) a counterpart of the
Intercreditor Agreement signed on behalf of such party or (ii) written
evidence satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of the Intercreditor Agreement) that
such party has signed a counterpart of the Intercreditor Agreement.  The Administrative Agent and the Arrangers
shall be satisfied with the terms of the Senior First Lien Note Documents and
the Intercreditor Agreement.

 

(m) The Existing Credit Agreement shall have been terminated, and all
loans, interest and other amounts accrued or owing thereunder shall have been
paid in full (other than the Existing Letters of Credit, which shall have been
fully cash collateralized on or prior to the Effective Date) and all Liens
granted in respect thereof shall have been released and the terms and
conditions of any such release shall be satisfactory to the Administrative
Agent and the Syndication Agent.  The
Administrative Agent shall have received a payoff letter in form and substance

 

97

 

reasonably
satisfactory to the Administrative Agent from Deutsche Bank Trust Company
Americas.

 

(n) The Lenders shall have received a pro forma consolidated balance
sheet of the Parent Borrower as of December 31, 2003, reflecting all pro
forma adjustments as if the Transactions had been consummated on such date, and
such pro forma consolidated balance sheet shall be consistent in all material
respects with the forecasts and other information previously provided to the
Lenders.  After giving effect to the
Transactions, the Parent Borrower and the Subsidiaries shall not have any
outstanding Indebtedness or preferred stock other than (i) Indebtedness
incurred under the Loan Documents, (ii) the Senior First Lien Notes, (iii) the
Senior Second Lien Notes, (iv) the Senior Subordinated Notes, (v) the
Existing Preferred Stock and (vi) the Indebtedness permitted pursuant to
Section 6.01(ii).

 

(o) The Agents shall be reasonably satisfied as to the amount and
nature of any contingent liabilities relating to environmental and employee
health and safety exposures to which the Parent Borrower and the Subsidiaries
may be subject, and with the plans of the Parent Borrower and the Subsidiaries
with respect thereto.

 

(p) The Agents shall have received all documentation and other
information requested by them to satisfy the requirements of bank regulatory
authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including the USA Patriot Act.

 

(q) The Agents shall have received a completed Borrowing Base
Certificate that sets forth the Pro Forma Opening Borrowing Base.

 

(r) The Agents shall have received the results of a field examination
with respect to the accounts receivable and inventory of the Parent Borrower
and the Subsidiaries and an inventory appraisal with respect to the inventory
of the Parent Borrower and the Subsidiaries, in each case in form and substance
reasonably satisfactory to the Agents.

 

98

 

The obligations
of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 10.02) at or prior to
5:00 p.m., New York City time, on February 25, 2004.  The Administrative Agent shall notify the
Parent Borrower and the Lenders of the Effective Date, and such notice shall be
conclusive and binding.

 

SECTION 4.02.  Each Credit Event.  The obligation of each Lender to make a Loan
on the occasion of any Borrowing, and of the Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:

 

(a) The representations and warranties of each Loan Party set forth in
the Loan Documents qualified as to materiality shall be true and correct and
those not so qualified shall be true and correct in all material respects on
and as of the date of such Borrowing or the date of issuance, amendment,
renewal or extension of such Letter of Credit, as applicable, except to the
extent such representations and warranties expressly relate to an earlier date
in which case such representations and warranties shall be true and correct as
of such earlier date.

 

(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.

 

(c) At the time of the Borrowing Request with respect to such
Borrowing, the amount that the Parent Borrower reasonably and in good faith
estimates will be the Cash Amount at 3:00 p.m., New York City time,
on the requested date of such Borrowing (after giving effect to such Borrowing)
shall not exceed $5,000,000, and such Borrowing Request shall contain a
statement to that effect and that the Parent Borrower reasonably and in good
faith expects to be in compliance with Section 6.14 as of the date of such
Borrowing.

 

(d) At the time of, and after giving effect to, such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, (i) the total
Domestic Revolving Exposures shall not exceed the

 

99

 

total amount
of the Domestic Commitments, (ii) the total Canadian Revolving Exposures
shall not exceed the total amount of the Canadian Commitments, (iii) the
total Revolving Exposures shall not exceed the lesser of (A) the total
amount of the Commitments and (B) the Borrowing Base then in effect,
(iv) if during the Availability Cap Period, the total Revolving Exposures
shall not exceed $45,000,000 and (v) if during a Reduced Availability
Period, the total Revolving Exposures shall not exceed the Reduced Availability
Amount.

 

(e) The Administrative Agent shall have received an Officers’
Certificate (as defined in the Senior First Lien Note Indenture, the Senior
Second Lien Note Indenture and the Senior Subordinated Note Indenture) of the
Parent Borrower, dated the date of such Borrowing, or the issuance, amendment,
renewal or extension of such Letter of Credit (delivered, and containing a
statement that it was delivered, in good faith after reasonable investigation)
to the effect that such Borrowing, or the issuance, amendment, renewal or
extension of such Letter of Credit, does not violate the provisions of the
Senior First Lien Note Indenture, the Senior Second Lien Note Indenture and the
Senior Subordinated Note Indenture (including a reasonably detailed summary as
to the calculations necessary to determine the absence of any such violation).

 

The making of any Loan on the occasion of each Borrowing and each
issuance, amendment, renewal or extension of a Letter of Credit shall be deemed
to constitute a representation and warranty by the Parent Borrower on the date
thereof as to the matters specified in paragraphs (a), (b) and (e) of this
Section.

 

ARTICLE V

 

Affirmative
Covenants

 

Until the
Commitments have expired or been terminated and the principal of and interest
on each Loan and all fees payable hereunder shall have been paid in full and
all Letters of Credit shall have expired or terminated and all
LC Disbursements shall have been reimbursed, each Borrower covenants and
agrees with the Lenders that:

 

100

 

SECTION 5.01.  Financial Statements and Other
Information.  The Parent Borrower
will furnish to the Administrative Agent, which will deliver to each Lender:

 

(a)
within 90 days after the end of each fiscal year of the Parent
Borrower, its audited consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Ernst & Young LLP or other independent
public accountants of recognized national standing (without a “going concern”
or like qualification or exception and without any qualification or exception
as to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Parent Borrower and its consolidated Subsidiaries
on a consolidated basis in accordance with GAAP consistently applied;

 

(b)
within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Parent Borrower, its consolidated balance
sheet and related statements of operations, stockholders’ equity and cash flows
as of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Parent Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;

 

(c)
concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Parent Borrower (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations with respect to

 

101

 

compliance
with Section 6.09, (iii) setting forth reasonably detailed
calculations of the Fixed Charge Coverage Ratio as of the last day of the last
fiscal period covered by such financial statements and (iv) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the Parent Borrower’s audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate;

 

(d)
concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during the
course of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);

 

(e)
no later than 12:00 noon, New York City time, on the
10th Business Day after the end of each month, a completed Borrowing Base
Certificate calculating and certifying the Borrowing Base as of the last day of
such month; provided, however, that (i) with respect to any
Weekly Reporting Period, if requested by the Collateral Agent or the
Co-Collateral Agent at any time, the Borrowing Base shall be computed for each
week containing a day within such Weekly Reporting Period and a completed
Borrowing Base Certificate calculating and certifying the Borrowing Base as of
the last day of such week shall be delivered to the Administrative Agent, the
Collateral Agent and the Co-Collateral Agent no later than 12:00 noon,
New York City time, on the third Business Day after the end of such week
and (ii) with respect to any Daily Reporting Period, if requested by the
Collateral Agent at any time, the Borrowing Base shall be computed for each
Business Day during such Daily Reporting Period and a completed Borrowing Base
Certificate calculating and certifying the Borrowing Base as of the end of such
Business Day shall be delivered to the Administrative Agent, the Collateral
Agent and the Co-Collateral Agent no later than 12:00 noon, New York
City time, on the third Business Day immediately following the Business Day for
which such Borrowing Base Certificate

 

102

 

must be delivered;
and provided further, however, that upon the termination of any
Weekly Reporting Period or Daily Reporting Period, the Parent Borrower shall
deliver to the Administrative Agent, the Collateral Agent and the Co-Collateral
Agent a certificate signed on behalf of the Parent Borrower by a Financial
Officer that sets forth in reasonable detail the calculations of the Borrowing
Base that support the termination of such Weekly Reporting Period or Daily
Reporting Period, as applicable, and includes such other information as may be
reasonably requested by the Consenting Agents with respect to the matters set
forth in such certificate;

 

(f)
to the extent requested by any Agent at any time when it reasonably
believes that the then-existing Borrowing Base Certificate is materially
inaccurate or that the Borrowing Base at such time would, if calculated at such
time, be materially different than the Borrowing Base reflected in such
then-existing Borrowing Base Certificate, within 10 Business Days of such
request, a completed Borrowing Base Certificate that satisfies the requirements
of Section 5.01(e) showing the Borrowing Base as of the date so requested,
accompanied by the reports and supporting information contemplated thereby or
otherwise requested by such Agent;

 

(g)
within two Business Days of any request therefor, such other information
concerning the amount, composition and manner of computation of the Borrowing
Base as any Agent may reasonably request (in such detail as may reasonably be
requested by such Agent);

 

(h)
not later than 30 days following the commencement of each fiscal
year of the Parent Borrower, a detailed consolidated budget for such fiscal
year (including a projected consolidated balance sheet and related statements
of projected operations and cash flow as of the end of and for such fiscal
year) and, promptly when available, any significant revisions of such budget;

 

(i)
promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Parent Borrower or any Subsidiary with the SEC, or any

 

103

 

Governmental
Authority succeeding to any or all of the functions of the SEC, or with any
national securities exchange, as the case may be; and

 

(j)
promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Parent Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, as the Administrative Agent, the Collateral Agent or any Lender may
reasonably request.

 

SECTION 5.02.  Notices of Material Events.  The Parent Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

 

(a)
the occurrence of any Default;

 

(b)
the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or, to the knowledge of
an executive officer or a Financial Officer of the Parent Borrower, affecting
the Parent Borrower or any Affiliate thereof that would reasonably be expected
to result in a Material Adverse Effect;

 

(c)
any downgrade of the ratings of the Parent Borrower’s senior secured
indebtedness for borrowed money by S&P, Moody’s or any other rating agency;

 

(d)
the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, would reasonably be expected to result in
liability of the Parent Borrower and the Subsidiaries in an aggregate amount
exceeding $5,000,000; and

 

(e)
any other development that results in, or would reasonably be expected
to result in, a Material Adverse Effect.

 

Each notice
delivered under this Section shall be accompanied by a statement of a Financial
Officer or other executive officer of the Parent Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

 

SECTION 5.03.  Information Regarding Collateral.  (a) 
The Parent Borrower will furnish to the Administrative

 

104

Agent and the
Collateral Agent prompt written notice of any change (i) in any Loan
Party’s corporate name or in any trade name used to identify it in the conduct
of its business or in the ownership of its properties, (ii) in the
location of any Loan Party’s chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by
it having an aggregate fair value in excess of $100,000 is located (including
the establishment of any such new office or facility), (iii) in any Loan
Party’s identity or corporate structure, (iv) in any Loan Party’s Federal
Taxpayer Identification Number or other organizational identification number
(or, with respect to each Foreign Subsidiary, any comparable identification
numbers issued by any Governmental Authority) or (v) in any Loan Party’s
jurisdiction of incorporation or organization. 
The Parent Borrower agrees not to effect or permit any change referred
to in the preceding sentence unless all filings have been made under the
Uniform Commercial Code (or the equivalent legislation of other jurisdictions)
or otherwise that are required in order for the Collateral Agent to continue at
all times following such change to have a valid, legal and perfected security
interest in all the Collateral; provided that the Collateral Agent shall
take any action reasonably requested by the Parent Borrower to maintain a
valid, legal and perfected security interest in all the Collateral.

 

(b)  Each quarter, at the time of delivery
of annual or quarterly financial statements with respect to the preceding
fiscal year or fiscal quarter pursuant to clause (a) or clause (b) of
Section 5.01, the Parent Borrower shall deliver to the Administrative
Agent a certificate of a Financial Officer and the chief legal officer of the
Parent Borrower or the Canadian Subsidiary Borrower, as
applicable,(i) setting forth the information required pursuant to
Section 2 of the Domestic Perfection Certificate and Section 2 of the
Canadian Perfection Certificate or confirming that there has been no change in
such information since the date of the applicable Perfection Certificate
delivered on the Effective Date or the date of the most recent certificate
delivered pursuant to this Section and (ii) certifying that all
Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations,
including all refilings, rerecordings and reregistrations, containing a
description

 

105

 

of the
Collateral have been filed of record in each governmental, municipal or other
appropriate office in each jurisdiction identified pursuant to clause (i)
above to the extent necessary to protect and perfect the security interests
under the Security Agreements for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period).

 

SECTION 5.04.  Existence; Conduct of Business.  The Parent Borrower will, and will cause
each of the Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges, franchises, patents, copyrights,
trademarks and trade names material to the conduct of the business of the
Parent Borrower and the Subsidiaries, taken as a whole; provided that
the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.04.

 

SECTION 5.05.  Payment of Obligations; Compliance
with Leases.  (a)  The Parent Borrower will, and will cause
each of the Subsidiaries to, pay (i) all material Taxes and other charges
of any Governmental Authority imposed on it or any of its properties or assets
or in respect of any of its franchises, business, income or property before any
material penalty or interest accrues thereon and (ii) all claims (including
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or may become a Lien (other than a Lien
permitted under Section 6.03) upon any of the property or assets of the
Parent Borrower or any of the Subsidiaries, prior to the time when any penalty
or fine shall be incurred with respect thereto, except where (A) the
validity or amount thereof is being contested in good faith by appropriate
procedures or proceedings, (B) the Parent Borrower or such Subsidiary has
set aside on its books adequate reserves with respect thereto in accordance
with GAAP, (C) such contest effectively suspends collection of the
contested obligation and the enforcement of any Lien securing such obligation
and (D) the failure to make payment pending such contest would not
reasonably be expected to result in a Material Adverse Effect.

