Document:

Exhibit 10.7

 

 

 

DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING, AND ASSIGNMENT OF
LEASES AND RENTS WITH PROVISION FOR FUTURE ADVANCES

 

made by

CELGARD, INC.,

Grantor,

to

FIRST AMERICAN TITLE
INSURANCE COMPANY, Trustee

for
the use and benefit of

JPMORGAN
CHASE BANK, 

as Administrative Agent, Beneficiary

Dated
as of May 13, 2004

 

 

After recording please return to:

Simpson
Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention:  Cynthia Parker

 

 

TABLE OF CONTENTS

	
   

  	
   

  	
  Page

  
	
  Background

  	
  1

  
	
  Granting Clauses

  	
  2

  
	
  Terms and Conditions

  	
  5

  
	
  1.

  	
  Defined Terms

  	
  5

  
	
  2.

  	
  Warranty of Title

  	
  5

  
	
  3.

  	
  Payment
  of Obligations

  	
  5

  
	
  4.

  	
  Requirements

  	
  5

  
	
  5.

  	
  Payment of Taxes
  and Other Impositions

  	
  5

  
	
  6.

  	
  Insurance

  	
  6

  
	
  7.

  	
  Restrictions on
  Liens and Encumbrances

  	
  7

  
	
  8.

  	
  Due on Sale
  and Other Transfer Restrictions

  	
  7

  
	
  9.

  	
  Condemnation/Eminent Domain

  	
  7

  
	
  10.

  	
  Leases

  	
  7

  
	
  11.

  	
  Further Assurances

  	
  7

  
	
  12.

  	
  Beneficiary’s Right to
  Perform

  	
  7

  
	
  13.

  	
  Remedies

  	
  7

  
	
  14.

  	
  Right of
  Beneficiary to Credit Sale

  	
  10

  
	
  15.

  	
  Appointment
  of Receiver

  	
  10

  
	
  16.

  	
  Extension, Release, etc

  	
  10

  
	
  17.

  	
  Security
  Agreement under Uniform Commercial Code

  	
  11

  
	
  18.

  	
  Assignment
  of Rents

  	
  11

  
	
  19.

  	
  Additional Rights

  	
  12

  
	
  20.

  	
  Notices

  	
  12

  
	
  21.

  	
  No Oral
  Modification

  	
  12

  
	
  22.

  	
  Partial
  Invalidity

  	
  12

  
	
  23.

  	
  Grantor’s Waiver of Rights

  	
  12

  
	
  24.

  	
  Remedies
  Not Exclusive

  	
  13

  
	
  25.

  	
  Multiple Security

  	
  14

  
	
  26.

  	
  Successors
  and Assigns

  	
  15

  
	
  27.

  	
  No Waivers, etc.

  	
  15

  
	
  28.

  	
  Governing Law, etc.

  	
  15

  
	
  29.

  	
  Certain
  Definitions

  	
  15

  
	
  30.

  	
  Last Dollars Secured;
  Priority

  	
  16

  
	
  31.

  	
  Trustee’s Powers and
  Liabilities

  	
  16

  
	
   

  	
   

  	
   

  
				

 

DEED
OF TRUST, SECURITY AGREEMENT, FIXTURE FILING, AND ASSIGNMENT OF LEASES AND
RENTS WITH PROVISION FOR FUTURE ADVANCES

THIS DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING, AND ASSIGNMENT
OF LEASES AND RENTS WITH PROVISION FOR FUTURE ADVANCES, dated as of May 13,
2004 is made by CELGARD, INC., a Delaware corporation (“Grantor”), whose
address is c/o PP HOLDINGS CORPORATION
13800 South Lakes Drive, Charlotte, NC  28273, Attention: Lynn Amos, to FIRST AMERICAN TITLE INSURANCE COMPANY, (“Trustee”),
whose address is c/o
Robert Bauchle, 629 Green Valley Road, Suite  212, Greensboro, NC 27408, for the use and benefit of
JPMORGAN CHASE BANK, as Administrative Agent (in such capacity, “Beneficiary”)
whose address is 270 Park Avenue, New York, New York 10017, Attention: Peter Dedousis. References to this “Deed of Trust”
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders and
replacements of this instrument.

Background

A.            PP Holdings Corporation and PP Acquisition Corporation
(collectively, “Borrower”) have entered into the Credit Agreement dated
as of the date hereof (as the same may be amended, supplemented, restated or
otherwise modified from time to time, the “Credit Agreement”) with the
several banks and other financial institutions from time to time parties
thereto (the “Lenders”), General Electric Capital Corporation, as documentation
agent, Bear Stearns Corporate Lending Inc., as syndication agent, and
Beneficiary.  The terms of the Credit
Agreement are incorporated by reference in this Deed of Trust as if the terms
thereof were fully set forth herein.  In
the event of any conflict between the provisions of this Deed of Trust and the
provisions of the Credit Agreement, the applicable provisions of the Credit
Agreement shall govern and control, provided, that in the case of a
provision in this Deed of Trust which is more specific and detailed than the
related provision in the Credit Agreement (including by way of illustration,
the section of this Deed of Trust entitled “Leases”), such Deed of Trust
provision shall not be deemed to be in conflict with the related provision in
the Credit Agreement.

B.            Grantor is the owner of the fee simple estate in the
parcel(s) of real property described on Schedule A attached (the “Land)
and owns the buildings, improvements, structures and fixtures now or
subsequently located on the Land (the “Improvements”; the Land and the
Improvements being collectively referred to as the “Real Estate”).

C.            Pursuant to the terms and conditions of the Credit
Agreement, inter  alia: (1) the Term Loan Lenders have severally
agreed to make certain Term Loans to Borrower in the original aggregate
principal amount of up to $370,000,000 and to make Euro Term Loans to Borrower
in the original aggregate principal amount of up to €36,000,000; (2) the
Revolving Credit Lenders have severally agreed to make certain Revolving Loans
to Borrower in the original aggregate principal amount of up to $90,000,000  (the “Revolving Facility”); (3) the Swingline Lender
has agreed to extend certain Swingline Loans not to exceed $5,000,000 in the
aggregate and the issuances of which shall reduce the availability of the
Revolving Credit Borrowing and (4) one or more Lenders may make Incremental
Loans in an aggregate principal amount not to exceed $200,000,000, as evidenced
by the Credit Agreement.

 

 

D.            This Deed of Trust is given to secure future advances and
is made pursuant to North Carolina General Statute 46-67 et. seq.  The amount of obligations presently secured
is $660,000,000 and €36,000,000 and the maximum principal amount, including
present and future obligations, which may be secured at any one time are
$660,000,000 and €36,000,000. All advances made hereunder must be made within
fifteen years of the date of this Deed of Trust.

E.             It is a condition, among others, to the obligations of
the Lenders to make the Loans and enter into any Hedge Agreement that Grantor
secure its obligations under the Guarantee and Collateral Agreement dated as of
the date hereof in favor of Beneficiary (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the “Guarantee
and Collateral Agreement”) pursuant to which Grantor guaranteed the
obligations of Borrower under the Credit Agreement and the other Loan
Documents, by executing and delivering this Deed of Trust.  Grantor, a wholly-owned subsidiary of
Borrower, will receive substantial direct and indirect benefit from the
extensions of credit made to Borrower pursuant to the Credit Agreement.

