Document:

ex10-1.htm

 

Exhibit 10.1

 

FIRST AMENDMENT TO FORBEARANCE AGREEMENT AND

FOURTH LOAN MODIFICATION AGREEMENT

 

This First Amendment to Forbearance Agreement and Fourth Loan Modification Agreement (this “Agreement”) is entered into as of July 31, 2010, by and among GAMETECH INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), U.S. BANK NATIONAL ASSOCIATION, a national banking association (“U.S. Bank”), BANK OF THE WEST, a national banking association (“BOW”, and, together with U.S. Bank, the “Lenders” and, each, a “Lender”), and U.S. BANK, in its separate capacity as agent for the Lenders (in such capacity, the “Agent”).

 

RECITALS

 

The Borrower, the Lenders and the Agent are parties to a Loan Agreement dated as of August 22, 2008 (as amended by a Loan Modification Agreement dated as of January 28, 2009, a Second Loan Modification Agreement dated as of March 16, 2010 and the Forbearance Agreement defined below, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), pursuant to which the Borrower executed an Amended and Restated Promissory Note dated June 21, 2010 in favor of U.S. Bank in the original stated amount of $23,000,000 and an Amended and Restated Promissory Note dated June 21, 2010 in favor of BOW in the original stated amount of $15,000,000 (each as amended, restated, replaced, extended or otherwise modified from time to time, a “Term Note” and, collectively, the “Term Notes”), and an Amended and Restated Revolving Promissory Note dated June 21, 2010 in favor of U.S. Bank in the original stated amount of $2,000,000 (as amended, restated, replaced, extended or otherwise modified from time to time, the “L/C Note”, and, together with the Term Notes, the “Notes”).

 

The Borrower and the Agent are also parties to that certain Forbearance and Third Loan Modification Agreement dated as of June 21, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “Forbearance Agreement”).

 

Pursuant to the terms of the Loan Agreement, the Notes and the other Loan Documents (as defined in the Loan Agreement), the Borrower is obligated to, among other things, make monthly and quarterly payments of principal and interest under the Term Notes on July 31, 2010.  The Borrower has notified the Agent and the Lenders that it is unable to make such payments of principal or interest on the date hereof, and certain Events of Default (as defined in the Loan Agreement) have therefore occurred.

 

The Borrower has requested that the Agent and the Lenders forbear from taking certain actions available to them on account of such Events of Default and make certain amendments to the Loan Agreement and the Forbearance Agreement.  The Agent and the Lenders are willing to grant the Borrower’s requests pursuant to the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.           Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings given them in the Loan Agreement or the Forbearance Agreement, as applicable.

 

2.           Amendments to the Forbearance Agreement.  The Forbearance Agreement is hereby amended as follows:

 

(a)           Amendment to Section 1 of the Forbearance Agreement (Definitions).  Section 1 of the Forbearance Agreement is hereby amended by amending and restating each of the following definitions:

 

“Forbearance Period” means the period commencing on the date hereof and ending on the earliest of:

 

(a)           the occurrence of the Stated Forbearance Termination Date;

 

(b)           a default of, breach of, or failure to perform any term, covenant or agreement on the part of the Borrower under, this Agreement;

 

(c)           the occurrence of an Event of Default (other than the Specified Events of Default), or an event that, with giving of notice or passage of time or both, would constitute an Event of Default (other than the Specified Events of Default); or

 

(d)           the consultant engaged by the Borrower pursuant to Section 14 hereof shall resign or be terminated by the Borrower, or such consultant shall no longer have all of the authority and responsibilities set forth in the Engagement Agreement (as defined in Section 14 hereof).

 

“Specified Events of Default” means the breach or default of the Borrower under the following provisions of the Loan Documents for the period or as of the date described below:

	
Section/Covenant

	
Date/Period

	
Required Performance

	
Actual Performance

	
Section 5.8 of the Loan Agreement

	
May 2, 2010

	
Delivery of quarterly financial statements and compliance certificate within 45 days after the end of each fiscal quarter

	
June 21, 2010

	
Section 5.12(a) of the Loan Agreement

	
May 2, 2010

	
Cash Flow Leverage Ratio of at least 3.75 to 1.00

	
13.14 to 1.00

	
Section 5.12(b) of the Loan Agreement

	
May 2, 2010

	
Fixed Charge Coverage Ratio of at least 0.95 to 1.00

	
0.20 to 1.00

	
Section 5.12(c) of the Loan Agreement

	
May 2, 2010

	
Maintain current assets in excess of current liabilities of at least $2,500,000

	
($18,249,000)

	
Section 1 of the Term Notes

	
July 31, 2010

	
Payment of quarterly installments of principal of the Term Notes in an aggregate amount equal to $1,087,647.06

	
$0

	
Section 1 of the Term Notes

	
July 31, 2010

	
Payment of monthly installments of interest  on the unpaid principal balance of the Term Notes

	
$0

 

(b)           Amendment to Section 6 of the Forbearance Agreement (Continued Payment of Interest; Forbearance Fee).  Section 6 of the Forbearance Agreement is hereby amended and restated in its entirety to read as follows:

 

3.           Deferral of Certain Payments of Principal and Interest; Forbearance Fee.

 

(a) Effective as of June 15, 2010, and continuing thereafter until the Specified Events of Default are cured or waived to the written satisfaction of the Lenders, all Loans and other Obligations shall bear interest at the Default Rate.

 

(b) The scheduled payments of principal due on July 31, 2010 under Section 1 of the Term Notes shall be deferred from July 31, 2010 to August 31, 2010 (the “Deferred Principal Payments”), and the scheduled payments of interest on the unpaid principal balance of the Term Notes due on July 31, 2010 under Section 1 of each Term Note shall be deferred from July 31, 2010 to August 31, 2010 (the “Deferred Interest Payments” and, together with the Deferred Principal Payments, the “Deferred Payments”).  All Deferred Payments shall be due and payable on August 31, 2010.  Except for the Deferred Payments, the Obligations shall be due and payable on the dates and in the manner set forth in the Loan Documents and shall not be deferred or delayed.

 

(c) On the date hereof, the Borrower shall pay to the Agent for the ratable benefit of each Lender in immediately available funds a forbearance fee (the “Forbearance Fee”) in an amount equal to $10,000.  The Forbearance Fee shall be deemed fully earned by the execution and delivery of this Agreement.

 

(c)           Addition of a new Section 14 to the Forbearance Agreement (Engagement of Consultant).  The Forbearance Agreement is hereby amended by adding a new Section 14 to the end thereof to read as follows:

 

14.           Engagement of Consultant.  The Borrower shall continue to retain a consultant acceptable to the Borrower, the Agent and the Lenders.  The consultant shall have all of the authority and responsibilities set forth in that certain Agreement for Consulting Services dated as of July 16, 2010 between Borrower and Morris-Anderson & Associates, Ltd. (as amended, restated, supplemented or otherwise modified from time to time, and collectively with the MA&A Work/Project Authorization dated as of July 16, 2010, the “Engagement Agreement”). The Borrower shall not terminate, amend, alter or otherwise change the terms of the Engagement Agreement, whether by execution of an Authorization (as defined in the Engagement Agreement) or otherwise, without the prior written consent of the Agent and the Lenders.

 

3.           Amendments to the Loan Agreement.  The Loan Agreement is hereby amended as follows:

 

(a)           Amendments and Additions to the Definitions of the Loan Agreement.  The Definitions contained in the Loan Agreement are amended by adding or amending and restating, as applicable, the following definitions:

 

“Acknowledgment and Agreement”: Means that certain Acknowledgment and Agreement of Consultant and Obligors dated as of July 30, 2010 by Borrower, each Restricted Subsidiary party thereto, and MorrisAnderson & Associates Ltd. in favor of Agent and its attorneys, officers, agents, employees, successors and assigns, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Copyright Security Agreement”: Means that certain Copyright Security Agreement dated as of July 31, 2010 among Borrower, each Restricted Subsidiary party thereto, and Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Forbearance Agreement”: Means that certain Forbearance Agreement dated as of June 21, 2010 between Borrower and Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Intercreditor Agreement”: Means that certain Limited Subordination and Intercreditor Agreement dated as of April 12, 2010 among Agent, Lenders and BOW (in its separate capacity as lender under the Line of Credit Agreement as therein defined), as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Investments”: Means, with respect to any Person, any loan, advance, extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities (including warrants or options to purchase securities) owned by such Person; any deposit accounts and certificates of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person.

 

“L/C Note”: Means the Amended and Restated Revolving Promissory Note dated June 21, 2010 in favor of U.S. Bank in the original stated amount of $2,000,000, as the same may be amended, restated, replaced, extended or otherwise modified from time to time.

 

“Loan Documents”: Means the Notes, the Deed of Trust, this Agreement, the Forbearance Agreement, the Assignments, the Control Agreement, the Securities Account Control Agreement, the IP Security Agreement, the Copyright Security Agreement, the Pledge Agreement, the Security Agreement, the Environmental Indemnity, the Acknowledgment and Agreement, the Intercreditor Agreement, the Guaranty, any Swap Contracts, and any other documents that evidence or secure the Loan, together with amendments to any of the foregoing and supplements thereto executed by Borrower, Guarantor and/or and Agent.

 

“Note” and Notes”: Means the L/C Note and/or any or all of the Term Notes, as the context requires.

 

“Pledge Agreement”: Means that certain Pledge Agreement dated as of July 31, 2010 between Borrower and Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Securities Account Control Agreement”: Means that certain Securities Account Control Agreement dated as of July 31, 2010 among Borrower, Agent and the Intermediary as therein defined, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Term Notes”: Means, collectively, the Amended and Restated Promissory Note dated June 21, 2010 in favor of U.S. Bank in the original stated amount of $23,000,000, and the Amended and Restated Promissory Note dated June 21, 2010 in favor of BOW in the original stated amount of $15,000,000, as the same may be amended, restated, replaced, extended or otherwise modified from time to time.

 

(b)           Amendment to Section 4.15 of the Loan Agreement (Subsidiaries).  Section 4.15 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

4.15           Subsidiaries.  As of July 31, 2010, the only Subsidiaries of Borrower are GameTech Mexico S. de. R.L. de C.V, GameTech Canada Corporation and GameTech Arizona Corporation, and all ownership interest in such Subsidiaries are owned by Borrower free and clear of all security interests of any Person.  All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable.

 

(c)           Amendment to Section 5.8 of the Loan Agreement (Providing Financial Information).  Subsection (c) of the first sentence of Section 5.8 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

(c) annual audited consolidated financial statements within ninety (90) days of the end of the fiscal year of Borrower, including balance sheets, statements of income, retained earnings and cash flow and supporting schedules reasonably requested by Agent, together with an unqualified opinion for a recognized, independent accounting firm reasonably acceptable to Agent and a certificate of said accountant certifying that, in the course of its examination of Borrower, it has obtained no knowledge of any default or Event of Default or if, in the opinion of such accountant, any default or Event of Default shall exist, stating the nature and status thereof.

 

(d)           Amendment to Section 5.26 of the Loan Agreement (Additional Guarantors and Obligations to Give Security).  Section 5.26 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

5.26           Additional Guarantors and Obligations to Give Security. At Borrower’s expense, within forty-five (45) days after the formation or acquisition of a Subsidiary that is a Restricted Subsidiary, Borrower shall take all action necessary or reasonably requested by Agent to cause each such Restricted Subsidiary to execute and deliver to Agent a supplement to the Guaranty, the Security Agreement, IP Security Agreement, Copyright Security and each other applicable Loan Document. If Borrower or any Restricted Subsidiary owns any equity interest in any Subsidiary of Borrower, it will execute and deliver to Agent a pledge agreement in a form satisfactory to the Agent, together with such supporting documentation (including without limitation any authorizing resolutions and opinions of counsel) as the Agent may request in order to create a perfected, first-priority security interest in the equity interests in such Subsidiary.

 

(e)           Amendment to Section 5.27 of the Loan Agreement (Dividends and Distributions).  Section 5.27 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

5.27           Dividends and Distributions. Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividend (except dividends paid in capital stock) or other distribution with respect to any equity interest in the Borrower or any Subsidiary, or any payment (including without limitation any sinking fund or similar deposit) on account of the purchase, redemption, retirement, acquisition, cancellation, withdrawal or termination of any such equity interests in Borrower or any Subsidiary or any option, warrant or other right to acquire any such equity interest in the Borrower or any Subsidiary.

 

(f)           Addition of new Sections 5.34 through 5.38 of the Loan Agreement (Additional Covenants).  Article V of the Loan Agreement is hereby amended by adding new Sections 5.34, 5.35, 5.36, 5.37 and 5.38 to the end thereof to read as follows:

 

5.34           Transactions with Affiliates.  Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including without limitation the purchase or sale of any property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favor to Borrower or such Subsidiary than Borrower or such Subsidiary would obtain in a comparable arms-length transaction.

 

5.35           Investments.  Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation loans and advances to, and other Investments in, Subsidiaries) or commitments therefor, or to become or remain a partner in any partnership or joint venture, except existing Investments in Subsidiaries and other Investments in existence on July 31, 2010 and described in Schedule 5.35 hereto.

 

5.36           Acquisitions.  Borrower will not, nor will it permit any Subsidiary to, make any transaction, or any series of related transactions, consummated on or after July 31, 2010, by which Borrower or any of its Subsidiaries (a) acquires any business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise, or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.

 

5.37           Capital Expenditures.  Borrower will not, nor will it permit any Subsidiary to, make, or be committed to make, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of Borrower and its Subsidiaries as prepared in accordance with GAAP; provided, however, that the Borrower may make expenditures, in an aggregate amount not to exceed $250,000 per fiscal year, in connection with the purchase or acquisition of gaming equipment (and the related parts thereof) for purposes of leasing such equipment to customers in the ordinary course of its business.

 

5.38           Notice of Event of Default.  Borrower will, and will cause each Subsidiary to, give notice in writing to the Agent, promptly and in any event within three days after an officer of Borrower obtains knowledge thereof, of the occurrence of any default or Event of Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect.

 

(g)           Addition of new Section 7.16 of the Loan Agreement (Indemnifications).  Article VII of the Loan Agreement is hereby amended by adding a new Section 7.16 to the end thereof to read as follows:

 

7.16           Indemnification.  Borrower hereby agrees to indemnify Agent, Lenders, their respective affiliates, and each of their respective past and present officers, directors, shareholders, attorneys, agents, and employees against all losses, claims damages, penalties, judgments, liabilities and expenses (including without limitation all expenses of litigation or preparation therefor) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby, except to the extent they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification.  The obligations of Borrower under this Section 7.16 shall survive termination of this Agreement.

 

(h)           Amendment to Section 8.2 of the Loan Agreement (Resignation of Agent; Removal).  Subsection (b) of Section 8.2 of the Loan Agreement is amended and restated in its entirety to read as follows:

 

(b)           In the case of any of the events described in Section 8.2(a), (1) the Majority Lenders shall have the right to appoint a successor Agent, provided, however, that the resigning Agent shall be entitled to appoint a successor agent if the Majority Lenders have not appointed a successor Agent within thirty (30) days after the date the resigning Agent gave notice of resignation; (2) upon a successor’s acceptance of appointment (and assumption of Agent’s obligations hereunder arising after the date of such appointment), the successor will thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent; (3) upon the effectiveness of any resignation or removal, the resigning or removed Agent will thereupon be discharged from the duties and obligations of Agent which thereafter arise under this Agreement or any of the other Loan Documents; and (4) any resigning Agent shall have the benefit of any indemnities provided in this Agreement and the other Loan Documents.  If Agent has resigned or been removed and no successor Agent has been appointed, Lenders may perform all of the duties of Agent hereunder, and Borrower, Guarantor and each other Person, as applicable, shall make payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with Lenders.

 

(i)           Amendment to Section 8.9(a) of the Loan Agreement (Permitted Assignments).  Section 8.9(a) of the Loan Agreement is amended and restated in its entirety to read as follows:

 

(a)           Permitted Assignments.  Any Lender may, upon the prior approval of Agent, assign all or a portion of its respective Commitment Percentage of the Loan to any Person (such Person, an “Assignee Lender”), which assignment shall create privity of contract between such Assignee Lender and the Borrower and make such Assignee Lender a “Lender” for all purposes under the Loan Documents.  Such assignment shall be made pursuant to an Assignment and Assumption Agreement or in such other form reasonably acceptable to the Agent.

 

(j)           Addition of new Schedule 5.35 to the Loan Agreement (Investments).  The Loan Agreement is amended by adding, as Schedule 5.35 thereto, Schedule 5.35 to this Agreement.

 

4.           Acknowledgments of the Borrower. The Borrower acknowledges and agrees that (a) the Loan Agreement, the Notes and the other Loan Documents are the valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, (b) the Borrower’s obligations under the Loan Agreements, the Notes and the other Loan Documents, including but not limited to the Borrower’s obligation to pay and perform the Obligations, are subject to no defense, offset or counterclaim of any kind, and (c) the Specified Events of Default have occurred and continue to exist, and the Agent and the Lenders are accordingly entitled to, among other things, exercise their rights and remedies available under the Loan Documents.  The Borrower acknowledges that, by entering into this Agreement, the Agent and the Lenders have agreed to forbear from exercising certain rights and remedies on account of the Specified Events of Default, but that nothing in this Agreement shall constitute a waiver of any such Specified Event of Default or of any other breach, default or Event of Default.

 

5.           Release of Agent and Lenders. The Borrower hereby absolutely and unconditionally releases and forever discharges the Agent and the Lenders, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrower has had, now has or has made claim to have against any such Person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Agreement, whether such claims, demands and causes of action are matured or unmatured, known or unknown, liquidated, fixed or contingent, or direct or indirect.

 

6.           Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders as follows:

 

(a)           The Borrower has all requisite power and authority, corporate or otherwise, to execute, deliver and perform this Agreement and to perform its obligations under this Agreement, the Loan Agreement as amended by this Agreement, the Forbearance Agreement as amended by this Agreement, and the other Loan Documents to which the Borrower is a party.  This Agreement, the Loan Agreement as amended by this Agreement, the Forbearance Agreement as amended by this Agreement and the other Loan Documents to which the Borrower is a party have been duly and validly executed and delivered to the Agent by the Borrower, and this Agreement, the Loan Agreement as amended by this Agreement, the Forbearance Agreement as amended by this Agreement and the other Loan Documents to which the Borrower is a party constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their terms.

 

(b)           The execution, delivery and performance by the Borrower of this Agreement, the Loan Agreement as amended by this Agreement, the Forbearance Agreement as amended by this Agreement, and the other Loan Documents to which the Borrower is a party have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate the Borrower’s organizational documents or any provision of any law, rule, regulation or order presently in effect having applicability to the Borrower, or (iii) result in a breach of, or constitute a default under, any indenture or agreement to which the Borrower is a party or by which the Borrower or its properties may be bound or affected.

 

(c)           All of the representations and warranties contained in Article IV of the Loan Agreement and in the other Loan Documents are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate to (i) the Specified Events of Default or (ii) solely to an earlier date, in which case such representations and warranties were correct on and as of such date.

 

7.           Conditions Precedent. This Agreement shall be effective only if the Agent has received each of the following, each in form and substance acceptable to the Agent in its sole discretion:

 

(a)           this Agreement, duly executed by the Borrower;

 

(b)           an Acknowledgment and Agreement of the Guarantors, duly executed by each Guarantor;

 

(c)           the Acknowledgment and Agreement, duly executed by the Borrower, the Guarantors and MorrisAnderson & Associates Ltd.;

 

(d)           a true and complete copy of the Engagement Agreement, duly executed by the parties thereto;

 

(e)           the Copyright Security Agreement, duly executed by the Borrower and each Guarantor;

 

(f)           the Pledge Agreement, duly executed and completed by the Borrower;

 

(g)           the Securities Account Control Agreement, duly executed by the parties thereto;

 

(h)           a Perfection Certificate, duly executed and completed by the Borrower;

 

(i)           payment to the Agent of $10,000 in immediately available funds to the Agent, which amendment fee shall be for the pro rata account of the Lenders, together with payment of all fees and expenses then due and payable pursuant to Section 9 hereof; and

 

(j)           a Certificate of the Secretary of the Borrower certifying as to (i) the resolutions of the board of directors of the Borrower approving the execution and delivery of this Agreement; (ii) the fact that the certificate of incorporation and bylaws of the Borrower, which were certified and delivered to the Agent pursuant to the most recent certificate of secretary or assistant secretary given by the Borrower to the Lender, continue in full force and effect and have not been amended or otherwise modified except as set forth in the Certificate to be delivered; and (iii) certifying that the officers and agents of the Borrower who have been certified to the Agent, pursuant to the certificate of secretary or assistant secretary given by the Borrower to the Agent as being authorized to sign and to act on behalf of the Borrower continue to be so authorized or setting forth the sample signatures of each of the officers and agents of the Borrower authorized to execute and deliver this Agreement and all other documents, agreements and certificates on behalf of the Borrower.

 

8.           Continuing Effect.  Except as expressly set forth herein, all terms of the Forbearance Agreement, the Loan Agreement and the other Loan Documents remain in full force and effect. This Agreement does not constitute (a) a waiver or excuse of any payment required under the Loan Agreement or under any of the other Loan Documents, (b) a waiver of any breach, default or Event of Default (including without limitation the Specified Events of Default) under the Loan Agreement or the other Loan Documents, or (c) except as expressly set forth in Section 2 of the Forbearance Agreement, an agreement to forbear from action on account of any existing or future breach, default or Event of Default.  No failure or delay on the part of the Agent or the Lenders in exercising any right, power or remedy, whether hereunder or under any other document in its favor, shall operate as a waiver thereof; nor shall any single or partial exercise of such right preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies contained herein and under the other documents in favor of the Agent and the Lenders are cumulative and not exclusive of any remedies provided by law or by any Loan Document.

 

9.             Costs and Expenses.  The Borrower hereby reaffirms its agreement under Section 5.4 of the Loan Agreement to pay or reimburse the Agent and the Lenders on demand for all costs and expenses (including without limitation the charges and disbursements of outside counsel to the Agent or any Lender, determined on the basis of such counsel’s generally applicable rates, which may be higher than the rates such counsel charges the Agent or any Lender in certain matters) in connection with the preparation, negotiation, execution, delivery and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof.

 

10.           Miscellaneous.  This Agreement sets forth the entire agreement of the parties with respect to the subject matter hereof, and supersedes any prior oral negotiations or agreements.  This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada.  This Agreement shall be binding upon and shall accrue to the benefit of the parties and their successors and assigns.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts of this Agreement, taken together, shall constitute but one and the same instrument.  Section and paragraph headings contained herein are for reference only.  Any provision of this Agreement that is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.

 

Signature page follows

 

--

  

  

  

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.