 

(b)  The Parent Borrower will, and will
cause each of the Subsidiaries to, comply with all material terms of each lease
under which the Parent Borrower or any

 

106

 

Subsidiary
leases any property, as lessee, and at which Accounts or Inventory that is
included in the calculation of the Borrowing Base is located.

 

SECTION 5.06.  Maintenance of Properties.  The Parent Borrower will, and will cause
each of the Subsidiaries to, keep and maintain all property material to the
conduct of the business of the Parent Borrower and the Subsidiaries taken as a
whole in good working order and condition, ordinary wear and tear excepted.

 

SECTION 5.07.  Insurance.  The Parent Borrower will, and will cause
each of the Subsidiaries to, maintain insurance with respect to its material
properties and business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business, of such types and
in such amounts as are customarily carried under similar circumstances by such
other Persons.  Such insurance shall be
maintained with financially sound and reputable insurers, except that a portion
of such insurance program (not to exceed that which is customary in the case of
companies engaged in the same or similar business or having similar properties
similarly situated) may be effected through self-insurance, provided adequate
reserves therefor, in accordance with GAAP, are maintained.  All insurance policies or certificates (or
certified copies thereof) with respect to such insurance (A) shall,
subject to the terms of the Intercreditor Agreement, be endorsed to the
Collateral Agent’s reasonable satisfaction for the benefit of the Lenders
(including by naming the Collateral Agent as loss payee or additional insured,
as appropriate); and (B) shall state that such insurance policy shall not
be canceled without 30 days’ prior written notice thereof (or, in
connection with any cancelation resulting from the non-payment of premiums,
10 days’ prior written notice thereof). 
The Parent Borrower shall promptly notify the Administrative Agent of
any material change or revision, or notice of expiration or non-renewal, with
respect to any such insurance policy. 
The Parent Borrower shall furnish to the Administrative Agent, on the
Effective Date and on the date of delivery of each annual financial statement, full
information as to the insurance carried. 
At any time that insurance at levels described in Schedule 5.07 is
not being maintained by or on behalf of the Parent Borrower or any of the
Subsidiaries, the Parent Borrower will notify the Lenders in writing within two
Business Days thereof and, if thereafter

 

107

 

notified by
the Administrative Agent or the Required Lenders to do so, the Parent Borrower
or any such Subsidiary, as the case may be, shall obtain insurance at such
levels at least equal to those set forth on Schedule 5.07, provided
that such insurance can be obtained at commercially reasonable rates.

 

SECTION 5.08.  Casualty and Condemnation.  (a) 
The Parent Borrower will furnish to the Administrative Agent, the
Collateral Agent and the Lenders prompt written notice of any casualty or other
insured damage to any portion of any Collateral or the commencement of any
action or proceeding for the taking of any Collateral or any part thereof or
interest therein under power of eminent domain or by condemnation or similar
proceeding, where the fair market value of the Collateral so affected in
connection with any such casualty event or condemnation is at least $1,000,000.

 

(b)  If any event described in
paragraph (a) of this Section results in Net Proceeds (whether in the
form of insurance proceeds, condemnation award or otherwise), the Collateral
Agent is authorized to collect such Net Proceeds and, if received by the Parent
Borrower or any Subsidiary, such Net Proceeds shall be paid over to the Collateral
Agent; provided that (i) if the aggregate Net Proceeds in respect
of such event (other than proceeds of business interruption insurance) are less
than $5,000,000, such Net Proceeds shall be paid over to the Parent Borrower
unless a Default has occurred and is continuing, (ii) all proceeds of
business interruption insurance shall be paid over to the Parent Borrower
unless a Default has occurred and is continuing and (iii) for so long as
the Senior First Lien Notes remain outstanding, all Net Proceeds in respect of
Second-Priority Collateral shall be paid over to the Senior First Lien Note
Trustee to the extent required by the terms of the Senior First Lien Note
Documents.  All such Net Proceeds
retained by or paid over to the Collateral Agent shall be held by the
Collateral Agent and released from time to time to pay the costs of repairing,
restoring or replacing the affected property or funding expenditures for assets
in any business permitted under Section 6.04(b), in each case in
accordance with the terms of the applicable Security Document, subject to the
provisions of the applicable Security Document regarding application of such
Net Proceeds during a Default.

 

108

 

SECTION 5.09.  Books and Records; Inspection and
Audit Rights.  (a)  The Parent Borrower will, and will cause
each of the Subsidiaries to, keep proper books of record and account in which
full, true and correct entries are made in all material respects of all
dealings and transactions in relation to its business and activities.  The Parent Borrower will, and will cause
each of the Subsidiaries to, permit any representatives designated by the
Administrative Agent, the Collateral Agent or any Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants (and the Parent Borrower shall be
provided the opportunity to participate in any such discussions with such
independent accountants), all at such reasonable times and as often as
reasonably requested.

 

(b)  The Parent Borrower will, and will
cause each of the Subsidiaries to, permit any representatives designated by the
Consenting Agents (including any consultants, accountants, lawyers and
appraisers retained by the Consenting Agents) to conduct evaluations and
appraisals of the Parent Borrower’s computation of the Borrowing Base and the
assets included in the Borrowing Base, all at such reasonable times and as
often as reasonably requested.  The
Parent Borrower shall pay the reasonable fees and expenses of any
representatives retained by the Consenting Agents to conduct any such
evaluation or appraisal.  The Parent
Borrower also agrees to modify or adjust the computation of the Borrowing Base
(which may include maintaining additional reserves or modifying the eligibility
criteria for the components of the Borrowing Base) to the extent required by
the Consenting Agents or the Required Lenders as a result of any such
evaluation or appraisal or otherwise.

 

(c)  In the event that historical
accounting practices, systems or reserves relating to the components of the
Borrowing Base are modified in a manner that is adverse to the Lenders in any
material respect, the Parent Borrower will agree to maintain such additional
reserves (for purposes of computing the Borrowing Base) in respect of the
components of the Borrowing Base and make such other adjustments to its
parameters for including the components of the Borrowing Base as the Consenting
Agents or the

 

109

 

Required
Lenders in their discretion shall require based upon such modifications.

 

SECTION 5.10.  Compliance with Laws.  The Parent Borrower will, and will cause
each of the Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property,
including Environmental Laws except where the failure to do so, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.

 

SECTION 5.11.  Use of Proceeds and Letters of
Credit.  The proceeds of the
Revolving Loans and Swingline Loans will be used solely for general corporate
purposes of the applicable Borrower.  No
part of the proceeds of any Loan will be used, whether directly or indirectly,
and whether immediately, incidentally or ultimately, (i) to purchase or
carry Margin Stock or any security convertible into or exchangeable for Margin
Stock, or extend credit to others for the purpose of purchasing or carrying
Margin Stock or any security convertible into or exchangeable for Margin Stock,
or to refund Indebtedness originally incurred for such purpose, or
(ii) for any purpose that entails a violation of any of the Regulations of
the Board, including Regulation U and Regulation X.  Letters of Credit will be issued only for
general corporate purposes.

 

SECTION 5.12.  Additional Subsidiaries.  If any additional Subsidiary is formed or
acquired after the Effective Date (or if any Subsidiary ceases to be an
Excluded Subsidiary after the Effective Date), the Parent Borrower will notify
the Administrative Agent, the Collateral Agent and the Lenders thereof and
(a) if (i) such Subsidiary is a Loan Party (other than a Loan Party
organized under the laws of Canada or any province thereof), the Parent
Borrower will cause such Subsidiary to become a party to the Guarantee
Agreement, the Indemnity, Subrogation and Contribution Agreement, the Domestic Security
Agreement, the Domestic Pledge Agreement and each other applicable Security
Document in the manner provided therein (or, if such Loan Party is a Foreign
Subsidiary not organized under the laws of Canada or any province thereof, such
mortgages and security, pledge, guarantee and subordination agreements as
reasonably requested by the Administrative Agent or the Collateral Agent to
guarantee and secure the Obligations) and (ii) if such Subsidiary is a
Loan Party organized under the laws of Canada or any province thereof, the
Parent Borrower will cause such

 

110

 

Subsidiary to
become a party to the Guarantee Agreement, the Indemnity, Subrogation and
Contribution Agreement, the Canadian Security Agreement, the Canadian Pledge
Agreement and each other applicable Security Document in the manner provided
therein, in each case within three Business Days after such Subsidiary is
formed or acquired and promptly take such actions to create and perfect Liens
on such Subsidiary’s assets to secure the Obligations as the Administrative
Agent or the Collateral Agent or the Required Lenders shall reasonably request
and (b) if any Equity Interests or Indebtedness of such Subsidiary are
owned by or on behalf of any Loan Party, the Parent Borrower will cause
certificates and promissory notes evidencing such Equity Interests and
Indebtedness to be pledged to secure the Obligations within three Business Days
after such Subsidiary is formed or acquired (except that, if such Subsidiary is
a Foreign Subsidiary and is not a Loan Party, Equity Interests of such
Subsidiary that are owned by or on behalf of the Parent Borrower or a
Subsidiary Loan Party and that are to be pledged to secure the Obligations may
be limited to 65% of the outstanding voting Equity Interests of such
Subsidiary).

 

SECTION 5.13.  Further Assurances.  (a) 
The Parent Borrower will, and will cause each other Loan Party to,
execute any and all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents), that may be required under any applicable law, or which
the Administrative Agent or the Collateral Agent or the Required Lenders may
reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien, all at the expense of the Loan Parties.  The Parent Borrower also agrees to provide
to the Administrative Agent and the Collateral Agent, from time to time upon
request, evidence reasonably satisfactory to the Administrative Agent and the
Collateral Agent as to the perfection and priority of the Liens created or
intended to be created by the Security Documents.

 

(b)  If any material assets (including any
real property or improvements thereto or any interest therein) are acquired by
the Parent Borrower or any other Loan Party

 

111

 

after the
Effective Date (other than assets constituting Collateral that become subject
to the Lien of the appropriate Security Agreements upon acquisition thereof),
the Parent Borrower will notify the Administrative Agent, the Collateral Agent
and the Lenders thereof, and, if requested by the Administrative Agent, the
Collateral Agent or the Required Lenders, the Parent Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the other Loan Parties to take, such actions as shall be necessary or
reasonably requested by the Administrative Agent or the Collateral Agent to
grant and perfect such Liens, including actions described in paragraph (a)
of this Section, all at the expense of the Loan Parties, provided that
the following property shall not be covered by this Section 5.13(b):  (i) intellectual property a security
interest in which would require filings or recordations under laws other than
the laws of the United States, Canada (in the case of intellectual
property of the Canadian Subsidiary Borrower or another Loan Party organized
under the laws of Canada or any province thereof) or any jurisdiction thereof,
(ii) owned real estate or leasehold interests with an aggregate fair
market value of less than $10,000,000, (iii) any other items of tangible
personal property with, in each case, a fair market value of less than $500,000
and (iv) items explicitly excluded by exceptions in any Security
Agreement, Pledge Agreement or other Security Document.

 

ARTICLE VI

 

Negative Covenants

 

Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all
LC Disbursements shall have been reimbursed, the Parent Borrower covenants
and agrees with the Lenders that:

 

SECTION 6.01.  Indebtedness.  The Parent Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:

 

(i) Indebtedness created under the Loan Documents;

 

(ii) Indebtedness existing on the Effective Date and set forth in
Schedule 6.01 and extensions,

 

112

 

renewals and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof;

 

(iii) Indebtedness of the Parent Borrower to any Subsidiary and of any
Subsidiary to the Parent Borrower or any other Subsidiary; provided that
Indebtedness of any Subsidiary that is not a Loan Party to any Loan Party shall
be subject to Section 6.05;

 

(iv) Guarantees by the Parent Borrower of Indebtedness of any
Subsidiary or Joint Venture and by any Subsidiary of Indebtedness of the Parent
Borrower, any other Subsidiary or any Joint Venture; provided that
(i) Guarantees by (A) any Loan Party of Indebtedness of any
Subsidiary that is not a Loan Party and (B) the Parent Borrower or any
Subsidiary of Indebtedness of a Joint Venture, in each case shall be subject to
Section 6.05, (ii) any Guarantee of the Senior Subordinated Notes by
a Subsidiary shall be subordinated on the same terms as the Senior Subordinated
Notes and (iii) any Guarantee of the Senior Subordinated Notes, the Senior
First Lien Notes or the Senior Second Lien Notes shall be given only by a
Subsidiary that is a Loan Party;

 

(v) Indebtedness of the Parent Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or capital
assets, including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on any
such assets prior to the acquisition thereof, including Capital Lease Obligations
incurred pursuant to transactions permitted by Section 6.07, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; provided that
(A) such Indebtedness is incurred prior to or within 120 days after
such acquisition or the completion of such construction or improvement and
(B) the aggregate principal amount of Indebtedness permitted by this
clause (v) shall not exceed $10,000,000 at any time outstanding;

 

(vi) the Senior First Lien Notes in an aggregate amount not exceeding
the $225,298,620 accreted value

 

113

 

thereof issued on the Effective Date (plus any accretion of the Senior
First Lien Notes after the Effective Date in accordance with the terms of the
Senior First Lien Note Indenture);

 

(vii) Indebtedness with respect to surety, appeal and performance bonds
obtained by the Parent Borrower or any of the Subsidiaries in the ordinary
course of business;

 

(viii) other Indebtedness of any Loan Party; provided that
(A) the aggregate principal amount of Indebtedness that may be incurred
pursuant to this clause (viii) shall not exceed $5,000,000 at any time
outstanding and (B) any such Indebtedness shall be unsecured (other than
Indebtedness secured by a Lien permitted by Section 6.03(d));

 

(ix) other Indebtedness of any Subsidiary that is not a Loan Party; provided
that the aggregate amount of Indebtedness that may be incurred pursuant to this
clause (ix) and outstanding at any time shall not exceed $35,000,000, minus the
aggregate amount of Indebtedness that has been incurred pursuant to clauses (v)
and (viii) above and that is outstanding at such time;

 

(x) the Senior Second Lien Notes in an aggregate principal amount not
exceeding $250,000,000;

 

(xi) the Senior Subordinated Notes in an aggregate principal amount not
exceeding $320,000,000;

 

(xii) the Existing Preferred Stock and all additional shares of such
Preferred Stock permitted to be issued under Section 6.09(a)(ii), in each
case to the extent that such Preferred Stock is or may subsequently become
characterized as Indebtedness in the consolidated financial statements of the
Parent Borrower in accordance with GAAP and other applicable financial
accounting standards; and

 

(xiii) unsecured Indebtedness representing the deferred purchase price
for Permitted Acquisitions; provided that (a) no Subsidiary shall be
liable (pursuant to a Guarantee or otherwise) for any such Indebtedness
incurred in connection with any Permitted Acquisition other than any Subsidiary
resulting from

 

114

 

such Permitted Acquisition, (b) the covenants and other material terms
with respect to such Indebtedness shall be no more restrictive to the Parent
Borrower than the equivalent covenants and terms contained in this Agreement
and (c) the aggregate principal amount of Indebtedness permitted by this clause
(xiii) shall not exceed $10,000,000 at any time outstanding.