Granting Clauses

For
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grantor hereby agrees that to secure the following
(collectively, the “Obligations”):

(a)           the due and punctual payment of (i)
the principal of and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by the
Borrower under the Credit Agreement in respect of any Letter of Credit, when
and as due, including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral, and (iii) all
other monetary obligations of the Borrower to any of the Secured Parties under
the Credit Agreement and each of the other Loan Documents, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding),

(b)           the due and punctual performance of
all other obligations of the Borrower under or pursuant to the Credit Agreement
and each of the other Loan Documents,

(c)           the due and punctual payment and
performance of all the obligations of each other Loan Party under or pursuant
to the Guarantee and Collateral Agreement and each of the other Loan Documents,
and

(d)           the due and
punctual payment and performance of all obligations of each Loan Party under
each Hedging Agreement that (i) is in effect on the Closing Date with a
counterparty that is a Lender or an Affiliate of a Lender as of the Closing
Date or (ii) is entered into after the Closing Date with any counterparty that
is a Lender or an Affiliate of a Lender at the time such Hedging

 

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Agreement is entered into
unless such Hedging Agreement provides the obligations thereunder are not
“Obligations” as defined in the Guarantee and Collateral Agreement.

GRANTOR HEREBY CONVEYS TO
TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO TRUSTEE, IN
TRUST WITH POWER OF SALE FOR THE USE AND BENEFIT OF BENEFICIARY, AND GRANTS
BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:

(a)           the Land;

(b)           all right, title and interest Grantor
now has or may hereafter acquire in and to the Improvements or any part
thereof, and all the estate, right, title, claim or demand whatsoever of
Grantor, in possession or expectancy, in and to the Real Estate or any part
thereof;

(c)           all right, title and interest of
Grantor in, to and under all easements, rights of way, licenses, operating
agreements, abutting strips and gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and flowage rights, development
rights, air rights, mineral and soil rights, plants, standing and fallen
timber, and all estates, rights, titles, interests, privileges, licenses,
tenements, hereditaments and appurtenances belonging, relating or appertaining
to the Real Estate, and any reversions, remainders, rents, issues, profits and
revenue thereof and all land lying in the bed of any street, road or avenue, in
front of or adjoining the Real Estate to the center line thereof;

(d)           all of the fixtures, chattels,
business machines, machinery, apparatus, equipment, furnishings, fittings,
appliances and articles of personal property of every kind and nature
whatsoever, and all appurtenances and additions thereto and substitutions or
replacements thereof (together with, in each case, attachments, components,
parts and accessories) currently owned or subsequently acquired by Grantor and
now or subsequently attached to, or contained in the Real Estate, including but
without limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators, elevators,
loading and unloading equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae), televisions,
computers, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of every kind and
description (all of the foregoing in this paragraph (d) being referred to
as the “Equipment”);

(e)           all right, title and interest of
Grantor in and to all substitutes and replacements of, and all additions and
improvements to, the Real Estate and the Equipment, subsequently acquired by or
released to Grantor or constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release, construction, assembling or
placement, including, without limitation, any and all building

 

3

 

materials whether stored at
the Real Estate or offsite, and, in each such case, without any further deed,
conveyance, assignment or other act by Grantor;

(f)            all right, title and interest of
Grantor in, to and under all leases, subleases, underlettings, concession
agreements, management agreements, licenses and other agreements relating to
the use or occupancy of the Real Estate or the Equipment or any part thereof,
now existing or subsequently entered into by Grantor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any of the
foregoing may be amended, restated, extended, renewed or modified from time to
time, the “Leases”), and all rights of Grantor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all other
rents, royalties, issues, profits, revenue, income and other benefits arising
from the use and enjoyment of the Trust Property (as defined below)
(collectively, the “Rents”);

(g)           subject to the terms of the Credit
Agreement, all unearned premiums under insurance policies now or subsequently
obtained by Grantor relating to the Real Estate or Equipment and Grantor’s
interest in and to all proceeds of any such insurance policies (including title
insurance policies) including the right to collect and receive such proceeds,
subject to the provisions relating to insurance generally set forth below; and
all awards and other compensation, including the interest payable thereon and
the right to collect and receive the same, made to the present or any
subsequent owner of the Real Estate or Equipment for the taking by eminent
domain, condemnation or otherwise, of all or any part of the Real Estate or any
easement or other right therein;

(h)           to the extent not prohibited under
the applicable contract, consent, license or other item unless the appropriate
consent has been obtained, all right, title and interest of Grantor in and to
(i) all contracts from time to time executed by Grantor or any manager or agent
on its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or any
part thereof and all agreements and options relating to the purchase or lease
of any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such options  and all leases
of Equipment, (ii) all consents, licenses, building permits, certificates of
occupancy and other governmental approvals relating to construction,
completion, occupancy, use or operation of the Real Estate or any part thereof,
and (iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate; and

(i)            all proceeds, both cash and noncash,
of the foregoing;

(All of the foregoing
property and rights and interests now owned or held or subsequently acquired by
Grantor and described in the foregoing clauses (a) through (c) are collectively
referred to as the “Premises”, and those described in the foregoing
clauses (a) through (i) are collectively referred to as the “Trust Property”).

TO HAVE AND TO HOLD the
Trust Property and the rights and privileges hereby conveyed unto Trustee, its
successors and assigns for the uses and purposes set forth, until the
Obligations are fully paid and performed, provided, however, that the condition
of this 

 

4

 

Deed of Trust is such that
if the Obligations are fully paid and performed, then the estate hereby granted
shall cease, terminate and become void but shall otherwise remain in full force
and effect.

This Deed of Trust covers
present and future advances and re-advances, in the aggregate amount of the
obligations secured hereby, made by the Secured Parties for the benefit of
Borrower, and the lien of such future advances and re-advances shall relate
back to the date of this Deed of Trust.

Terms and Conditions

1.                             Defined Terms. Capitalized terms used herein (including
in the “Background” and “Granting Clauses” sections above) and not otherwise
defined herein shall have the meanings ascribed thereto in the Credit Agreement
and the Guarantee and Collateral Agreement, as applicable.  References in this Deed of Trust to the “Default
Rate” shall mean the interest rate applicable pursuant to Section 2.7 of
the Credit Agreement.

2.                             Warranty of Title. 
Grantor warrants that it has good record title in fee simple to the Real
Estate, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and any other lien or encumbrance as permitted by
Section 6.2 of the Credit Agreement (the “Permitted Exceptions”). 
Grantor shall warrant, defend and preserve such title and the lien of
this Deed of Trust against all claims of all persons and entities (not
including the holders of the Permitted Exceptions).  Grantor represents and warrants that it has the right to mortgage
the Trust Property.

3.                             Payment of Obligations.  Grantor shall pay and perform the Obligations at the times and
places and in the manner specified in the Loan Documents.

4.                             Requirements. 
Grantor shall promptly comply with all covenants, restrictions and
conditions now or later of record which may be applicable to any of the Trust
Property, or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of any of the Trust Property,
except where a failure to do so could not reasonably be expected to have a
Material Adverse Effect.

5.                             Payment of Taxes and Other Impositions.  (a)  Promptly
when due or prior to the date on which any fine, penalty, interest or cost may
be added thereto or imposed, Grantor shall pay and discharge all taxes, charges
and assessments of every kind and nature, all charges for any easement or
agreement maintained for the benefit of any of the Real Estate, all general and
special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges, vault taxes and all other public charges even if
unforeseen or extraordinary, imposed upon or assessed against or which may
become a lien on any of the Real Estate, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest
on any of the foregoing (all of the foregoing are collectively referred to
hereinas the “Impositions”),
except where otherwise permitted under Section 5.3 of the Credit Agreement.  Upon request by Beneficiary, Grantor shall
deliver to Beneficiary evidence reasonably acceptable to Beneficiary showing
the payment of any such Imposition.  If
by law any Imposition, at Grantor’s option, may be paid in installments
(whether or not interest shall accrue on the unpaid balance of such

 

5

 

Imposition),
Grantor may elect to pay such Imposition in such installments and shall be
responsible for the payment of such installments with interest, if any.