 

 

	  	
GAMETECH INTERNATIONAL, INC., as Borrower

	  
	  	  	  	  	  
	  	  	  	  	  
	  	
By:

	
/S/ Bill Fasig

	  
	  	  	
Name:

	
Bill Fasig

	  
	  	  	
Title:

	
Chief Executive Officer

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	
U.S. BANK NATIONAL ASSOCIATION, as Agent and as a Lender

	  	  	  	  	  
	  	  	  	  	  
	  	
By:

	
/S/ U.S. BANK NATIONAL ASSOCIATION

	  
	  	  	
Name:

	  	  
	  	  	
Title:

	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	
BANK OF THE WEST, as a Lender

	  
	  	  	  	  	  
	  	  	  	  	  
	  	
By:

	
/S/ BANK OF THE WEST

	  
	  	  	
Name:

	  	  
	  	  	
Title:Exhibit
10.1

	
   

  	
   

  

 

EQUIPMENT
LEASE AGREEMENT

 

dated
as of June 24, 2010

 

between

 

GOSSAMER
HOLDINGS, LLC,

as Lessor,

 

and

 

CHICOPEE,
INC.,

as Lessee

 

This Lease Agreement and the
Schedule may be executed in any number of counterparts, each of which, when so executed
and delivered, shall be deemed an original, but all such counterparts taken
together shall constitute one and the same instrument.  If this Lease Agreement or the Schedule
constitutes chattel paper (as defined in the Uniform Commercial Code as in effect
in any applicable jurisdiction), no security interest therein may be created
except through the transfer or possession of the original counterpart marked “No.
1 - Original.”

	
   

  	
   

  

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  LEASING

  	
   

  	
  1

  
	
  2.

  	
  TERM, RENT AND PAYMENT

  	
   

  	
  4

  
	
  3.

  	
  RENT ADJUSTMENTS

  	
   

  	
  5

  
	
  4.

  	
  TAXES

  	
   

  	
  7

  
	
  5.

  	
  REPORTS

  	
   

  	
  10

  
	
  6.

  	
  DELIVERY, USE AND OPERATION

  	
   

  	
  11

  
	
  7.

  	
  MAINTENANCE

  	
   

  	
  14

  
	
  8.

  	
  CASUALTY OCCURRENCE

  	
   

  	
  15

  
	
  9.

  	
  LOSS OR DAMAGE

  	
   

  	
  16

  
	
  10.

  	
  INSURANCE

  	
   

  	
  16

  
	
  11.

  	
  RETURN OF EQUIPMENT

  	
   

  	
  19

  
	
  12.

  	
  DEFAULT; REMEDIES

  	
   

  	
  22

  
	
  13.

  	
  ASSIGNMENT; SYNDICATION

  	
   

  	
  27

  
	
  14.

  	
  NET LEASE; NO SET-OFF, ETC.

  	
   

  	
  29

  
	
  15.

  	
  INDEMNIFICATION

  	
   

  	
  29

  
	
  16.

  	
  DISCLAIMER

  	
   

  	
  32

  
	
  17.

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
   

  	
  32

  
	
  18.

  	
  INTENT; TITLE

  	
   

  	
  38

  
	
  19.

  	
  PURCHASE OPTIONS

  	
   

  	
  38

  
	
  20.

  	
  MISCELLANEOUS

  	
   

  	
  39

  
	
  21.

  	
  CHOICE OF LAW; JURISDICTION

  	
   

  	
  43

  
	
  22.

  	
  CONFIDENTIAL INFORMATION

  	
   

  	
  43

  
	
  23.

  	
  DEFINITIONS

  	
   

  	
  45

  

 

 

	
  APPENDIX
  I

  	
  –

  	
  DEFINITIONS

  
	
  APPENDIX
  II

  	
  –

  	
  FINANCIAL COVENANTS

  
	
  EXHIBIT
  NO. 1

  	
  –

  	
  FORM OF EQUIPMENT SCHEDULE

  
	
  ANNEX
  A

  	
   

  	
  -

  	
  DESCRIPTION OF EQUIPMENT

  
	
  ANNEX
  B

  	
   

  	
  -

  	
  CERTIFICATE OF ACCEPTANCE

  
	
  ANNEX
  C

  	
   

  	
  -

  	
  STIPULATED LOSS VALUE
  TABLE

  
	
  EXHIBIT
  NO. 2

  	
  –

  	
  FORM OF ACCEPTABLE LETTER
  OF CREDIT

  
	
  EXHIBIT
  NO. 3

  	
  –

  	
  FORM OF GUARANTY

  
	
  EXHIBIT
  NO. 4

  	
  –

  	
  FORM OF CONFIDENTIALITY
  AGREEMENT

  
	
  EXHIBIT
  NO. 5

  	
  –

  	
  FORM OF SECURITY DEPOSIT
  PLEDGE AGREEMENT

  

 

2

 

EQUIPMENT
LEASE AGREEMENT

 

THIS EQUIPMENT LEASE
AGREEMENT, dated as of June 24, 2010 (the “Agreement”),
between GOSSAMER HOLDINGS, LLC, a Delaware limited liability company
(hereinafter called, together with its successors and assigns, if any, “Lessor”) and CHICOPEE, INC., a Delaware corporation
(hereinafter called “Lessee”).

 

1.             LEASING

 

(a)           Subject to the
terms and conditions set forth below, Lessor agrees to lease to Lessee, and
Lessee agrees to lease from Lessor, the Equipment described in Annex A to the
Schedule executed pursuant hereto.  The
Basic Term shall commence on the Basic Term Commencement Date.  Terms defined in the Schedule and not
otherwise defined herein shall have the meanings ascribed to them in the
Schedule.  Certain definitions are provided
in Appendix I hereto.

 

(b)           The obligation
of Lessor to lease the Equipment set forth on the Schedule to Lessee shall be
subject to satisfaction of the following conditions, on or prior to the Basic
Term Commencement Date:

 

(i)            Receipt by
Lessor of the following documents in form and substance satisfactory to Lessor:

 

(1)           the Schedule
relating to the Equipment to be made subject to this Agreement (including a
duly completed Annex A thereto describing the Equipment and a duly completed
Annex C thereto describing the Stipulated Loss Values applicable to the
Equipment), in favor of Lessor, duly executed by Lessee;

 

(2)           (a) bills
of sale, in favor of Lessor, evidencing free and clear title to the Equipment,
duly executed by the respective Vendors; and (b) official invoices that
comply with all requirements under German tax laws, with respect to the
Equipment purchased by the Lessor from any German Vendor, as well as all other
documents in connection with the importation of any of the Equipment, including
without limitation: certificates of origin, importation permits, and receipts
of payment of applicable taxes;

 

(3)           a Certificate
of Acceptance with respect to the Equipment, in favor of Lessor, duly executed
by Lessee;

 

(4)           an SNDA with
respect to the Equipment, in favor of Lessor, duly executed by the mortgagee,
if any, with respect to the Site;

 

(ii)           Receipt by
Lessor of an Acceptable Letter of Credit, maintained by the Lessee for the
benefit of Lessor (or its assignee or designee) having at the date of issuance
thereof a stated amount not less than the Required Amount;

 

 

(iii)          Receipt by
Lessor of the Security Deposit and the Security Deposit Pledge Agreement duly
executed by Lessee;

 

(iv)          Receipt by
Lessor of evidence of insurance which complies with the requirements of Section 10
hereof;

 

(v)           Receipt by
Lessor of an Appraisal with respect to the Equipment, in form and substance
satisfactory to Lessor;

 

(vi)          Receipt by
Lessor of a certificate signed by the Secretary of Lessee confirming (x) that
attached thereto is (1) a certificate, where available, as to the good
standing of, and payment of franchise taxes by, the Lessee from the Secretary
of State of Delaware and the Secretary of State of the Commonwealth of
Virginia, (2) a true and correct certified copy of the organizational
documents and by-laws (together with amendments thereto if applicable) of
Lessee as in effect prior to the date of the resolutions referred to in clause (3) of
this paragraph through to such Basic Term Commencement Date and (3) resolutions
of the board of directors of Lessee authorizing the execution, delivery and
performance of its obligations under the Documents (y) that (1) the
resolutions referred to in clause (3) above were duly adopted, are in full
force and effect on such Basic Term Commencement Date and have not been
amended, modified, revoked or rescinded prior to such date and (2) all
conditions for the effective application of such actions or resolutions to the
transactions contemplated by this Agreement have been satisfied, and (z) the
incumbency and signature of each officer executing any Document on behalf of
Lessee;

 

(vii)         Receipt by
Lessor of a certificate signed by the Secretary of each of the Guarantors
confirming (x) that attached thereto is (1) a certificate, where available,
as to the good standing of, and payment of franchise taxes by, each of the
Guarantors from the Secretary of State of Delaware, (2) a true and correct
certified copy of the organizational documents (including articles of
incorporation and by-laws or operating agreement (together with amendments
thereto if applicable)) of each of the Guarantors as in effect prior to the
date of the resolutions referred to in clause (3) of this paragraph
through to such Basic Term Commencement Date, (3) resolutions of the board
of directors, members or manager of each of the Guarantors authorizing the
execution, delivery and performance of its obligations under the Documents, (y) that
(1) the resolutions referred to in clause (3) above were duly
adopted, are in full force and effect on such Basic Term Commencement Date and
have not been amended, modified, revoked or rescinded prior to such date, and (2) all
conditions for the effective application of such actions or resolutions to the
transactions contemplated by this Agreement have been satisfied, and (z) the
incumbency and signature of each officer executing any Document on behalf of
each of the Guarantors.

 

(viii)        (1)           No Default and
no event, which with the lapse of time or the giving of notice, shall
constitute a Default, shall have occurred and be continuing, no Casualty
Occurrence shall have occurred and the representations and warranties of Lessee
herein are true and correct as of such Basic Term Commencement Date, and 

 

2

 

Lessor shall have received a certificate dated such date signed by a
Responsible Officer of Lessee to such effect; and

 

(2)           No Construction
Agency Event of Default (as defined in the CAA) and no event, which with the
lapse of time or the giving of notice, shall constitute a Construction Agency
Event of Default, shall have occurred and be continuing.

 

(ix)           UCC financing
statements, including fixture filings, naming Lessee as debtor and Lessor as
secured party, shall have been filed in all jurisdictions where it is necessary
and desirable in the reasonable opinion of Lessor to so file so as to perfect
and protect Lessor’s interest in the Equipment;

 

(x)            The chattel
paper counterpart of this Agreement and the Schedule shall have been delivered
to Lessor;

 

(xi)           No material
adverse change shall have occurred in the financial condition of PGI and its
subsidiaries (including Lessee), taken as a whole, since December 31,
2009;

 

(xii)          Receipt by
Lessor of evidence reasonably satisfactory to it that Construction Completion
(as defined in the CAA) has occurred;

 

(xiii)         Receipt by
Lessor of evidence that the Site Lease, Site Sublease, Support Agreement, the
Easement Agreement and the Guaranty are each in full force and effect;

 

(xiv)        All Liens on
the Equipment, other than Permitted Liens, shall be discharged and released and
duly delivered and/or executed releases with respect thereto shall have been
delivered to Lessor;

 

(xv)         The Equipment
shall be located at the Site;

 

(xvi)        Receipt by
Lessor of evidence reasonably satisfactory to it that Lessee has obtained all
consents, licenses, authorizations, permits, concessions and other documents
required for the use and operation of the Equipment and the Site under
Applicable Laws;

 

(xvii)       There has been
neither (i) any change in any Applicable Laws that, in the good faith
opinion of any of the parties hereto, renders the overall transaction
contemplated by this Agreement and the other Operative Documents illegal for
any of such parties nor (ii) any Change in Law that, in the good faith
opinion of Lessor (after taking into account the effect of any adjustment made
pursuant to Section 3 hereof), could adversely affect the Net Economic
Return to the Lessor (or any Member) or otherwise adversely affect the tax
consequences to the Lessor or any Member of participating in such overall
transaction.

 

(xviii)      A written
opinion of Parker Poe Adams & Bernstein LLP, special counsel to Lessee
and each Guarantor, in the form and substance satisfactory to Lessor, and a
written opinion of Woods Rogers PLC, special Virginia counsel to Lessee and
Guarantor, in the form and substance satisfactory to Lessor.

 

3

 

(xix)         A tax opinion
from Winston & Strawn LLP in form and substance satisfactory to
Lessor.

 

(xx)          Such
certificates, lien releases, consents, notices and other documents as Lessor
may reasonably request.

 

(c)           Upon execution
by Lessee of the Certificate of Acceptance, the Equipment described thereon
shall be deemed to have been delivered to, and irrevocably accepted by, Lessee
for lease hereunder.  Lessee’s acceptance
of any Equipment under this Lease will not be deemed to limit any of Lessee’s
rights or remedies against any manufacturer or provider of the Equipment.

 

2.             TERM, RENT AND
PAYMENT

 

(a)           Lessee hereby
agrees to pay Lessor the Basic Term Rent for the Equipment throughout the Basic
Term applicable thereto in monthly installments payable in advance on each Rent
Payment Date as set forth in the Schedule. 
The Basic Term Rent shall be calculated in accordance with Section E
of Exhibit No. 1.  The Basic
Term Rent payable hereunder and Lessee’s right to use the Equipment shall
commence on the date of execution by Lessee of the Certificate of Acceptance
for the Equipment and the satisfaction of the conditions in Section 1(b) above
(to the extent not waived by the Lessor) (“Basic Term Commencement
Date”) pursuant to this Agreement. 
The term of this Agreement shall be the period specified in the
Schedule.  If any Term is extended, the
word “Term” shall be deemed to refer to all extended terms, and all provisions
of this Agreement shall apply during any extended terms, except as otherwise
may be specifically provided in writing. 
If any Rent Payment Date is not a Business Day, the Basic Term Rent
otherwise due on such date shall be payable on the immediately preceding
Business Day.  The Basic Term Rent due
and payable under the Schedule shall also represent and be the amount of rent
for which Lessee becomes liable on account of the use of the Equipment for the
period beginning on each Rent Payment Date and ending on the immediately
succeeding Rent Payment Date, and shall therefore constitute the rent allocated
to such rental periods within the meaning of Treasury Regulations Section 1.467-1(c)(2)(ii).  Lessee hereby agrees to pay to Lessor any and
all Supplemental Rent when and as the same shall become due and owing.

 

(b)           Rent shall be
paid to Lessor by wire transfer of immediately available funds in United States
Dollars to:

 

	
  Bank:

  	
  Deutsche
  Bank

  
	
  Branch:

  	
  New
  York

  
	
  Bank
  Account #:

  	
  50286772

  
	
  ABA:

  	
  021001033

  
	
  Account Name:

  	
  Gossamer
  Holdings, LLC

  
	
  Customer:

  	
  Polymer Group, Inc.

  

 

or
to such other account as Lessor may direct in writing; and shall be effective
upon receipt.  All such accounts shall be
under the full dominion and control of Lessor. 
Payments of Basic 

 

4

 

Term
Rent shall be in the amount set forth in, and due and allocated in accordance
with, the provisions of the Schedule.  In
no event shall any Rent payments be refunded to Lessee.

 

(c)           At such time as
Stipulated Loss Value (or an amount determined by reference thereto) shall be
payable hereunder, the amount payable by Lessee shall be calculated by
reference to Annex C to the Schedule for the affected Equipment.

 

3.             RENT
ADJUSTMENTS

 

(a)           The Basic Term
Lease Rate Factor set forth on the Schedule, the Basic Term, the First EBO
Price, the Second EBO Price and the Stipulated Loss Value set forth on Annex C
were calculated by Lessor on the basis of the tax assumptions set forth in part
1 of Section D of Exhibit No. 1 (the “Tax Benefits”)
and in addition thereto, the assumptions set forth in Section C of Exhibit No. 1
(the “Pricing Assumptions”).

 

(b)           If at the Basic
Term Commencement Date, any of the Tax Benefits or Pricing Assumptions shall
change or are incorrect (including any change resulting from a change in law),
then Lessor shall recompute the Capitalized Lessor’s Cost, the Basic Term Lease
Rate Factor, the First EBO Date, the First EBO Price, the Second EBO Date, the
Second EBO Price and the Stipulated Loss Value Table (in each case, by
increasing or decreasing such amount or amounts) as shall be necessary to
preserve the both General Electric Credit Corporation of Tennessee’s Net
Economic Return and ING Spunmelt Holdings LLC’s Net Economic Return while
minimizing the Basic Term Lease Rate Factor. 
Any such recomputation shall be consistent with the Pricing Assumptions
and Tax Benefits (other than any such Pricing Assumption or Tax Benefit the
incorrectness of which gave rise to such recomputation or to a prior
recomputation), and the Lessor shall utilize the same methods, constraints and
assumptions originally used to calculate the Basic Term Lease Rate Factor, the
First EBO Price, the Second EBO Price and Stipulated Loss Values.  Such adjustments shall comply with Section 467
of the Code and the Regulations and the requirements of Sections 4.02(5), 4.07(1) and
(2) and 4.08(1) of Revenue Procedure 2001-29, as amended (and such
that the Lease could not be treated as a “disqualified leaseback” or “long term
agreement” within the meaning of Section 467 of the Code).  Such adjustments shall be reflected in
amendments to Exhibit No. 1 to this Agreement and/or the Schedule
that Lessor and Lessee hereby agree to execute and deliver on or prior to the
Basic Term Commencement Date subject to the satisfaction of the conditions set
forth in Section 1(b) of this Agreement.  Lessor shall notify Lessee in writing of any
recomputation required under this Section 3(b) and such notice shall
include the adjustments made to the Capitalized Lessor’s Cost, the Basic Term
Lease Rate Factor, the First EBO Date, the First EBO Price, the Second EBO
Date, the Second EBO Price and the Stipulated Loss Value Table.

 

(c)           At the Basic
Term Commencement Date, in addition to the pricing adjustments described in Section 3(b),
the Lessor reserves the right to make an additional adjustment prior to the
Basic Term Commencement Date if the Corporate Index Spread Average (2) is
more than 25 basis points different from the Corporate Index Spread (1) as
of May 14, 2010 (“Initial Spread”), which Initial Spread is 112 basis
points.

 

5

 

(1) “Corporate
Index Spread” means the U.S. Aggregate Corporate AA-Rated Index as calculated
by Barclays Capital on an Option Adjusted Spread (OAS) basis currently
available online at
http://online.wsj.com/mdc/public/page/2_3022-bondbnchmrk.html?mod=mdc_bnd_pglnk
or such other nationally recognized reporting source or publication as Lessor
may specify.  Please note that the
aforementioned spread is published at least once a week by the mentioned
sources.

 

(2) Corporate Index
Spread Average means the average of the weekly Corporate Index Spreads over the
period starting on May 14, 2010 until the date of the last available
Corporate Index Spread as of the Basic Term Commencement Date.

 

Any such adjustments shall
be reflected in amendments to Exhibit No. 1 to this Agreement and/or
the Schedule that Lessee hereby agrees to execute and deliver prior to the
Basic Term Commencement Date.

 

(d)           If, solely as a
result of U.S. Congressional enactment of any law (including, without
limitation, any modification of, or amendment or addition to, the Code), the
maximum U.S. effective corporate income tax rate (exclusive of any minimum tax
rate) for calendar-year taxpayers (“Effective Rate”) is higher than thirty-five percent
(35%) for any year during the Term for any Lease, then Lessor shall have the
right to increase such rent payments by requiring payment of a single
additional sum.  The additional sum shall
be equal to the product of (i) the Effective Rate (expressed as a decimal)
for such year less 0.35 (or, in the event that any adjustment has been made
hereunder for any previous year, the Effective Rate (expressed as a decimal)
used in calculating the next previous adjustment) times (ii) the adjusted
Stipulated Loss Value (defined below), divided by (iii) the difference
between the new Effective Rate (expressed as a decimal) and one (1).  The adjusted Stipulated Loss Value shall be
the Stipulated Loss Value (calculated as of the first rental due in the year
for which such adjustment is being made) minus the Tax Benefits that would be
allowable under Section 168 of the Code (as of the first day of the year
for which such adjustment is being made and all future years of the Term for
any Lease).  The Tax Benefits are defined
on the Schedule.  Lessee shall pay to
Lessor the full amount of the additional rent payment on the later of (i) receipt
of notice or (ii) the first day of the year for which such adjustment is
being made.

 

(e)           If upon the
determination of the Basic Term Rent, subject to the adjustments set forth in Section 3
above, the Lessee should determine that the present value of the Basic Term
Rents and including other cash outlays required to be considered in accordance
with GAAP, discounted at the Discount Rate, computes to an amount that equals
or exceeds 90% of the Equipment Cost, then the Lessee may elect to purchase the
Equipment (i) in the case that the Basic Term Lease Rate Factor, as
recomputed in accordance with Section 3(b), has increased over the Basic
Term Lease Rate Factor set forth in Section B of Exhibit No. 1,
at a purchase price equal to 101% of the Lease Investment Balance, or (ii) in
all other cases, at a purchase price equal to 102% of the Lease Investment
Balance, plus, in each case, any fees, costs and expenses incurred by Lessor or
any Member in connection with execution of the Schedule, which are not included
in the Lease Investment Balance. If the Lessee exercises such purchase option, (x) the
Lessee and the Lessor will not execute the Schedule and the Basic Term shall
not commence, (y) Lessee shall pay to Lessor the amount set forth in the
immediately 

 

6

 

preceding sentence and (z) upon Lessor’s receipt of such amount,
Lessor shall convey to Lessee title to the Equipment on an AS IS, WHERE IS
BASIS, free and clear of all Lessor’s Liens. Notwithstanding the provisions of
this clause (e), upon receipt of notice from Lessee electing such option to
purchase the Equipment, and such notice from Lessee will include the applicable
present value calculation described above, presented in reasonably sufficient
detail, the Lessor shall have the right but not any obligation to reduce such
Basic Term Lease Rate Factor so that the present value of the Basic Term Rents
and including other cash outlays required to be considered in accordance with
GAAP, discounted at the Discount Rate, computes to an amount less than 90% of
the Equipment Cost.  If Lessor elects to
reduce the Basic Term Lease Rate Factor in accordance with the immediately
preceding sentence, then any election by Lessee to purchase the Equipment
pursuant to this clause (e) shall automatically and without further action
be deemed null and void.

 

4.             TAXES

 

(a)           Except as
provided in Section 3 (d) and Section 15(c) hereof, Lessee
shall have no liability for (i) taxes imposed by the United States of
America or any State or political subdivision thereof or any other Governmental
Authority (each, a “Taxing Authority”)
which are based on or measured by the net income of any Indemnified Party, and (ii) taxes
in respect of, and fairly attributable to, any period after the expiration or
early termination of this Agreement and the satisfaction by Lessee of all
obligations hereunder (it being understood that this clause (ii) shall not
apply to any taxes that relate to events occurring or matters arising prior to
or simultaneously with such expiration or early termination) (the taxes
described in clauses (i) and (ii) are “Excluded
Taxes”).