 

SECTION 6.02.  Certain Equity Securities.  The Parent Borrower will not, nor will it
permit any Subsidiary to, issue any preferred stock (other than Qualified
Preferred Stock of the Parent Borrower) or be or become liable in respect of
any obligation (contingent or otherwise) to purchase, redeem, retire, acquire
or make any other payment in respect of any Equity Interests of the Parent
Borrower or any Subsidiary, except for (i) the warrants issued in
connection with the Existing Preferred Stock, (ii) the Warrants and
(iii) actions otherwise permitted under Section 6.09.

 

SECTION 6.03.  Liens.  The Parent Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:

 

(a)
Liens created under the Loan Documents;

 

(b)
Permitted Encumbrances;

 

(c)
any Lien on any property or asset of the Parent Borrower or any
Subsidiary existing on the Effective Date and set forth in Schedule 6.03; provided
that (i) such Lien shall not apply to any other property or asset of the
Parent Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations that it secures on the Effective Date and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof;

 

(d)
any Lien existing on any property or asset prior to the acquisition
thereof by the Parent Borrower or any Subsidiary or existing on any property or
asset of any Person that becomes a Subsidiary after the Effective Date prior to
the time such Person becomes a Subsidiary; provided that (i) such
Lien is not created in contemplation of or in connection with

 

115

 

such acquisition or such Person becoming a Subsidiary, as the case may
be, (ii) such Lien shall not apply to any other property or assets of the
Parent Borrower or any Subsidiary and (iii) such Lien shall secure only
those obligations that it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be and extensions, renewals
and replacements thereof that do not increase the outstanding principal amount
thereof;

 

(e)
Liens on fixed or capital assets acquired, constructed or improved by
the Parent Borrower or any Subsidiary; provided that (i) such Liens
secure Indebtedness permitted by clause (v) of Section 6.01,
(ii) such Liens and the Indebtedness secured thereby are incurred prior to
or within 120 days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does
not exceed 100% of the cost of acquiring, constructing or improving such fixed
or capital assets and (iv) such security interests shall not apply to any
other property or assets of the Parent Borrower or any Subsidiary other than
property directly related to such fixed or capital assets and of a type
customarily covered by such Liens, except that such security interests may not
apply to any accounts receivable or inventory;

 

(f)
Liens securing Indebtedness incurred pursuant to Section 6.01(ix); provided
that such Liens shall apply only to properties and assets of Foreign
Subsidiaries that are not Loan Parties;

 

(g)
leases and subleases of real property and tangible personal property and
licenses and sublicenses of intellectual property rights, in each case granted
in the ordinary course of business and not interfering individually or in the
aggregate (with all such licenses and subleases being taken as a whole) in any
material respect with the conduct of the business of the Parent Borrower and
the Subsidiaries;

 

(h)
Liens to secure compensation and indemnity obligations to the trustee
under the indenture for the Senior Subordinated Notes and the warrant agent
under the warrant agreement for the Warrants;

 

116

 

(i)
Liens granted under the Senior First Lien Security Documents or the
Senior Second Lien Security Documents; provided that (i) such Liens
secure only obligations under the Senior First Lien Note Documents and the
Senior Second Lien Note Documents, respectively, except that such obligations
shall not include obligations under any Indebtedness (or obligations under any
Swap Agreements) except to the extent incurred pursuant to
Section 6.01(x), with respect to the Senior Second Lien Notes, or
Section 6.01(vi), with respect to the Senior First Lien Notes,
(ii) such Liens do not apply to any asset other than Collateral that is subject
to a Lien granted under a Security Document to secure the Obligations,
(iii) any Liens on any First-Priority Collateral that secure obligations
in respect of the Senior First Lien Notes or Senior Second Lien Notes are
subordinated to the Liens on such First-Priority Collateral that secure the
Obligations, (iv) any Liens on any Second-Priority Collateral that secure
obligations in respect of the Senior Second Lien Notes rank equally and ratably
with the Liens on such Second-Priority Collateral that secure the Obligations
and (v) all such Liens granted under the Senior First Lien Security
Documents and Senior Second Lien Security Documents shall be subject to the
terms of the Intercreditor Agreement; and

 

(j)
Liens on cash deposited with the issuing bank for any Existing Letter of
Credit to cash collateralize such Existing Letter of Credit (including with
respect to interest, fees and expenses associated therewith); provided
that (i) the amount of such cash subject to such Lien at any time shall
not exceed 102% of the face amount of such Existing Letter of Credit and
(ii) upon the termination or expiration of such Existing Letter of Credit,
to the extent there has been no drawing under such Existing Letter of Credit
that has not been reimbursed at such time, an amount of cash equal to 102% of
the face amount of such Existing Letter of Credit (less any amounts retained to
pay interest, fees and expenses associated therewith) shall be promptly
released from such Lien.

 

SECTION 6.04.  Fundamental Changes.  (a) 
The Parent Borrower will not and will not permit any Subsidiary to,
merge into or consolidate with any other Person, or

 

117

 

permit any
other Person to merge into or consolidate with it, or liquidate or dissolve,
except that, if at the time thereof and immediately after giving effect thereto
no Default shall have occurred and be continuing (i) any Subsidiary (other
than the Canadian Subsidiary Borrower) may merge into the Parent Borrower in a
transaction in which the Parent Borrower is the surviving corporation,
(ii) any Subsidiary (other than the Canadian Subsidiary Borrower) may
merge into any Subsidiary that is a Loan Party, provided that if any
Subsidiary that is party to such transaction is (A) a Loan Party, the
surviving entity must be a Loan Party or (B) a Domestic Subsidiary
Borrower, the surviving entity must be a Domestic Subsidiary Borrower,
(iii) any Subsidiary that is not a Loan Party may merge into any
Subsidiary that is not a Loan Party, (iv) any Subsidiary (other than the
Canadian Subsidiary Borrower) may merge into any other Person that becomes a
Loan Party in connection with a Permitted Acquisition, provided that if
such Subsidiary is (A) a Loan Party, the surviving entity must be a Loan
Party, or (B) a Domestic Subsidiary Borrower, the surviving entity must be
such Domestic Subsidiary Borrower, (v) any Subsidiary (other than any
Domestic Subsidiary Borrower or the Canadian Subsidiary Borrower) may liquidate
or dissolve if the Parent Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Parent Borrower and
is not materially disadvantageous to the Lenders; provided that any such
merger involving a Person that is not a Wholly Owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by
Section 6.05 and (vi) the Parent Borrower may merge with an Affiliate
incorporated under the laws of the State of Delaware solely for the purpose of
incorporating or organizing the Parent Borrower under the laws of the State of
Delaware; provided that such merger does not adversely affect the
Lenders in any material respect.

 

(b)  The Parent Borrower will not, and
will not permit any of the Subsidiaries to, engage to any material extent in
any business other than businesses of the type conducted by the Parent Borrower
and the Subsidiaries on the Effective Date and businesses reasonably related,
ancillary or complementary thereto.

 

SECTION 6.05.  Investments, Loans, Advances,
Guarantees and Acquisitions.  The
Parent Borrower will not, and will not permit any of the Subsidiaries to,
purchase,

 

118

 

hold or
acquire (including pursuant to any merger with any Person that was not a Wholly
Owned Subsidiary prior to such merger) any Equity Interests, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the forgoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any
other Person constituting a business unit, except:

 

(a)
Permitted Investments;

 

(b)
investments existing on the date hereof and set forth on
Schedule 6.05(b), to the extent such investments would not be permitted
under any other clause of this Section 6.05;

 

(c)
investments by the Parent Borrower and the Subsidiaries in the Equity
Interests of their respective Subsidiaries (that are Subsidiaries prior to such
Investment); provided that (i) any such Equity Interests owned by a
Loan Party shall be pledged to secure the Obligations and (ii)(A) the amount of
any such investment by a Loan Party in a Subsidiary that is not a Loan Party
shall be automatically added to the Accumulated Investment Balance and (B)
(1) at all times the Accumulated Investment Balance shall not exceed
$10,000,000 and (2) immediately prior to and immediately after giving
effect to such investment (and the incurrence of any Loans and the issuance of
any Letters of Credit in connection therewith), the total Revolving Exposures
shall not exceed 25% of the lesser of (I) the total amount of the Commitments
and (II) the Borrowing Base then in effect;

 

(d)
loans or advances made by the Parent Borrower to any Subsidiary and made
by any Subsidiary to the Parent Borrower or any other Subsidiary; provided
(i) that any such loans and advances made by a Loan Party shall be
evidenced by a promissory note pledged to secure the Obligations and (ii)(A)
the amount of any such loan or advance by a Loan Party to a Subsidiary that is
not a Loan Party shall be automatically added to the Accumulated Investment
Balance and (B) (1) at all times the Accumulated Investment Balance shall
not exceed $10,000,000 and

 

119

 

(2) immediately prior to and immediately after giving effect to
such loan or advance (and the incurrence of any Loans and the issuance of any
Letters of Credit in connection therewith), the total Revolving Exposures shall
not exceed 25% of the lesser of (I) the total amount of the Commitments
and (II) the Borrowing Base then in effect;

 

(e)
Guarantees by the Parent Borrower of Indebtedness and other obligations
of any Subsidiary or any Joint Venture and Guarantees by any Subsidiary of
Indebtedness or other obligations of the Parent Borrower or any Subsidiary or
any Joint Venture; provided that (i) a Subsidiary shall not Guarantee
the Senior First Lien Notes, Senior Second Lien Notes or Senior Subordinated
Notes unless (A) such Subsidiary also has Guaranteed the Obligations and
(B) with respect to any Guarantee of the Senior Subordinated Notes, such
Guarantee is subordinated to such Guarantee of the Obligations on terms no less
favorable to the Lenders than the subordination provisions of the Senior
Subordinated Notes, (ii) any such Guarantee constituting Indebtedness is
permitted by Section 6.01 and (iii) in the event of any Guarantee by
a Loan Party of Indebtedness of a Person that is not a Loan Party, (A) the
aggregate principal amount of such Indebtedness shall be automatically added to
the Accumulated Investment Balance and (B) (1) at all times the Accumulated
Investment Balance shall not exceed $10,000,000 and (2) immediately prior
to and immediately after giving effect to such Guarantee, the total Revolving
Exposures shall not exceed 25% of the lesser of (I) the total amount of
the Commitments and (II) the Borrowing Base then in effect;

 

(f)
investments received in connection with the bankruptcy or reorganization
of, or settlement of delinquent accounts and disputes with, customers and
suppliers, in each case in the ordinary course of business;

 

(g)
Permitted Acquisitions; provided that (i) the aggregate amount of
the investment attributable to any such Permitted Acquisition (including all
Indebtedness assumed or acquired in connection therewith) is automatically
added to the Accumulated Investment Balance and (ii) (A) at all times the
Accumulated

 

120

 

Investment Balance shall not exceed $10,000,000 and
(B) immediately prior to and immediately after giving effect to such
Permitted Acquisition (and the incurrence of any Loans and the issuance of any
Letters of Credit in connection therewith), the total Revolving Exposures shall
not exceed 25% of the lesser of (1) the total amount of the Commitments
and (2) the Borrowing Base then in effect;

 

(h)
investments in Joint Ventures (i) existing on February 17,
2004, and set forth in Schedule 6.05(h) or (ii) made thereafter,
provided that (A) the amount of any such investment pursuant to this clause
(ii) shall be automatically added to the Accumulated Investment Balance and
(B) (1) at all times the Accumulated Investment Balance shall not
exceed $10,000,000 and (2) immediately prior to and immediately after
giving effect to any such investment (and the incurrence of any Loans and the
issuance of any Letters of Credit in connection therewith), the total Revolving
Exposures shall not exceed 25% of the lesser of (I) the total amount of
the Commitments and (II) the Borrowing Base then in effect;

 

(i)
payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;

 

(j)
investments of any Person existing at the time such Person becomes a
Subsidiary or at the time such Person merges or consolidates with the Parent
Borrower or any of the Subsidiaries, in either case in compliance with the
terms of this Agreement, provided that such investments were not made by
such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Subsidiary or such merger or consolidation;

 

(k)
Swap Agreements entered into in compliance with Section 6.08;

 

(l)
other loans, advances and investments, provided that (i) the amount of
any such loan, advance or investment made pursuant to this clause (l) shall be
automatically added to the Accumulated Investment Balance and (ii) (A) at
all times the Accumulated

 

121

 

Investment Balance shall not exceed $10,000,000 and
(B) immediately prior to and immediately after giving effect to any such
loan, advance or investment (and the incurrence of any Loans and the issuance
of any Letters of Credit in connection therewith),the total Revolving Exposures
shall not exceed 25% of the lesser of (1) the total amount of the
Commitments and (2) the Borrowing Base then in effect; and

 

(m)
notes or other evidences of Indebtedness acquired as consideration in
connection with a sale, transfer, lease or other disposition of any asset by
the Parent Borrower or any of the Subsidiaries.