(b)           Nothing herein shall affect any right or remedy of Trustee
or Beneficiary under this Deed of Trust or otherwise, without notice or demand
to Grantor, to pay any Imposition after the date such Imposition shall have
become due, and add to the Obligations the amount so paid, together with
interest from the time of payment at the Default Rate.  Any sums paid by Trustee or Beneficiary in
discharge of any Impositions shall be (i) a lien on the Premises secured hereby
prior to any right or title to, interest in, or claim upon the Premises
subordinate to the lien of this Deed of Trust , and (ii) payable on demand by
Grantor to Beneficiary together with interest at the Default Rate as set forth
above.

6.                             Insurance.  (a) 
Grantor shall maintain insurance policies in connection with the Real
Estate in such form and amounts, covering such risks, issued by such companies
and otherwise in the manner and to the extent required pursuant to Section 5.2
of the Credit Agreement.

 

(b)           If the Trust Property, or any part thereof, shall be
destroyed or damaged, to the extent required by Section 5.6 of the Credit
Agreement, Grantor shall give prompt notice thereof to Beneficiary.  All insurance proceeds paid or payable in
connection with any damage or casualty to the Real Estate shall be deemed
proceeds from a Recovery Event and applied in the manner specified in the
Credit Agreement.

(c)           To the extent required under Section 5.2(e) of the Credit
Agreement, Grantor shall notify the Beneficiary immediately whenever any
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained on the Trust Property under Section 5.2 of the
Credit Agreement is taken out by the Grantor; and Grantor shall promptly
deliver to the Beneficiary a duplicate original copy of such policy or
policies.

 

6

 

7.                             Restrictions on Liens and Encumbrances.  Except for the lien of this Deed of Trust
and the Permitted Exceptions or as permitted by the Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust Property nor
create or suffer to exist any lien, charge or encumbrance on the Trust
Property, or any part thereof, whether superior or subordinate to the lien of
this Deed of Trust and whether recourse or non-recourse.

8.                             Due on Sale and Other Transfer
Restrictions.  Except as expressly
permitted under the Credit Agreement, Grantor shall not sell, transfer, convey
or assign all or any portion of, or any interest in, the Trust Property.

9.                             Condemnation/Eminent Domain.  Promptly upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Trust Property, or
any material portion thereof, Grantor will notify Beneficiary of the pendency
of such proceedings.  All awards and
proceeds relating to such condemnation shall be deemed proceeds from a Recovery
Event and applied in the manner specified in the Credit Agreement.

10.                           Leases.  Except as expressly permitted under the
Credit Agreement, Grantor shall not (a) execute an assignment or pledge of any
Lease relating to all or any portion of the Trust Property other than in favor
of Beneficiary, or (b) execute or permit to exist any Lease of any of the Trust
Property.

11.                           Further Assurances. 
To further assure Beneficiary’s and Trustee’s rights under this Deed of
Trust , Grantor agrees promptly upon demand of Beneficiary to do any act or
execute any additional documents (including, but not limited to, security
agreements on any personalty included or to be included in the Trust Property)
as may be reasonably required by Beneficiary or Trustee to confirm the lien of
this Deed of Trust and all other rights or benefits conferred on Beneficiary or
Trustee by this Deed of Trust.

12.                           Beneficiary’s Right to Perform.  If Grantor fails to perform any of the
covenants or agreements of Grantor, within the applicable grace period, if any,
provided for in the Credit Agreement or the Guarantee and Collateral Agreement,
Beneficiary or Trustee, without waiving or releasing Grantor from any
obligation or default under this Deed of Trust , may, at any time upon 5 days’
notice to Grantor (but shall be under no obligation to) pay or perform the
same, and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Grantor to Beneficiary or Trustee and the same shall be
secured by this Deed of Trust and shall be a lien on the Trust Property prior
to any right, title to, interest in, or claim upon the Trust Property attaching
subsequent to the lien of this Deed of Trust. 
No payment or advance of money by Beneficiary or Trustee under this
Section shall be deemed or construed to cure Grantor’s default or waive any
right or remedy of Beneficiary or Trustee.

13.                           Remedies.  (a)  Upon the occurrence and during the
continuance of any Event of Default, Beneficiary may immediately take such
action, without notice or demand, as it deems advisable to protect and enforce its
rights against Grantor and in and to the Trust Property, including, but not
limited to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such manner as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:

 

7

 

(i)            Beneficiary may elect to foreclose
under power of sale, in which case it shall be lawful for, and the duty of, Trustee,
upon receipt by Trustee of a written declaration of default and demand for sale
by Beneficiary, to sell (and, in case of any default of any purchaser, resell)
the Trust Property, in whole or in part or parcels (without regard to the right
of any party to a marshalling of assets, Grantor hereby expressly waiving any
such right), such sale in whole or in part or parcels to be determined by
Trustee in his sole discretion (Grantor hereby expressly consenting thereto),
at public venue to the highest bidder for cash at the door of the court house
then customarily employed for that purpose in the county where the Real Estate
is located, after having given such notice of hearing as to commencement of
foreclosure proceedings and having obtained such findings or leave of court as
may then be required by law and then having given such notice of the time and
place of sale and a description of the property to be sold and by advertisement
published as is provided by the laws of the State of North Carolina then in effect,
and by such other methods, if any, as Beneficiary may deem desirable or as may
be required or permitted by applicable law. 
The Trustee shall receive the proceeds of such sale and, after retaining
a reasonable commission for his services, together with reasonable attorneys
fees incurred by the Trustee in such proceeding, apply such proceeds to the
cost of sale, including, but not limited to, costs of collection, taxes,
assessments, costs of recording, service fees and incidental expenditures, the amount
due on the note secured hereby and advancements and other sums expended by the
Beneficiary according to the provisions hereof and otherwise as required by the
then existing law relating to foreclosures. 
If permitted by the then existing law relating foreclosures, the Trustee
may sell and convey the Trust Property under the power aforesaid, although the
Trustee has been, may now be or may hereafter be attorney or agent or employee
of the Beneficiary with respect to the Loans or the Obligations or with respect
to any matter or business whatsoever. 
If permitted by the then existing law relating to foreclosures, Trustee
may adjourn from time to time any sale by him to be made under or by virtue or
this Deed of Trust by announcement at the time and place appointed for such
sale or for such adjourned sale or sales; and, except as otherwise provided by
any applicable provision of law, Trustee, without further notice or
publication, except for any notice or publication as may be required by the
then existing law, may make such sale at the time and place to which the same
shall be adjourned.