 

(b)           Lessee shall
report (to the extent that it is legally permissible) and shall pay prior to
delinquency all taxes, fees, duties and assessments (other than the Excluded
Taxes) due, imposed, assessed or levied against: (i) the Equipment, the
Facility or the Site (or the construction, import, installation, financing,
refinancing, warranty, ownership, maintenance, repair, condition, alteration,
modification, improvement, restoration, refurbishing, rebuilding, transport,
assembly, repossession, dismantling, abandonment, retirement, decommissioning,
storage, replacement, return, acquisition, sale or other disposition, insuring,
sublease, manufacture, design, acceptance, rejection, purchase, ownership,
delivery, leasing, possession, mortgaging, operation or other use or non-use of
any thereof, in each case, by Lessee or any Affiliate of Lessee or any
sublessee of Lessee or other user or person in possession of any Equipment (or
any part thereof)); (ii) any amounts paid or payable under this Agreement,
the other Operative Documents, or the Documents; (iii) any of the
Documents or the Operative Documents; (iv) the conduct of business or
affairs of Lessee or any Affiliate thereof; (v) any Indemnified Party with
respect to the transactions contemplated by the Operative Documents; or (vi) Lessee,
by any foreign, United States federal, state or local government or taxing
authority in any of the foregoing related to any of the transactions
contemplated by the Documents, including, without limitation, all license and
registration fees, and all sales, use, personal property, real property, ad
valorem, rental, transfer, excise, gross receipts, value added, goods and
services, franchise, stamp or other taxes, imports, customs or other duties and
charges, other than Excluded Taxes, together with any penalties, fines or
interest thereon (all hereinafter called “Taxes”).  Lessee shall (i) pay, indemnify and hold
harmless each Indemnified Party (on an After-Tax Basis) upon receipt of written
request for indemnification 

 

7

 

or reimbursement for any Taxes (but excluding the Excluded Taxes)
charged to or assessed against such Indemnified Party, (ii) on request of
Lessor, submit to such Indemnified Party written evidence of Lessee’s payment
of such Taxes, (iii) on all reports or tax returns show the Lessor as the
owner of the Equipment, and (iv) send a copy of the reports or tax returns
referred to in clause (iii) above, upon written request by Lessor, to
Lessor and at Lessor’s request to each Indemnified Party, identified by Lessor
in such written request.  At the written
request of Lessor, Lessee shall pay directly any such taxes imposed on any such
Indemnified Party.  Notwithstanding
anything to the contrary set forth in this Agreement, the provisions of the
immediately preceding two sentences shall be effective on and after the Basic
Term Commencement Date.

 

(c)           If any Tax
Claim shall be made against any Indemnified Party or if any proceeding shall be
commenced against any Indemnified Party (including a written notice of such
proceeding) for any Taxes as to which Lessee shall have a Tax indemnity
hereunder,  such Indemnified Party shall
promptly notify Lessee within thirty (30) days (but failure to notify Lessee
within this time period shall not impair such Indemnified Party’s right to
indemnification hereunder, unless Lessee’s rights to contest such Tax Claim
shall have been precluded by such failure). If (i) Lessee in writing shall
request an Indemnified Party to contest a claim for which an indemnity for
Taxes may be payable by Lessee hereunder (a “Tax Claim”),
(ii) Lessee shall agree to pay, and shall be paying currently, all costs
and expenses, including, without limitation, reasonable attorneys’ fees and
expenses, incurred by the Indemnified Party in connection with contesting such
Tax Claim, (iii) the Indemnified Party shall reasonably determine that the
action to be taken will not result in the imposition of a Lien upon, and will
not result in a material risk of the sale, forfeiture or other loss of, the
Equipment or any component thereof, and will not involve any risk of criminal
liabilities,  (iv) Winston &
Strawn LLP or other independent nationally recognized tax counsel selected by
the Indemnified Party and reasonably acceptable to Lessee shall have furnished
an opinion to the effect that there is a reasonable basis to contest such Tax
Claim, (v) Lessee shall have executed a written acknowledgment of its
liability to indemnify the Indemnified Person for such Taxes if and to the
extent that the contest is not successful, (vi) no Default shall have
occurred and be continuing, and (vii) the amount of the potential tax indemnity
payment exceeds $25,000, then the Indemnified Party shall, except as set forth
below, contest the validity, applicability or amount of such Taxes by, as
determined in such Indemnified Party’s sole discretion (x) resisting
payment thereof, (y) not paying the same except under protest, if protest
is necessary and proper or (z) if payment is made, using reasonable
efforts to obtain a refund thereof in appropriate administrative or judicial
proceedings.  Any such contest conducted
pursuant to the preceding sentence shall be controlled, and conducted by
counsel chosen, by the Indemnified Party unless such Indemnified Party requests
Lessee to conduct such contest and Lessee agrees to itself conduct such
contest.  The Indemnified Party shall
endeavor in good faith to consult with and advise Lessee of all material
actions taken or proposed to be taken by the applicable Taxing Authority and of
all material actions proposed to be taken by the Indemnified Party with respect
to such contest, and shall, to the extent practicable, permit Lessee, upon
request, reasonable opportunity to review the content of any written
submissions relating exclusively to the contest of such Tax Claim; provided,
however that the Indemnified Party shall not be required to disclose any
document or information that the Indemnified Party considers privileged or
confidential.    Subject to the
conditions and limitations set forth herein, such Indemnified Party agrees to
appeal any adverse decision with respect to such contest, provided 

 

8

 

that in no event shall any Indemnified Party be required to appeal any
adverse decision to the U.S. Supreme Court. 
If the contest shall be made by the payment of such Taxes and the
claiming of a refund, Lessee shall either make such payment directly to the
appropriate authority or advance to such Indemnified Party on an interest-free
basis sufficient funds to make the payment (including any related interest,
penalties and additions to tax). If an Indemnified Party shall be subject to
any Taxes as a result of the making or existence of any such payment or
advance, such Taxes shall be treated as Taxes for which Lessee is required to
indemnify such Indemnified Party hereunder without regard to whether such Taxes
are Excluded Taxes.  Nothing contained
herein shall require an Indemnified Party to contest, or permit Lessee to
contest, a Tax Claim that such Indemnified Party would otherwise be required to
contest, if such Indemnified Party shall waive payment by Lessee of any amount
that might otherwise be payable by Lessee hereunder in respect of such Tax
Claim and pay to Lessee any amounts (excluding the expenses of a contest)
theretofore paid by Lessee with respect to such Tax Claim.

 

(d)           If an
Indemnified Party realizes a reduction in taxes as a result of any
indemnification by Lessee under Section 4 (whether by way of deduction,
credit, allocation or apportionment or otherwise) not previously taken into
account in calculating an indemnity hereunder, or any reduction, refund or
rebate of any Tax paid by Lessee pursuant to this Section 4, such
Indemnified Party shall promptly pay to Lessee an amount equal to (1) the
amount of any such reduction in taxes or reduction plus (2) the aggregate
reduction in such Indemnified Party’s taxes attributable to the deduction, if
any, of the amounts payable to Lessee pursuant to this Section 4. Upon
receipt by an Indemnified Party of any refund or credit of all or part of any
taxes paid or indemnified against by Lessee, such Indemnified Party shall
promptly pay to Lessee an amount equal to the amount of such refund plus any
interest received by or credited to such Indemnified Party with respect to such
refund plus or minus (as the case may be) the aggregate reduction or increase, respectively,
in such Indemnified Party’s taxes attributable to the receipt of the refund or
credit from the Taxing Authority and the deduction, if any, of the amounts
payable to Lessee pursuant to this Section 4.  Notwithstanding the foregoing, in no event shall
any Indemnified Party be required to make a payment to Lessee under this Section 4(d) (i) if
a Default shall have occurred and be continuing and (ii) in an amount
greater than the amount paid by Lessee under Section 4 with respect to the
related taxes for which the Lessee indemnified such Indemnified Party (provided
that any interest received by or credited to such Indemnified Party with
respect to such refund shall also be paid to Lessee).  Lessee shall fully indemnify such Indemnified
Party if and to the extent any such reduction, refund, rebate or other tax
savings is subsequently lost or disallowed.

 

(e)           Lessee’s
obligations and rights, and Lessor’s (and each Indemnified Party’s) rights,
privileges and indemnities, contained in this Section 4 shall survive the
expiration or other termination of this Agreement.  The rights, privileges and indemnities
contained in this Agreement are expressly made for the benefit of, and shall be
enforceable by Lessor, any Member, and the successors and assigns of the Lessor
and any Member, and each Indemnified Party.

 

9

 

5.             REPORTS

 

(a)           Lessee will
notify Lessor in writing, within 10 days after obtaining actual knowledge, or
after Lessee shall have received written notice, of the attachment of any tax
or other Lien (other than Permitted Liens) against the Facility or any Equipment,
of the full particulars thereof and of the location of the Facility and
Equipment on the date of such notification.

 

(b)           Lessee will
deliver to Lessor, (i) within 90 days of the close of each fiscal year of
PGI, PGI’s consolidated balance sheet, profit and loss statement and statement
of cash flows, prepared in accordance with generally accepted accounting
principles consistently applied in the United States of America (“GAAP”) certified by a recognized firm of certified public
accountants, and (ii) within three Business Days after it is actually
filed with the Securities and Exchange Commission, if applicable, PGI’s Form 10-K.  Lessee will deliver to Lessor (x) within
50 days of the close of each fiscal quarter of PGI, in reasonable detail, copies
of PGI’s quarterly financial report certified by the chief financial officer of
PGI, and (y) within three Business Days after it is actually filed with
the Securities and Exchange Commission, if applicable, PGI’s Form 10-Q.

 

(c)           Lessee will
promptly and fully report to Lessor in writing if any Equipment (or any part
thereof) is lost or damaged (where the estimated repair costs would exceed
$100,000), or is otherwise involved in an accident causing personal injury or
property damage which may result in a loss or liability in excess of $100,000.

 

(d)           (i) Within
30 days after any request by Lessor and (ii) in connection with any
financial statement delivered pursuant to subparagraphs (b)(i) and (b)(x) above
and paragraph (e) below, Lessee will furnish to Lessor (A) a
certificate of a Responsible Officer of PGI and Lessee, respectively, stating
that such officer has reviewed the activities of PGI and Lessee, respectively,
and that, to the best of such officer’s knowledge, there exists no Default or
event which, with the giving of notice or the lapse of time (or both), would
become a Default, and (B) a certificate from a financial officer of PGI
containing a computation in reasonable detail of, and showing compliance with,
each of the financial ratios and restrictions contained in the financial
covenants set forth in Appendix II.

 

(e)           No later than February 28
of each fiscal year of PGI, Lessee will deliver to Lessor a detailed
consolidated budget of PGI by fiscal quarter for such fiscal year (including a
projected consolidated balance sheet and related statements of projected
operations and cash flow or at the end of and for each fiscal quarter during
such fiscal year) and the next two succeeding fiscal years, and promptly when
available any significant revisions of such budgets.

 

(f)            Lessee will
comply with Section 17(b)(ii) within 120 days of the Basic Term
Commencement Date and will provide Lessor with a written report of the
identification numbers applicable to each item of Equipment within 120 days of
the Basic Term Commencement Date.

 

(g)           Lessee shall
promptly deliver to Lessor written notice of: (i) any violation of any
Environmental Law or Environmental Permit which violation could result in a
material administrative, criminal or civil liability to Lessor, any Guarantor
or Lessee with respect to the Site, the Facility or the Equipment or could
otherwise result in a Material Adverse Effect, (ii) 

 

10

 

any proceeding, investigation or inquiry of which Lessee has been
notified in writing by any Governmental Authority (including without
limitation, the EPA) or any non-government third party with respect to the
presence or Release of Hazardous Substances in, on, from or to the Site, the
Facility or the Equipment which presence or Release could result in a violation
of or liability under any Environmental Law or Environmental Permit, and (iii) any
Release of Hazardous Substances by the Lessee or with respect to the Site, the
Facility or the Equipment which Release could result in a violation of or
liability under any Environmental Law or Environmental Permit, other than a de
minimis Release.

 

(h)           The Lessor will
keep the Lessee apprised of changes in the ownership structure and outstanding
debt obligation of Gossamer Holdings, LLC. 
Following the receipt of a written request from Lessee for Gossamer
Holdings, LLC financial information, solely for purposes of Lessee’s financial
reporting and only when required by Lessee to comply with GAAP, Lessor shall,
within 30 days after the end of any calendar quarter that falls in whole or in
part in the period between the Basic Term Commencement Date and the date on
which this Agreement terminates, deliver to the Lessee unaudited copies of (i) a
balance sheet of Gossamer Holdings, LLC as of the end of that calendar quarter,
and (ii) a statement of operations of Gossamer Holdings, LLC, for that
year to date fiscal calendar quarter and (iii) in addition from time to
time following the receipt of a written request from Lessee, Gossamer Holdings,
LLC will allow for the timely review by the Lessee’s independent public
accountants of Gossamer Holdings, LLC source documents, excluding any and all
tax records, returns, filings or other tax related documents, as may be
reasonably required by Lessee’s independent public accountants, such as cash
disbursements records or similar information, and will timely respond to
reasonable inquiry or confirmation by Lessee’s independent public accountants
related to such disclosures as described above (all such disclosures described
in this sentence and the immediately preceding sentence, collectively, to be
defined as the “Lessor Financial Disclosures”).  Lessor shall not have any liability to the
Lessee or any other third party in connection with the Lessee’s use or non-use
of any Lessor Financial Disclosures. 
Lessee hereby, and as a condition of accepting receipt of any Lessor
Financial Disclosures, releases the Lessor, the Members, and each of their
respective officers, directors and employees from and against any and all
claims, rights, actions, damages and liabilities of any kind, and waives any
and all claims and rights to commence any action against such parties in
connection with any Lessor Financial Disclosures.  The Lessee hereby acknowledges and agrees
that the Lessor Financial Disclosures shall be deemed “Confidential Information”
and Lessee shall comply with Section 22 as if all obligations of Lessor
applied to Lessee mutatis mutandis with respect to
such Lessor Financial Disclosures. 
Lessee shall be responsible for any breach of any third-party
confidentiality agreement.  Lessee
expressly agrees that any damages, losses, liabilities and expenses (including
attorneys’ fees and disbursements) that may be incurred by any Member or Lessor
or any of their respective officers, directors and employees as a direct or
indirect result of (i) the provision of any Lessor Financial Disclosures
to the Lessee or (ii) any breach of this Section 5(h) by Lessee,
shall each constitute an indemnifiable Claim under Section 15(a).

 

6.             DELIVERY, USE
AND OPERATION

 

(a)           Lessee
represents and warrants that the Equipment shall be in Lessee’s possession as
of the Basic Term Commencement Date.

 

11

 

(b)           Lessee agrees
that the Equipment will be maintained and used by Lessee solely in the conduct
of its business and in a manner complying with all Applicable Laws and the
Insurance Requirements (including any applicable insurance policies required to
be maintained in accordance therewith), and Lessee shall not permanently
discontinue use of the Equipment (except as otherwise provided in Section 6(g)).

 

(c)           Lessee shall
not create, incur, assume or suffer to exist, any Lien on or with respect to
the Equipment or any part thereof, title thereto, or any interest of Lessor
therein, or in this Agreement, except Permitted Liens.  Lessee will promptly, at its own expense,
take or cause to be taken such action as may be necessary to discharge any Lien
with respect to the Equipment which is not a Permitted Lien.

 

(d)           Lessee shall
permit any Person designated by Lessor, during normal business hours upon
reasonable notice to visit (and, unless a Default shall have occurred and be
continuing, in no event more than quarterly), inspect and survey the Facility
and the Equipment, its condition, use and operation, and the records maintained
in connection therewith; provided, that
no such exercise of such inspection rights shall violate Lessee’s reasonable
and customary safety, security and confidentiality policies and
procedures.  None of Lessor or any of its
designees shall have any duty to make any such inspection and shall not incur
any liability or obligation by reason of not making any such inspection.  The failure of any such party to object to any
condition or procedure observed or observable in the course of an inspection
hereunder shall not be deemed to waive or modify any of the terms of this
Agreement with respect to such condition or procedure.

 

(e)           Lessee will
keep all the Equipment at the Site specified in the Schedule and will not move
the Equipment (or any component thereof) from the Site; provided that subject
to the terms and conditions hereinafter set forth, Lessee shall be permitted to
remove components as necessary and keep such components (i) at the
location of a Vendor within the United States or other location in the United
States for the sole purpose of repairing such components or (ii) at any
other location for any other purpose with Lessor’s prior written consent.  Anything in the foregoing to the contrary
notwithstanding, (i) upon the written request of Lessor, Lessee will
notify Lessor forthwith in writing of the location of any Equipment as of the
date of such notification, (ii) in no event shall any components be
removed from the Site for a period of one (1) month or longer, whether for
permitted inspection or repairs or for any other reason, unless Lessee gives
Lessor prior notice of the same and 
assists Lessor with the preparation and filing (prior to the expiration
of such one (1) month period) of such instruments and documents as Lessor
may deem reasonably necessary to preserve Lessor’s rights in such components.

 

(f)            The parties
agree that the Equipment shall at all times remain personal property of Lessor
regardless of the degree of its annexation to any real property and shall not
by reason of any installation in, or affixation to, real or personal property
become a part thereof.  Lessee shall
obtain and deliver to Lessor (to be recorded at Lessee’s expense) from any Person
having an interest in the property where the Equipment is to be located,
waivers of any Lien, encumbrance or interest which such Person might have or
hereafter obtain or claim with respect to the Equipment.

 

12

 

(g)           Lessee (and not
the Lessor) will be solely responsible for complying with all Applicable Laws
and existing agreements in connection with the installation, use, possession
and operation of the Equipment, and to obtain and maintain on its own behalf
the Government Approvals required in accordance with such Applicable Laws and
existing agreements. The Lessee (and not the Lessor) will be solely liable for
any fines or penalties imposed by any Governmental Authority in connection with
the foregoing.  Lessee shall have the
right to contest and appeal all such fines and penalties, and Lessor will
provide reasonable assistance and cooperation to Lessee in connection with the
same.

 

(h)           Lessee shall (1) not
use the Equipment for any purpose other than as provided herein, (2) be
responsible for any damages caused to third parties by the use and/or operation
of the Equipment and (3) cause the Equipment to not contain any Hazardous
Substance, except for such Hazardous Substances used in the ordinary course of operation
of the Equipment, provided the use of such Hazardous Substance complies with
Environmental Laws.  Lessor may require
Lessee, to conduct an Environmental Evaluation of the Site provided such
Environmental Evaluation shall not be conducted more than once in any 18 month
period except in the event of a Default.

 

(i)            Lessee shall at
its own cost, defend the Equipment, as well as the rights of Lessor in the
Equipment and the Site, from any third party claims and take all such actions
that are necessary in connection with such defense.

 

(j)            From time to
time at Lessee’s reasonable request and sole expense, Lessor will execute and
deliver to Lessee promptly all applications, forms and other documents that
must be executed by the owner of the Equipment or which are necessary for
Lessee to pursue or enforce any warranty or other claim against any
manufacturer or Vendor of the Equipment or to apply for or pursue any permit or
other item described in subparagraph (g) above.

 

(k)           If an Adverse
Environmental Condition is identified (other than a minor non-compliance or a
de minimis and surficial Release to a non-pervious surface or to soil) at any
time prior to the expiration or termination of this Agreement or in the event
of a Default, Lessee, at its sole     cost and in
compliance with Environmental Laws, shall promptly address, correct and
remediate each identified Adverse Environmental Condition.  For noncompliance matters, Lessee shall
promptly achieve compliance with Environmental Law unless Lessee is diligently
contesting the noncompliance in good faith and prevails on the merits within
180 days of the condition being initially identified and after such 180 days
only if the Lessee has established a reserve required by GAAP, and for the
Release of or presence of Hazardous Substances in the environment (other than a
de minimis and surficial Release to a non-pervious surface or to soil), Lessee
shall remediate groundwater contamination to achieve federal Maximum
Contaminant Levels (MCLs) and remediate soil contamination to achieve
industrial cleanup standards (including the use of engineering and
institutional controls solely for soil, provided such controls do not interfere
with the operation of the Equipment, the Facility or the Site), and complete
such remediation within 180 days of the condition being initially identified
and after such 180 days, only if the Lessee has established a reserve for the
condition required by GAAP.

 

13

 

7.             MAINTENANCE

 

(a)           Lessee will, at
its sole expense, maintain the Equipment in good operating order, repair,
condition and appearance in accordance with manufacturer’s warranty
requirements and in compliance in all material respects with any Applicable Law
and in compliance with the Insurance Requirements, and standards consistent
with and customary to industry practice, reasonable wear and tear
excepted.  Lessee shall obtain, maintain
in full force and effect and comply in all material respects with all
Environmental Permits required to operate the Equipment.

 

(b)           Lessee shall
from time to time make such alterations, additions and modifications to the
Equipment as shall (i) be required to cause the Equipment to comply in all
material respects with any Applicable Law and to comply with all Insurance
Requirements, or (ii) be required to enable the Equipment to continue to
be capable of operating at the capacity levels at which the Equipment was
capable of operating as of the Basic Term Commencement Date, reasonable wear
and tear excepted (each a “Required Modification”).  Lessee will not, without the prior consent of
Lessor, affix or install any accessory, equipment or device on any Equipment if
such addition will materially impair the originally intended function, use,
useful life or ability to operate of such Equipment or materially impair the
value or residual value of such Equipment, unless required by Applicable
Law.  Each Required Modification shall
become the property of Lessor and part of the Equipment free and clear of all
Liens except Permitted Liens.  Lessee
will not, without the prior written consent of Lessor and subject to such
conditions as Lessor may reasonably impose for its protection, affix or install
any Equipment (or any component thereof) to, or in, any other personal or real
property of a third party (other than as permitted under Section 6(e)).

 

(c)           Lessee at any
time may alter, modify or make additions to the Equipment (any such alteration,
modification or addition which is not a Required Modification is an optional modification
(“Optional Modification”)).  No Optional Modification shall (i) diminish
the fair market value, utility, condition, remaining economic useful life, or
estimated residual value of the Equipment below the fair market value, utility,
condition, remaining economic useful life, or estimated residual value
immediately prior to the completion of such Optional Modification, (ii) cause
the Equipment or any portion thereof to become “limited use property” within
the meaning of Revenue Procedures 2001-28 and 2001-29, (iii) otherwise
result in an adverse tax consequence to Lessor or any Member, or (iv) alter
the function of the Equipment or any portion thereof from that for which it was
designed and intended.  Title to any
Optional Modification which is a Non-Severable Modification shall be (at no
cost to Lessor) immediately vested in Lessor and shall automatically become
part of the Equipment and become subject to this Lease and the other Operative
Documents for all purposes.  Title to any
Optional Modification which is a Severable Modification shall remain with
Lessee, and Lessor shall have no interest in such Optional Modification.  During the Basic Term or at the return of the
Equipment, Lessee may remove or replace any Optional Modification which is a
Severable Modification.  If Lessee, at
its cost, shall complete any Severable Modifications which are Optional
Modifications, and such Severable Modifications theretofore made have not been
removed at the end of the Basic Term or at the return of the Equipment, or
within 30 days thereafter, title to such Severable Modifications shall pass to
Lessor at no cost to Lessor.  During such
30-day period, Lessor will give Lessee and its contractors reasonable access to
the Equipment to remove such Optional Modification and to repair any resulting
damage as provided in this Agreement as long as they agree to comply with
Lessor’s reasonable and 

 

14

 

customary safety, security and confidentiality policies and
procedures.  Notwithstanding anything to
the contrary set forth in this Agreement, Lessor will not be in breach of its
confidentiality obligations under this Agreement for allowing third parties to
have access to the Equipment that includes an Optional Modification which is a
Severable Modification.