 

SECTION 6.06.  Asset Sales.  The Parent Borrower will not, and will not
permit any of the Subsidiaries to, sell, transfer, lease or otherwise dispose
of any asset, including any Equity Interest owned by it (other than any such
sale, transfer, lease or other disposition resulting from any casualty or
condemnation of any assets of the Parent Borrower or any of the Subsidiaries),
nor will the Parent Borrower permit any of the Subsidiaries to issue any
additional Equity Interest in such Subsidiary, except:

 

(a)
sales of inventory, used or surplus tangible property and Permitted
Investments in the ordinary course of business;

 

(b)
sales, transfers, issuances and dispositions to the Parent Borrower or a
Subsidiary; provided that any such sales, transfers or dispositions
involving a Subsidiary that is not a Loan Party shall be made in compliance
with Section 6.10;

 

(c)
leases and licenses entered into in the ordinary course of business;

 

(d)
sales in connection with sale-leasebacks permitted under Section 6.07;

 

(e)
sales of investments referred to in clauses (b), (f), (h), (l) and
(m) of Section 6.05;

 

(f)
sales, transfers and dispositions of assets (other than Equity Interests
of a Subsidiary) that are not permitted by any other clause of this Section; provided
that the aggregate fair market value of all assets sold, transferred or
otherwise disposed of in

 

122

 

reliance upon this clause (f) shall not, in the aggregate, exceed
$5,000,000 during the term of this Agreement;

 

(g)
sales, transfers and dispositions of Foreign Assets;

 

(h)
transfers and dispositions constituting investments permitted under
Section 6.05; and

 

(i)
sales, transfers and dispositions of the assets set forth in
Schedule 6.06; provided that the Parent Borrower provides the
Administrative Agent, the Collateral Agent and the Co-Collateral Agent with
written notice of any such sale, transfer or disposition not less than five
Business Days prior to the consummation thereof;

 

provided that all sales, transfers, leases and
other dispositions permitted hereby (other than those among Loan Parties
permitted by clause (b) above) shall be made for an amount not less than
fair value (as determined in good faith by the Board of Directors of the Parent
Borrower), or, in the case of clause (d) above, for an amount, if less,
equal to the aggregate cost expended for the property that is the subject of
such sale-leaseback (except that those permitted by clause (a) above shall
be made on terms that are customary in the ordinary course) and for
consideration at least 75% of which is (i) cash, (ii) except in the
case of dispositions pursuant to clause (b) above that are not among Loan
Parties, in the form of properties or assets to be owned by the Parent Borrower
or any other Loan Party for use in a business permitted by this Agreement or
(iii) except in the case of dispositions pursuant to clause (b) above
that are not among Loan Parties, voting Equity Interests in one or more Persons
engaged in a Permitted Business that are or are to become Wholly Owned
Subsidiaries that will be Loan Parties in connection with such transaction (provided
that, (A) in the case of clause (ii), in the event of any sale,
transfer, lease or other disposition of First-Priority Collateral, the assets
received in respect of such First-Priority Collateral shall be First-Priority
Assets that become First-Priority Collateral, (B) in the case of
clause (iii), in the event such Equity Interests of such Person are
received in respect of any sale, transfer, lease or other disposition of
First-Priority Collateral, such Person owns First-Priority Assets that become
First-Priority

 

123

 

Collateral with a fair market value that is equal to or greater than
(1) 75% of the fair market value of the First-Priority Collateral that is
the subject of such sale, transfer, lease or disposition, minus (2) the
fair market value of any consideration received by any Loan Party pursuant to
clauses (i) and (ii) above and (C) in the case of clauses (ii)
and (iii), the applicable transaction involves a Permitted Acquisition).  For purposes of this Section 6.06, the
following shall be deemed to be cash: 
(a) the assumption of any liabilities of the Parent Borrower or any
Subsidiary with respect to, and the release of the Parent Borrower or such
Subsidiary from all liability in respect of, any Indebtedness of the Parent
Borrower or the Subsidiaries permitted hereunder (in the amount of such
Indebtedness) in connection with a sale, transfer, lease or other disposition
of Second-Priority Collateral permitted under Section 6.06 and
(b) securities received by the Parent Borrower or any Subsidiary from the
transferee that are immediately convertible into cash without breach of their
terms or the agreement pursuant to which they were purchased and that are
promptly converted by the Parent Borrower or such Subsidiary into cash.

 

For purposes of this Section 6.06 and for so long as any Senior
First Lien Notes that are secured by a first-priority Lien on the
Second-Priority Collateral remain outstanding, (a) any sale, transfer,
lease or other disposition of the Equity Interests of any Loan Party that owns
assets constituting First-Priority Collateral or Second-Priority Collateral shall
be deemed to be a sale, transfer, lease or disposition of such First-Priority
Collateral or Second-Priority Collateral, (b) any sale, transfer, lease or
other disposition of Equity Interests of a Loan Party that owns both
First-Priority Collateral and Second-Priority Collateral shall be deemed to be
a separate sale, transfer, lease or disposition of such First-Priority
Collateral and such Second-Priority Collateral) and (c) the proceeds
received by the Parent Borrower or any Subsidiary in respect of any such sale,
transfer, lease or disposition referred to in clause (b) above (or any
sale, transfer, lease or other disposition of assets (other than those
described in clause (b) above) including both First-Priority Collateral
and Second-Priority Collateral without allocating the purchase price between
First-Priority Collateral and Second-Priority Collateral) shall be allocated to
the First-Priority Collateral and the Second-Priority

 

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Collateral pursuant to the terms of the
Intercreditor Agreement.

 

SECTION 6.07.  Sale and Lease-Back Transactions.  The Parent Borrower will not, and will not
permit any Subsidiary to, enter into any arrangement, directly or indirectly,
with any Person whereby it shall sell or transfer any property, real or
personal, used or useful in its business, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other property that it
intends to use for substantially the same purpose or purposes as the property
being sold or transferred, except for any such sale of fixed or capital assets
that is consummated within 120 days after the date the Parent Borrower or
such Subsidiary acquires or finishes construction of such fixed or capital
asset.

 

SECTION 6.08.  Swap Agreements.  The Parent Borrower will not, and will not
permit any of the Subsidiaries to, enter into any Swap Agreement, except
(a) Swap Agreements entered into to hedge or mitigate risks to which the
Parent Borrower or any Subsidiary has actual exposure (other than those in
respect of Equity Interests of the Parent Borrower or any of the Subsidiaries)
and (b) Swap Agreements entered into in order to effectively cap, collar
or exchange interest rates (from fixed to floating rates, from one floating rate
to another floating rate, to a fixed rate or otherwise) with respect to any
interest-bearing liability or investment of the Parent Borrower or any
Subsidiary.

 

SECTION 6.09.  Restricted Payments; Certain
Payments of Indebtedness.  (a)  The Parent Borrower will not, and will not
permit any Subsidiary to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except (i) Wholly Owned Subsidiaries may declare and pay
dividends with respect to their Equity Interests and Subsidiaries that are not
Wholly Owned Subsidiaries may declare and pay dividends ratably with respect to
their Equity Interests, (ii) the Parent Borrower may, subject to
Section 6.02, make dividends with respect to its Equity Interests
consisting solely of additional Equity Interests permitted hereunder and
(iii) the Parent Borrower may make Restricted Payments to management or
employees of the Parent Borrower and the Subsidiaries or their Permitted Transferees
(as defined in the Stockholders Agreement) in an aggregate amount not to exceed
$1,000,000

 

125

 

during the
term of this Agreement, pursuant to and in accordance with the Stockholders
Agreement, employment agreements, stock option plans or agreements or other
benefit plans or agreements; provided that no Default has occurred and
is continuing or would result therefrom; and (iv) the Parent Borrower may
repurchase or otherwise acquire from any holder thereof shares of Qualified
Preferred Stock for consideration consisting solely of (x) Qualified
Preferred Stock, (y) cash in an aggregate amount not greater than the
amount of Net Proceeds received from a substantially concurrent issuance of
Qualified Preferred Stock or (z) a combination of the Qualified Preferred
Stock described in clause (x) and the cash described in clause (y); provided
that no Default has occurred and is continuing or would result therefrom.

 

(b)  The Parent Borrower will not, and will
not permit any Subsidiary to, make or agree to pay or make, directly or
indirectly, any payment or other distribution (whether in cash, securities or
other property) of or in respect of principal of or interest on any Senior
First Lien Note, Senior Second Lien Note or Senior Subordinated Note, or any
payment or other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any Senior
First Lien Note, Senior Second Lien Note or Senior Subordinated Note, except
(i) payment of regularly scheduled interest payments as and when due in
respect of the Senior First Lien Notes; provided that, on and prior to
June 15, 2007, the Parent Borrower shall not be permitted to make cash
interest payments in respect of the Senior First Lien Notes unless
(A) such payment is made after the date that is 18 months after the
Effective Date, (B) no Default has occurred and is continuing or would
result therefrom and (C) the Fixed Charge Coverage Ratio as of the last
day of the most recently completed fiscal quarter for which financial
statements have been delivered pursuant to Section 5.01(a) or (b) is
equal to or greater than 1.15 to 1.00 and (ii) payment of regularly
scheduled interest payments as and when due in respect of the Senior Second
Lien Notes and Senior Subordinated Notes.

 

SECTION 6.10.  Transactions with Affiliates.  The Parent Borrower will not, and will not
permit any Subsidiary to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise

 

126

 

acquire any
property or assets from, or otherwise engage in any other transactions with,
any of its Affiliates (including any Subsidiary), except (a) transactions
in the ordinary course of business that are at prices and on terms and
conditions not less favorable to the Parent Borrower or such Subsidiary than
could be obtained on an arm’s-length basis from unrelated third parties (as
determined in good faith by members of the board of directors of the Parent
Borrower having a majority of the voting power held by all disinterested
members of the board of directors of the Parent Borrower), (b) transactions
between or among the Loan Parties and not involving any other Affiliate (except
to the extent the involvement with the other Affiliate otherwise complies with
this Section 6.10), (c) any Restricted Payment permitted by
Section 6.09 and (d) transactions expressly contemplated by
Schedule 6.10.

 

SECTION 6.11.  Restrictive Agreements.  The Parent Borrower will not and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Parent Borrower or any
Subsidiary to create, incur or permit to exist any Lien upon any of its
property or assets or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any of its Equity Interests (it being
understood that the priority of any preferred stock in receiving dividends or
liquidating distributions prior to dividends or liquidating distributions being
paid on common stock shall not be deemed a restriction on the ability to make
distributions on capital stock) or to make or repay loans or advances to the
Parent Borrower or any other Subsidiary (it being understood that the
subordination of loans or advances made to the Parent Borrower or any Subsidiary
to other Indebtedness incurred by the Parent Borrower or such Subsidiary shall
not be deemed a restriction on the ability to make loans or advances) or to
Guarantee Indebtedness of the Parent Borrower or any other Subsidiary; provided
that (i) the foregoing shall not apply to restrictions and conditions
imposed by law or by any Loan Document, (ii) the foregoing shall not apply
to restrictions and conditions existing on the Effective Date identified on
Schedule 6.11, (iii) the foregoing shall not apply to any restriction
or condition with respect to a Subsidiary pursuant to an agreement relating to
any Equity Interests or Indebtedness of such Subsidiary, in each case incurred
by such

 

127

 

Subsidiary
prior to the date on which such Subsidiary was acquired by the Parent Borrower
(other than Equity Interests or Indebtedness incurred as consideration in, in
contemplation of, or to provide all or any portion of the funds or credit
support utilized to consummate the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
otherwise acquired by the Parent Borrower) and outstanding on such date;
(iv) the foregoing shall not apply to any restriction or condition
pursuant to an agreement refinancing an agreement referred to in
clause (i), (ii) or (iii) or this clause (iv) or contained in any
amendment to an agreement referred to in clause (i), (ii) or (iii) or this
clause (iv); provided, however, that the conditions and
restrictions contained in any such refinancing agreement or amendment are no
more restrictive, taken as a whole, than the encumbrances and restrictions
contained in the applicable predecessor agreement; (v) the foregoing shall
not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary or assets pending such sale, provided such
restrictions and conditions apply only to the Subsidiary or assets that are to
be sold and such sale is permitted hereunder, (vi) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness, (vii) clause (a) of the foregoing shall not apply to
customary provisions in contracts restricting the assignment thereof, or the
subletting, assignment or transfer of any property or asset that is subject to
a lease, license or similar contract; (viii) the foregoing shall not apply
to restrictions imposed by any agreement relating to Indebtedness of a Foreign
Subsidiary (other than a Foreign Subsidiary that is a Loan Party) that applies
only to such Foreign Subsidiary and its assets (including its subsidiaries);
(ix) the foregoing shall not apply to customary provisions in Joint
Venture agreements and other similar agreements entered into in the ordinary
course of business; (x) the foregoing shall not apply to net worth
provisions in lease and other agreements entered into by the Parent Borrower or
any Subsidiary in the ordinary course of business; and (xi) the foregoing
shall not apply to restrictions imposed by the Senior First Lien Note Documents
and the Senior Second Lien Note Documents.