(ii)           Beneficiary may, to the extent
permitted by applicable law, (A) institute and maintain an action of judicial
foreclosure against all or any part of the Trust Property, (B) institute and
maintain an action on the Credit Agreement, the Guarantee and Collateral
Agreement or any other Loan Document, or (C) take such other action at law or
in equity for the enforcement of this Deed of Trust or any of the Loan
Documents as the law may allow. 
Beneficiary may proceed in any such action to final judgment and
execution thereon for all sums due hereunder, together with interest thereon at
the Default Rate and all costs of suit, including, without limitation,
reasonable attorneys’ fees and disbursements. 
Interest at the Default Rate shall be due on any judgment obtained by
Beneficiary from the date of judgment until actual payment is made of the full
amount of the judgment; and

 

8

 

(iii)          Beneficiary may personally, or by its
agents, attorneys and employees and without regard to the adequacy or
inadequacy of the Trust Property or any other collateral as security for the
Obligations enter into and upon the Trust Property and each and every part
thereof and exclude Grantor and its agents and employees therefrom without
liability for trespass, damage or otherwise (Grantor hereby agreeing to
surrender possession of the Trust Property to Beneficiary upon demand at any
such time) and use, operate, manage, maintain and control the Trust Property
and every part thereof.  Following such
entry and taking of possession, Beneficiary shall be entitled, without
limitation, (x) to lease all or any part or parts of the Trust Property for
such periods of time and upon such conditions as Beneficiary may, in its
discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed, matter or thing
concerning the Trust Property as Beneficiary shall deem appropriate as fully as
Grantor might do.

(b)           Beneficiary, in any action to foreclose this Deed of Trust
in a judicial procedure or in connection with the exercise of any non-judicial
power of sale by Trustee, shall be entitled to the appointment of a
receiver.  In case of a trustee’s sale
or foreclosure sale, the Real Estate may be sold, at Beneficiary’s election, in
one parcel or in more than one parcel and Beneficiary is specifically empowered
(without being required to do so, and in its sole and absolute discretion) to
cause successive sales of portions of the Trust Property to be held.

(c)           Upon the occurrence and during the continuance of any
Event of Default resulting from any breach of any of the covenants, agreements,
terms or conditions contained in this Deed of Trust, Beneficiary shall be
entitled to enjoin such breach and obtain specific performance of any covenant,
agreement, term or condition and Beneficiary shall have the right to invoke any
equitable right or remedy as though other remedies were not provided for in
this Deed of Trust.

(d)           It is agreed that if an Event of Default shall occur and
be continuing, any and all proceeds of the Trust Property received by Trustee
or Beneficiary shall be held by Trustee or Beneficiary for the benefit of the
Secured Parties as collateral security for the Obligations (whether matured or
unmatured), and shall be applied in payment of the Obligations, in the
following order:

First, to the
payment of all costs and expenses incurred by the Beneficiary (in its capacity
as such hereunder or under any other Loan Document) in connection with such
collection, sale, foreclosure or realization or otherwise in connection with
this Deed of Trust , any other Loan Document or any of the Obligations,
including all court costs and the fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Beneficiary hereunder or
under any other Loan Document and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Loan Document;

 

Second, to the
payment in full of the Obligations (the amounts so applied to be distributed
among the Secured Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such distribution); and

 

9

 

Third, to the
Borrower, their successors or assigns, or as a court of competent jurisdiction
may otherwise direct.

 

14.                           Right of Beneficiary to Credit Sale.  Upon the occurrence of any sale made under
this Deed of Trust, whether made under the power of sale or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Trust Property or any part thereof.  In lieu of paying cash therefore,
Beneficiary may make settlement for the purchase price by crediting upon the
Obligations or other sums secured by this Deed of Trust, the net sales price
after deducting therefrom the expenses of sale and the cost of the action and
any other sums which Beneficiary is authorized to deduct under this Deed of
Trust.  In such event, this Deed of
Trust, the Credit Agreement, the Guarantee and Collateral Agreement and
documents evidencing expenditures secured hereby may be presented to the person
or persons conducting the sale in order that the amount so used or applied may
be credited upon the Obligations as having been paid.

15.                           Appointment of Receiver.  If an Event of Default shall have occurred
and be continuing, Beneficiary as a matter of right and without notice to
Grantor, unless otherwise required by applicable law, and without regard to the
adequacy or inadequacy of the Trust Property or any other collateral or the
interest of Grantor therein as security for the Obligations, shall have the
right to apply to any court having jurisdiction to appoint a receiver or
receivers or other manager of the Trust Property, without requiring the posting
of a surety bond, and without reference to the adequacy or inadequacy of the
value of the Trust Property or the solvency or insolvency of Grantor or any
other party obligated for payment of all or any part of the Obligations, and
whether or not waste has occurred with respect to the Trust Property, and
Grantor hereby irrevocably consents to such appointment and waives notice of
any application therefore (except as may be required by law).  Any such receiver or receivers or manager
shall have all the usual powers and duties of receivers in like or similar cases
and all the powers and duties of Beneficiary in case of entry as provided in
this Deed of Trust, including, without limitation and to the extent permitted
by law, the right to enter into leases of all or any part of the Trust
Property, and shall continue as such and exercise all such powers until the
date of confirmation of sale of the Trust Property unless such receivership is
sooner terminated.

16.                           Extension, Release, etc. 
(a)  Without affecting the lien
or charge of this Deed of Trust upon any portion of the Trust Property not then
or theretofore released as security for the full amount of the Obligations,
Beneficiary may, to the extent permitted elsewhere under the Loan Documents,
from time to time and without notice, agree to (i) release any person liable
for the indebtedness borrowed or guaranteed under the Loan Documents, (ii)
extend the maturity or alter any of the terms of the indebtedness borrowed or
guaranteed under the Loan Documents or any other guaranty thereof, (iii) grant
other indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Beneficiary’s option any parcel, portion or all of
the Trust Property, (v) take or release any other or additional security for
any obligation herein mentioned, or (vi) make compositions or other
arrangements with debtors in relation thereto.

(b)           No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect the lien of this Deed of Trust or any liens,
rights, powers or remedies of Beneficiary hereunder, and such liens, rights,
powers and remedies shall continue unimpaired.

 

10

 

(c)           If Beneficiary shall have the right to foreclose this Deed
of Trust or to direct the Trustee to exercise its power of sale, Grantor
authorizes Beneficiary at its option to foreclose the lien of this Deed of
Trust (or direct the Trustee to sell the Trust Property, as the case may be)
subject to the rights of any tenants of the Trust Property.  The failure to make any such tenants parties
defendant to any such foreclosure proceeding and to foreclose their rights, or
to provide notice to such tenants as required in any statutory procedure
governing a sale of the Trust Property by Trustee, or to terminate such
tenant’s rights in such sale will not be asserted by Grantor as a defense to
any proceeding instituted by Beneficiary to collect the Obligations or to
foreclose the lien of this Deed of Trust.

(d)           Unless expressly provided otherwise, in the event that
ownership of this Deed of Trust and title to the Trust Property or any estate
therein shall become vested in the same person or entity, this Deed of Trust
shall not merge in such title but shall continue as a valid lien on the Trust
Property for the amount secured hereby.

17.                           Security Agreement under Uniform
Commercial Code.  (a)  It is the intention of the parties hereto
that this Deed of Trust shall constitute a “security agreement” within the
meaning of the Uniform Commercial Code (the “Code”) of the State of
North Carolina and Grantor hereby grants to Beneficiary a security interest in
all the Trust Property that is personal property under the Code.  If an Event of Default shall occur and be
continuing under this Deed of Trust, then in addition to having any other right
or remedy available at law or in equity, Beneficiary shall have the option of
either (i) proceeding under the Code and exercising such rights and remedies as
may be provided to a secured party by the Code with respect to all or any
portion of the Trust Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Trust Property in accordance with
Beneficiary’s rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply).  If Beneficiary shall elect to proceed under
the Code, then ten days’ notice of sale of the personal property shall be
deemed reasonable notice and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like incurred by Beneficiary shall include,
but not be limited to, attorneys’ fees and legal expenses.  At Beneficiary’s request, Grantor shall
assemble the personal property and make it available to Beneficiary at a place
designated by Beneficiary which is reasonably convenient to both parties.