 

(d)           Any Required
Modification shall be made at the expense of Lessee, shall be free and clear of
all Liens (other than Permitted Liens), and shall immediately become the
property of Lessor.

 

8.             CASUALTY
OCCURRENCE.

 

Lessee shall promptly notify
Lessor in writing if the Equipment (i) suffers damage or destruction
resulting in an insurance settlement on the basis of actual, constructive or
compromised total loss; (ii) suffers destruction or damage beyond repair;
or (iii) becomes lost, stolen, destroyed or suffers damage, which in the
reasonable determination of Lessor, makes repair uneconomic or renders the
Equipment permanently unfit for use from any cause whatsoever (including an
Adverse Environmental Condition) (such occurrences being hereinafter called “Casualty Occurrences”). 
The parties hereby acknowledge and agree that all of the Equipment shall
be under Lessee’s care and attention at all times, and that Lessee shall
maintain and use the Equipment in accordance with the terms of this Agreement,
and therefore, Lessee shall be responsible for any Casualty Occurrence.  Unless otherwise expressly provided for in Section 10(g) hereof,
if any of the events set forth in the proviso to clause (ii) of Section 10(g) have
occurred, on the date set forth on Annex C to the Schedule during the first
month next succeeding a Casualty Occurrence, or if such date is not a Business
Day, then on the next day that is a Business Day (the “Payment Date”),
Lessee shall pay Lessor the sum of (x) the Stipulated Loss Value of all
Equipment calculated in accordance with Annex C of the Schedule; and (y) all
Rent (including Basic Term Rent scheduled to be paid on such Payment Date) and
other amounts which are due hereunder with respect to the Equipment as of the
Payment Date; provided that Lessee shall not be
required to make any payment in respect of a Casualty Occurrence if (A) the
Equipment affected by such Casualty Occurrence is not necessary to enable the
Equipment to continue to be capable of operating at the capacity levels at
which the Equipment was capable of operating as of the Basic Term Commencement
Date with respect to the Equipment covered by the Schedule (reasonable wear and
tear excepted) and (B) the failure to repair or replace such Equipment
does not diminish the value, utility or remaining useful life of the Equipment
which remains subject to this Agreement from the value, utility and remaining
useful life of all Equipment subject to this Agreement immediately prior to
such Casualty Occurrence.  Upon payment
of all sums due hereunder, the obligation of Lessee to pay Rent and the Term of
this Agreement as to the Equipment shall terminate, and (except in the case of
the loss, theft or complete destruction of the Equipment ) Lessee may elect (by
giving Lessor written notice) to receive from Lessor title to the Equipment, on
an AS IS, WHERE IS BASIS, free and clear of all Lessor’s Liens; provided that if Lessee elects to take title to the
Equipment (in-place and in-use) and the Fair Market Value of the Equipment is
greater than the applicable Stipulated Loss Value, then Lessee will pay Lessor
as additional purchase price the amount by which such Fair Market Value exceeds
such Stipulated Loss Value.  Lessor shall
apply any insurance proceeds received pursuant to any insurance policies
maintained by the Lessee to the payment of Lessee’s obligations under this Section 8,
and Lessee shall be entitled to receive any such insurance proceeds in excess
of the proceeds necessary to pay Lessor the amounts due under this

 

15

 

Section 8.  Any other amounts received by Lessor or
Lessee with respect to such Casualty Occurrence from any Governmental Authority
or other Person shall be divided between the Lessee and Lessor as their
interests appear.

 

9.             LOSS OR DAMAGE

 

Lessee hereby assumes and
shall bear the entire responsibility for any loss, theft, damage to, or
destruction of the Equipment from any cause whatsoever, in accordance with the
terms of this Agreement; provided, however,
that if, and so long as, no Default exists under this Agreement, the foregoing
shall not limit or otherwise affect any rights the Lessee may have against
third parties.

 

10.          INSURANCE

 

(a)           Coverage.  Without limiting any of the other obligations
or liabilities of Lessee under this Agreement, Lessee shall, during the term of
this Agreement, carry and maintain, with respect to the Equipment, at its own
expense, at least the minimum insurance coverage set forth in this Section 10.  Lessee shall also carry and maintain any
other insurance that Lessor may reasonably require from time to time.  All insurance carried pursuant to this Section 10
shall be placed with such insurers having a minimum A.M. Best rating of
A:X, with terms, conditions and limits as shall be acceptable to Lessor.  The insurance required to be carried and
maintained by Lessee hereunder shall in all events, include the following:

 

(i)            All Risk
Property Insurance.  Lessee
shall maintain all risk property insurance covering the Equipment against all
risks of physical loss or damage, including but not limited to fire and
extended coverage, collapse, flood, earth movement and comprehensive boiler and
machinery coverage (including but not limited to electrical malfunction and
mechanical breakdown).  Coverage shall be
written in the greater of the then current Stipulated Loss Value or replacement
cost value in an amount reasonably acceptable to Lessor.  Such insurance policy shall contain an agreed
amount endorsement waiving any coinsurance penalty and shall include expediting
expense coverage in an amount not less than $1,000,000; and

 

(ii)           Business
Interruption Insurance.  As
an extension of the insurance required under subsection (a)(i), Lessee shall
maintain, or cause to be maintained, business interruption insurance in an
agreed amount equal to 12 months gross profit or gross earnings until the
production is restored.  Deductibles
shall not exceed $250,000; and

 

(iii)          Commercial
General Liability Insurance.  Lessee shall maintain comprehensive general
liability insurance written on an occurrence basis with a limit of not less
than $1,000,000 each occurrence, $2,000,000 Products & Completed
Operations Aggregate and $2,000,000 General Aggregate.  Such coverage shall include, but not be
limited to, premises/operations, broad form contractual liability, independent
contractors, products/completed operations, property damage and personal injury
liability.  Such insurance shall be
written on form ISO CGL 00 01 12 07 (or its equivalent) and shall not contain
an exclusion for punitive or exemplary damages where insurable by law; and

 

16

 

(iv)          Workers’
Compensation/Employer’s Liability.  The Lessee shall maintain (A) workers’
compensation insurance or any other statutory insurance required by Applicable
Law with respect to work-related injuries, disease or death of any employee of
Lessee while at work or in the scope of his/her employment with the Lessee and (B) Employer’s
Liability in an amount not less than $1,000,000 each accident, each employee;
and

 

(v)           Excess/Umbrella
Liability.  Lessee
shall maintain excess or umbrella liability insurance written on an occurrence
basis in an amount not less than $100,000,000 General Aggregate providing coverage
limits excess of the insurance limits required under sections (a)(iii), and (a)(iv) employer’s
liability only.  Such insurance shall
follow the form of the primary insurances and drop down in case of exhaustion
of underlying limits and/or aggregates.  Such
insurance shall not contain an exclusion for punitive or exemplary damages
where insurable under law.

 

(b)           Waiver of
Subrogation.  Lessee and
its insurers waives its right to subrogate against Lessor and its insurers for
all policies Lessee is required to carry and maintain.

 

(c)           Endorsements.  Lessee shall cause all insurance policies
carried and maintained in accordance with this Section 10 to be endorsed
as follows:

 

(i)            Lessee shall be
the named insured and loss payee and Lessor shall be an additional insured and
lender loss payee as its interest may appear with respect to the Equipment
covered by property policies described in subsection (a)(i) and
(a)(ii).  Lessee shall be the named
insured and Lessor shall be named as an additional insured with respect to
liability policies described in subsections (a)(iii), (a)(iv) to the
extent allowed by law and (a)(v).  It
shall be understood that any obligation imposed upon Lessee, including but not
limited to the obligation to pay premiums, shall be the sole obligation of
Lessee and not that of Lessor; and

 

(ii)           With respect to
property policies described in subsections (a)(i) and (a)(ii), the
interests of Lessor shall not be invalidated by any action or inaction of
Lessee, any Guarantor or any other Person, and shall insure Lessor regardless
of any breach or violation by Lessee or any other Person, of any warranties,
declarations or conditions of such policies; and

 

(iii)          Inasmuch as the
liability policies are written to cover more than one insured, all terms
conditions, insuring agreements and endorsements, with the exception of the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured; and

 

(iv)          The insurers
thereunder shall waive all rights of subrogation against Lessor any right of
setoff or counterclaim and any other right to deduction, whether by attachment
or otherwise; and

 

(v)           Such insurance
shall be primary without right of contribution of any other insurance carried
by or on behalf of Lessor with respect to their interests as such in the
Equipment; and

 

17

 

(vi)          If such
insurance is canceled for any reason whatsoever, including nonpayment of
premium, or any changes are initiated by Lessee or the carrier which affects
the interests of Lessor, such cancellation or change shall not be effective as
to Lessor until 30 days, except for (non-payment of premium which shall be 10
days) after receipt by Lessor of written notice sent by registered mail from such
insurer.

 

(d)           Certifications.  On the Basic Term Commencement Date with
respect to the Equipment leased as of such date, and at each policy renewal,
but not less than annually with respect to all Equipment then leased, Lessee
shall provide to Lessor a certification and endorsement from each insurer or by
an authorized representative of each insurer. 
Such certification and endorsement shall identify the companies
affording coverage, the type of insurance, the policy period(s), policy
numbers, limits, and term thereof and shall specifically list the special
provisions delineated for such insurance required for this Section 10.

 

(e)           Insurance
Report.  Concurrently with the
furnishing of all certificates referred to in this Section 10, Lessee
shall furnish Lessor with a statement from Lessee’s independent insurance
broker stating that all premiums then due have been paid and that, in the
opinion of such broker, the insurance then maintained by Lessee is in
accordance with this Section 10. 
Furthermore, upon its first knowledge, such broker shall advise Lessor
promptly in writing of any default in the payment of any premiums or any other
act or omission, on the part of any person, which might invalidate or render
unenforceable, in whole or in part, any insurance provided by Lessee and/or
user hereunder.

 

(f)            General.  Upon request, Lessee shall furnish Lessor
with copies of all insurance policies, binders and cover notes or other
evidence of such insurance. 
Notwithstanding anything to the contrary herein, no provision of this Section 10
or any provision of this Agreement shall impose on Lessor any duty or
obligation to verify the existence or adequacy of the insurance coverage
maintained by Lessee, nor shall Lessor be responsible for any representations
or warranties made by or on behalf of Lessee to any insurance broker, company
or underwriter.  Lessor, at its sole
option, may obtain such insurance if not provided by Lessee and in such event,
Lessee shall reimburse Lessor upon demand for the cost thereof together with
interest.

 

(g)           Proceeds of
Insurance.  Insurance
proceeds shall be applied as follows:

 

(i)            If the Lessee
believes that, based on reasonable estimates of loss, the amount of insurance
proceeds payable in respect of any casualty event or any series of related
casualty events to be less than or equal to $500,000, the Lessee may elect to
restore or replace the property affected by such casualty event without the
consent of the Lessor so long as no Default shall have occurred and be
continuing.

 

(ii)           If the Lessee
believes that, based on reasonable estimates of loss, the amount of insurance
proceeds payable in respect of any casualty event or any series of related
casualty events to be in excess of $500,000, the Lessee may elect to restore or
replace the property affected by such casualty event if the Lessee has
delivered to the Lessor, within twenty (20) days from the occurrence of such
casualty event, a Restoration or Replacement Plan with respect to such casualty
that is based upon, or accompanied by, 

 

18

 

each of the following:  (A) (1) a
detailed breakdown of the nature and extent of such casualty event and (2) a
bona fide assessment (from a contractor reasonably acceptable to the Lessor) of
the estimated cost and time needed to restore or replace the affected property;
(B) satisfactory evidence that such insurance proceeds and the Lessee’s
other available funds are sufficient to make the necessary restorations to or
replacement of the affected property; (C) delivery of an officer’s
certificate of the Lessee certifying that, at the completion of the restoration
or replacement, no Default shall have occurred and be continuing in connection
with such casualty event; and (D) confirmation by the Engineering Consultant,
of its agreement based on the information available to it with the matters set
forth in clauses (A) through (B) above within twenty (20) days after
the receipt of the foregoing information and its approval of such Restoration
or Replacement Plan; provided, that,
if the Lessee does not deliver such Restoration or Replacement Plan within such
20-day period or if the Lessor or the Engineering Consultant provides written
notice to Lessee that it rejects the Restoration or Replacement Plan, and
following consultation by the Lessee with the Lessor or the Engineering
Consultant regarding any proposal by Lessee to modify the Restoration or
Replacement Plan but within 20 days after Lessee has received such initial
written rejection notice, the Lessor or the Engineering Consultant provides
written notice to Lessee that it has rejected Lessee’s modified Restoration or
Replacement Plan, the Lessee shall promptly pay, or cause to be paid, proceeds
of any insurance to Lessor, as loss payee, which shall be applied, in Lessor’s
discretion, toward the replacement, restoration or repair of the Equipment to
the condition required by Section 7 or toward the payment of Stipulated
Loss Value in accordance with Section 8 hereof.

 

(iii)          If a Default
shall have occurred and be continuing, then Lessee shall remit to Lessor, as
loss payee, proceeds of any insurance covering damage or loss which proceeds
shall be applied, in Lessor’s discretion, to replacement, restoration or repair
of the Equipment to the condition required by Section 7 or toward the
payment of Stipulated Loss Value in accordance with Section 8.

 

11.          RETURN OF
EQUIPMENT

 

(a)           Upon any
expiration or termination of this Agreement or the Schedule, Lessee shall
promptly, at its own cost and expense comply with the obligations set forth Section 11(c) below
and shall: (i) perform any testing and repairs required to place the
Equipment in substantially the same condition as when received by Lessee and in
good working order for its originally intended purpose (reasonable wear and
tear excepted), and (ii) tender the Equipment to Lessor at the Facility,
free and clear of all Liens other than Lessor’s Liens.

 

(b)           Until Lessee
has fully complied with the requirements of Section 11(a) above,
Lessee’s Rent payment obligation with respect to Equipment for which Lessee has
not complied and all other obligations under this Agreement shall continue from
month-to-month notwithstanding any expiration or termination of the Basic Term
provided that the Rent payable for the Equipment shall be the higher of (A) the
then Fair Market Rental Value, and (B) the monthly average Rent payable
over the Basic Term.  Lessor may
terminate such continued leasehold interest upon ten (10) days prior
written notice to Lessee.  In addition to

 

19

 

these rents, Lessor shall have all of its other rights and remedies
available as a result of this non-performance.

 

(c)           (i) Upon
written notice from Lessor not less than two hundred seventy (270) days prior
to the expiration of this Agreement, Lessee shall no later than two hundred ten
(210) days prior to the expiration of this Agreement (or as promptly as
practicable following the earlier termination of this Agreement):

 

(1) 
provide a detailed inventory of the Equipment (including the model and serial
number of each major component thereof), including, without limitation, all
accessories and features;

 

(2) 
provide a complete and current set of 
all manuals, blue prints, process flow diagrams, equipment configuration
diagrams, maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment and of all Required
Modifications and of all Optional Modifications that are Non-Severable
Modifications, but always excluding any of the foregoing concerning any
Optional Modifications that are Severable Modifications or any Proprietary
Information, in each case subject to Section 7(c) above; and

 

(3) 
provide a certification of the manufacturer or of a maintenance provider
acceptable to Lessor that the Equipment (a) has been tested and is
operating in accordance with manufacturer’s specifications (reasonable wear and
tear excepted), together with a report detailing the condition of the
Equipment, the results of such test(s) and inspection(s) and all
repairs that were performed as a result of such test(s) and inspection(s) and
(b) if applicable, that the Equipment qualifies for the manufacturer’s
used equipment maintenance program; provided that
Lessee shall not be required to spend or pay any additional amount to qualify
the Equipment for any such program.

 

(ii) 
at least three hundred sixty-five (365) days prior to expiration of this
Agreement (or as promptly as practicable following the earlier termination of
this Agreement), upon receiving reasonable written notice from Lessor, make the
Equipment available for on-site operational inspections by potential purchasers
(which may include competitors of PGI or any of its Subsidiaries or
Affiliates), under power, and provide personnel, power and other requirements necessary
to demonstrate electrical, mechanical and hydraulic systems for the Equipment; provided that no inspection shall violate Lessee’s
reasonable and customary safety, security and confidentiality policies and
procedures;

 

(iii) 
with respect to any Equipment which has been modified by Lessee, except with
respect to any Optional Modifications which are Severable Modifications that
Lessee intends to remove prior to return, furnish to Lessor a listing of no
less than three (3) (if available) alternative suppliers of replacement
parts and other materials necessary for the prolonged operation of the
Equipment;

 

(iv) 
have all Equipment cleaned and treated, at least 14 days prior to return of the
Equipment, with respect to Hazardous Substances, rust, corrosion and appearance
in accordance with manufacturer’s recommendations and consistent with
commercially reasonable 

 

20

 

practices
of dealers in used equipment similar to the Equipment (provided that Lessee may
leave Hazardous Substances specified by the manufacturer as necessary to
maintain or operate the Equipment provided no Hazardous Substance is leaking
from the Equipment); have all Lessee installed markings or labels which are not
necessary for the operation, maintenance or repair of the Equipment removed;
and cause the Equipment to be in compliance in all material respects with all
Applicable Laws;

 

(v) at
Lessor’s choice, either (1) allow Lessor, at Lessor’s expense, and
provided that Lessor has given reasonable notice to Lessee, arrange for an
on-site auction of the Equipment in an assembled and functional state, any such
auction will be conducted in a manner which will not unreasonably interfere
with Lessee’s business operations and in accordance with Lessee’s reasonable
and customary safety, security and confidentiality policies and procedures, or (2) tender
the Equipment to the Lessor at the Facility;

 

(vi) allow Lessor, at Lessee’s expense, to conduct
an Environmental Evaluation with respect to the Site or the Facility at least
120 days prior to the return of the Equipment, demonstrating there are no
Adverse Environmental Conditions (other than a de minimis and surficial Release
to a non-pervious surface) associated with the Site or the Facility. If an
Adverse Environmental Condition is identified (other than a de minimis and
surficial Release to a non-pervious surface), Lessee, at its sole cost and in
compliance with Environmental Laws, shall promptly address, correct and
remediate each identified Adverse Environmental Condition. For noncompliance
matters, Lessee shall promptly achieve compliance with Environmental Law unless
Lessee is diligently contesting the noncompliance in good faith and has
established a reserve required by GAAP, and for the Release of or presence of
Hazardous Substances in the environment (other than a de minimis and surficial
Release to a non-pervious surface), Lessee shall remediate groundwater
contamination to achieve federal Maximum Contaminant Levels (MCLs) and
remediate soil contamination to achieve industrial cleanup standards (including
the use of engineering and institutional controls solely for soil, provided
such controls do not interfere with the operation or return of the Equipment,
or the operation of the Facility or the Site), and complete such remediation
within 180 days of the condition being identified and after such 180 days only
if Lessee has established a reserve for the condition required under GAAP;

 

(vii) at
the request of Lessor and to the extent permissible under Applicable Law,
assign, transfer, or furnish, or cause to be assigned, transferred, furnished,
or re-issued, to Lessor or its designee, Lessee’s rights and interest in, to
and under all permits (including Environmental Permits), certificates, licenses,
approvals, Included IP, intellectual property, and similar rights which
are necessary or reasonably desirable for the operation of the Equipment (other
than the Proprietary Information);

 

(viii) Lessee
shall provide to Lessor copies of all permits, licenses, certificates and
consents required to evidence compliance with Lessee’s obligations under clause
(vii) above to allow the Equipment to continue to be operated at the
capacity levels at which the Equipment was capable of being operated as of the
Basic Term Commencement Date; and

 

(ix)      After
expiration of the Basic Term the Lessee shall make available key employee’s
(chief engineer & operators) to aid the Lessor in the selling of the
Equipment for a 

 

21

 

period
of up to 720 days.  During such period
the Lessee shall make available the Equipment for on-site operational
inspections by potential purchasers, under power, and provide personnel, power
and other requirements necessary to demonstrate electrical, mechanical and
hydraulic systems for the Equipment, subject to and in compliance with Lessee’s
reasonable and customary safety, security and confidentiality policies and
procedures.

 

(d)           Notwithstanding
any other provision of this Agreement (other than Section 7(c) above),
(i) no Proprietary Information will become the property of Lessor and (ii) all
Proprietary Information will always remain the property of Lessee (or its
customers or suppliers, as the case may be).