 

128

 

SECTION 6.12.  Amendment of Material Documents.  The Parent Borrower will not, and will not
permit any Subsidiary to, amend, modify or waive any of its rights under
(a) its certificate of incorporation, by-laws

 

SECTION 6.13.   or other organizational documents, including the terms related to
the Existing Preferred Stock (other than amendments and modifications that are
not adverse to the interests of the Lenders and do not impair the exercise of
remedies under any Security Document or the Intercreditor Agreement) or
(b) the Senior First Lien Note Documents, the Senior Second Lien Note
Documents or the Senior Subordinated Note Documents (other than amendments to
the Senior First Lien Security Documents or the Senior Second Lien Security
Documents permitted by the Intercreditor Agreement and other amendments and
modifications that are not adverse to the interests of the Lenders and do not
impair the exercise of remedies under any Security Document or the Intercreditor
Agreement).

 

SECTION 6.14.  Designated Senior Debt.  The Parent Borrower shall not designate any
Indebtedness (other than indebtedness under the Loan Documents, indebtedness in
respect of the Senior First Lien Notes incurred in compliance with Section 6.01(vi)
and indebtedness in respect of the Senior Second Lien Notes incurred in
compliance with Section 6.01(x)) as “Designated Senior Debt” for purposes
of and as defined in the Senior Subordinated Note Documents.

 

SECTION 6.15.  Cash Held by Foreign Subsidiaries.  The Parent Borrower will not permit at any
time on any day (a) the aggregate amount of “cash and cash equivalents”
and “marketable securities” of the Foreign Subsidiaries (other than Foreign
Subsidiaries that are Loan Parties), in each case that would be required to be
reflected on a consolidated balance sheet of the Parent Borrower and the
Subsidiaries prepared as of such time in accordance with GAAP, minus
(b) the aggregate amount of payments in such cash and cash equivalents
that the Parent Borrower reasonably and in good faith determines will be made
by the Foreign Subsidiaries that are not Loan Parties (and will reduce such
cash and cash equivalents) on such day to exceed $10,000,000.

 

129

 

ARTICLE VII

 

Events of Default

 

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

 

(a)
any Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;

 

(b)
any Borrower shall fail to (i) pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement or any other Loan Document, when and
as the same shall become due and payable, or (ii) fail to deliver any
Borrowing Base Certificate required to be delivered pursuant to the terms of
this Agreement, and, in either case, such failure shall continue unremedied for
a period of three Business Days;

 

(c)
any representation or warranty made or deemed made by or on behalf of
the Parent Borrower or any Subsidiary in or in connection with any Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, shall have been incorrect in any
material respect when made or deemed made;

 

(d)
any Borrower shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.02, 5.04 (with respect to the existence
of such Borrower) or 5.11 or in Article VI;

 

(e)
any Loan Party shall fail to observe or perform any covenant, condition
or agreement contained in any Loan Document (other than those specified in
clause (a), (b) or (d) of this Article), and such failure shall continue
unremedied for a period of 30 days after notice thereof from the
Administrative

 

130

 

Agent to the Parent Borrower (which notice will be given at the request
of any Lender);

 

(f)
the Parent Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable,
including any applicable grace period;

 

(g)
any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with
or without the giving of notice) the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause any
Material Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided
that this clause (g) shall not apply to secured Indebtedness that becomes
due as a result of the voluntary sale, transfer or other disposition (including
as a result of a casualty or condemnation event) of the property or assets
securing such Indebtedness in a manner not prohibited by this Agreement;

 

(h)
an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Parent Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Parent Borrower or any Subsidiary or
for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

 

(i)
the Parent Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution

 

131

 

of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Parent
Borrower or any Subsidiary or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any proceeding described in clause (h) of this Article,
(v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;

 

(j)
the Parent Borrower or any Subsidiary (other than Immaterial
Subsidiaries) shall become unable, admit in writing its inability or fail generally
to pay its debts as they become due;

 

(k)
one or more judgments for the payment of money in an aggregate amount in
excess of $10,000,000 (net of amounts covered by insurance as to which the
insurer has not denied liability) shall be rendered against the Parent
Borrower, any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Parent Borrower or
any Subsidiary to enforce any such judgment;

 

(l)
an ERISA Event shall have occurred that, in the reasonable opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Parent
Borrower and the Subsidiaries in an aggregate amount exceeding
(i) $7,000,000 in any year or (ii) $10,000,000 for all periods;

 

(m)
(i) any Loan Document shall for any reason be asserted by the
Parent Borrower or any of the Subsidiaries (or, in the case of the
Intercreditor Agreement, any of the other parties thereto) not to be a legal,
valid and binding obligation of any party thereto, (ii) any Lien purported
to be created under any Security Document shall cease to be, or shall be
asserted by any Loan Party not to be, a valid and perfected Lien on any
Collateral, with the priority

 

132

 

required by the Loan Documents, except (A) as a result of the sale
or other disposition of the applicable Collateral in a transaction permitted
under the Loan Documents, (B) as a result of (1) the Collateral
Agent’s failure to take any action reasonably requested by the Parent Borrower
in order to maintain a valid and perfected Lien on any Collateral or
(2) any action taken by the Collateral Agent to release any Lien on any
Collateral or (C) Liens on any item of Collateral with a fair market value
not exceeding $500,000, (iii) the Guarantees pursuant to the Guarantee
Agreements by the Loan Parties of any of the Obligations shall cease to be in
full force and effect (other than in accordance with the terms thereof), or
shall be asserted by any Loan Party not to be in effect or not to be legal,
valid and binding obligations, (iv) the Obligations of any Borrower or the
Guarantees thereof by the Loan Parties pursuant to the Security Documents,
shall cease to constitute “Senior Indebtedness” under the subordination
provisions of the Senior Subordinated Note Documents, or such subordination
provisions shall be invalidated or otherwise cease, or shall be asserted by any
Loan Party to be invalid or to cease, to be legal, valid and binding
obligations of the parties thereto or (v) the Intercreditor Agreement
shall cease to be a legal, valid and binding agreement of the parties thereto;
or

 

(n)
a Change in Control shall occur;

 

then, and in every such event (other than an event with respect to any
Borrower described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Parent
Borrower, take either or both of the following actions, at the same or
different times:  (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or
in part, in which case any principal not so declared to be due and payable (the
“remaining Loans”) may thereafter be declared to be due and payable),
and thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations
(other than any remaining Loans) of each

 

133

 

Borrower accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower; and in case of any event with respect to
any Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of each Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower.

 

ARTICLE VIII

 

The Agents

 

Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent
to take such actions on its behalf and to exercise such powers as are delegated
to the Administrative Agent by the terms of the Loan Documents, together with
such actions and powers as are reasonably incidental thereto.

 

The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Parent Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.

 

The Administrative Agent shall not have any duties or obligations
except those expressly set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances

 

134

 

as provided in Section 10.02), and
(c) except as expressly set forth in the Loan Documents, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Parent
Borrower or any of the Subsidiaries that is communicated to or obtained by the
bank serving as Administrative Agent or any of its Affiliates in any
capacity.  The Administrative Agent
shall not be liable for any action taken or not taken by it with the consent or
at the request of the Required Lenders (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in
Section 10.02) or in the absence of its own gross negligence or willful
misconduct.  The Administrative Agent
shall not be deemed to have knowledge of any Default unless and until written
notice thereof is given to the Administrative Agent by the Parent Borrower or a
Lender, and the Administrative Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered thereunder or
in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness
of any Loan Document or any other agreement, instrument or document, or
(v) the satisfaction of any condition set forth in Article IV or
elsewhere in any Loan Document, other than to confirm receipt of items
expressly required to be delivered to the Administrative Agent.

 

The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to be made
by the proper Person, and shall not incur any liability for relying
thereon.  The Administrative Agent may
consult with legal counsel (who may be counsel for any of the Borrowers),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.

 

135

 

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

 

Subject to the appointment and acceptance of a successor to the Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Collateral Agent, the Lenders, the Issuing Bank and the
Parent Borrower.  Upon any such
resignation, the Required Lenders shall have the right, with the consent of the
Parent Borrower (such consent not to be unreasonably withheld), to appoint a
successor.  If no successor shall have
been so appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent that
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank.  Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Parent Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Parent Borrower and such
successor.  After the Administrative
Agent’s resignation hereunder, the provisions of this Article and
Section 10.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

 

Each Lender acknowledges that it has, independently and without
reliance upon the Administrative

 

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Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or related agreement or any
document furnished hereunder or thereunder.

 

The provisions of this Article shall apply to the Collateral Agent
and the Co-Collateral Agent as though named herein as the Administrative Agent;
provided that, for purposes of paragraph six of this Article VIII,
(i) the Collateral Agent may resign by giving notice to the Administrative
Agent, the Co-Collateral Agent, the Lenders, the Issuing Bank and the Parent
Borrower and (ii) the Co-Collateral Agent may resign by giving notice to
the Administrative Agent, the Collateral Agent, the Lenders, the Issuing Bank
and the Parent Borrower; and provided further that no successor
Co-Collateral Agent shall be appointed or designated hereunder following the
resignation of the Co-Collateral Agent without the prior written approval of
the Administrative Agent and the Collateral Agent (in which case no approval of
the Required Lenders shall be required therefor).  Notwithstanding any other provision contained herein, none of the
Syndication Agent, the Documentation Agent or either of the Arrangers shall, in
its capacity as such, have any responsibilities under this Agreement or the
other Loan Documents.

 

ARTICLE IX

 

Collection Allocation Mechanism

 

SECTION 9.01.  Implementation of CAM.  (a) 
On the CAM Exchange Date, (i) the Commitments shall automatically and
without further act be terminated as provided in Article VII, (ii) each
Domestic Lender shall immediately be deemed to have acquired (and shall promptly
make payment therefor to the Administrative Agent in accordance with
Section 2.04(c)) participations in the Swingline Loans in an amount equal
to such Lender’s ratable share (based on the respective Domestic Commitments of
the Lenders immediately prior to the CAM Exchange Date) of each Swingline Loan
outstanding on such date and (iii) the

 

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Lenders shall
automatically and without further act (and without regard to the provisions of
Section 10.04) be deemed to have exchanged interests in the Loans (other
than the Swingline Loans) and participations in Swingline Loans and Letters of
Credit, such that in lieu of the interest of each Lender in each Loan and
Letter of Credit in which it shall participate as of such date (including the
Obligations of each Loan Party in respect of each such Loan and Letter of
Credit), such Lender shall hold an interest in every one of the Loans (other
than the Swingline Loans) and a participation in every one of the Swingline
Loans and Letters of Credit (including the Obligations of each Loan Party in
respect of each such Loan and each Reserve Account established pursuant to
Section 9.02 below), whether or not such Lender shall previously have
participated therein, equal to such Lender’s CAM Percentage thereof.  Each Lender and each Loan Party hereby
consents and agrees to the CAM Exchange, and each Lender agrees that the CAM
Exchange shall be binding upon its successors and assigns and any person that
acquires a participation in its interests in any Loan.  Each Loan Party agrees from time to time to
execute and deliver to the Administrative Agent all such promissory notes and
other instruments and documents as the Administrative Agent shall reasonably
request to evidence and confirm the respective interests of the Lenders after
giving effect to the CAM Exchange, and each Lender agrees to surrender any
promissory notes originally received by it in connection with its Loans
hereunder to the Administrative Agent against delivery of any promissory notes
evidencing its interests in the Loans so executed and delivered; provided,
however, that the failure of any Loan Party to execute or deliver or of
any Lender to accept any such promissory note, instrument or document shall not
affect the validity or effectiveness of the CAM Exchange.

 

(b)  As a result of the CAM Exchange, upon
and after the CAM Exchange Date, each payment received by the Administrative
Agent or the Collateral Agent pursuant to any Loan Document in respect of the
Obligations, and each distribution made by the Collateral Agent pursuant to any
Security Document in respect of the Obligations, shall, subject to the terms of
the Intercreditor Agreement, be distributed to the Lenders pro rata in
accordance with their respective CAM Percentages.  Any direct payment received by a Lender upon or after the CAM
Exchange Date, including by way of set-off, in respect of an Obligation

 

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shall be paid
over to the Administrative Agent for distribution to the Lenders in accordance
herewith.

 

SECTION 9.02.  Letters of Credit.  (a) 
In the event that on the CAM Exchange Date any Letter of Credit shall be
outstanding and undrawn in whole or in part, or any LC Disbursement shall not
have been reimbursed either by the Parent Borrower or with the proceeds of a
Revolving Borrowing or Swingline Loan, each Domestic Lender shall promptly pay
over to the Administrative Agent, in immediately available funds, an amount in
dollars equal to such Domestic Lender’s Applicable Percentage of such undrawn
face amount or (to the extent it has not already done so) such unreimbursed
drawing, as applicable, together with interest thereon from the CAM Exchange
Date to the date on which such amount shall be paid to the Administrative Agent
at the rate that would be applicable at the time to an ABR Revolving Loan in a
principal amount equal to such undrawn face amount or unreimbursed drawing, as
applicable.  The Administrative Agent
shall establish a separate account (each, a “Reserve Account”) or
accounts for each Lender for the amounts received with respect to each such
Letter of Credit pursuant to the preceding sentence.  The Administrative Agent shall deposit in each Lender’s Reserve
Account such Lender’s CAM Percentage of the amounts received from the Lenders
as provided above.  The Administrative
Agent shall have sole dominion and control over each Reserve Account, and the
amounts deposited in each Reserve Account shall be held in such  Reserve Account until withdrawn as provided
in paragraph (b), (c), (d) or (e) below. 
The Administrative Agent shall maintain records enabling it to determine
the amounts paid over to it and deposited in the Reserve Accounts in respect of
each Letter of Credit and the amounts on deposit in respect of each Letter of
Credit attributable to each Lender’s CAM Percentage.  The amounts held in each Lender’s Reserve Account shall be held
as a reserve against the LC Exposures, shall be the property of such Lender,
shall not constitute Loans to or give rise to any claim of or against any Loan
Party and shall not give rise to any obligation on the part of any Borrower to
pay interest to such Lender, it being agreed that the reimbursement obligations
in respect of Letters of Credit shall arise only at such times as drawings are
made thereunder, as provided in Section 2.05.