(b)           Grantor and Beneficiary agree, to the extent permitted by
law, that: (i) all of the goods described within the definition of the word “Equipment”
are or are to become fixtures on the Real Estate; (ii) this Deed of Trust upon
recording or registration in the real estate records of the proper office shall
constitute a financing statement filed as a “fixture filing” within the meaning
of Sections 9-334a and 9-502a of the Code; (iii) Grantor is the record owner of
the Land; and (iv) the addresses of Grantor and Beneficiary are as set forth on
the first page of this Deed of Trust.

18.                           Assignment of Rents.  (a)  Grantor hereby
assigns to Trustee, for the benefit of the Beneficiary, the Rents as further
security for the payment of and performance of the Obligations, and Grantor grants
to Trustee and Beneficiary the right to enter the Trust Property for the
purpose of collecting the same and to let the Trust Property or any part
thereof, and to apply the Rents on account of the Obligations.  The foregoing assignment and grant is
present and absolute and shall continue in effect until the Obligations are
fully paid and performed, but Beneficiary 

 

11

 

and
Trustee hereby waive the right to enter the Trust Property for the purpose of
collecting the Rents and Grantor shall be entitled to collect, receive, use and
retain the Rents until the occurrence and during the continuance of an Event of
Default under this Deed of Trust; such right of Grantor to collect, receive,
use and retain the Rents may be revoked by Beneficiary upon the occurrence and
during the continuance of any Event of Default under this Deed of Trust by
giving not less than five days’ written notice of such revocation to Grantor;
in the event such notice is given, Grantor shall pay over to Beneficiary, or to
any receiver appointed to collect the Rents, any lease security deposits, and
shall pay monthly in advance to Beneficiary, or to any such receiver, the fair
and reasonable rental value as determined by Beneficiary for the use and
occupancy of such part of the Trust Property as may be in the possession of
Grantor or any affiliate of Grantor, and upon default in any such payment
Grantor and any such affiliate will vacate and surrender the possession of the
Trust Property to Beneficiary or to such receiver, and in default thereof may
be evicted by summary proceedings or otherwise.  Grantor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).

(b)           Grantor has not affirmatively done any act which would
prevent Beneficiary from, or limit Beneficiary in, acting under any of the
provisions of the foregoing assignment.

(c)           Except for any matter disclosed in the Credit Agreement,
no action has been brought or, so far as is known to Grantor, is threatened,
which would interfere in any way with the right of Grantor to execute the
foregoing assignment and perform all of Grantor’s obligations contained in this
Section and in the Leases.

19.                           Additional Rights. 
The holder of any subordinate lien or subordinate deed of trust on the
Trust Property shall have no right to terminate any Lease whether or not such
Lease is subordinate to this Deed of Trust nor shall Grantor consent to any
holder of any subordinate lien or subordinate deed of trust joining any tenant
under any Lease in any trustee’s sale or action to foreclose the lien or
modify, interfere with, disturb or terminate the rights of any tenant under any
Lease.  By recordation of this Deed of
Trust all subordinate lienholders and the trustees and beneficiaries under
subordinate deeds of trust are subject to and notified of this provision, and
any action taken by any such lienholder or trustee or beneficiary contrary to
this provision shall be null and void. 
Upon the occurrence and during the continuance of any Event of Default,
Beneficiary may, in its sole discretion and without regard to the adequacy of
its security under this Deed of Trust, apply all or any part of any amounts on
deposit with Beneficiary under this Deed of Trust against all or any part of
the Obligations.  Any such application
shall not be construed to cure or waive any Default or Event of Default or
invalidate any act taken by Beneficiary on account of such Default or Event of
Default.

20.                           Notices.  All notices, requests, demands and other
communications hereunder shall be given in accordance with the provisions of
Section  9.1 of the Credit
Agreement to Grantor and to Beneficiary as specified therein.

21.                           No Oral Modification.  This Deed of Trust may not be amended, supplemented or otherwise
modified except in accordance with the provisions of Section  9.8 of the Credit Agreement.  Any agreement made by Grantor and
Beneficiary after the date of this Deed of Trust relating to this Deed of Trust
shall be superior to the rights of the holder of any intervening

 

12

 

or subordinate lien or encumbrance.  Trustee’s execution of any written agreement
between Grantor and Beneficiary shall not be required for the effectiveness
thereof as between Grantor and Beneficiary.

22.                           Partial Invalidity. 
In the event any one or more of the provisions contained in this Deed of
Trust shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, but each shall be construed as if such invalid,
illegal or unenforceable provision had never been included.  Notwithstanding to the contrary anything
contained in this Deed of Trust or in any provisions of any Loan Document, the
obligations of Grantor and of any other obligor under any Loan Documents shall
be subject to the limitation that Beneficiary shall not charge, take or receive,
nor shall Grantor or any other obligor be obligated to pay to Beneficiary, any
amounts constituting interest in excess of the maximum rate permitted by law to
be charged by Beneficiary.

23.                           Grantor’s Waiver of Rights.  To the fullest extent permitted by law,
Grantor waives the benefit of all laws now existing or that may subsequently be
enacted providing for (i) any appraisement before sale of any portion of the
Trust Property, (ii) any extension of the time for the enforcement of the
collection of the Obligations or the creation or extension of a period of
redemption from any sale made in collecting such debt and (iii) exemption of
the Trust Property from attachment, levy or sale under execution or exemption
from civil process.  To the full extent
Grantor may do so, Grantor agrees that Grantor will not at any time insist
upon, plead, claim or take the benefit or advantage of any law now or hereafter
in force providing for any appraisement, valuation, stay, exemption, extension
or redemption, or requiring foreclosure of this Deed of Trust before exercising
any other remedy granted hereunder and Grantor, for Grantor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Trust Property, to the extent permitted by law, hereby waives and releases all
rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature (except as expressly provided in the Credit Agreement) or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Beneficiary of the foreclosure rights, power of sale, or other
rights hereby created.

24.                           Remedies Not Exclusive.  Beneficiary and Trustee shall be entitled to enforce payment and
performance of the Obligations and to exercise all rights and powers under this
Deed of Trust or under any of the other Loan Documents or other agreement or
any laws now or hereafter in force, notwithstanding some or all of the
Obligations may now or hereafter be otherwise secured, whether by deed of
trust, security agreement, pledge, lien, assignment or otherwise.  Neither the acceptance of this Deed of Trust
nor its enforcement, shall prejudice or in any manner affect Beneficiary’s or
Trustee’s right to realize upon or enforce any other security now or hereafter
held by Beneficiary and Trustee, it being agreed that Beneficiary and Trustee
shall be entitled to enforce this Deed of Trust and any other security now or
hereafter held by Beneficiary or Trustee in such order and manner as
Beneficiary may determine in its absolute discretion.  No remedy herein conferred upon or reserved to Trustee or
Beneficiary is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute.  Every power or
remedy given by any of the Loan Documents to Beneficiary or Trustee or to which
either may otherwise be entitled, may be exercised, concurrently or independently,
from time to time and as often as may be deemed

 

13

 

expedient by Beneficiary or Trustee.  In no event shall Beneficiary or Trustee, in
the exercise of the remedies provided in this Deed of Trust (including, without
limitation, in connection with the assignment of Rents to Beneficiary, or the
appointment of a receiver and the entry of such receiver on to all or any part
of the Trust Property), be deemed a “mortgagee in possession,” and Beneficiary
and Trustee shall not in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.