 

12.          DEFAULT;
REMEDIES

 

(a)           Lessor may in
writing to Lessee declare this Agreement in default (“Default”)
if:

 

(i)            Lessee breaches
its obligation to pay Rent or any other sum as and when due and fails to cure
the breach within 5 Business Days after the date such amount was due;

 

(ii)           Lessee fails to
maintain its insurance coverage required under Section 10;

 

(iii)          Lessee breaches
its covenants set forth in Section 17(b)(xii) of this Agreement;

 

(iv)          Lessee breaches
any of its other covenants or obligations set forth in this Agreement
(excluding those covenants and obligations covered by clauses (i), (ii) and
(iii) above and clauses (v), (vi), (vii), (xi), (xv), (xxi) and (xxii) below)
and Lessee fails to cure such breach within 30 days after written notice
thereof;

 

(v)           any
representation or warranty made by Lessee, any Guarantor and/or its
Subsidiaries or Affiliates in connection with any Operative Document or
Document shall be false or misleading in any material respect when made;

 

(vi)          Lessee shall or
shall attempt to (except as expressly permitted by the provisions of this
Agreement) sell, transfer, encumber (except to the extent of a Permitted Lien),
or assign the Equipment or any part thereof, or use the Equipment for an
illegal purpose or permit the same to occur;

 

(vii)         any
certificate, statement, representation, warranty or audit contained herein or
heretofore or hereafter furnished in writing with respect hereto by or on
behalf of Lessee or any Guarantor proving to have been false in any material
respect when made;

 

(viii)        Lessee or PGI
admits in writing its inability to pay its debts as they become due, terminates
its corporate existence, or ceases to do business as a going concern;

 

22

 

(ix)          Lessee or any
Guarantor shall file a voluntary petition in bankruptcy  or
a voluntary petition or an answer seeking reorganization in a proceeding under
any bankruptcy or receivership laws (as now or hereafter in effect) or an
answer admitting the material allegations of a petition filed against Lessee or
any Guarantor in any such proceeding, or Lessee or any Guarantor shall, by
voluntary petition, answer or consent, seek relief under the provisions of any
other now existing or future bankruptcy, receivership or other similar law
providing for the reorganization or liquidation of corporations, or providing
for an agreement, composition, extension or adjustment with its creditors;

 

(x)           petition is
filed against Lessee or any Guarantor in a proceeding under applicable
bankruptcy, receivership or other insolvency laws, as now or hereafter in
effect, and is not withdrawn, stayed or dismissed within 45 days thereafter, or
if, under the provisions of any law providing for reorganization or liquidation
of corporations which may apply to Lessee or any Guarantor any court of
competent jurisdiction shall assume jurisdiction, custody or control of Lessee
or any Guarantor or of any substantial part of their property, and such
jurisdiction, custody or control shall remain in force unrelinquished, unstayed
or unterminated for a period of 45 days;

 

(xi)          (1) any
dissolution or termination of existence of the Lessee or any Guarantor, (2) any
Person other than MatlinPatterson shall own, collectively, on a fully-diluted
basis, more than 50% of the aggregate shares of voting capital stock of PGI or (3) any
merger or consolidation of the Lessee or any Guarantor or either the Lessee or
any Guarantor sells or leases all, or substantially all, of its assets;

 

(xii)         there occurs (a) an
Event of Default (as defined in the Credit Agreement) under the Credit
Agreement (after giving effect to all notice and cure periods), (b) a
default by any Guarantor under the Guaranty, (c) a Construction Agency
Event of Default under the CAA or (d) a breach by the Lessee or any of the
Guarantors under any other Operative Document any of which has not been duly
waived or cured thereunder;

 

(xiii)        there occurs a
default beyond any applicable grace periods under (A) any of Lessee’s or
any Guarantor’s or any of Lessee’s or any Guarantor’s Affiliate’s other agreements
with Lessor (or any Member or Affiliate of such Member) under which Lessee or
any Guarantor or any Affiliate of any of them owes Lessor (or any Member or
Affiliate of such Member) $500,000 or more at the time of such default or (B) any
contract or agreement that could reasonably be expected to materially and
adversely affect the operation or value of the Equipment or result in a
Material Adverse Effect;

 

(xiv)        there occurs a
default under any of Lessee’s or under any Guarantor’s credit agreements or
financing facilities or similar arrangements (i) with Persons other than
Lessor (or any Member or Affiliate of such Member) or (ii) with Lessor (or
any Member or any Affiliate of such Member) under which Lessor (or any Member
or any Affiliate of such Member) does not have the right to direct or control
the exercise of remedies, under which, in each case, any indebtedness equal to
or exceeding an aggregate principal amount of $10,000,000 or more was created
or is governed thereby which has not been duly waived or cured thereunder;

 

23

 

(xv)         PGI shall no
longer, directly or indirectly, control 100% of the equity interests in Lessee
or any successor entity;

 

(xvi)        Lessee shall
fail to maintain or replace any Acceptable Letter of Credit in accordance with Section 17(b)(viii) of
this Agreement;

 

(xvii)       any Acceptable
Letter of Credit shall cease to be binding on the provider thereof, shall be
rendered unenforceable in any material respect, shall not have been renewed or
replaced within 30 days before its expiry, or any such provider thereof shall
expressly renounce or repudiate in writing its obligations thereunder (unless
such Acceptable Letter of Credit has been replaced by a replacement Acceptable
Letter of Credit);

 

(xviii)      if, at any time
the Guaranty ceases to constitute a valid, legal and binding agreement,
enforceable against any Guarantor or such Guaranty is otherwise the directly or
indirectly contested by any Guarantor or any Affiliate thereof;

 

(xix)        the direct or
indirect contest by the Lessee of the validity of the Lien granted in favor of,
or for the benefit of, Lessor in any of the Operative Documents, or the taking
of any action by the Lessee to repudiate, or purport to discontinue or
terminate this Agreement or any of the other Operative Documents;

 

(xx)         if this
Agreement or any of the other Operative Documents shall cease (1) to be a
legal, valid and binding obligation, or (2) to be in full force and
effect;

 

(xxi)        Lessee breaches
its covenants in Section 6(k) or 11(c)(vi) of this Agreement;

 

(xxii)       Lessee fails to
maintain material compliance with or incurs material liability under
Environmental Laws or Environmental Permits, including any Governmental
Approval issued under Environmental Laws, in each case with respect to the Site
or the Facility;

 

(xxiii)      any Claim
against any Indemnified Party in respect of any Environmental Loss or Taxes
(other than Excluded Taxes) arises out of or relates to a Default under Section 12(a)(iv) if
such Default results from Lessee’s failure to provide audited financial
statements within the designated time period in accordance with Section 5(b);

 

(xxiv)     any Claim
against any Indemnified Party in respect of any Environmental Loss or Taxes
(other than Excluded Taxes) arises out of or relates to a Default under Section 12(a)(xi)(2) or
Section 12(a)(xi)(3);

 

(xxv)      any Claim
against any Indemnified Party in respect of any Environmental Loss or Taxes
(other than Excluded Taxes) arises out of or relates to a Default under Section 12(a)(xii)(a) other
than as a result of a payment default; or

 

24

 

(xxvi)     any Claim
against any Indemnified Party in respect of any Environmental Loss or Taxes
(other than Excluded Taxes) arises out of or relates to a Default under Section 12(a)(xiii) other
than as a result of a payment default thereunder.

 

(b)           After any
Default shall have occurred:

 

(i)            at the request
of Lessor, Lessee shall comply with the provisions of Section 11(a) hereof;

 

(ii)           Lessee hereby
authorizes Lessor to enter any premises where the Facility or any Equipment is
located and take possession thereof;

 

(iii)          (1) 
Provided that Lessor has not exercised remedies under Section 12(b)(iii)(2),
Lessee shall, without further demand, forthwith pay to Lessor (A) the
Stipulated Loss Value of the Equipment (calculated in accordance with Annex C
of the Schedule as of the Payment Date next preceding the declaration of
default), plus (B) an amount equal to all Rent (including Basic Term
Rent), all applicable taxes and other sums then due hereunder; provided, that for the avoidance of doubt, such Rent and
other sums shall be the unaccelerated amounts due as of such date. If Lessee
shall have made the foregoing payments indefeasibly in full, Lessor shall
thereafter pay over to Lessee as and when from time to time received, the net
proceeds of any sale, lease or other disposition of such Equipment (after
deducting all costs and expenses whatsoever incurred by Lessor or any Member in
connection therewith and all other amounts which may become payable by Lessor
or any Member with respect thereto) up to the amount of such Stipulated Loss
Value actually paid by Lessee.

 

(2)           In lieu of
exercising its rights under Section 12(b)(iii)(1), Lessor may by written notice
to Lessee specifying a Payment Date which is not earlier than 10 days after the
date of such notice, demand that Lessee pay to Lessor and Lessee shall pay to
Lessor, on such Payment Date, in lieu of all Rent due after such Payment Date,
an amount equal to the excess, if any, of the Stipulated Loss Value of the
Equipment computed as of the Payment Date specified in the notice over the Fair
Market Value thereof as of such Payment Date.

 

(iv)          Lessor may, but
shall not be required to, retain an Environmental Consultant to undertake an
Environmental Evaluation of the Site at Lessee’s expense; and

 

(v)           Lessor may, but
shall not be required to, sell the Equipment, or any portion thereof, at
private or public sale, in bulk or in parcels, with or without notice, and
without having the Equipment present at the place of sale; or Lessor may, but
shall not be required to, lease, otherwise dispose of or keep idle all or part
of the Equipment; and Lessor may use the Facility pursuant to the Site Lease,
until all amounts due hereunder have been paid, for any or all of the foregoing
without liability for rent.  The proceeds
of sale, lease or other disposition, if any, together with the aggregate
proceeds obtained by Lessor from one or more drawings under an Acceptable Letter
of Credit made pursuant to Section 12(c), shall be applied in the
following order of priorities: (A) first, to pay all of Lessor’s
costs, charges and expenses incurred in taking, removing, holding, repairing
and 

 

25

 

selling, leasing or otherwise disposing of the Equipment; then, (B) second,
to the extent not previously paid by Lessee, to pay Lessor all amounts due from
Lessee hereunder; then, (C) third, to reimburse to Lessee
any sums previously paid by Lessee to Lessor pursuant to Section 12(b); then,
(D) fourth, to reimburse to Lessee any sums obtained by Lessor from
one or more drawings under an Acceptable Letter of Credit pursuant to Section 12(c) in
excess of application of such sums against any amounts due to Lessor from
Lessee hereunder (including any application of such sums to the payment of
contractual penalties); and (E) fifth, any surplus shall be
retained by Lessor.  Lessee shall pay any
deficiency in clauses (A) and (B) forthwith.

 

(c)           In addition to
any other rights set forth in this Section 12 but subject to Section 12(b)(iii),
after a Default shall have occurred, and without limitation of any of the
foregoing remedies, Lessor (i) may terminate or cancel this Agreement as
to any or all of the Equipment; (ii) shall be entitled to make a drawing
under any Acceptable Letter of Credit for the maximum amount available
thereunder and apply the proceeds thereof to satisfy Lessee’s obligations
hereunder and under the other Documents; or (iii) may exercise all rights
and remedies as a secured party under the UCC with respect to the Security
Deposit, including the right to collect, receive, appropriate and realize upon
the Security Deposit and apply the proceeds thereof to satisfy Lessee’s
obligations hereunder and under the other Documents.

 

(d)           The foregoing
remedies are cumulative, and any or all thereof may be exercised in lieu of or
in addition to each other or any remedies at law.  If permitted by Applicable Laws, Lessee shall
pay reasonable attorneys’ fees actually incurred by Lessor or any Member in
enforcing the provisions of this Agreement and any ancillary documents.  Waiver of any Default shall not be a waiver
of any other or subsequent default.

 

(e)           Notwithstanding
any other provision set forth in this Agreement, if (w) a Default shall
have occurred solely as a result of an event or events set forth in Section 12(a)(iii),
(x) such Default is not caused by the Lessee for the purpose of obtaining
this right to obtain title to the Equipment, (y) Lessor shall have
declared such Default and pursued remedies as set forth herein, and (z) as
a result thereof Lessee shall have paid (and Lessor shall have received) (A) the
Stipulated Loss Value of the Equipment (calculated in accordance with Annex C
of the Schedule as of the Payment Date next preceding the declaration of
default), plus (B) an amount equal to all Rent (including Basic Term
Rent), all applicable taxes and other sums then due hereunder; provided, that for the avoidance of doubt, such Rent and
other sums shall be the unaccelerated amounts due as of such date, then Lessor
shall convey to Lessee title to the Equipment on an AS IS, WHERE IS BASIS, free
and clear of all Lessor’s Liens, provided that
if the Fair Market Value of the Equipment (in-place and in-use) is greater than
the Stipulated Loss Value as of the Payment Date next preceding the declaration
of Default, then Lessee will pay Lessor as additional purchase price the amount
by which such Fair Market Value exceeds such Stipulated Loss Value; provided further, however, that Lessee’s right to obtain
title in the limited circumstances set forth in this clause (e) shall not
apply with respect to any Default described in any other clause or clauses of Section 12(a).

 

(f)            Notwithstanding
any other provision set forth in this Agreement or the Security Deposit Pledge
Agreement, if a Default shall have occurred solely with respect to (i) Section 12(a)(iv) if
such Default results from Lessee’s failure to provide audited financial
statements 

 

26

 

within the designated time period in accordance with Section 5(b);
(ii) Section 12(a)(xi)(2) or Section 12(a)(xi)(3); (iii) Section 12(a)(xii)(a) other
than as a result of a payment default; (iv) Section 12(a)(xiii) other
than as a result of a payment default thereunder (each of the foregoing, a “Limited Remedy Event of Default”), if and only if Lessor has
elected to exercise remedies under this Section 12(f) and so long as
no other Default (other than any other Limited Remedy Event of Default) has
occurred and is continuing, then the Lessee shall, upon demand by Lessor, pay
to Lessor an amount (the “Special SLV Amount”)
such that the sum of (A) the present value of all Basic Term Rent paid
through the date such Special SLV Amount is paid, plus (B) (1) the
present value of the Lessee’s cost for obtaining an Acceptable Letter of Credit
with a stated amount equal to the Required Amount to be delivered at the Basic
Term Commencement Date paid through the date such Special SLV Amount is paid,
plus (2) the Security Deposit as of the Basic Term Commencement date minus
the present value of the Security Deposit as of the day such Special SLV Amount
is paid, plus (C) the present value of the Special SLV Amount, will equal 89.95%
of Equipment Cost.  The actual Special
SLV Amount required to be paid by the Lessee to the Lessor pursuant to this Section 12(f) shall
be reduced by the amount of proceeds of the Security Deposit and/or proceeds of
any Acceptable Letter of Credit that have been applied by the Lessor against
the Special SLV Amount (as determined in accordance with the immediately
preceding sentence).  If and only if
Lessor has elected to exercise remedies under this Section 12(f) and
has demanded payment of the Special SLV Amount, the only amount payable by the
Lessee solely in respect of any Limited Remedy Event of Default shall be the
Special SLV Amount.  Notwithstanding the
foregoing provisions set forth in this Section 12(f), this Section 12(f) shall
not limit in any respect (1) Lessor’s rights and remedies in connection
with any Default other than a Limited Remedy Event of Default, including any
and all rights and remedies relating to Lessee’s failure to pay such Special
SLV Amount or to comply with any other provisions of this Agreement which
failure occurs either before or after the occurrence of such Limited Remedy
Event of Default and (2) any of Lessee’s obligations under Section 4
and Section 15; provided that, if and only if Lessor has elected to
exercise remedies under this Section 12(f), Lessor shall not be entitled
to recover any damages under Section 4 or Section 15 incurred by
Lessor solely in respect of a Limited Remedy Event of Default to the extent
that the aggregate amounts of any such recoveries plus any other amounts paid
by Lessee under this Section 12(f) exceeds the Special SLV
Amount.  All present value calculations
required to be made under this Section 12(f) shall use a discount
rate equal to the Discount Rate.  
Notwithstanding anything to the contrary set forth in this Section 12(f),
unless Lessor elects to exercise remedies under this Section 12(f), none
of the limitations set forth in this Section 12(f) on Lessor’s
rights, remedies and indemnities shall be effective.

 

(g)           Unless
previously terminated, upon payment of all amounts due hereunder and
satisfaction of all other obligations hereunder, this Agreement shall terminate
and Lessor shall pay any balance of the Security Deposit to Lessee promptly and
release any further interest in any Acceptable Letter of Credit.

 

13.          ASSIGNMENT;
SYNDICATION

 

(a)           LESSEE SHALL
NOT ASSIGN, MORTGAGE, SUBLET OR CREATE ANY TYPE OF LIEN OVER ANY EQUIPMENT OR
THE INTEREST OF LESSEE 

 

27

 

HEREUNDER (OTHER THAN PERMITTED LIENS) WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR.

 

(b)           Lessor may,
without the consent of Lessee, assign any or all of its right, title and
interest in this Agreement and the Schedule, provided,
that so long as no Default has occurred and is continuing, Lessor will not
assign all or any portion of its right, title and interest in this Agreement
and the Schedule to any entity that Lessee determines, based on written advice
of its auditors and as confirmed to Lessor in a certificate of a Responsible
Officer of Lessee delivered to Lessor within ten days after receipt of notice
by Lessor as to the identity of the proposed transferee, will result in Lessee
consolidating its financial reports with such entity.  Lessee agrees that it will pay all Rent and
other amounts payable under this Agreement and the Schedule to Lessor named
therein; provided, however,
if Lessee receives written notice of an assignment from Lessor, Lessee will pay
all Rent and other amounts payable under this Agreement and the Schedule to such
assignee or as instructed by Lessor. 
Lessee agrees reasonably to cooperate with Lessor in connection with any
such proposed assignment, including the execution and delivery of such other
documents, instruments, notices, opinions, certificates and acknowledgments, as
reasonably may be required by Lessor or such assignee, and the delivery of all
information concerning Lessee and each Guarantor that is reasonably necessary
for Lessor to complete the assignment; and Lessee further agrees to confirm in
writing receipt of a notice of assignment as reasonably may be requested by
assignee.  Lessee hereby waives and agrees not to assert against any such assignee
any defense, set-off, recoupment claim or counterclaim that Lessee has or may
at any time have against Lessor for any reason whatsoever, provided, however,
that nothing contained in this sentence shall be construed as a waiver by
Lessee of its right to assert against Lessor, in a separate action
against Lessor, any claims that Lessee has against Lessor.

 

(c)           Subject always
to the foregoing, this Agreement inures to the benefit of, and is binding upon,
the successors and assigns of the parties hereto.

 

(d)           Lessee
acknowledges that it has been advised that the interest of Lessor in this
Agreement and the other Documents may be conveyed to or participated to, in
whole or in part, and may be used as security for financing obtained from, one
or more third parties without the consent of Lessee pursuant to a syndication.

 

(e)           In connection
herewith the Lessor, any member of the Lessor or any Affiliate of such member
(a “Syndication Agent”) may initiate
discussions with potential participants regarding their participation in this
transaction.  Lessee and its management
will assist in all syndication efforts. 
Such assistance will include, but not be limited to: (i) prompt
assistance in the preparation of an information memorandum and verification of
the accuracy and completeness of the information contained therein; (ii) preparation
of other information, offering materials and projections by Lessee and its
advisors taking into account this transaction; (iii) providing any
Syndication Agent with all information reasonably deemed necessary by such
Syndication Agent to complete the syndication successfully; (iv) confirmation
as to accuracy and completeness of such information, offering materials and
projections; (v) participation of Lessee’s senior management in meetings
and conference calls with potential lenders and rating agencies, if applicable,
at such times and places as such Syndication Agent may reasonably request; and (vi) using
reasonable efforts to ensure that the 

 

28

 

syndication efforts benefit from all existing lending and investor
relationships.  Each Syndication Agent
reserves the right to provide to industry trade organizations information
necessary and customary for the inclusion of any member of Lessor as lead
arranger in league table measurements. 
The parties agree that all information provided to Lessor from Lessee,
each Guarantor, and any affiliate thereof and/or any third parties acting on
behalf of such parties may be used in the syndication process and a
confidentiality agreement in the form of Exhibit No. 4 shall be
executed by any potential participants.

 

14.          NET LEASE; NO
SET-OFF, ETC.

 

This Agreement is a net
lease.  Lessee’s obligation to pay Rent
and other amounts due hereunder shall be absolute and unconditional.  Lessee shall not be entitled to any abatement
or reductions of, or set-offs against, said Rent or other amounts, including,
without limitation, those arising or allegedly arising out of claims (present
or future, alleged or actual, and including claims arising out of strict tort
or negligence of Lessor) of Lessee against Lessor under this Agreement or
otherwise.  Except as provided in Section 8
hereof, with respect to any Equipment that shall have suffered a Casualty
Occurrence, this Agreement shall not terminate and the obligations of Lessee
shall not be affected by reason of any defect in or damage to, or loss of
possession, use or destruction of, any Equipment from whatsoever cause.  It is the intention of the parties that Rents
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.

 

15.          INDEMNIFICATION

 

Notwithstanding anything to
the contrary set forth in this Agreement, the provisions of this Section 15
shall be effective on and after the Basic Term Commencement Date.

 

(a)           Lessee hereby
agrees to defend, indemnify, save and keep harmless (on an After-Tax Basis),
Lessor, its Members, any Affiliate of Lessor or any Member, and all agents,
directors, officers, employees, successors and assigns of any of the foregoing
(each an “Indemnified Party”), from and against
any and all losses, damages, penalties and injuries suffered by such
Indemnified Party, and claims (including any Environmental Loss), actions and
suits against such Indemnified Party, including reasonable legal expenses, of
whatsoever kind and nature, in contract or tort, whether caused by the active
or passive negligence of Lessor (other than Lessor’s gross negligence or
willful misconduct) (herein a “Claim”) arising
out of or related to this Agreement or any other Operative Document, the
transaction contemplated hereby or the enforcement hereof or related to the
Facility, the Equipment or the Site, including, but not limited to, Lessor’s
strict liability in tort, arising out of the selection, importation,
manufacture, purchase, acceptance, operation or rejection of any or the
Equipment, the ownership of the Equipment during the Term, and the delivery,
lease, sublease, possession, maintenance, use, condition, return or operation
of the Equipment (including, without limitation, latent and other defects,
whether or not discoverable by Lessor or Lessee and any claim for patent,
trademark or copyright infringement or Environmental Loss); provided, that the indemnity set forth in this Section 15(a) shall
not be available to the extent (i) such Claim is attributable to the gross
negligence, willful misconduct or breach of this Agreement or any other
Operative Document by such Indemnified Party, (ii) such Claim arises

 

29

 

and relates to periods after the later of (x) the termination or
expiration of this Agreement or (y) the return of the Equipment in
accordance with the terms hereof or (iii) such claims are for Taxes.

 

(b)           Lessee
hereby represents, warrants and covenants that at no time during the term of
this Agreement will Lessee take or omit to take, nor will it permit any
sublessee or assignee to take or omit to take, any action (whether or not such
act or omission is otherwise permitted by Lessor or by this Agreement), which
will result in the disqualification of any Equipment for, or the recapture or
disallowance of, all or any portion of the Tax Benefits.

 

(c)           If
as a result of a breach of any representation, warranty or covenant of Lessee
contained in this Agreement or the Schedule (including part 2 of Section D
of Exhibit No. 1 but excluding part 1 of Section D of Exhibit No. 1)  (i) tax counsel of Lessor shall
reasonably determine that Lessor (or any Member) is not entitled to claim on
its U.S. Federal income tax return all or any portion of the Tax Benefits with
respect to any Equipment, or (ii) any Tax Benefit claimed on the U.S.
Federal income tax return of Lessor or any Member is disallowed or adjusted by
the Internal Revenue Service, or (iii) any Tax Benefit is recalculated or
recaptured (any determination, disallowance, adjustment, recalculation or
recapture being a “Loss”),
then Lessee shall pay to Lessor or the applicable Member, as an indemnity and
as additional Rent, an amount that shall, in the reasonable opinion of Lessor
and each Member,  cause each Member’s Net
Economic Return to equal the Net Economic Return that would have been realized
by such Member if such Loss had not occurred. 
Such amount shall be payable upon demand accompanied by a written statement
from the Lessor or a Member describing in reasonable detail such Loss and the
computation of such amount.  If an
adjustment has been made under Section 3 then the Effective Rate used in
the next preceding adjustment shall be substituted.  If Lessee is obligated to make a tax
indemnity payment to any Member pursuant to this Section 15(c), in lieu of
making such payment in a lump sum, Lessee may elect (with such Member’s
consent, it being understood that such Member may withhold its consent to such
election based upon, without limitation, the Lessee’s (or PGI’s) then credit
rating or such Member’s then lending policies) to pay the amount due in a
series of equal payments that will be sufficient to maintain the Net Economic
Return of each Member as if such Loss had not occurred, commencing on the next
Rent Payment Date and payable on each Rent Payment Date thereafter until a date
not later than the end of the Term; provided that if the Lease terminates prior
to its scheduled expiration, Lessee shall make a lump sum payment to Lessor or
each Member that, in the reasonable opinion of Lessor and such Member, is
sufficient to cause each Member’s Net Economic Return to equal the Net Economic
Return that would have been realized by such Member if such Loss had not
occurred.