 

(b)  In the event that after the CAM
Exchange Date any drawing shall be made in respect of a Letter of

 

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Credit, the Administrative
Agent shall, at the request of the applicable Issuing Bank, withdraw from the
Reserve Account of each Lender any amounts, up to the amount of such Lender’s
CAM Percentage of such drawing or payment, deposited in respect of such Letter
of Credit and remaining on deposit and deliver such amounts to such Issuing
Bank in satisfaction of the reimbursement obligations of the Lenders under
Section 2.05(d) (but not of the Parent Borrower under
Section 2.05(e)).  In the event
that any Lender shall default on its obligation to pay over any amount to the
Administrative Agent as provided in this Section 9.02, the applicable
Issuing Bank shall have a claim against such Lender to the same extent as if
such Lender had defaulted on its obligations under Section 2.05(d), but
shall have no claim against any other Lender in respect of such defaulted
amount, notwithstanding the exchange of interests in the Parent Borrower’s
reimbursement obligations pursuant to Section 9.01.  Each other Lender shall have a claim against
such defaulting Lender for any damages sustained by it as a result of such
default, including, in the event that such Letter of Credit shall expire
undrawn, its CAM Percentage of the defaulted amount.

 

(c)  In the event that after the CAM
Exchange Date any Letter of Credit shall expire undrawn, the Administrative
Agent shall withdraw from the Reserve Account of each Lender the amount
remaining on deposit therein in respect of such Letter of Credit and distribute
such amount to such Lender.

 

(d)  With the prior written approval of
the Administrative Agent (not to be unreasonably withheld), any Lender may
withdraw the amount held in its Reserve Account in respect of the undrawn
amount of any Letter of Credit.  Any Lender
making such a withdrawal shall be unconditionally obligated, in the event there
shall subsequently be a drawing under such Letter of Credit, to pay over to the
Administrative Agent, for the account of the applicable Issuing Bank, on
demand, its CAM Percentage of such drawing or payment.

 

(e)  Pending the withdrawal by any Lender
of any amounts from its Reserve Account as contemplated by the above
paragraphs, the Administrative Agent will, at the direction of such Lender and
subject to such rules as the Administrative Agent may prescribe for the
avoidance of inconvenience, invest such amounts in Permitted

 

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Investments.  Each Lender that has not withdrawn its
amounts in its Reserve Account as provided in paragraph (d) above shall have
the right, at intervals reasonably specified by the Administrative Agent, to
withdraw the earnings on investments so made by the Administrative Agent with
amounts in its Reserve Account and to retain such earnings for its own account.

 

ARTICLE X

 

Miscellaneous

 

SECTION 10.01.  Notices.  (a) 
Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

 

(i) if to any Borrower, to the Parent Borrower at 1475 Woodfield Road,
Suite 700, Schaumberg, Illinois 60173, Attention of Chief Financial Officer
(Telecopy No. (847) 969-3338);

 

(ii) if to the Administrative Agent or the Documentation Agent, to
Credit Suisse First Boston, Eleven Madison Avenue, New York, New York
10010, Attention of Agency Group (Telecopy No. (212) 325-8304);

 

(iii) if to the Collateral Agent, to Deutsche Bank Trust Company
Americas, 222 South Riverside Drive, 29th Floor, Chicago, Illinois 60606,
Attention of Pliant Account Officer (Telecopy No. (312) 537-1327);

 

(iv) if to the Co-Collateral Agent, to General Electric Capital
Corporation, 335 Madison Avenue, 12th Floor, New York, New York 10017,
Attention of Account Manager — Pliant Corporation (Telecopy No. (212)
370-8088);

 

(v) if to the Issuing Bank, to Deutsche Bank Trust Company Americas,
222 South Riverside Drive, 29th Floor, Chicago, Illinois 60606,, Attention of
Pliant Account Officer (Telecopy No. (312) 537-1327);

 

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(vi) if to the Swingline Lender, to Credit Suisse First Boston, Eleven
Madison Avenue, New York, New York 10010, Attention of Agency Group
(Telecopy No. (212) 325-8304);

 

(vii) if to the Syndication Agent, to JPMorgan Chase Bank, Loan and
Agency Services Group, 1111 Fannin, 10th Floor, Houston, Texas,
Attention of Giovanna Parr (Telecopy No. (713) 750-2892), with a copy to
JPMorgan Chase Bank, 270 Park Avenue, 4th Floor, New York,
New York 10017, Attention of Peter Dedousis (Telecopy
No. (212) 270-5100); and

 

(viii) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.

 

(b)  Notices and other communications to
the Lenders hereunder may be delivered or furnished by electronic
communications pursuant to procedures approved by the Administrative Agent; provided
that the foregoing shall not apply to notices pursuant to Article II unless
otherwise agreed by the Administrative Agent and the applicable Lender or
Issuing Bank.  The Administrative Agent
or the Parent Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may
be limited to particular notices or communications.

 

(c)  Any party hereto may change its
address or telecopy number for notices and other communications hereunder by notice
to the other parties hereto.  All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

 

SECTION 10.02.  Waivers; Amendments.  (a) 
No failure or delay by any Agent, the Issuing Bank or any Lender in
exercising any right or power hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. 
The rights and remedies of the Administrative Agent, the Collateral
Agent, the Co-Collateral Agent, the Issuing Bank and the Lenders hereunder and
under the other

 

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Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision
of any Loan Document or consent to any departure by any Loan Party therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which
given.  Without limiting the generality
of the foregoing, the making of a Loan or issuance or a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether any Agent,
any Lender or the Issuing Bank may have had notice or knowledge of such Default
at the time.

 

(b)  Neither this Agreement nor any other
Loan Document nor any provision hereof or thereof may be waived, amended or
modified except, in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by the Parent Borrower and the Required
Lenders or, in the case of any other Loan Document, pursuant to an agreement or
agreements in writing entered into by the Administrative Agent or Collateral
Agent, as applicable, and the Loan Party or Loan Parties that are parties
thereto, in each case with the consent of the Required Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest
thereon, or reduce any fees payable hereunder, without the written consent of
each Lender affected thereby, (iii) postpone the maturity of any Loan, or
any scheduled date of payment of the principal amount of any Loan, or the
required date of reimbursement of any LC Disbursement, or any date for the
payment of any interest thereon, or any fees payable hereunder, or reduce the
amount of, waive or excuse any such payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.17(b) or (c) in a manner that
would alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) change any of the provisions of this
Section or the definition of the term “Required Lenders” or any other
provision of any Loan Document specifying the number or percentage of Lenders
(or Lenders of any Class, including as contemplated by the term “Required
Domestic Lenders” or the term “Required Canadian Lenders”) required
to waive, amend or modify any rights thereunder or make any

 

143

 

determination
or grant any consent thereunder, without the written consent of each Lender (or
each Lender of such Class, as the case may be), (vi) release any Loan
Party from its Guarantee under any Guarantee Agreement (except as expressly
provided in the applicable Guarantee Agreement), or limit its liability in
respect of such Guarantee, without the written consent of each Lender,
(vii) release all or substantially all the Collateral from the Liens of
the Security Documents (except as expressly provided therein or in the
Intercreditor Agreement), without the written consent of each Lender, (viii)
change any provision of any Loan Document to permit the Parent Borrower or any
of the Subsidiaries to enter into any accounts receivable or inventory
securitization transaction or other similar financing arrangement, including
any sale of, or any grant of a security interest in, accounts receivable or
inventory in connection with any asset securitization or other similar
financing arrangement, without the written consent of Lenders having
Commitments representing in the aggregate more than 662/3%
of the total amount of the Commitments at such time, (ix) change any
provision of any Loan Document in a manner that by its terms adversely affects
the rights in respect of payments due to Lenders holding Loans of any Class
differently than those holding Loans of any other Class without the written
consent of Lenders holding a majority in interest of the outstanding Loans and
unused Commitments of each affected Class or (x) amend, modify or
otherwise alter the eligibility standards, advance rates or reserves used in
determining the Borrowing Base in a manner that would increase the amount of
the Borrowing Base, without the written consent of Lenders having Commitments
representing in the aggregate more than 662/3%
of the total amount of the Commitments at the time; provided further
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent, the Collateral Agent, the Co-Collateral
Agent, the Issuing Bank or the Swingline Lender without the prior written
consent of the Administrative Agent, the Collateral Agent, the Co-Collateral
Agent, the Issuing Bank or the Swingline Lender, as the case may be.

 

SECTION 10.03.  Expenses; Indemnity; Damage
Waiver; Joint and Several Obligations. 
(a)  The Borrowers shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative
Agent, the Collateral Agent, the Co-Collateral Agent, the Syndication Agent,
the Documentation Agent, each Arranger and their respective

 

144

 

Affiliates
(other than the Sponsor or any Person Controlled by the Sponsor), including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, the Collateral Agent, the Co-Collateral Agent, the Syndication Agent,
the Documentation Agent and each Arranger, in connection with the syndication
of the credit facilities provided for herein, the preparation and
administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, the Collateral Agent, the Co-Collateral Agent, the
Issuing Bank, the Syndication Agent, the Documentation Agent, either Arranger
or any Lender, including the fees, charges and disbursements of any counsel for
the Administrative Agent, the Collateral Agent, the Co-Collateral Agent, the
Issuing Bank, the Syndication Agent, the Documentation Agent, either Arranger
or any Lender, in connection with the enforcement or protection of its rights
in connection with the Loan Documents, including its rights under this Section,
or in connection with the Loans made or Letters of Credit issued hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

 

(b)  The Borrowers shall indemnify the
Administrative Agent, the Collateral Agent, the Co-Collateral Agent, the
Issuing Bank, the Syndication Agent, the Documentation Agent, each Arranger and
each Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including the fees, charges and disbursements of any counsel for any
Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of any
Loan Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or

 

145

 

the use of the
proceeds therefrom (including any refusal by the Issuing Bank to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit), (iii) any actual or alleged presence or Release of Hazardous
Materials on or from any Mortgaged Property or any other property currently or
formerly owned or operated by the Parent Borrower or any of the Subsidiaries,
or any Environmental Liability related in any way to the Parent Borrower or any
of the Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is
a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or any Affiliate of
such Indemnitee (or of any officer, director, employee, advisor or agent of
such Indemnitee or any such Indemnitee’s Affiliates) or to the extent such
damages constitute special, indirect or consequential damages (as opposed to
direct or actual damages), and provided, further, that, for
purposes of the foregoing proviso, JPMorgan Chase Bank and its Affiliates
(other than the Sponsor and any Persons Controlled by the Sponsor) shall not be
deemed to be Affiliates of the Sponsor or any Person Controlled by the Sponsor.

 

(c)  To the extent that the Borrowers fail
to pay any amount required to be paid by it to the Administrative Agent, the
Collateral Agent, the Co-Collateral Agent, the Issuing Bank, the Syndication
Agent, the Documentation Agent, either Arranger or the Swingline Lender under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay
to the Administrative Agent, the Collateral Agent, the Co-Collateral Agent, the
Issuing Bank, the Syndication Agent, the Documentation Agent, the applicable
Arranger or the Swingline Lender, as the case may be, such Lender’s pro rata
share (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent,

 

146

 

the Collateral
Agent, the Co-Collateral Agent, the Issuing Bank or the Swingline Lender in its
capacity as such.  For purposes hereof,
a Lender’s “pro rata share” shall be determined based upon its share of the sum
of the total Revolving Exposures and unused Commitments at the time.

 

(d)  To the extent permitted by applicable
law, the Borrowers shall not assert, and each of them hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or
Letter of Credit or the use of the proceeds thereof.

 

(e)  All amounts due under this
Section shall be payable promptly after written demand therefor.  Each Borrower shall be jointly liable for
all expense reimbursement and indemnification obligations under this
Section 10.03, and all other Obligations of the Borrowers under this
Agreement.  Each of the Borrowers agrees
that the provisions of Sections 1, 2, 4, 5, 6, 7, 8 and 10(b) of the
Guarantee Agreement will apply, mutatis  mutandis, to its joint
and several obligations under this Section 10.03 as if references in such
Sections of the Guarantee Agreement to the Guarantors were to it.

 

SECTION 10.04.  Successors and Assigns.  (a) 
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) no Borrower may assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by any
Borrower without such consent shall be null and void) and (ii) no Lender
may assign or otherwise transfer its rights or obligations hereunder except in
accordance with this Section.  Nothing
in this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of
this Section) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative

 

147

 

Agent, the
Collateral Agent, the Co-Collateral Agent, the Issuing Bank, the Syndication
Agent, the Documentation Agent, the Arrangers and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

 

(b)
(i) Subject to the conditions set forth in paragraph (b)(ii)
below, any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written
consent (such consent not to be unreasonably withheld or delayed) of:

 

(A) the Parent Borrower, provided that
no consent of the Parent Borrower shall be required if an Event of Default has
occurred and is continuing;

 

(B) the Administrative Agent; and

 

(C) with respect to any assignment of a
Domestic Commitment or a Domestic Revolving Loan, the Issuing Bank and the
Swingline Lender.