25.                           Multiple Security. 
If (a) the Premises shall consist of one or more parcels, whether or not
contiguous and whether or not located in the same county, or (b) in addition to
this Deed of Trust, Beneficiary shall now or hereafter hold or be the
beneficiary of one or more additional mortgages, liens, deeds of trust or other
security (directly or indirectly) for the Obligations upon other property in
the State in which the Premises are located (whether or not such property is
owned by Grantor or by others) or (c) both the circumstances described in
clauses (a) and (b) shall be true, then to the fullest extent permitted by law,
Beneficiary may, at its election, commence or consolidate in a single trustee’s
sale or foreclosure action all trustee’s sales or foreclosure proceedings
against all such collateral securing the Obligations (including the Trust
Property), which action may be brought or consolidated in the courts of, or
sale conducted in, any county in which any of such collateral is located.  Grantor acknowledges that the right to
maintain a consolidated foreclosure action is a specific inducement to
Beneficiary to extend the indebtedness borrowed pursuant to or guaranteed by
the Loan Documents, and Grantor expressly and irrevocably waives any objections
to the commencement or consolidation of the foreclosure proceedings in a single
action and any objections to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have.  Grantor further agrees that if Trustee or
Beneficiary shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Trust Property or against any collateral other than
the Trust Property, which collateral directly or indirectly secures the
Obligations, or if Beneficiary shall have obtained a judgment of foreclosure
and sale or similar judgment against such collateral (or, in the case of a
trustee’s sale, shall have met the statutory requirements therefor with respect
to the collateral), then, whether or not such proceedings are being maintained
or judgments were obtained in or outside the State in which the Premises are
located, Beneficiary may commence or continue any trustee’s sale or foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all or any part of the Trust Property and Grantor waives any objections
to the commencement or continuation of a foreclosure of this Deed of Trust or
exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Deed of Trust or such other
proceedings on such basis.  Neither the
commencement nor continuation of proceedings to sell the Trust Property in a
trustee’s sale, to foreclose this Deed of Trust nor the exercise of any other
rights hereunder nor the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall prejudice,
limit or preclude Beneficiary’s right to commence or continue one or more
trustee’s sales, foreclosure or other proceedings or obtain a judgment against (or,
in the case of a trustee’s sale, to meet the statutory requirements for, any
such sale of) any other collateral (either in or outside the State in which the
Premises are located) which directly or indirectly secures the Obligations, and
Grantor expressly waives any objections to the commencement of, continuation
of, or entry of a judgment in such other sales or proceedings or exercise of
any remedies in such sales or proceedings based upon any action or judgment
connected to this Deed of Trust, and Grantor also waives any right to seek to
dismiss, stay, remove, transfer or consolidate either such other sales or
proceedings or any sale or action under this Deed of Trust on such basis.  It is expressly understood and agreed 

 

14

 

that to the fullest extent permitted by law,
Beneficiary may, at its election, cause the sale of all collateral which is the
subject of a single trustee’s sale or foreclosure action at either a single
sale or at multiple sales conducted simultaneously and take such other measures
as are appropriate in order to effect the agreement of the parties to dispose
of and administer all collateral securing the Obligations (directly or
indirectly) in the most economical and least time-consuming manner.

26.                           Successors and Assigns.  All covenants of Grantor contained in this Deed of Trust are
imposed solely and exclusively for the benefit of Beneficiary and Trustee and
their respective successors and assigns, and no other person or entity shall
have standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may
be freely waived in whole or in part by Beneficiary or Trustee at any time if
in the sole discretion of either of them such waiver is deemed advisable.  All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. 
Without limiting the generality of the foregoing, any successor to
Trustee appointed by Beneficiary shall succeed to all rights of Trustee as if
such successor  had been originally
named as Trustee hereunder.  The word
“Grantor” shall be construed as if it read “Grantors” whenever the sense of
this Deed of Trust so requires and if there shall be more than one Grantor, the
obligations of the Grantors shall be joint and several.

27.                           No
Waivers, etc.  Any failure by
Beneficiary to insist upon the strict performance by Grantor of any of the
terms and provisions of this Deed of Trust shall not be deemed to be a waiver
of any of the terms and provisions hereof, and Beneficiary, notwithstanding any
such failure, shall have the right thereafter to insist upon the strict
performance by Grantor of any and all of the terms and provisions of this Deed
of Trust to be performed by Grantor. 
Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in any way impairing or affecting
the lien of this Deed of Trust or the priority of such lien over any
subordinate lien or deed of trust.

28.                        Governing
Law, etc.  THE PROVISIONS OF THIS
DEED OF TRUST WITH RESPECT TO THE CREATION, PERFECTION, PRIORITY,
ENFORCEABILITY AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS OF THIS DEED
OF TRUST SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA, AND GRANTOR EXPRESSLY ACKNOWLEDGES THAT ALL OF THE
OTHER PROVISIONS OF THIS DEED OF TRUST SHALL BE, AND BY THEIR RESPECTIVE TERMS
EACH OF THE GUARANTEE AND COLLATERAL AGREEMENT AND THE CREDIT AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.

29.                           Certain Definitions.  Unless the context clearly indicates a contrary intent or unless
otherwise specifically provided herein, words used in this Deed of Trust shall
be used interchangeably in singular or plural form and the word “Grantor” shall
mean “each Grantor or any subsequent owner or owners of the Trust Property or
any part thereof or interest therein,” the word “Beneficiary” shall mean
“Beneficiary or any successor agent for the Lenders,” the word 

 

15

 

“Trustee” shall mean “Trustee and any successor
hereunder,” the word “person” shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words “Trust Property” shall include any
portion of the Trust Property or interest therein.  Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural and vice versa.  The captions in this Deed of Trust are for
convenience or reference only and in no way limit or amplify the provisions
hereof.

30.                           Last Dollars Secured; Priority.  This Deed of Trust secures only a portion of
the indebtedness owing or which may become owing by Grantor to the Secured
Parties.  The parties agree that any
payments or repayments of such indebtedness shall be and be deemed to be
applied first to the portion of the indebtedness that is not secured hereby, it
being the parties’ intent that the portion of the indebtedness last remaining
unpaid shall be secured hereby.  If at
any time this Deed of Trust shall secure less than all of the principal amount
of the Obligations, it is expressly agreed that any repayments of the principal
amount of the Obligations shall not reduce the amount of the lien of this Deed
of Trust until the lien amount shall equal the principal amount of the
Obligations outstanding.

31.                           Trustee’s Powers and Liabilities.  (a) Trustee, by acceptance hereof, covenants
faithfully to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation, in lieu thereof,
for any services rendered by Trustee in accordance with the terms hereof.

(b)           Trustee, may resign at any time upon giving thirty (30)
days’ notice in writing to Grantor and to Beneficiary.

(c)           Beneficiary may remove Trustee at any time or from time to
time and select a successor trustee.  In
the event of the death, removal, resignation, refusal to act, inability to act
of Trustee, or absence from the State of North Carolina of Trustee, or in its
sole discretion for any reason whatsoever Beneficiary, without notice and
without specifying the reason therefor and without applying to any court, may
select and appoint a successor trustee, and all powers, rights, duties and
authority of the former Trustee, as aforesaid, shall thereupon become vested in
such successor.  Such substitute trustee
shall not be required to give bond for the faithful performance of his duties
unless required by Beneficiary.  Such
substitute trustee shall be appointed by written instrument duly recorded in
the county where the Real Estate is located. 
Grantor hereby ratifies and confirms any and all acts which the
herein-named Trustee, or his successor or successors in this trust, shall do
lawfully by virtue hereof.  Grantor
hereby agrees, on behalf of itself and of its heirs, executors, administrators
and assigns, that the recitals contained in any deed or deeds executed in due
form by any Trustee or substitute trustee, acting under the provisions of this
instrument, shall be prima facie evidence of the facts recited, and that it
shall not be necessary to prove in any court, otherwise than by such recitals,
the existence of the facts essential to authorize the execution and delivery of
such deed or deeds and the passing of title thereby.