 

(d)           All
references to Lessor in this Section 15 include Lessor, each Member, and
any assignees of Lessor or any Member, and (for the purposes of determining
whether a Loss has occurred and any amount due hereunder) the consolidated
taxpayer group of which any Member is a member. All of Lessor’s, each Member’s
and each Indemnified Party’s rights, privileges and indemnities contained in
this Section 15 shall survive the expiration or other termination of this
Agreement.  The rights, privileges and
indemnities contained in this Agreement are expressly made for the benefit of,
and shall be enforceable by Lessor, any Member, and the successors and assigns
of the Lessor and any Member, and each Indemnified Party.

 

30

 

(e)           Lessee
acknowledges and agrees that there is no employment relationship between Lessor
and the personnel, employees and subcontractors of the Lessee or its
Affiliates, and responsibility for such labor relationship belongs exclusively
to the Lessee or its Affiliate in accordance with the requirements of all
Applicable Laws.  Lessee or its Affiliate
is the “Employer” for all purposes of United States and Virginia law with
respect to all of the employees at Lessee’s service, and they are the only
person benefiting from the services rendered by such employees.

 

Lessee represents and
warrants that it or its Affiliates has the legal and economic capacity to
comply with its labor obligations, so that it or its Affiliates shall be solely
responsible for all obligations with respect to their respective employees.

 

Therefore, in the case of
any labor dispute between Lessee and its or its Affiliate’s personnel,
employees and subcontractors, in which, for any reason, Lessor is involved,
Lessee shall release and indemnify Lessor (on an After-Tax Basis) from any kind
of claim made against it by any of Lessee’s or its Affiliate’s personnel,
employees and subcontractors, and Lessee shall have the obligation to pay any
such amounts as indemnification (severance), and the Lessee hereby releases
Lessor from any responsibility thereof.

 

Lessee shall reimburse
Lessor for all costs and expenses caused by any labor dispute filed directly or
indirectly against Lessee or Lessor or with respect to the Equipment unless
such dispute arises during and relates solely to the period following the later
of (i) the termination or expiration of this Agreement or (ii) the
return of the Equipment in accordance with the terms hereof.

 

(f)            Lessor and each
other Indemnified Party will give Lessee prompt written notice of any Claim or
claim for which it is entitled indemnity under this Section 15 or any
other provision of this Agreement. 
Lessee will be entitled to control the defense and settlement of each
such Claim or claim, including the selection of legal counsel reasonably
acceptable to Lessor, provided that
Lessee shall have no right to defend or settle any Claim or claim if (1) a
Default shall have occurred and be continuing or (2) such claim would
entail significant risk to any Indemnified Party of any criminal liability; provided further, that no right to compromise or settle such
Claim or claim shall exist unless the Lessee agrees in writing to pay the
amount of such settlement or compromise. 
Each Indemnified Party will give Lessee and its legal counsel reasonable
assistance in connection with any such defense or settlement, and Lessee will
reimburse the foregoing Persons for their actual out-of-pocket expenses
incurred in connection with providing that assistance. Each Indemnified Party
may participate in such defense and settlement at its own expense using legal
counsel it selects, provided that
in the event Lessee fails to defend or settle any Claim or claim, Lessee shall
pay all costs and expenses (including, without limitation, reasonable attorneys’
fees and expenses) incurred by such Indemnified Party in connection with such
action, suit or proceeding; provided further,  that if in the written opinion of counsel to such
Indemnified Party an actual or potential material conflict exists where it is
advisable for such Indemnified Party to be represented by separate counsel, the
reasonable fees and expenses of such separate counsel shall be paid by the
Lessee.  Notwithstanding the foregoing,
this Section 15(f) shall not apply to any claim for Taxes, or any
amount payable pursuant to Section 4 or Section 15(c) hereof.

 

31

 

16.           DISCLAIMER

 

LESSEE ACKNOWLEDGES THAT IT HAS
SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR
EMPLOYEES, AND, UPON LESSEE’S EXECUTION AND DELIVERY OF THE CERTIFICATE OF
ACCEPTANCE, IT ACKNOWLEDGES AND ACCEPTS THE PHYSICAL AND OPERATING STATE
OF THE EQUIPMENT AS SATISFACTORY.  LESSOR
DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH
RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR
TITLE.  All such risks, as between
Lessor and Lessee, are to be borne by Lessee. 
Without limiting the foregoing, Lessor shall have no responsibility or
liability to Lessee or any other Person with respect to any of the following: (i) any
liability, loss or damage caused or alleged to be caused directly or indirectly
by any Equipment, any inadequacy thereof, any deficiency or defect (latent or
otherwise) therein, or any other circumstance in connection therewith; (ii) the
use, operation or performance of the Equipment or any risks relating thereto; (iii) any
interruption of service, loss of business or anticipated profits or
consequential damages, including damages and lost as rendered by any law or
court with jurisdiction in the United States of America or any other similar
concept under Applicable Law; or (iv) the delivery, operation, servicing,
maintenance, repair, improvement or replacement of any Equipment.  If, and so long as, no default exists under
this Agreement, Lessee shall be, and hereby is, authorized during the Term of
this Agreement to assert and enforce, at Lessee’s sole cost and expense, from
time to time, in the name of and for the account of Lessor and/or Lessee, as
their interests may appear, whatever claims and rights Lessor may have against
any Vendor of the Equipment.  Lessee
hereby acknowledges that as between Lessor and Lessee, Lessor is not advising
Lessee of any accounting, tax, legal or other economic implications of this
Agreement or the other Operative Documents, and Lessee represents and warrants
to Lessor that it is not relying on Lessor, any Member or any other Person with
respect to the legal, tax, accounting and other economic considerations in
connection with this Agreement or with the other Operative Documents, other
than Lessee’s own accountants, counsel and other advisors.  Lessee has such knowledge and experience in
financial, accounting, tax and business matters that Lessee is capable of
evaluating the merits and risks of all aspects this Agreement and the other
Operative Documents.

 

17.           REPRESENTATIONS, WARRANTIES AND
COVENANTS

 

(a)           Lessee
hereby represents and warrants to Lessor that on the date hereof and on the
date of execution of the Schedule:

 

(i)            Lessee
is a Delaware corporation duly incorporated and validly existing in accordance
with the laws of the State of Delaware and the Lessee’s organizational
identification number is 2460209. Lessee’s EIN is 57-1013629.

 

32

 

(ii)           The
Documents to which Lessee is a party have been duly authorized, executed and
delivered by Lessee and, assuming the due authorization, execution and delivery
of the Operative Documents by each party thereto other than Lessee, constitute
valid, legal and binding obligations, enforceable against Lessee in accordance
with their respective terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy,
insolvency and other laws affecting creditors’ rights generally.

 

(iii)          No
approval, consent, giving notice to or withholding of objections is required
from any Governmental Authority with respect to the entry into or performance
by Lessee of the Documents except such as have already been obtained or those,
which if not obtained, would not have a Material Adverse Effect, individually
or in the aggregate.

 

(iv)          Lessee
has adequate corporate power and authority to enter into, and perform under,
the Documents to which it is a party. 
The entry into and performance by Lessee of the Documents will not: (i) violate
any judgment, order, law or regulation applicable to it or any provision of its
charter or by-laws; or (ii) result in any breach of, constitute a default
under or result in the creation of any Lien (other than Permitted Liens) upon
the Facility or the Equipment pursuant to any indenture, mortgage, deed of
trust, bank loan or credit agreement or other material instrument (other than
this Agreement) to which it is a party.

 

(v)           There
are no suits or proceedings (including arbitration proceedings) pending or to
Lessee’s knowledge threatened in court or before any commission, board or other
administrative agency against or affecting Lessee or any Guarantor which are
reasonably likely to result in a Material Adverse Effect.

 

(vi)          The
Lessee is located in Delaware for the purposes of Section 9-307 of the UCC
and covenants and agrees that it will not change such status without 30 days
prior written notice to Lessor.  Lessee
also covenants and agrees that it shall not, for purposes of Section 9-503(a) of
the UCC, change its name as reflected on the public record in the state of its
organization without 30 days prior written notice to Lessor.

 

(vii)         Lessor
is and will remain the owner of the Equipment free and clear of all Liens other
than Permitted Liens.

 

(viii)        Each
financial statement required to be delivered by Lessee to Lessor has been
prepared in accordance with GAAP and fairly presents, in all material respects,
the financial condition of PGI and its consolidated Subsidiaries, and since December 31,
2009, the date of the most recent annual audited financial statement, there has
been no material adverse change in the financial condition of PGI and its
consolidated Subsidiaries.

 

(ix)           Each
representation and warranty of PGI made in the Credit Agreement is true and
correct in all material respects when made.

 

(x)            The
Site identified on the Schedule is owned or leased by the entity identified on
the Schedule free and clear of any Liens for indebtedness or leases subject 

 

33

 

to the Permitted Liens and the liens of mortgagees and interest of the
landlords identified on the Schedule; provided, that
Lessee shall obtain from such mortgagees or landlords a subordination, waiver
or release within 10 days after receiving a written request from Lessor.

 

(xi)           Upon
the Construction Completion Date (as defined in the CAA), Lessor shall have
good and marketable title to the Equipment free and clear of all Liens
whatsoever, other than Permitted Liens.

 

(xii)          Following
the Basic Term Commencement Date and continuing thereafter, the Equipment will
be used by Lessee in the active conduct of its business, pursuant to the terms
of this Agreement.

 

(xiii)         Since
December 31, 2009, there has not been any material adverse change in the
capital structure or liquidity levels of PGI and its consolidated Subsidiaries
taken as a whole except as set forth in public filings or otherwise publicly
disclosed.

 

(xiv)        Except
as previously disclosed to Lessor prior to the Basic Term Commencement Date: (i) neither
Lessee nor any Guarantor is or has in the past been in violation of any
Environmental Law or Environmental Permit with respect to the Equipment or the
Site, which violation could reasonably be expected to result in a material
liability to any Guarantor or Lessee or could otherwise result in a Material
Adverse Effect; (ii) no Guarantor nor Lessee, nor to any Guarantor’s or
Lessee’s knowledge any third party, has used, Released, generated, handled,
manufactured, produced or stored at, in, on, under, or about the Site, or
transported thereto or therefrom, any Hazardous Substances that could be expected
to subject any Guarantor or Lessee to material liability under any
Environmental Law or Environmental Permit; (iii) there are no Hazardous
Substances generated, used, stored or present on the Site other than is
necessary for the business as presently conducted and in material compliance
with applicable Environmental Law or Environmental Permit; (iv) to the
best of Lessee’s knowledge, there is or has been no condition, circumstance,
action, omission, activity or event with respect to the Site that could form
the basis of any material violation of any Environmental Law, Environmental
Permit or any material liability to any Guarantor and Lessee under
Environmental Law or Environmental Permit; and (v) there is no pending or
unresolved proceeding, investigation or inquiry of which Lessee has been
notified by any Governmental Authority (including without limitation, the EPA
or any non-government third party) with respect to the presence or Release of
Hazardous Substances at, in, on or from the Site which presence or Release
could reasonably be expected to result in any material violation of or
liability to Lessee or any Guarantor under Environmental Law or Environmental
Permit.

 

(xv)         The
Equipment has been “placed in service” on or prior to the Basic Term Commencement
Date.

 

(xvi)        Lessee
and each Guarantor is (i) in compliance in all material respects with all
applicable laws and regulations relating to (x) the regulations
promulgated by the Office of Foreign Assets Control (“OFAC”), U.S. Department
of the Treasury relating to 

 

34

 

dealings with certain persons listed on the publicly available
Specially Designated Nationals and Blocked Persons List maintained by OFAC, (y) Section 1(b),
(c) or (d) of Executive Order No. 13224 (September 23,
2001) and (z) the prevention and detection of money laundering violations
under the US Bank Secrecy Act (Financial Recordkeeping and Reporting of
Currency and Foreign Transactions Act of 1970, 31 U.S.C. 1051 et. seq.) (“BSA”),
under all regulations promulgated under the BSA and under all published U.S.
government guidance, and (ii) in compliance with all other Applicable Laws
the non-compliance with which, with respect to this clause (ii) only,
could reasonably be expected to result in a Material Adverse Effect.

 

(xvii)       The
Virginia Incentives Addendum, Project Gossimer, dated March 2, 2010 (the “Incentive Plan”) prepared by the Virginia Economic
Development Partnership, is in full force and effect and has not been amended
by any party thereto.  No default or
breach by any party of its obligations under the Incentive Plan has occurred or
is continuing.

 

(xviii)      The
rights and interests of Lessor in and to the Equipment and the Facility are and
will be sufficient to enable Lessor, its transferee or assignee or an operator
acting on behalf of Lessor or its transferee or assignee to obtain access to
and operate the Equipment in the Facility, upon such Person’s taking possession
of the Equipment, in commercial operation in substantially the same manner in
which it has been operated by Lessee (excluding access to or use of Proprietary
Information and Optional Modifications that are Severable Modifications).  There is no reason to expect that any licenses,
permits, authorizations or approvals of any Governmental Authority or supply,
disposal or other contracts that are required at the time of and after such
taking of possession of the Equipment to enable Lessor or its transferee or
assignee or an operator to operate the Equipment in the Facility in the
ordinary course and in compliance with substantially the same legal
requirements as are applicable to Lessee cannot be obtained, renewed or
replaced, as the case may be, by Lessor, such transferee or assignee or an
operator, as the case may be, upon such Person’s taking possession of the
Equipment. There is no reason to expect that licenses and permits which are
presently issued by Governmental Authorities with respect to the Equipment
could not be obtained under the same or similar conditions with respect to the
Equipment by Lessor, such transferee, assignee or operator to the extent
applicable thereto.  Lessor has and will
have sufficient rights to all present and future intellectual property
(including all Included IP, but excluding, in all cases, Proprietary
Information) that is necessary or desirable for operation of the Equipment.

 

(xix)         Lessee
and each Guarantor is in compliance in all material respects with (a) the
Trading with the Enemy Act, and each of the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as
amended) and any other enabling legislation or executive order relating
thereto, and (b) the Patriot Act.

 

(b)           Lessee
hereby covenants and agrees with Lessor that:

 

(i)            The
Equipment will at all times be used for commercial or business purposes,
pursuant to the terms of this Agreement.

 

35

 

(ii)           Lessee
shall maintain a system of identification number tagging on the Equipment and any
significant Part thereof by affixing in a prominent position on the
Equipment (and components thereof) plates, tags or other identifying labels
stating (i) that the Equipment is property of Lessor and (ii) the
manufacturer, serial numbers and type and model thereof as set forth in Annex A
to the Schedule.

 

(iii)          Lessee,
at its sole cost and expense, at all times hereinafter shall maintain and
implement at the Site a written environmental, health and safety (“EH&S”) program (“EH&S Program”)
to ensure that Lessee’s operations at the Site are conducted in compliance with
all applicable Environmental Laws and Environmental Permits.  The EH&S Program shall involve senior
management, shall include a formal written corporate environmental policy, and
shall be directed by the person responsible for Lessee’s EH&S compliance.

 

(iv)          At
Lessor’s request (not more frequently than once in any 12-month period, unless
a Default shall have occurred and be continuing), Lessee shall provide Lessor
with a briefing regarding Lessee’s compliance with its EH&S Program and
Lessee shall take such action reasonably requested by Lessor to address any
deficiencies noted by Lessor under Applicable Law.

 

(v)           Lessee
agrees that it shall not (i) establish a new “location” for the purposes
of Section 9-307 of the UCC, (ii) change its chief executive office
or its jurisdiction of organization, (iii) change its name or (iv) do
business under any name other than “Chicopee, Inc.” until it shall have
given to the Lessor not less than 30 days’ prior written notice of its
intention so to do, clearly describing such new location, jurisdiction and/or
name and providing such other information in connection therewith as the Lessor
may reasonably request.

 

(vi)          Lessee
has fee simple title to the Site and shall cause fee simple title to the future
expansion parcel referenced in the Site Lease to be granted to it no later than
September 1, 2010.

 

(vii)         Lessee
shall provide, at its sole cost and expense, prior to entering into a mortgage
with respect to the Site, a SNDA, duly executed (and in recordable form) by
each mortgagee, with respect to the Site. 
Lessee shall maintain each SNDA at all times during the Term for the
estimated useful life of the Equipment. 
Lessee shall deliver to Lessor 30 days’ prior written notice of any
assignment, transfer or sale by Site Lessor of the Site and Lessee agrees that
any assignment of the Site shall be made subject to the terms of the Site
Lease.

 

(viii)        Lessee
shall maintain at all times from the date hereof through the Basic Term, an
Acceptable Letter of Credit, for the benefit of Lessor, in order to secure
Lessee’s obligations under the Documents. 
In the event that any Acceptable Letter of Credit has an expiration or
termination date prior to the Basic Term, Lessee shall replace such Acceptable
Letter of Credit with an Acceptable Letter of Credit in accordance with the
requirements of this Agreement no later than thirty (30) days prior to such
expiration or termination date.  If (a) a
Downgrade Event has occurred or (b) Lessee shall make a 

 

36

 

good faith determination that a significant possibility exists that a
Downgrade Event will occur, Lessee, within 30 days of the earliest of (i) having
knowledge of such fact, (ii) reaching such good faith determination or (iii) receiving
notice from Lessor of such fact, shall provide a replacement Acceptable Letter
of Credit.  Lessee shall not at any time
permit any Liens (other than Lessor’s Liens) to exist on Lessor’s interest in
the Acceptable Letter of Credit or in its rights to enforce payment thereon.

 

(ix)           Lessee
shall deliver the reports as set forth in Sections 5(b) and 5(e).

 

(x)            Lessee
shall promptly deliver to Lessor written notice of any default under any of the
Operative Documents, the Documents or any material contract pertaining to the
Equipment.

 

(xi)           At
all times during the Term, PGI shall control, directly or indirectly, 100% of
the equity interests in Lessee or any successor entity.

 

(xii)          Lessee
shall comply or cause PGI to comply with the financial covenants set forth in
Appendix II of this Agreement.

 

(xiii)         Lessee
shall, and shall cause each Guarantor to, remain (i) in compliance in all
material respects with all applicable laws and regulations relating to (x) the
regulations promulgated by OFAC relating to dealings with certain persons
listed on the publicly available Specially Designated Nationals and Blocked
Persons List maintained by OFAC, (y) Section 1(b), (c) or (d) of
Executive Order No. 13224 (September 23, 2001) and (z) the
prevention and detection of money laundering violations under the BSA, under
all regulations promulgated under the BSA and under all published U.S.
government guidance, and (ii) in compliance with all other Applicable Laws
the non-compliance with which, with respect to this clause (ii) only,
could reasonably be expected to result in a Material Adverse Effect.

 

(c)           Lessor
hereby represents and warrants to Lessee that on the date hereof and on the
date of execution of the Schedule:

 

(i)            Lessor
is a Delaware limited liability company duly formed and validly existing in
accordance with the laws of the State of Delaware and the Lessor’s
organizational identification number is 4821012. Lessor’s EIN is 27-2569352.

 

(ii)           The
Documents to which Lessor is a party have been duly authorized, executed and
delivered by Lessor and, assuming the due authorization, execution and delivery
of the Operative Documents by each party thereto other than Lessor, constitute
valid, legal and binding obligations, enforceable against Lessor in accordance
with their respective terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy,
insolvency and other laws affecting creditors’ rights generally.

 

(iii)          Lessor
has adequate limited liability company power and authority to enter into, and
perform under, the Documents to which it is a party.  The entry into and 

 

37

 

performance by Lessor of the Documents will not violate its certificate
of formation or limited liability company agreement.

 

18.           INTENT; TITLE

 

(a)           It
is the express intent of the parties that this Agreement constitute a true
lease and not a sale of the Equipment. 
It is hereby acknowledged by the parties hereto that Lessor is the legal
owner of all of the Equipment.  Title to
the Equipment shall at all times remain in Lessor, and Lessee shall acquire no
ownership, title, property, right, equity, or interest in the Equipment other
than its leasehold interest solely as Lessee subject to all the terms and
conditions hereof.  The parties agree
that the lease is a “Finance Lease” as defined in Uniform Commercial Code Article 2A
— Leases (“Article 2A”).  Lessee
acknowledges: (a) that Lessee has selected the “Supplier” (as defined in Article 2A)
and directed Lessor to purchase the Equipment from the Vendors; (b) that
Lessee has been informed in writing in this Agreement, before signing this
Agreement, that Lessee is entitled under Article 2A to the promises and
warranties, including those of any third party, provided to Lessor by the
Vendors in connection with or as part of the contract by which Lessor acquired
the Equipment, and that Lessee may communicate with the Vendor and receive an
accurate and complete statement of those promises and warranties, including any
disclaimers and limitations of them or of remedies.  To the extent permitted by Applicable Law,
Lessee hereby waives any and all rights and remedies conferred upon a lessee in
Section 508(5) of Article 2A; provided, however that such waiver
shall not preclude Lessee from asserting any claim of Lessee against Lessor in
a separate cause of action; and provided further that such waiver shall not
affect Lessor’s obligations of good faith, diligence, reasonableness and care.

 

(b)           Notwithstanding
the express intent of the parties, should a court of competent jurisdiction
determine that this Agreement is not a true lease, but rather one intended as
security, then solely in that event and for the expressly limited purposes
thereof, Lessee shall be deemed to have hereby granted Lessor a security
interest in the Equipment, and all accessions thereto, substitutions and
replacements therefor, and proceeds (including insurance proceeds) thereof (but
without power of sale) to secure the prompt payment and performance as and when
due of all obligations and indebtedness of Lessee (or any affiliate of Lessee)
to Lessor, now existing or hereafter created. 
For the purposes of this paragraph, this Agreement, the Schedule, or a
photocopy of either thereof may be filed as a financing statement under the
Uniform Commercial Code.

 

19.           PURCHASE OPTIONS

 

Provided no Default shall
have occurred and be continuing, Lessee shall have the option to purchase all
(but not less than all) of the Equipment leased under all Schedules executed
hereunder upon the following terms and conditions.

 

(a)           Upon
not more than 365 days’ and not less than 300 days’ irrevocable prior written
notice by Lessee to Lessor, Lessee may elect to purchase, at expiration of the
Basic Term, all (but not less than all) of the Equipment on an AS IS, WHERE IS
BASIS, for cash equal to the then Fair Market Value of the Equipment (in-place
and in-use), plus (in any event) all applicable taxes.  If Lessee has elected to exercise the
purchase option set forth in this 

 

38

 

Section 19(a), on the last day of the Basic Term, Lessee shall pay
to Lessor in cash the full purchase price (plus all applicable taxes), together
with any Rent or other sums then due hereunder on such date and Lessor shall
convey to Lessee title to the Equipment on an AS IS, WHERE IS BASIS, free and
clear of all Lessor’s Liens.