 

(ii) Assignments shall be subject to the following additional
conditions:

 

(A) except in the case of an assignment to a
Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the
entire remaining amount of the assigning Lender’s Commitment or Loans of any
Class, the amount of the Commitment or Loans of the assigning Lender subject to
each such assignment (determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $1,000,000 unless each of the Parent Borrower and the
Administrative Agent otherwise consents, provided that no such consent
of the Parent Borrower shall be required if an Event of Default has occurred
and is continuing;

 

(B) each partial assignment shall be made as
an assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement, except that this clause (B) shall

 

148

 

not be construed to prohibit the assignment of a proportionate part of
all the assigning Lender’s rights and obligations in respect of one Class of
Commitments or Loans;

 

(C) the parties to each such assignment shall
(1) electronically execute and deliver to the Administrative Agent an
Assignment and Assumption via an electronic settlement system acceptable to the
Administrative Agent (which initially shall be ClearPar, LLC) or (2) if no such
system shall then be being utilized by the Administrative Agent, manually execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee of $3,500; and

 

(D) the assignee, if it shall not be a
Lender, shall (1) deliver to the Administrative Agent an Administrative
Questionnaire and all applicable tax documentation and (2) in the event of
an assignment of Canadian Commitments and Canadian Revolving Loans, notify the
Administrative Agent of such assignee’s Canadian Lending Office and US Lending
Office.

 

For the purposes of this Section 10.04(b), the term “Approved
Fund” has the following meaning:

 

“Approved Fund” means any Person (other than a natural person)
that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender
or (c) an entity or an Affiliate of an entity that administers or manages
a Lender.

 

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the rights
and obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of

 

149

 

an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.14,
2.15, 2.16 and 10.03).  Any assignment
or transfer by a Lender of rights or obligations under this Agreement that does
not comply with this Section 10.04 shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (c) of this Section.

 

(iv) The Administrative Agent, acting for this purpose as an agent of
the Parent Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans and LC Disbursements owing to, each Lender pursuant to the
terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Parent Borrower, each Domestic Subsidiary Borrower, the
Canadian Subsidiary Borrower, the Administrative Agent, the Collateral Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Parent Borrower, the Issuing Bank and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.

 

(v) Upon its receipt of a duly completed Assignment and Assumption and
all applicable tax documentation executed by an assigning Lender and an
assignee, the assignee’s completed Administrative Questionnaire (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in this Section and any written consent to such assignment
required by this Section, the Administrative Agent shall accept such Assignment
and Assumption and record the information contained therein in the
Register.  No assignment shall be
effective for purposes of this Agreement unless it has

 

150

 

been recorded in the Register as provided in this paragraph.

 

(c)  (i) 
Any Lender may, without the consent of any Borrower, the Administrative
Agent, the Issuing Bank or the Swingline Lender, sell participations to one or
more banks or other entities (a “Participant”) in all or a portion of
such Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment of any Class and the Loans owing to it); provided
that (A) such Lender’s obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (C) each
Borrower, the Administrative Agent, the Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce the Loan Documents and to approve any
amendment, modification or waiver of any provision of the Loan Documents; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver described in clauses (i) through (vii) of the first proviso to
Section 10.02(b) that affects such Participant.  Subject to paragraph (c)(ii) of this Section, the Borrowers
agree that each Participant shall be entitled to the benefits of
Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to paragraph (b) of this
Section.  To the extent permitted by
law, each Participant also shall be entitled to the benefits of
Section 10.08 as though it were a Lender, provided such Participant agrees
to be subject to Section 2.17(c) as though it were a Lender.

 

(ii) A Participant shall not be entitled to receive any greater payment
under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Parent Borrower’s prior written consent. 
A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 2.16 unless the

 

151

 

Parent Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrowers, to
comply with Section 2.16(e) as though it were a Lender.

 

(d)  Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including any pledge or assignment
to secure obligations to a Federal Reserve Bank, and this Section shall
not apply to any such pledge or assignment of a security interest; provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

 

(e)  Notwithstanding anything to the
contrary contained herein, any Lender (a “Granting Lender”) may grant to a
special purpose funding vehicle (an “SPC”), identified as such in writing from
time to time by the Granting Lender to the Administrative Agent and the Parent
Borrower, the option to provide to the Borrowers all or any part of any Loan
that such Granting Lender would otherwise be obligated to make to the Borrowers
pursuant to this Agreement; provided, however, that (i) nothing herein shall
constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects
not to exercise such option or otherwise fails to provide all or any part of
such Loan, the Granting Lender shall be obligated to make such Loan pursuant to
the terms hereof.  The making of a Loan
by an SPC hereunder shall utilize the applicable Commitment of the Granting
Lender to the same extent, and as if, such Loan were made by such Granting Lender.  Each party hereto hereby agrees that no SPC
shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Lender).  In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof, or the laws of Canada or any province or territory
thereof.  In addition, notwithstanding
anything

 

152

 

to the
contrary contained in this Section 10.04, any SPC may (i) with notice to,
but without the prior written consent of, the Parent Borrower and the
Administrative Agent and without paying any processing fee therefor, assign all
or a portion of its interests in any Loans to the Granting Lender or to any
financial institutions (consented to by the Parent Borrower and the
Administrative Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC.

 

SECTION 10.05.  Survival.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the
Collateral Agent, the Co-Collateral Agent the Issuing Bank or any Lender may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on
any Loan or any fee or any other amount payable under this Agreement is
outstanding and unpaid or any Letter of Credit is outstanding and so long as
the Commitments have not expired or terminated.  The provisions of Sections 2.14, 2.15, 2.16, 10.03 and 10.13
and Article VIII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement or any provision
hereof.

 

SECTION 10.06.  Counterparts; Integration;
Effectiveness.  This Agreement may
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original,

 

153

 

but all of
which when taken together shall constitute a single contract.  This Agreement, the other Loan Document and
any separate letter agreements with respect to fees payable to the
Administrative Agent, the Collateral Agent, the Arrangers, any other Agent or
the Issuing Bank constitute the entire contract among the parties relating to
the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

 

SECTION 10.07.  Severability.  Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

SECTION 10.08.  Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of any Borrower
against any of and all the obligations of the Borrowers now or hereafter
existing under this Agreement or any other Loan Document held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured.  The rights of each Lender under this
Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender may have.

 

154

 

SECTION 10.09.  Governing Law; Jurisdiction;
Consent to Service of Process. 
(a)  This Agreement shall be
construed in accordance with and governed by the law of the State of
New York.

 

(b)  Each of the Borrowers hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or any other Loan
Document shall affect any right that the Administrative Agent, the Collateral
Agent, the Co-Collateral Agent, the Issuing Bank or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against any Borrower or its properties in the courts of any
jurisdiction.

 

(c)  Each of the Borrowers hereby
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or any other Loan Document in any court referred to in
paragraph (b) of this Section. 
Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

(d)  Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices
in Section 10.01.  Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.

 

155

 

SECTION 10.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 10.11.  Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

 

SECTION 10.12.  Confidentiality.  Each of the Administrative Agent, the
Collateral Agent, the Co-Collateral Agent, the Syndication Agent, the
Documentation Agent, the Issuing Bank and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ investment advisors,
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (the “Representatives”) and any direct or indirect
contractual counterparty in swap agreements entered into in connection with a
Lender’s outstanding Loans from time to time or to such contractual
counterparty’s professional advisor (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential and, in
the case of any such contractual counterparty or its professional advisor, such
persons shall agree in writing to be bound by the provisions of this
Section 10.12), (b) to the extent requested or demanded by any
Governmental Authority or any self-regulatory organization (including the
National Association of Insurance Commissioners or other similar organization),
(c) to the extent required by applicable laws or regulations or by any
subpoena, order or similar

 

156

 

legal process;
provided that, to the extent reasonably practicable and not prohibited
by applicable laws or regulations or by any judicial or administrative order,
such Person will provide the Parent Borrower with prior notice of such
disclosure, (d) any nationally recognized rating agency that requires
access to information about a Lender’s investment portfolio in connection with
ratings issued with respect to such Lender, (e) to any other party to this
Agreement, (f) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (g) subject
to an agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement, or
(ii) any actual or prospective counterparty (or its advisors) to any swap
or derivative transaction relating to the Parent Borrower and its obligations,
(h) with the consent of the Parent Borrower or (i) to the extent such
Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative
Agent, the Collateral Agent, the Co-Collateral Agent, the Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Parent Borrower,
any Subsidiary or any of their Representatives that is not known to such Person
to be subject to any obligation of confidentiality to the Parent Borrower or
any Subsidiary.  For the purposes of
this Section, “Information” means all information received from the
Parent Borrower, any Subsidiary or any of their Representatives relating to the
Parent Borrower, the Subsidiaries or their businesses, other than any such
information that is available to the Administrative Agent, the Collateral
Agent, the Co-Collateral Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Parent Borrower or any
Subsidiary.  Any Person required to
maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

SECTION 10.13.  Conversion of Currencies.  (a) 
If, for the purpose of obtaining judgment in any court, it is necessary
to convert a sum owing hereunder in

 

157

 

one currency
into another currency, each party hereto agrees, to the fullest extent that it
may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures in the relevant jurisdiction the
first currency could be purchased with such other currency on the Business Day
immediately preceding the day on which final judgment is given.

 

(b)  The obligations of the Borrowers in
respect of any sum due to any party hereto or any holder of the obligations
owing hereunder (the “Applicable Creditor”) shall, notwithstanding any
judgment in a currency (the “Judgment Currency”) other than the currency
in which such sum is stated to be due hereunder (the “Agreement Currency”),
be discharged only to the extent that, on the Business Day following receipt by
the Applicable Creditor of any sum adjudged to be so due in the Judgment
Currency, the Applicable Creditor may in accordance with normal banking procedures
in the relevant jurisdiction purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less than the
sum originally due to the Applicable Creditor in the Agreement Currency, each
of the Borrowers agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Applicable Creditor against such loss.  The obligations of the Borrowers contained
in this Section 10.13 shall survive the termination of this Agreement and
the payment of all other amounts owing hereunder.

 

SECTION 10.14.  Interest Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts that are treated as interest on such
Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate

 

158

 

therefor)
until such cumulated amount, together with interest thereon at the Federal
Funds Effective Rate to the date of repayment, shall have been received by such
Lender.

 

159

 

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

 

	
   

  	
  PLIANT CORPORATION,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  UNIPLAST HOLDINGS, INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  UNIPLAST U.S., INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  PIERSON INDUSTRIES, INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  TUREX, INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  UNIPLAST MIDWEST, INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  UNIPLAST INDUSTRIES CO.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch,
  individually and as Administrative Agent and as Documentation Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY AMERICAS, individually and as Collateral
  Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION, individually and as
  Co-Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, as Syndication Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:EXHIBIT 10.20

 

CONSENT AND
AMENDMENT dated as of March 8, 2004 (this “Consent and Amendment”),
to the Credit Agreement dated as of February 17, 2004 (the “Credit
Agreement”), among PLIANT CORPORATION (the “Parent Borrower”),
UNIPLAST INDUSTRIES CO. (the “Canadian Subsidiary Borrower”), the
domestic subsidiary borrowers party to the Credit Agreement (collectively, the
“Domestic Subsidiary Borrowers” and, together with the Parent Borrower
and the Canadian Subsidiary Borrower, the “Borrowers”), the financial institutions
party to the Credit Agreement as Lenders (the “Lenders”), CREDIT SUISSE
FIRST BOSTON, acting through its Cayman Islands Branch, as Administrative Agent
and Documentation Agent, DEUTSCHE BANK TRUST COMPANY AMERICAS (“DBTCA”),
as Collateral Agent, GENERAL ELECTRIC CAPITAL CORPORATION (“GECC”), as
Co-Collateral Agent, and JPMORGAN CHASE BANK, as Syndication Agent.

 

A.  DBTCA has agreed to resign as Collateral Agent under the
Credit Agreement and the other Loan Documents, the undersigned Lenders have
agreed to appoint and designate GECC as successor Collateral Agent and the
Parent Borrower is willing to consent to the appointment and designation of
such successor Collateral Agent.

 

B.  GECC has agreed to resign as Co-Collateral Agent under
the Credit Agreement and the other Loan Documents, with no successor
Co-Collateral Agent being appointed or designated hereunder.

 

C.  LaSalle Business Credit, LLC
(“LaSalle”) and DBTCA have agreed that LaSalle will replace DBTCA as
Issuing Bank under the Credit Agreement, and the Parent Borrower and the
Administrative Agent are willing to consent to such replacement.

 

D.  The Parent Borrower has requested that the Lenders agree
to amend certain provisions of the Credit Agreement as set forth herein.

 

E.  The undersigned Lenders are willing so to amend the
Credit Agreement pursuant to the terms and subject to the conditions set forth
herein.

 

F.  Capitalized terms used and not otherwise defined herein
shall have the meanings assigned thereto in the Credit Agreement.

 

SECTION 1. Resignation of Collateral Agent; Successor
Collateral Agent.  (a)  Pursuant to Article VIII of the Credit
Agreement, DBTCA hereby resigns as Collateral Agent under the Credit Agreement
and the other Loan Documents and hereby relinquishes all rights, powers and
privileges of, and is hereby discharged form its duties and obligations as,
Collateral Agent under the Credit Agreement and the other Loan Documents (other
than pursuant to the provisions of Article VIII and Section 10.03 of
the

 

 

Credit Agreement, in each case in respect of any actions taken or
omitted to be taken by DBTCA while it was acting as Collateral Agent).