(d)           Trustee shall not be required to see that this Deed of
Trust is recorded, nor be liable for its validity or its priority as a first
deed of trust, or otherwise, nor shall Trustee be answerable or responsible for
performance of observance of the covenants and agreements imposed upon Grantor
or Beneficiary, by this Deed of Trust or any other agreement.  Trustee, as

 

16

 

well as Beneficiary, shall have authority in their
respective discretion to employ agents and attorneys in the execution of this
trust and to protect the interest of the Beneficiary hereunder, and to the
extent permitted by law they shall be compensated and all expenses relating to
the employment of such agents and/or attorneys, including expenses of
litigation, shall be paid out of the proceeds of the sale of the Trust Property
conveyed hereby should a sale be had, but if no such sale be had, all sums
shall be recoverable to the extent permitted by law by all remedies at law or
in equity by which the Loans may be recovered.

(e)           At any time, or from time to time, without liability
therefor and without notice, upon written request of Beneficiary and without
affecting the effect of this Deed of Trust upon the remainder of the Trust
Property; Trustee may (i) reconvey any part of the Trust Property, (ii) consent
in writing to the making of any map or plat thereof, (iii) join in granting any
easement thereon, or (iv) join in any extension agreement or any agreement
subordinating the lien or charge hereof.ReleaseSupplementing
the provisions of Section 9.18 of the Credit Agreement, if any of the Trust
Property shall be sold, transferred or otherwise disposed of by any Grantor in
a transaction permitted by the Credit Agreement and the Net Cash Proceeds are
applied in accordance with the terms of the Credit Agreement, or otherwise
consented to by Beneficiary, then the Beneficiary, at the request and sole
expense of such Grantor, shall execute and deliver to such Grantor, in form
suitable for recording, all releases or other documents reasonably necessary or
desirable for the release of the Liens created hereby on such Trust
Property.  The Grantor shall deliver to
the Beneficiary, at least five Business Days prior to the date of the proposed
release, a written request for release identifying the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Grantor stating
that such transaction is in compliance with, and permitted by, the Credit
Agreement and the other Loan Documents or otherwise consented to by
Beneficiary.

 

17

 

This
Deed of Trust has been duly executed by Grantor on May 13, 2004 and is intended
to be effective as of such date.

                                                                                                                

	
   

  	
  CELGARD, INC.

  
	
   

  
	
   By:

  	
  /s/  Lynn Amos

  
	
   

  	
  Name: Lynn Amos

  
	
   

  	
  Title: Chief Financial
  Officer, Executive

  
	
   

  	
   

  	
  Vice President, Treasurer
  and 

  
	
   

  	
   

  	
  Secretary

  

 

 

 

	
  STATE OF NEW YORK

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss:

  
	
  COUNTY OF NEW YORK

  	
  )

  	
   

  

 

 

I, the undersigned, a Notary
Public  in the County
and State aforesaid, certify that Lynn Amos personally came before me
this day and acknowledged that he is CFO, EVP, Treasurer and Secretary of
Celgard, Inc., a Delaware corporation, and that he, CFO, EVP, Treasurer and Secretary,
being authorized to do so, executed the foregoing on behalf of the corporation.

 

Witness my hand and official
seal, this 13th day of May, 2004.

 

 

 

 

 

	
   

  	
   

  	
  /s/ Francis J. Kelleher

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  
	
   

  	
   

  	
  By: 

  	
  Francis J. Kelleher

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

 

	
  My Commission Expires: August 26, 2006

  
	
   

  
	
  and I am a resident of New York County, New YorkExhibit
10.8

 

TAX SHARING AGREEMENT

THIS
AGREEMENT (this “Agreement”) made
and entered into as of                ,
2004, by and among PP Holding Corporation II, a Delaware corporation
(“PHC II”), PP Holding
Corporation, a Delaware  corporation
and direct wholly owned subsidiary of PHC II (“PHC”), Polypore, Inc., a Delaware  corporation and direct wholly owned subsidiary of PHC (“Polypore”), and such direct and indirect
subsidiaries of PHC II that are listed on Exhibit A hereto
from time to time (collectively with PHC and Polypore, the “Subsidiaries” and each individually, a “Subsidiary”).

WITNESSETH:

WHEREAS,
PHC II and each of the Subsidiaries qualifies as an “includible
corporation” within the meaning of Section 1504(b) of the Internal Revenue Code
of 1986, as amended (the “Code”);

WHEREAS,
the affiliated group of corporations, consisting of PHC II, as the common
parent, and each of the Subsidiaries (the “Polypore Group”), qualifies as an
“affiliated group” within the meaning of Section 1504(a) of the Code; and

WHEREAS,
the Polypore Group desires to take advantage of the tax savings that may result
from the filing of U.S. federal income tax returns on a consolidated basis, in
accordance with Sections 1501 et seq.
of the Code and the Treasury Regulations promulgated thereunder.

NOW,
THEREFORE, in consideration of the covenants, agreements, terms and conditions
contained herein, and for other good, valid and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:

SECTION 1.  Defined Terms.  As used in this Agreement, the following
terms shall have the following meanings.

“Code” shall have the
meaning set forth in the recitals of this Agreement.

“Fiscal Year” shall mean
the annual accounting period of PHC II and any other Member.

“Interim Payments” shall
have the meaning set forth in Section 3(b) of this Agreement.

“Member” shall mean a
member (as defined in Treasury Regulations Section 1.1502-1(b)) of the Polypore
Group.

“PHC” shall have the
meaning set forth in the heading of this Agreement.

“PHC II” shall have
the meaning set forth in the heading of this Agreement.

“Polypore”
shall have the meaning set forth in the heading of this Agreement.

 

 

“Polypore  Group”
shall have the meaning set forth in the recitals of this Agreement.

“Separate Return Liability”
shall mean, with respect to any Subsidiary for any Fiscal Year, the U.S.
federal income taxes (including any minimum tax or alternative minimum tax)
that would be payable by such Subsidiary to the U.S. Treasury had the
Subsidiary filed a separate income tax return for that Fiscal Year based on the
Subsidiary’s Separate Taxable Income for that Fiscal Year.

“Separate Taxable Income”
shall mean, with respect to any Subsidiary for any Fiscal Year, the income,
gains, losses, deductions and credits of such Subsidiary for that Fiscal Year
calculated as follows:  (i) any
dividends received by one Member from another Member will be assumed to qualify
for the 100% dividends received deduction of Section 243 of the Code or shall
otherwise be eliminated from such calculation; (ii) gain or loss on
intercompany transactions, whether or not deferred, shall be treated by each
Member in the manner required by Treasury Regulations Section 1.1502-13;
(iii) limitations on the calculation of a deduction or the utilization of
tax credits or the calculation of a tax liability shall be made on a
consolidated basis; (iv) net operating losses and credits of a Subsidiary
shall be treated as available to such Subsidiary in determining such
Subsidiary’s Separate Taxable Income, and shall not be reduced even if such net
operating losses or credits are used in determining the consolidated taxable
income of the Polypore Group, instead, such net operating losses and credits
shall be reduced only if, when and to the extent used in determining the
Separate Taxable Income of the Subsidiary; and (v) elections relating to
tax credits and tax computations that differ from the consolidated treatment if
separate returns were filed shall be made on an annual basis by PHC II.