 

(b)           Subject
to Section 12(e), if a Default shall have occurred and be continuing at
the time of the notice in the first sentence of paragraph (a) above, then
on the date of expiration of the Term, Lessee shall return the Equipment in
full compliance with Section 11 of this Agreement on or prior to the date
of expiration of the Term.  If Lessee
shall have given the notice provided in the first sentence of paragraph (a) above,
and a Default occurs and is continuing at the expiration of this Agreement,
Lessor may elect either to enforce the option exercised by Lessee or demand
return of the Equipment to Lessor in full compliance with Section 11 of
this Agreement.

 

(c)           The
Lessee may elect, upon not more than 180 days’ and not less than 90 days’
irrevocable written notice to Lessor prior to the First EBO Date, to purchase
on the First EBO Date all (but not less than all) of the Equipment on an AS IS,
WHERE IS BASIS for a purchase price equal to the First EBO Price plus all
applicable taxes.  If Lessee has elected
to exercise the purchase option set forth in this Section 19(c), on the
First EBO Date, Lessee shall pay to Lessor in cash the First EBO Price (plus
all applicable taxes) together with any Rent or other sums due hereunder on
such date (excluding any Basic Term Rent scheduled to be paid on such First EBO
Date) and Lessor shall convey to Lessee title to the Equipment on an AS IS,
WHERE IS BASIS, free and clear of all Lessor’s Liens.

 

(d)           The
Lessee may elect, upon not more than 180 days’ and not less than 90 days’
irrevocable written notice to Lessor prior to the Second EBO Date, to purchase
on the Second EBO Date all (but not less than all) of the Equipment on an AS
IS, WHERE IS BASIS for a purchase price equal to the Second EBO Price plus all
applicable taxes.  If Lessee has elected
to exercise the purchase option set forth in this Section 19(d), on the
Second EBO Date, Lessee shall pay to Lessor in cash the Second EBO Price (plus
all applicable taxes) together with any Rent or other sums due hereunder on
such date (excluding any Basic Term Rent scheduled to be paid on such Second EBO
Date) and Lessor shall convey to Lessee title to the Equipment on an AS IS,
WHERE IS BASIS, free and clear of all Lessor’s Liens.

 

20.           MISCELLANEOUS

 

(a)           Any
cancellation or termination by Lessor, pursuant to the provisions of this
Agreement, the Schedule, supplement or amendment hereto, or the lease of the
Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder.

 

(b)           Lessor’s
failure at any time to require strict performance by Lessee of any of the
provisions hereof shall not waive or diminish Lessor’s right thereafter to
demand strict compliance therewith.

 

(c)           Lessee
agrees, upon receiving Lessor’s written request, to execute any instrument
necessary for filing, recording or perfecting the interest of Lessor, and to
execute and deliver to Lessor such further documents, instruments and
assurances and to take such

 

39

 

further action as Lessor from time to time reasonably may request in
order to carry out the intent and purpose of the transaction contemplated
hereunder.

 

(d)           All
notices, consents, directions, approvals, instructions, requests, demands, and
other communications required or permitted to be given hereunder shall be in
writing, personally delivered, delivered by overnight courier service, sent by
facsimile transmission (with confirmation of receipt), or sent by certified
mail, return receipt requested, addressed to the other party at each of its
respective addresses stated below or at such other address as such party shall
from time to time designate in writing to the other party; and shall be
effective from the date of receipt.

 

If
to the Lessee:                                                           Chicopee, Inc.

9335
Harris Corners Parkway

Suite 300

Charlotte
NC 28269

Attention:
Chief Financial Officer

Telephone:  (704) 697-5186

Facsimile:  (704)
697-5121

 

With
a copy to:                                                             Polymer Group, Inc.

9335
Harris Corners Parkway

Suite 300

Charlotte
NC 28269

Attention:
General Counsel

Telephone:  (704) 697-5179

Facsimile:  (704)
697-5120

 

If
to the Lessor:                                                            Gossamer Holdings, LLC

201
Merritt Seven

Norwalk,
CT  06851 USA

Attention: Annie Schorr, Portfolio Manager

Telephone: 
(203) 229-1421

Facsimile:
(513) 770-5460

 

With
copies to:                                                              General Electric Credit Corporation of Tennessee

201 Merritt Seven, 2nd Floor

Norwalk, CT 
06851 USA

Attention: Annie Schorr

Telephone: 
(203) 229-1421

Facsimile:
 (513)
770-5460

 

ING Spunmelt Holdings
LLC

200 Galleria Parkway, Ste. 950

Atlanta, Georgia  30339 USA

Attention: Jerry L. McDonald, Director

Telephone: 
(770) 984-4514

Facsimile:
 (770)
951-1005

 

40

 

(e)           This
Agreement, the Exhibits and the Schedule and Annexes thereto constitute the entire
agreement of the parties with respect to the subject matter hereof.  NO VARIATION OR MODIFICATION OF THIS
AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID
UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY
HERETO.

 

(f)            The
representations, warranties and covenants of Lessee herein shall be deemed to
survive the closing hereunder.  The
obligations of Lessee under Sections 4, 11 and 15 hereof which accrue during
the Term of this Agreement and obligations which by their express terms survive
the termination of this Agreement, shall survive the termination of this
Agreement.

 

(g)           Each
Member is an express third party beneficiary of the agreements of the Lessee
and Lessor hereunder and shall be entitled to rely on such agreements as if it
were named a party hereto.

 

(h)           In
case of a failure of Lessee to comply with any provision of this Agreement,
Lessor shall have the right, but shall not be obligated, to effect such
compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance
(together with interest thereon at the Overdue Rate) shall constitute
Supplemental Rent due to Lessor within 5 days after the date Lessor sends
written notice to Lessee requesting payment. 
Lessor’s effecting such compliance shall not be a waiver of Lessee’s
default.

 

(i)            Any
Rent or other amount not paid to Lessor when due hereunder shall bear interest,
both before and after any judgment or termination hereof, at Overdue Rate.

 

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

 

(k)           So
long as no Default shall have occurred and be continuing hereunder, and
conditioned upon Lessee performing all of the covenants and conditions hereof,
as to claims of Lessor or Persons claiming under Lessor, Lessee shall peaceably
and quietly hold, possess and use the Equipment during the Term of this
Agreement subject to the terms and conditions hereof.

 

(l)            Lessee
agrees to pay on demand all reasonable costs and expenses incurred by Lessor,
the Members and any assignee from and after the Basic Term Commencement Date
during the term of this Agreement in connection with (i) the formation,
administration and operation of the Lessor and (ii) the preparation,
execution, delivery, filing, recording, and administration of any of the
Documents, including (without limitation) the reasonable fees and expenses of
counsel for Lessor, any Member and any assignee thereof, accounting, tax
administration, due diligence, appraisals, lien searches, UCC and/or SNDA
filing fees, and 

 

41

 

field audits; and all costs and expenses incurred by Lessor or any Member,
if any, in connection with the enforcement of any of the Documents.

 

(m)          Each
party hereto agrees to keep confidential, the terms and provisions of the
Operative Documents and the transactions contemplated hereby and thereby
(collectively, the “Transactions”);
provided that either party may disclose
the terms and provisions of the Documents and transactions contemplated hereby
and thereby (i) to its or its controlling entities’ employees, officers,
directors and agents who agree to hold the same confidential in accordance with
the terms of this Section 20(m), (ii) to its or its controlling
entities’ consultants, auditors, attorneys and accountants who agree to hold
the same confidential substantially in accordance with the terms of this Section 20(m),
(iii) if it is reasonably believed by it to be compelled by any court
decree, subpoena or other legal or administrative order or process after giving
the other party advance written notice of the proposed disclosure to the extent
reasonably possible, (iv) on the advice of its counsel, otherwise required
by law or necessary or appropriate in connection with any litigation or other
proceeding to which it or its affiliates is a party after giving the other
party advance written notice of the proposed disclosure to the extent
reasonably possible, or (v) which becomes available to such party from a
third party on a non-confidential basis. 
Section 22 below contains additional provisions regarding
confidentiality and to the extent there is a conflict between Section 22
and this Section 20(m), Section 22 shall control.

 

(n)           Lessee
shall not, and shall not permit any Guarantor or any of their respective
Affiliates to, issue any press release or other public disclosure using the
name, logo or otherwise referring to any Member or any Affiliate of such
Member, the Operative Documents or any transaction contemplated therein to
which Owner or any Member is party without the prior consent of each Member
except to the extent required to do so under Applicable Law and then, only
after consulting with each Member.

 

(o)           Lessee
consents to the publication by Lessor or any Member of Lessor of advertising
material relating to the transactions contemplated by this Agreement using
Lessee’s or any Guarantor’s name, product photographs, logo or trademark.  Lessor or such Member shall provide a draft
of any advertising material to Lessee for review and comment prior to the
publication thereof.  Neither Lessor nor
any Member of Lessor will obtain any license of or right to use such names, product
photographs, logos or trademarks beyond that expressly authorized in this Section 20(o),
which is non-exclusive.

 

(p)           The
parties hereto acknowledge and agree that this Agreement and the Schedule shall
constitute a single lease instrument.

 

(q)           All
consultants, contractors, engineers, employees, independent contractors and
other Persons who seek to enter the Site, the Facility or any other property of
Lessee, or who desire to observe or inspect the Equipment or any of Lessee’s
records, on behalf of or at the request of Lessor or any Member pursuant to
this Agreement must comply with Lessee’s reasonable and customary safety,
security and confidentiality policies and procedures.

 

(r)            Each
of Lessor and each Member that is subject to the Patriot Act hereby notifies
Lessee and Guarantors that pursuant to the requirements of the Patriot Act, it
is 

 

42

 

required to obtain, verify and record information that identifies
Lessee and each Guarantor, which information includes the name and address of
Lessee and each Guarantor and other information that will allow Lessor and each
Member to identify Lessee and each Guarantor in accordance with the Patriot
Act.

 

21.           CHOICE OF LAW; JURISDICTION

 

THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF
SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.  The parties agree that any
action or proceeding arising out of or relating to this Agreement may be
commenced in the United States District Court for the Southern District of New
York and the parties irrevocably submit to the jurisdiction of such court and
agree not to assert, by way of motion, as a defense or otherwise, in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient form, that the venue of such suit, action or proceeding is
improper, or that this Agreement or the subject matter hereof or the
transaction contemplated hereby may not be enforced in or by such court.  Each of the parties hereto agree 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; provided that this sentence will
not be construed as a waiver of any right to file an appeal or to seek a stay.

 

22.           CONFIDENTIAL INFORMATION.

 

(a)           Lessor shall keep
confidential and shall not disclose to any Person, except as expressly
permitted by this Section 22, all Confidential Information.  Lessor shall only be entitled to disclose
Confidential Information to (i) its, its Members’ and its Members’
Affiliates’ respective employees, officers, directors, agents, consultants,
advisors, auditors, attorneys and accountants (to the extent such disclosure
reasonably relates to the Transactions) who agree to hold the Confidential
Information in accordance with the terms of this Section 22, (ii) any
prospective purchaser of the Equipment or of any Member’s interest in Lessor
(if such Person first executes and delivers to Lessor and Lessee a
confidentiality agreement at least as restrictive as this Section 22), provided that under no circumstances shall Lessor disclose
any Proprietary Information to any such prospective purchaser, (iii) to
the extent requested by any Governmental Authority, (iv) to the extent
required by Applicable Laws or by any subpoena or similar legal process, (v) in
connection with the exercise of remedies under this Agreement or under any
other Operative Document or any suit, action or proceeding relating to this
Agreement or any other Operative Document or the enforcement of rights
hereunder or thereunder.

 

(b)           Lessor shall only
use the Confidential Information as expressly permitted by this Section 22
and shall not use any Confidential Information on behalf of any other Person
except as expressly permitted by this Section 22.

 

43

 

(c)           Lessor shall have no
liability for any disclosure of any Confidential Information by any
consultants, contractors, engineers, employees, independent contractors and
other Persons who have executed a confidentiality agreement with Lessee or any
of its Affiliates.

 

(d)           Confidential
Information shall not include any information, document or record (a) that
is or becomes lawfully available to the general public without any breach of
this Agreement or any violation of any Applicable Law, (b) that was
previously lawfully in the possession of Lessor without any obligation to
Lessee, any Guarantor or any other Person to hold it in confidence or to
restrict the use of it, or (c) that Lessor receives from a third party who
is free to disclose that information to Lessor without breaching any agreement
or violating any Applicable Law.

 

(e)           If Lessor is
required or intends to disclose Confidential Information under Section 22(a)(iii),
22(a)(iv) or 22(a)(v), Lessor shall give Lessee prompt and prior written
notice of the proposed disclosure (to the extent reasonably possible and not
otherwise prohibited).  Additionally,
Lessee shall be entitled to take those actions it deems necessary or
appropriate, including seeking to prevent the disclosure of its Confidential
Information.  Lessor will provide
reasonable assistance to Lessee in connection with those actions, and Lessee
will reimburse Lessor for Lessor’s and any Member’s actual out-of-pocket
expenses incurred in providing that assistance. 
Lessor shall disclose Confidential Information only in compliance with
this Section 22.

 

(f)            Notwithstanding the
foregoing provisions of this Section 22, Lessor may disclose Confidential
Information (but not Proprietary Information), as necessary, to a potential
investor in a syndication of this Lease as long as that potential investor
first executes and delivers to Lessor a confidentiality agreement in the form
of Exhibit No. 4.

 

(g)           The provisions
contained in this Section 22 and any similar provisions in any separate
confidentiality agreement executed by any Member or any employee of Lessor or
any Member shall survive for a period of 18 months following the termination of
this Agreement (whether at the end of the Basic Term or at the time of any
earlier termination of this Agreement).

 

(h)           Notwithstanding the
foregoing, the obligations of confidentiality contained herein, as they relate
to the Transactions, shall not apply to the federal tax structure or federal
tax treatment of the Transactions, and each party hereto (and any employee,
representative, or agent of any party hereto) may disclose to any and all
persons, without limitation of any kind, the federal tax structure and federal
tax treatment of the Transactions.  The
preceding sentence is intended to cause each Transaction to be treated as not
having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under Section 6011
of the Internal Revenue Code of 1986, as amended, and shall be construed in a
manner consistent with such purpose.  In
addition, each party hereto acknowledges that it has no proprietary or
exclusive rights to the federal tax structure of the Transactions or any
federal tax matter or federal tax idea related to the Transactions.

 

44

 

(i)            Lessor will use
commercially reasonable efforts not to obtain Proprietary Information except as
permitted under this Agreement and necessary to carry out its obligations, or
to exercise its rights, under this Agreement, and Lessee will use commercially
reasonable efforts not to disclose Proprietary Information to Lessor or its
employees, contractors, consultants or agents except as necessary to carry out
its obligations or to exercise its rights under this Agreement.

 

23.           DEFINITIONS

 

Capitalized terms used but
not otherwise defined herein or in the Schedule shall have the meanings
assigned thereto in Appendix I attached hereto; and the general provisions and rules of
interpretation set forth in Appendix I shall apply to this Agreement.

 

[Signatures
on next page]

 

45

 

IN WITNESS WHEREOF, Lessee
and Lessor have caused this Equipment Lease Agreement to be executed by their
duly authorized representatives as of the date first above written.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
  GOSSAMER HOLDINGS, LLC

  	
   

  	
  CHICOPEE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:

  	
  GENERAL ELECTRIC CREDIT CORPORATION
  OF

  	
   

  	
  By:

  	
   

  
	
   

  	
  TENNESSEE, its member

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:

  	
  ING SPUNMELT HOLDINGS LLC,
  its member

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

APPENDIX
I

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

DEFINITIONS

 

See
attached.

 

 

Appendix I

 

Definitions

 

“Acceptable Letter of Credit” shall mean a valid and
enforceable irrevocable transferable letter of credit substantially in the form
of Exhibit A hereto and otherwise in form and substance acceptable to
Owner or Lessor, as applicable, that is: (1) issued by an Acceptable
Letter of Credit Bank, (2) having a stated expiration date of not earlier
than 364 days after the date of original issuance, (3) drawable in full if
not renewed or replaced with an Acceptable Letter of Credit 30 days before its
expiry, (4) payable and drawable at an office of such issuing bank in the
United States of America, (5) payable in U.S. dollars in immediately
available funds, (6) issued under arrangements not illegal for the parties
to enter into, (7) is governed by the Uniform Customs and Practice for
Documentary Credits (revision effective January 1, 1994), International
Chamber of Commerce Publication No. 500 or the International Standby
Practices (ISP98) International Chamber of Commerce Publication No. 590,
and, to the extent not inconsistent therewith, the laws of New York State, and (8) which
shall permit the beneficiary thereof to assign its interest without the consent
of such Acceptable Letter of Credit Bank.

 

“Acceptable Letter of Credit Bank” shall mean a bank (1) the
senior unsecured debt obligations (or long-term deposits) of which upon the
date of issuance of an Acceptable Letter of Credit is rated at least “A3” by
Moody’s and at least “A-” by S&P, with capital in excess of
U.S.$500,000,000.00 Dollars, (2) from whom receipt of a letter does not
violate Owner’s or Lessor’s then current policies including its credit and
lending country exposure limits, which country limits shall be deemed satisfied
if the bank is a United States bank, (3) as to whom there shall be no
material litigation or arbitration proceeding threatened or pending between
Lessor and such bank or Owner and such bank and (4) whom is otherwise reasonably
acceptable to Owner and Lessor acting in good faith.

 

“Acts of God” shall mean any inevitable, unpredictable, and
unreasonably severe event caused by natural forces without any human
interference, and over which any party to any Operative Document has no
control, such as flood, earthquake, storm, hurricane or other natural disaster.

 

“Additional Construction Document” shall mean any material
contract or undertaking to which the Construction Agent or the Owner is a party
relating to the development, installation, construction, completion, operation,
administration or maintenance of the Equipment entered into after the
Construction Closing Date but prior to the Basic Term Commencement Date.

 

“Adjacent Property” shall mean those parcels of land owned by
Site Lessor located adjacent to the Site as legally described on Schedule B to the Site Lease.

 

“Advance” shall have the meaning set forth in Section 3.1(a) of the Construction Agency
Agreement, in each case, made in accordance with the applicable Operative
Document.

 

“Adverse Environmental Condition”  shall
refer to (i) the Release of or exposure to any Hazardous Substance at, on,
under or within the Site, the Facility or the Equipment in violation of or
could result in liability under any Environmental Law, (ii) the use,
generation, handling, transportation, storage, treatment or disposal of
Hazardous Substances in connection with the operation of the Facility and
Equipment in violation of or could result in liability under any 

 

 

Environmental
Law, or (iii) the violation of any Environmental Law resulting from
ownership, possession, use, operation or modification of the Site, the Facility
or the Equipment.

 

“Affiliate” of any specified Person shall mean any other
Person that, directly or indirectly, controls, is controlled by or is under
common control with such Person.  For
purposes of this definition, “control” when used with respect to any particular
Person shall mean the power to direct, or cause the direction of, the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms “controlling”,
“controlled” and “under common control” have meanings correlative to the
foregoing; provided, however, that any Person owning, directly or indirectly,
10% or more of the securities having ordinary voting power for the election of
directors or other members of the Governing Body of a corporation, or 10% or
more of the partnership or other ownership interests of any other Person, is
deemed to control such corporation or other Person. Notwithstanding the
foregoing, with respect to PGI and its Subsidiaries (including Lessee), “Affiliate”
shall not include MatlinPatterson Global Opportunities Fund, LP (“MPG”) or any
Affiliate of MPG that is not PGI or a Subsidiary of PGI.

 

“After-Tax Basis” shall mean, in the context of determining
the amount of a payment to be made on such basis, the payment of an amount
which, after reduction by the net increase in Taxes of the recipient (actual or
constructive) of such payment, which net increase shall be calculated by taking
into account any current reduction in such Taxes resulting from any tax
benefits realized the recipient as a result of such payment, shall be equal to
the amount required to be paid. In calculating the amount payable by reason of
this provision, all income taxes payable and tax benefits realized shall be
determined on the assumptions that (i) the recipient is subject to
applicable income taxes at the highest marginal tax rates then applicable to
widely held corporations that are in effect in the applicable jurisdictions for
the relevant period or periods and (ii) all related tax benefits are
utilized at the highest marginal tax rates then applicable to widely held
corporations that are in effect in the applicable jurisdictions for the
relevant period or periods, and shall take into account the deductibility of
state and local income taxes for U.S. Federal income tax purposes.

 

“Allocated Cost” for the Support
Items, means Chicopee’s out-of-pocket costs incurred to provide such Support
Items during a particular period, and shall include an allocated portion of the
cost, if any, of (1) continuing access rights, (2) maintaining
licenses and permits, (3) supplies, (4) third-party services,
(5) utilities and (6) an allocable share of Chicopee’s overhead or
administrative costs related thereto. 
All Allocated Costs shall be determined in accordance with GAAP and in a
manner consistent with Chicopee’s past practices.

 

“Applicable Laws” means all laws, judgments, decrees,
ordinances and regulations and any other governmental rules and orders and
all requirements having the force of law, now or hereafter enacted, made or
issued, whether or not presently contemplated, including compliance with all
requirements of zoning laws, labor laws and Environmental Laws, compliance with
which is required with respect to the Site, the Facility or the Equipment,
whether or not such compliance shall require structural, unforeseen or
extraordinary changes to the Site, the Facility or the Equipment or the
operation, occupancy or use thereof.

 

2

 

“Applicable Margin” shall mean from the Construction Closing
Date until the Construction Termination Date, 5.0% per annum; provided  however that
during and after a Construction Termination Extension or if a Construction
Agency Event of Default has occurred and is continuing, Applicable Margin shall
mean 7% per annum.

 

“Appraisal” shall mean the appraisal, dated the Basic Term
Commencement Date, prepared by the Appraiser and addressed to the Lessor, which
Appraisal shall:

 

(i)                                     determine the Equipment Cost, which will be equal to the fair market
value of the Equipment on the Basic Term Commencement Date;

 

(ii)                                  determine the economic useful life of the Equipment and confirm that the
Equipment shall be reasonably estimated on the Basic Term Commencement Date to
have (i) a remaining economic useful life equal to 133.33% of the Basic
Term and (ii) a fair market value at the end of the Basic Term equal to at
least 20% of the Equipment Cost, without regard to inflation or deflation
during the Basic Term;

 

(iii)                               confirm that it is reasonable to expect that upon expiration or
termination of the Equipment Lease, it will be commercially feasible for a
party other than the Lessee to operate  the
Equipment;

 

(iv)                              allocate the percentage of the Equipment Cost eligible for each category
of Depreciation Deduction;

 

(v)                                 confirm an orderly liquidation value for the Equipment; and

 

(vi)                              address any other matters (including the matters addressed in the
Preliminary Appraisal) that the Lessor shall request.