 

(b)  Pursuant to
Article VIII of the Credit Agreement, GECC is hereby appointed and
designated as successor Collateral Agent under the Credit Agreement and the
other Loan Documents and hereby assumes, and shall succeed to and become vested
with, all rights, powers, privileges and duties of the Collateral Agent under
the Credit Agreement and the other Loan Documents.  The Parent Borrower hereby consents to the appointment and
designation of GECC as successor Collateral Agent under the Credit Agreement
and the other Loan Documents.

 

(c)  All notices and
communications to be delivered to GECC as successor Collateral Agent shall be delivered
to GECC pursuant to Section 10.01(a)(iv) of the Credit Agreement.

 

SECTION 2. Resignation of Co-Collateral Agent; No Successor
Co-Collateral Agent.  (a)  Pursuant to Article VIII of the Credit
Agreement, GECC hereby resigns as Co-Collateral Agent under the Credit
Agreement and the other Loan Documents and hereby relinquishes all rights,
powers and privileges of, and is hereby discharged from its duties and
obligations as, Co-Collateral Agent under the Credit Agreement and the other
Loan Documents (other than pursuant to the provisions of Article VIII and
Section 10.03 of the Credit Agreement, in each case in respect of any
actions taken or omitted to be taken by GECC while it was acting as
Co-Collateral Agent).

 

(b)  No successor Co-Collateral
Agent is appointed or designated hereunder.

 

SECTION 3. Replacement of Issuing Bank; Cash Collateralization.  (a)   
Pursuant to Section 2.05(i) of the Credit Agreement, (i) LaSalle is
hereby appointed to replace DBTCA as Issuing Bank under the Credit Agreement
and hereby assumes, and shall succeed to and become vested with, all rights,
powers, privileges and duties of the Issuing Bank under the Credit Agreement
and the other Loan Documents (except with respect to any Letters of Credit
issued under the Credit Agreement prior to the effectiveness of this Consent
and Amendment) and (ii) DBTCA hereby resigns as Issuing Bank under the Credit
Agreement and, except as provided under clauses (b) and (c) below, hereby
relinquishes all rights, powers and privileges of, and is hereby discharged
from its duties and obligations as, Issuing Bank under the Credit Agreement and
the other Loan Documents.  The Parent
Borrower and the Administrative Agent hereby consent to the appointment of
LaSalle to replace DBTCA as Issuing Bank.

 

(b)  With respect to the Letters
of Credit issued by DBTCA under the Credit Agreement and outstanding on the
effective date of this Consent and Amendment (the “Outstanding Letters of
Credit”), which Outstanding Letters of Credit are listed on Schedule A
to this Consent and Amendment, effective upon the receipt by DBTCA of the Cash
Collateral Amount (as defined below), (i) the Parent Borrower and DBTCA
hereby agree that the Outstanding Letters of Credit shall remain outstanding,
(ii) DBTCA hereby

 

2

 

releases each Lender from its obligations under Section 2.05 of
the Credit Agreement in respect of the Outstanding Letters of Credit,
(iii) DBTCA hereby waives any and all of its rights as a Secured Party under
the Security Documents, and any and all of its rights in the Lien of the
Security Documents, in each case in respect of the Outstanding Letters of
Credit and (iv) notwithstanding clause (i) of this sentence, the
Outstanding Letters of Credit shall thereafter be deemed not to be “Letters of
Credit” under the Credit Agreement and the other Loan Documents; provided,
however, that the Parent Borrower shall remain liable for (x) its
obligations under Section 2.05 of the Credit Agreement to reimburse any LC
Disbursements under the Outstanding Letters of Credit, (y) its obligations
under the Credit Agreement to pay interest on any such LC Disbursements and (z)
its obligations under Section 2.11(b) of the Credit Agreement to pay fees
in respect of the Outstanding Letters of Credit.  Accrued fees referred to in clause (z) above shall be payable as
provided in the Credit Agreement and upon termination or cancellation of the
Outstanding Letters of Credit, except that participation fees accrued after
receipt by DBTCA of the Cash Collateral Amount shall be for the account of
DBTCA.

 

(c)  The Parent Borrower and
DBTCA hereby agree to the establishment of a cash collateral account (the “Cash
Collateral Account”) at DBTCA to secure the Parent Borrower’s obligations
under the Outstanding Letters of Credit. 
The Parent Borrower will wire transfer to DBTCA for deposit in the Cash
Collateral Account, pursuant to wire transfer instructions previously provided
by DBTCA to the Parent Borrower, an amount of cash (the “Cash Collateral
Amount”) equal to 101% of the aggregate face amount of the Outstanding
Letters of Credit.  The Parent Borrower
hereby grants to DBTCA a security interest in the Cash Collateral Account and
all amounts deposited therein to secure the Parent Borrower’s obligations in
connection with the Outstanding Letters of Credit.  Without limiting the generality of the foregoing, the Parent
Borrower agrees that DBTCA may withdraw funds from the Cash Collateral Account
(i) to pay all fees and other amounts that are or become payable to DBTCA in
connection with the Outstanding Letters of Credit, (ii) to reimburse DBTCA for
all amounts paid by DBTCA under or in connection with drafts drawn under the
Outstanding Letters of Credit and (iii) to pay all reasonable out-of-pocket
costs and expenses of DBTCA incurred from time to time in connection with the
Outstanding Letters of Credit and the administration of the Cash Collateral
Account.  In the event that either (x)
the Parent Borrower provides DBTCA such documents and other evidence as DBTCA
may reasonably request, in form and substance reasonably satisfactory to DBTCA,
evidencing full and complete release and satisfaction of a particular
Outstanding Letter of Credit or (y) the Parent Borrower provides DBTCA with a
back-to-back letter of credit issued by a financial institution reasonably
satisfactory to DBTCA (it being understood that either LaSalle or LaSalle Bank
National Association, an Affiliate of LaSalle, shall be a satisfactory
financial institution) with a face amount equal to 101% of the face amount of a
particular Outstanding Letter of Credit, DBTCA hereby agrees to release from
the Cash Collateral Account, and return to the Company, an amount equal to 101%
of the face amount of such Outstanding Letter of Credit (less any amounts
retained by DBTCA to pay interest, fees and expenses associated with such
Outstanding Letter of Credit pursuant to the previous sentence).

 

3

 

(d)  All notices and
communications to be delivered to LaSalle as replacement Issuing Bank shall be
delivered to LaSalle Business Credit, LLC, 135 S. LaSalle Street, Chicago,
Illinois 60603, Attention of James C. Simpson (Telecopy No. (312)
904-6450), with a copy to LaSalle Bank National Association, 540 W. Madison
Street, Chicago, Illinois 60603, Attention of Trade Services (Telecopy No.
(312) 904-6303).

 

SECTION 4. Amendments to the Credit Agreement.  (a) 
Section 1.01 of the Credit Agreement is hereby amended by adding
the following sentence at the end of the definition of “Consenting Agents”:

 

Notwithstanding
the foregoing, at any time when there is no acting Co-Collateral Agent under
the Credit Agreement, the term “Consenting Agents” shall mean the
Administrative Agent and the Collateral Agent.

 

(b)  The parties hereto hereby
further acknowledge and agree that, notwithstanding anything in the Credit
Agreement or any other Loan Document to the contrary, in the event that the
Credit Agreement or any other Loan Document shall require (a) the agreement, request,
consent or approval of the Co-Collateral Agent prior to the taking of (or as a
condition to any Loan Party’s being required to take) any action under the
Credit Agreement or any other Loan Document or (b) the delivery of certificates
or other documentation to the Co-Collateral Agent, no such agreement, request,
consent or approval of the Co-Collateral Agent shall be so required to be
obtained, and no such delivery to the Co-Collateral Agent shall be required to
be made, at any time when there is no acting Co-Collateral Agent under the
Credit Agreement and the other Loan Documents.

 

(c)  Section 1.01 of the
Credit Agreement is further amended by adding the following definitions in the
appropriate alphabetical order:

 

“Consent and Amendment Effective Date” means the effective date
of the Consent and Amendment among the Borrowers, the Lenders party thereto,
Credit Suisse First Boston, acting through its Cayman Islands Branch, as
Administrative Agent, Deutsche Bank Trust Company Americas, as resigning Collateral
Agent and replaced Issuing Bank, General Electric Capital Corporation, as
successor Collateral Agent and resigning Co-Collateral Agent, and LaSalle
Business Credit, LLC, as replacement Issuing Bank.

 

“Outstanding Letters of Credit” means the letters of credit
issued by Deutsche Bank Trust Company Americas under this Agreement and
outstanding on the Consent and Amendment Effective Date, which letters of
credit are listed on Schedule 1.01(e), but not any extensions, renewals or
replacements thereof.

 

4

 

(d)  The Credit Agreement is
further amended to create a new Schedule 1.01(e), which
Schedule 1.01(e) shall be entitled “Outstanding Letters of Credit” and
shall contain the items listed on Schedule A to this Consent and
Amendment.

 

(e)  Section 6.01 of the
Credit Agreement is hereby amended by (i) deleting the word “and” at the
end of clause (xii) thereof, (ii) replacing the period at the end of
clause (xiii) thereof with “; and” and (iii) inserting the following
at the end of such Section:

 

(xiv) the Outstanding Letters of Credit.

 

(f)  Section 6.03 of the
Credit Agreement is hereby amended by (i) deleting the word “and” at the end of
clause (i) thereof, (ii) replacing the period at the end of clause (j) thereof
with “; and” and (iii) inserting the following at the end of such Section:

 

(k) 
any Lien on cash deposited on or prior to the Consent and Amendment
Effective Date with the issuing bank for any Outstanding Letter of Credit to
cash collateralize such Outstanding Letter of Credit (including with respect to
interest, fees and expenses associated therewith); provided that (i) the
amount of such cash subject to such Lien at any time shall not exceed 101% of
the face amount of such Outstanding Letter of Credit and (ii) upon the
termination or expiration of such Outstanding Letter of Credit, to the extent
there has been no drawing under such Outstanding Letter of Credit that has not
been reimbursed at such time, an amount of cash equal to 101% of the face amount
of such Outstanding Letter of Credit (less any amounts retained to pay
interest, fees and expenses associated therewith) shall be promptly released
from such Lien.

 

SECTION 5. Representations and Warranties.  Each Borrower represents and warrants to the
Administrative Agent, to each of the Lenders and to LaSalle, as replacement
Issuing Bank, that:

 

(a)  This Amendment has been
duly authorized, executed and delivered by it and constitutes a legal, valid
and binding obligation of each Loan Party party hereto, enforceable against
such Loan Party in accordance with its terms.

 

(b)  After giving effect to this
Amendment, the representations and warranties set forth in Article III of
the Credit Agreement are true and correct in all material respects on and as of
the date hereof with the same effect as if made on and as of the date hereof,
except to the extent such representations and warranties expressly relate to an
earlier date.

 

(c)  After giving effect to this
Amendment, no Default has occurred and is continuing.

 

5

 

SECTION 6. Conditions to Effectiveness.  This
Consent and Amendment shall become effective when (a) the Administrative Agent
shall have received counterparts of this Consent and Amendment that, when taken
together, bear the signatures of the Borrowers, the Required Lenders, the
Administrative Agent, DBTCA, GECC and LaSalle, (b) the representations and
warranties set forth in Section 5 hereof are true and correct (as set
forth on an officer’s certificate delivered to the Administrative Agent) and
(c) all fees and expenses required to be paid or reimbursed by the
Borrowers pursuant hereto or the Credit Agreement or otherwise, including all
invoiced fees and expenses of counsel to the Administrative Agent, DBTCA (as
resigning Collateral Agent and replaced Issuing Bank), GECC (as successor
Collateral Agent and resigning Co-Collateral Agent) and LaSalle (as replacement
Issuing Bank), shall have been paid or reimbursed, as applicable.

 

SECTION 7. Credit Agreement.  Except as specifically amended hereby, the Credit Agreement shall
continue in full force and effect in accordance with the provisions thereof as
in existence on the date hereof.  After
the date hereof, any reference to the Credit Agreement shall mean the Credit
Agreement as amended hereby.  This
Consent and Amendment shall be a Loan Document for all purposes.

 

SECTION 8. Applicable Law.  THIS CONSENT AND AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 9. Counterparts. 
This Consent and Amendment may be executed in two or more counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute but one agreement. 
Delivery of an executed signature page to this Consent and Amendment by
facsimile transmission shall be effective as delivery of a manually signed
counterpart of this Consent and Amendment.

 

SECTION 10. Expenses. 
The Parent Borrower agrees to reimburse the Administrative Agent for
their out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore
LLP, counsel for the Administrative Agent.

 

SECTION 11. Headings. 
The headings of this Consent and Amendment are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof.

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Amendment to be duly executed by their respective authorized officers as of the
day and year first written above.

 

	
   

  	
  PLIANT CORPORATION,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNIPLAST INDUSTRIES CO.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNIPLAST HOLDINGS, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNIPLAST U.S., INC.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PIERSON INDUSTRIES, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TUREX, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  UNIPLAST MIDWEST, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE FIRST BOSTON, acting

  through its Cayman Islands Branch,

  individually and as Administrative Agent,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY

  AMERICAS, individually and as resigning

  Collateral Agent and replaced Issuing Bank,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION, individually and as

  successor Collateral Agent and resigning

  Co-Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE BUSINESS CREDIT, LLC, as

  replacement Issuing Bank,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

SIGNATURE PAGE
TO

AMENDMENT
DATED AS OF

March 8,
2004

 

 

To Approve the Amendment:

 

 

	
  Name of Institution

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

 

SCHEDULE A

 

Outstanding Letters of Credit

 

	
  Number

  	
   

  	
  Amount

  	
   

  	
  Expiration
  Date

  	
   

  	
  Beneficiary

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