“Subsidiary” and “Subsidiaries” shall have the meanings set
forth in the heading of this Agreement.

SECTION 2.  Consent to
Filing of Consolidated Return.

(a)           PHC II shall
file a consolidated U.S. federal income tax return, and pay to the U.S.
Treasury any taxes due thereon, on behalf of the Polypore Group for the taxable
year ending December 31, 2004, and for each subsequent taxable period for which
this Agreement is in effect and for which the Polypore Group is required or
permitted to file a consolidated tax return; provided, that PHC II
shall not be liable for any taxes attributable to a Subsidiary if such
Subsidiary has not complied with its tax payment requirements as set forth in
Section 3 hereof.  Each Subsidiary shall
execute and file such consents, elections and other documents that may be
required or appropriate for the proper filing of such returns.

(b)           Each corporation
that, subsequent to the date of this Agreement, becomes a Member shall be added
to the list of Subsidiaries contained in Exhibit A hereto.  Polypore (or the applicable Member that is
the direct parent corporation of such Subsidiary) shall cause each of the
Subsidiaries listed on Exhibit A hereto, as amended from time to time,
to become a party hereto by executing this Agreement in counterpart.

 

2

 

SECTION 3.  Tax Payments.

(a)           Each Subsidiary
shall make payments to PHC II with respect to each Fiscal Year equal to its
respective Separate Return Liability for such Fiscal Year.  Such payments shall be made in the manner
set forth in paragraphs (b) and (c) below.

(b)           From time to time
during the Fiscal Year each Subsidiary shall make interim payments (“Interim
Payments”) to PHC II with respect to its Separate
Return Liability (i) pursuant to the schedule set forth in Section 6655(c)
of the Code and (ii) calculated under the principles Section 6655(d) of
the Code.  Interim Payments shall be
made no later than 5 calendar days prior to the due date of the relevant
estimated tax payment.

(c)           If a Subsidiary’s
Separate Return Liability for a particular Fiscal Year is greater than its
aggregate Interim Payments with respect to such Fiscal Year, then such
Subsidiary shall pay to PHC II the excess of its Separate Return Liability
over its aggregate Interim Payments at least five calendar days before
PHC II files the Polypore Group’s consolidated U.S. federal income tax
return in respect of such Fiscal Year. 
If a Subsidiary’s aggregate Interim Payments for a particular Fiscal
Year exceed its Separate Return Liability with respect to such Fiscal Year,
such excess shall be allowed as a credit to the Subsidiary in respect of the
Interim Payment next due from that Subsidiary to PHC II.

SECTION 4.  Adjustments to
the Separate Return Liability.

(a)           If for any Fiscal
Year the Internal Revenue Service makes an upward adjust to, or PHC II
files an amended return resulting in an upward adjustment of, the Polypore
Group’s consolidated U.S. federal income tax liability with respect to such
Fiscal Year, then each Subsidiary shall pay to PHC II an amount equal to
the excess of the Separate Return Liability for such Fiscal Year, as adjusted,
over the Separate Return Liability for such Fiscal Year paid to date.  In the event of a downward adjustment, the
excess of a Subsidiary’s Separate Return Liability for such Fiscal Year paid to
date over its Separate Return Liability, as adjusted, shall be allowed as a credit
to the Subsidiary in respect of the Interim Payment next due from that
Subsidiary to PHC II under Section 3 of this Agreement.

(b)           The payments
required under this Section 4 shall be made promptly after a “determination”
(as defined in Section 1313(a) of the Code) in respect of the amount at issue; provided,
however, that payments in the case of the filing of an amended return
shall be made promptly upon such filing.

SECTION 5.  Interest
Payments.  Interest
will be paid pursuant to this Agreement only with respect to payments required
to be made by a Subsidiary as a result of any adjustment or redetermination of
income by the Internal Revenue Service or in the case of a filing of an amended
return.  Such interest will be
calculated at the applicable overpayment or underpayment rate and shall otherwise
be determined in the same manner as would be determined by the Internal Revenue
Service.

SECTION 6.  Appointment of
PHC II as Agent.  Each
Subsidiary hereby appoints PHC II its agent with full power to act on its
behalf in all matters concerning the consolidated U.S. federal income tax
returns filed on behalf of the Polypore Group, including the preparation 

 

3

 

and
filing of such returns (including any amendments thereto), making or revoking
all elections with respect thereto, negotiating and settling any audit,
examination or administrative proceeding with respect to such tax returns, and
commencing and prosecuting any judicial proceeding related to such tax returns.

SECTION 7.  State Tax
Returns.  The provisions of this
Agreement shall apply, as appropriately adjusted, to any Members filing
combined, consolidated, unitary or similar income or franchise returns for
state tax purposes.

SECTION 8.  Miscellaneous.

(a)           This Agreement and
any provision hereof may be amended, waived, discharged or terminated only by
an instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge or termination is sought.

(b)           This Agreement shall
constitute the entire agreement between the parties concerning the subject
matter hereof and shall supersede any prior agreements and understandings
between or among the parties with respect to the subject matter hereof.

(c)           The validity,
interpretation and enforceability of this Agreement shall be governed in all
respects by the laws of the State of New York, without regard to conflict of
law principles.

(d)           Failure of any party
at any time to require the other party’s performance of any obligation under
this Agreement shall not affect the right to require performance of that
obligation.  Any waiver by any party of
any breach of any provision of this Agreement shall not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver or
modification of the provision itself, or a waiver of any right under this
Agreement.

(e)           Section and other
headings contained in this Agreement are for reference purposes only and are in
no way intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement or of any provision hereof.

(f)            Every provision of
this Agreement is intended to be severable. 
If any term or provision hereof is determined to be illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder of this Agreement.

(g)           This Agreement may
be executed in multiple counterparts, each of which shall be deemed an original
and all of which together shall constitute one agreement.  The signatures of any party to any such
counterpart shall be deemed to be a signature to, and may be appended to, any
other counterpart.

(h)           This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of,
and be enforceable by, the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations herein shall be assigned by any party hereto without the prior
written consent of the other parties hereto.

 

4

 

 

(i)            Matters of
interpretation and calculations under this Agreement shall be made in good
faith by PHC II.

(j)            Upon request by
PHC II, each Subsidiary shall pay to PHC II, no later than the due
date of the next Interim Payment due following such request, such Subsidiary’s pro rata share of (i) amounts
expended by PHC II in connection with the determination of the tax
liability of the Polypore Group and the preparation of necessary tax return
filings and (ii) amounts expended by PHC II in determining amounts
due pursuant to this Agreement.

[REMAINDER
OF PAGE LEFT BLANK]

 

5

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first set forth above.

 

	
  PP HOLDING CORPORATION II

  	
   

  	
  PP HOLDING CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lynn Amos

  	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  POLYPORE, INC.

  	
   

  	
  CELGARD, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lynn Amos

  	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DARAMIC, INC.

  	
   

  	
  DARAMIC ASIA, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lynn Amos

  	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DARAMIC INTERNATIONAL, INC.

  	
   

  	
  POLYPORE HOLDINGS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lynn Amos

  	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Title:

  

 

 

6

 

 

EXHIBIT A

 

Celgard, Inc., a Delaware corporation

Daramic, Inc., a Delaware corporation

Daramic Asia, Inc., a Delaware corporation

Daramic International, Inc., a Delaware
corporation

Polypore Holdings, Inc., a Delaware
corporation

 

7

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