 

“Appraisal Procedure” shall mean the following procedure for
determining the Fair Market Value of the Equipment:

 

(a)                                  At either Lessee’s or Lessor’s written
request, as the case may be, Lessor and Lessee shall negotiate in good faith to
determine the Fair Market Value of the Equipment within 30 days after such
request has been given.  If after such
30-day period, Lessor and Lessee are unable to agree upon a determination of
the Fair Market Value of the Equipment, the Fair Market Value shall be
determined in accordance with the appraisal procedure set forth in this
definition.  If either party shall have
given written notice to the other requesting determination of such Fair Market
Value by such appraisal procedure, the parties shall consult for the purpose of
appointing an independent appraiser by mutual agreement.  If a single appraiser shall have been
appointed by the parties, the determination of such appraiser shall be final
and binding upon the parties.  If no such
appraiser is appointed within 20 days after such notice is given, such
determinations shall be made as follows:

 

3

 

(i)                                     Two qualified appraisers shall be appointed, one of whom shall be
selected by Lessee and the other of whom shall be selected by Lessor, both
selections to be made within 10 days after the end of such 20 day period.  The appraisal determined by each appraiser
shall be compared and if the differential between the two is less than 10% of
the average of the two appraisers, then such average of the two appraisals
shall be final and binding upon the parties; but

 

(ii)                                  if the differential between the two appraisals is 10% or more of the
average of the appraisals, then a third qualified appraiser shall be promptly
appointed by the American Arbitration Association of New York, in accordance
with its rules as then in effect. 
The appraisals determined by each of the three appraisers shall be
averaged and the appraisal furthest from such average shall be
disregarded.  The appraisals determined
by each of the two remaining appraisers shall be averaged and such average
shall be final and binding upon the parties.

 

(b)                                 The appraiser or appraisers shall be provided
with, and instructed to appraise in accordance with, the definitions of all
terms appearing herein and having a bearing on the determinations subject to
appraisal and in accordance with customary appraisal procedures.

 

(c)                                  The fees and expenses of each appraiser shall
be paid by Lessee.

 

“Appraiser” shall mean Accuval Associates, Inc., a
licensed appraiser pursuant to Title XI of FIRREA, or such other recognized
appraiser as Lessor shall designate.

 

“Appurtenances” shall have the meaning given such term in Section 2.1 of the Site Lease.

 

“Arbitration Proceeding” means the procedure specified in the
succeeding sentences for settling any dispute as to Fair Market Rental Value
under the Support Agreement.  In the
event that Lessor disagrees with Chicopee’s determination of Fair Market Rental
Value under the Support Agreement, Lessor shall provide written notice to
Chicopee of its intention to arbitrate the same.  Such dispute shall be arbitrated by a panel
of three arbitrators, each of whom shall be experienced in the industrial
textile manufacturing industry, one of which shall be chosen by the Lessor and
one of which shall be chosen by Chicopee, in each case on or before the 20th
day after such notice is given.  If
either party required to choose an arbitrator hereunder shall fail to do so on
or before such 20th day, then the appointment of such arbitrator shall be made
by the American Arbitration Association, or an organization that is a successor
thereto, upon application thereto in the same manner as specified below for the
appointment of a third arbitrator.  The
two arbitrators so chosen shall meet on or before the 10th day after the second
arbitrator is appointed and on or before the 30th day after they meet shall
decide the dispute.  If within such
period they cannot agree upon their decision, they shall on or before the 10th
day thereafter appoint a third arbitrator and, if they cannot agree upon such
appointment, the third arbitrator shall be appointed upon their application or
upon the application of either party to the American Arbitration Association,
or any organization that is a successor thereto, from a panel of arbitrators
having expertise in the industrial textile manufacturing  industry
and a familiarity with 

 

4

 

the
equipment used or operated in such business. 
The three arbitrators shall meet and decide the Fair Market Rental Value
on or before the 30th day after the appointment of the third arbitrator.  Any decision or determination in which two of
the three arbitrators shall concur shall be final and binding upon the parties,
to the extent permitted by Applicable Laws and Regulations.  In designating arbitrators and in deciding
the dispute, the arbitrators shall act in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in force;
subject however, to the express provisions to the contrary, if any, contained
in the Support Agreement.  If the
American Arbitration Association or its successor shall not then be in
existence, the arbitration shall proceed under comparable laws or statutes then
in effect.  The parties to the
arbitration shall be entitled to present evidence and argument to the
arbitrators.  Each party shall pay (i) the
fees and expenses of the arbitrator appointed by or on its behalf, (ii) equal
shares of (A) the other expenses of the arbitration properly incurred, and
(B) the fees and expenses of the third arbitrator, if any, and (iii) its
own legal fees and expenses.

 

“AS IS, WHERE IS BASIS” shall mean the transfer of the
interest in the Equipment on an AS IS, WHERE IS BASIS, without recourse or
warranty, express or implied of any kind whatsoever, except as to the absence
of Lessor’s Liens.

 

“ASTM Standard”  shall mean the
American Society for Testing and Materials Standard Practice for Environmental
Site Assessments:  Phase I Environmental
Site Assessment Process (Standard Designation E 1527-05), or subsequent ASTM
standard relating to the scope of Phase I Environmental Site Assessments.

 

“Authorized Officer” shall mean, with respect to any Person,
its Chairman of the Board, its Chief Executive Officer, its President, any
Senior Vice President, the Chief Financial Officer, any Vice President, the
Treasurer or any other management employee (A) that has the power to take
the action in question and has been authorized, directly or indirectly, by the
Governing Body of such Person, (B) working under the direct supervision of
such Chairman of the Board, Chief Executive Officer, President, Senior Vice
President, Chief Financial Officer, Vice President or Treasurer and (C) whose
responsibilities include the administration of the transactions and agreements
contemplated by the Operative Documents.

 

“Basic Term” shall have the meaning given such term in Section B
of the Schedule.

 

“Basic Term Commencement Date” shall have the meaning given
such term in Section 2(a) of the
Equipment Lease.

 

“Basic Term Lease Rate Factor” shall have meaning given such
term in Section B of the Schedule.

 

“Basic Term Rent” shall have the meaning given such term in Section E
of the Schedule.  Basic Term Rent shall
equal the product of the Basic Term Lease Rate Factor times the Capitalized
Lessor’s Cost on the Schedule.

 

“Beneficiary” means Site Lessee and any subsequent lessee or
sublessee under the Site Lease, other than Chicopee and its Affiliates.

 

5

 

“Breakage Costs” shall mean an amount equal to the amount, if
any, required to compensate the Owner, the Lessor or any Member, as the case
may be, for any additional losses (including any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or funds acquired by
the Owner to fund its obligations under the Operative Documents, but excluding
any lost profits) that it may sustain or incur.

 

“BSA” has the meaning given to such term in Section 17(a)(xvi) of the Equipment Lease.

 

“Business Day” shall mean any day other than a Saturday, a
Sunday, and any day on which commercial banking institutions located in New
York, New York are authorized by law or other governmental action to close.

 

“CAA” and “Construction Agency
Agreement” each means that certain Construction Agency Agreement
dated as of June 24, 2010 between the Owner, as owner, and the
Construction Agent, as the construction agent.

 

“CAA Discount Rate” shall mean the LIBOR Base Rate plus five
percent (5%) as of the Construction Closing Date.

 

“Capitalized Lessor’s Cost” shall mean the Lease Investment
Balance on the Basic Term Commencement Date plus any fees, costs and expenses
incurred by Lessor or any Member in connection with the execution of the
Schedule which are not included in the Lease Investment Balance.

 

“Carry Cost on Advances” means the sum of (i) for each
day during each Carry Cost Period the amount equal to the product of (a) a
rate per annum of 0.5% and (b) an amount equal to the Commitment less the
aggregate amount of the outstanding Advances, (ii) with respect to any
Carry Cost Period, an amount equal to the product of (a) a percentage rate
per annum equal to the LIBOR Rate for such Carry Cost Period plus the
Applicable Margin and (b) the aggregate amount of outstanding Advances and
(iii) the amount equal the product of (a) 1.0% and (b) the
Commitment which amount in this clause (iii) shall be deemed full earned
on and as of the Construction Closing Date.

 

“Carry Cost Period” shall mean, with respect to any Advance, (i) initially,
the period beginning on (and including) the date on which such Advance is made
and ending on the day one month thereafter (or, if such subsequent month has no
numerically corresponding calendar day, on the next succeeding  LIBOR Business Day) and (ii) thereafter,
each period commencing on the first day after the end of the next preceding
Carry Cost Period applicable to such Advance and ending on the day one month
thereafter (or, if such month has no numerically corresponding calendar day, on
the next succeeding LIBOR Business Day); provided, however,
that all of the foregoing provisions relating to Carry Cost Periods are subject
to the following:

 

(A)          if any Carry Cost Period would
otherwise end on a day that is not a LIBOR Business Day, such Carry Cost Period
shall be extended to the next succeeding LIBOR Business Day (unless the result
of such extension would be to carry such Carry Cost Period into another
calendar month, in which case such Carry Cost Period shall end on the
immediately preceding LIBOR Business Day);

 

6

 

(B)           no Carry Cost Period may end later
than the Basic Term Commencement Date; and

 

(C)           any Carry Cost Period that begins on
the last LIBOR Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such Carry
Cost Period) shall end on the last LIBOR Business Day of the calendar month at
the end of such Carry Cost Period.

 

“Casualty Occurrence”, (i) for purposes of, and as used
in, the Equipment Lease, the Site Lease and the Site Sublease, shall have the
meaning set forth in Section 8
of the Equipment Lease and (ii) for purposes of, and as used in, the CAA,
shall have the meaning set forth in Section 2.7
of the CAA.

 

“Certificate of Acceptance” means each certificate of
acceptance executed and delivered pursuant to Section 1(b) of
the Equipment Lease in substantially the form of Annex B to Exhibit No. 1
of the Equipment Lease.

 

“Change Date” shall mean the Second EBO Date.

 

“Change in Law” shall mean any change (or proposed change, if
in the Lessor’s good faith judgment, such proposed changed has a realistic
possibility of becoming law, and would have a material adverse effect on Lessor
or any Member) in the Code or in the interpretation, re-interpretation or
application thereof made subsequent to the Construction Closing Date and on or
prior to the Basic Term Commencement Date.

 

“Change Order” shall have the meaning set forth in Section 2.9(b) of the Construction Agency
Agreement.

 

“Chicopee” means Chicopee, Inc., a Delaware corporation.

 

“Claim”, (i) for purposes of, and as used in, the
Equipment Lease, the Site Lease and the Site Sublease, shall have the meaning
set forth in Section 15(a) of the
Equipment Lease and (ii) for purposes of, and as used in the CAA, shall
have the meaning set forth in Section 7.1(a) of
the CAA.

 

“Code” shall mean the Internal Revenue Code of 1986, as
amended and superseded from time to time, and the rules and regulations
promulgated thereunder.

 

“Commercial Operation” shall mean the capability of the
Equipment to operate in all respects in accordance with the terms of the
Purchase Documents and which satisfies the Construction Completion
requirements.

 

“Commitment” shall mean U.S.$56,657,070.00.

 

“Commitment Fee” shall mean an amount equal to 1% of the
Commitment.

 

“Company” means Chicopee, Inc., a Delaware corporation.

 

7

 

“Confidential Information” means (i) all information,
documents and records describing or relating to the business, operational,
marketing and financial plans, strategies, relationships and performance of
Lessee, any Guarantor or any Affiliate of any of them and their respective
suppliers and customers provided by Lessee, any Guarantor or any Affiliate of
any of them to Lessor or its advisors in the course of due diligence, in
reports from Lessee, or through observations at the Site or the Facility and (ii) all
Proprietary Information.  All of the
foregoing information, documents and records shall be Confidential Information
whether or not they are marked “confidential”, whether or not they are in oral,
written, electronic or other form.

 

“Construction Agency Event of Default” shall have the meaning
set forth in Section 4.1 of the CAA.

 

“Construction Agent” shall mean the Company in its capacity
as construction agent under the CAA.

 

“Construction Budget” shall mean the budget attached as Exhibit V
to the CAA, which budget sets forth all costs anticipated on the Construction
Closing Date to be incurred for the purchase (in the name of the Lessor, as
owner), delivery and installation of the Equipment and the construction,
start-up and testing of the Equipment, as such budget may be amended, modified
or adjusted in accordance with the CAA.

 

“Construction Closing Date” shall mean June 24, 2010.

 

“Construction Completion” shall mean the Equipment is
complete and in Commercial Operation, which is expected to be October 8,
2011.  The Equipment will be deemed to be
completed upon receipt by Owner of evidence, in form and substance satisfactory
to Owner, of (i) successful completion of fundings of Project Costs in
accordance with the Construction Budget for the purchase, delivery and
installation of the Equipment at the Site, (ii) certification of
satisfactory completion by the Engineering Consultant, (iii) the Appraisal
by the Appraiser and a tax opinion from Winston & Strawn LLP, (iv) Lessee’s
Certificate of Acceptance, (v) Lessee’s acceptance of an amended Schedule,
including acknowledgment of any repricing under the Equipment Lease and a
representation and warranty that the conditions precedent to the Equipment
Lease have been satisfied, (vi) title to the Equipment, is held by Owner,
free and clear of all Liens (other than Lessor’s Liens), (vii) the
Equipment, the Facility and the Site comply with all Applicable Laws in all material
respects, (viii) all Governmental Approvals required to operate the
Equipment, for which failure to obtain could have a Material Adverse Effect, (ix) a
certificate of occupancy relating to the Facility, (x) all lien waivers or
releases with respect to all amounts paid to any contractor or Vendor in
connection with the Equipment, the Facility or the Site, and (xi) all
employees of Lessee necessary or required to operate the Equipment have been
hired and trained.

 

“Construction Completion Date” shall mean the date upon which
Construction Completion is achieved and the Basic Term (as defined in the
Equipment Lease) commences with respect to the Equipment.

 

“Construction Documents” shall mean, collectively, the
Construction Budget, the Milestones, the Preliminary Specifications, the
Drawings and Specifications, and any other Additional 

 

8

 

Construction
Documents or other agreements with architects or contractors entered into by
the Construction Agent in accordance with the Construction Agency Agreement in
connection with the construction of the Facility or the Equipment.

 

“Construction Period” shall mean the period that commences on
the Construction Closing Date and ends on the Basic Term Commencement Date.

 

“Construction Restoration or Replacement Plan” shall mean a
plan and time schedule for the application of insurance proceeds in the case of
a casualty event (including a Casualty Occurrence) and any other funds
available to the Construction Agent with which to restore or replace any
property affected by a casualty event (including a Casualty Occurrence).

 

“Construction Termination Date” shall mean October 8,
2011; provided, however,
that if through no fault of the Construction Agent the Equipment has not then
been completed but can reasonably be anticipated to be completed and
Construction Completion achieved by December 30, 2011, the Construction
Termination Date shall be extended until December 30, 2011 (the “Construction Termination Extension”).

 

“Construction Termination Extension” shall have the meaning
set forth in the definition of “Construction Termination Date”.

 

“Consultants” shall mean the Appraiser, the Engineering
Consultant and the Environmental Consultant.

 

“Credit Agreement” shall mean the Credit Agreement dated as
of November 22, 2005, as amended December 8, 2006, as further amended
September 17, 2009, among Polymer Group, Inc., as Borrower, the
Lenders referred to therein, Citicorp North America, Inc., as
Administrative Agent, Documentation Agent, Collateral Agent and Syndication
Agent, and Citigroup Global Markets Inc., as Sole Lead Arranger and Sole
Bookrunner, as amended from time to time and any successor credit agreement
entered into in connection with a refinancing, refunding or replacements
thereto.  References to any terms defined
in the Credit Agreement shall mean the Credit Agreement as in effect as of the
Construction Closing Date without regard to any further amendments or
supplements.

 

“Default” shall have the meaning given such term in Section 12(a) of the Equipment Lease.

 

“Discount Rate” means the
interest rate per annum provided by the Lessee in writing, on or before the
Base Lease Term Commencement Date, and reflected in amendments to Exhibit No. 1
to the Equipment Lease.  Such Discount
Rate will be determined by the Lessee in accordance with GAAP.

 

“Documents” means, collectively, the Equipment Lease, the
Schedule, each Certificate of Acceptance, the Guaranty, the Site Lease, the
Site Sublease, the Support Agreement, the Security Deposit Pledge Agreement,
the Easement Agreement, each Acceptable Letter of Credit, each SNDA, the Letter
of Understanding and all other consents, agreements and documents relating
thereto or to the Equipment, the Facility or the Site.

 

“Dollars” or “$” means the
legal currency of the United States of America.

 

9

 

“Downgrade Event” shall mean that the senior unsecured debt
obligations (or long-term deposits) of an Acceptable Letter of Credit Bank are
no longer rated at least “Baa3” by Moody’s and at least “BBB-” by S&P.

 

“Drawings and Specifications” shall have the meaning given
such term in Section 2.2(a) of the
Site Lease.

 

“Easement
Agreement” shall mean the Easement Agreement, dated as of June 24,
2010, by and between Site Lessor, as grantor, and Site Lesee, as grantee.

 

“Easements”
shall have the meaning given such term in Schedule
E of the Site Lease.

 

“Effective Rate” shall have the
meaning given such term in Section 3(d) of
the Equipment Lease.

 

“EH&S” shall have the meaning given such term in Section 17(b)(iii) of the Equipment Lease.

 

“EH&S Program” shall have the meaning given such term in Section 17(b)(iii) of Equipment Lease.

 

“Engineer” means an independent engineer of national standing
competent in industrial textile manufacturing operations mutually selected by
Beneficiary and Chicopee.  If Chicopee and
Beneficiary cannot agree upon the Engineer, either party, on behalf of both
parties, may apply to the Chief Judge of the United States District Court for
the Southern District of New York for the appointment of the Engineer, and the
other party may not raise any questions as to the court’s full power and
jurisdiction to entertain the application and make the appointment.

 

“Engineering Consultant” shall mean E3 Consulting, Inc.,
or such other qualified and recognized engineering firm as the Lessor shall designate.

 

“Environmental Consultant” shall mean an independent third
party environmental consultant as the Owner shall designate who has training
and experience adequate to perform an Environmental Evaluation in a safe and
professional manner in accordance with current industry standards and in
compliance with all applicable Environmental Laws.

 

“Environmental Evaluation” means (i) the completion of a
Phase I ESA and environmental compliance review of the Site, the Facility and
the Equipment and (ii) if (A) the Phase I ESA identifies RECs or
environmental compliance issues related to the operation of the Site, and (B) the
Environmental Consultant recommends further evaluation or investigation in
addition to the Phase I ESA or environmental compliance review, then (iii) Lessor
or Owner shall engage an Environmental Consultant to complete a Phase II ESA or
further compliance evaluation.  Copies of
any Phase I ESA or Phase II ESA reports generated as part of the Environmental
Evaluation shall be provided to and may be relied upon by the other party.  If an Adverse Environmental Condition (other
than a minor noncompliance or de minimis and
surficial Release to a non-pervious surface or to soil) is identified, the
Company or PGI will pay for the Environmental Evaluation; to the extent not
specified in the Operative Documents, Owner shall pay for the Environmental
Evaluation.

 

10

 

“Environmental Law” shall mean, whenever enacted or
promulgated, any applicable Federal, state, county or local law, statute,
ordinance, rule, regulation, Environmental Permit, administrative or court
order, judgment, decree, injunction, code or requirement or any agreement with
a Governmental Authority:

 

(x)            relating to pollution (or the cleanup,
removal, remediation or encapsulation thereof, or any other response thereto),
or the regulation or protection of human health, safety or the environment,
including air, water, vapor, surface water, groundwater, drinking water, land
(including surface or subsurface), plant, aquatic and animal life, or

 

(y)           concerning exposure to, or the use,
containment, storage, recycling, treatment, generation, discharge, emission,
Release or threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous Substance.

 

in
each case as amended and as now or hereafter in effect, and any common law
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries (whether personal or property) or damages due to or
threatened as a result of the presence of, exposure to, or ingestion of, any
Hazardous Substance, whether such common law or equitable doctrine is now or
hereafter recognized or developed.  .

 

“Environmental Loss” shall mean any loss, cost ( including
investigation, removal, cleanup and remedial costs), damage, liability, fine,
penalty, penalty interest and surcharges or expense (including, without
limitation, reasonable attorneys’, engineering and other professional or expert
fees), and damages to, loss of the use of, or decrease in value of, the Site,
the Facility or the Equipment arising out of or based on any Adverse Environmental
Condition.

 

“Environmental Permits” mean all Governmental Approvals
required under Environmental Law for the ownership, lease, construction or
operation of the Equipment, the Support Equipment, the Support Items or the
Site.

 

“EPA” shall mean the United States Environmental Protection
Agency.

 

“Equipment” shall mean an integrated manufacturing line in
terms of design, function and manufacturing capabilities (which, on the Basic
Term Commencement Date, generally consists of the equipment listed in Annex A
to the Schedule of the Lease) including (i) one complete REICOFIL 4 SSMMS
line for the production of heat sealed polypropylene nonwoven fabrics,
consisting of a 5-beam REICOFIL 4 Composite Extrusion Line, (ii) the
Packaging and Wrapping system consisting of an automated bundle sorting and
wrapping system that will accept custom-slit rolls from the production line,
allow an operator to sort rolls into appropriately sized bundles, then
automatically apply end protection and wrap each bundle with polyethylene
stretch film, (iii) the Mixing and dosing system consisting of a
batch-style mixing system used to prepare chemical solutions for application by
the production equipment, (iv) the Equipment lighting consisting of sealed
fluorescent lighting fixtures placed on the machine platform to illuminate all
levels of the production equipment, (v) all parts or components of any of
the Equipment, including ones that are temporarily removed from the Equipment, (vi) all
manuals, Included IP, 

 

11

 

other
licenses and records (other than Rent records and Proprietary Information) with
respect to such Equipment, and (vii) all substitutions and replacements of
any and all thereof, including, but not limited to, any replacement equipment
which may from time to time be substituted for the Equipment leased hereunder;
together in each case with any and all Parts permanently incorporated or
installed in or attached thereto or any and all Required Modifications and
Optional Modifications that are Non-Severable Modifications, in each case, to
which title thereto vests in the Lessor pursuant to the terms of the Equipment
Lease.

 

“Equipment Cost” means the fair
market value of the Equipment on the Basic Term Commencement Date as determined
in the Appraisal.

 

“Equipment Lease” means the Equipment Lease Agreement, dated
as of June 24, 2010, together with the Schedule thereto, pursuant to which
the Lessor has leased the Equipment to Chicopee.

 

“Equipment Lease Default” means a Default.

 

“Equipment Lease Term” means the term of the Equipment Lease,
including all extensions thereof.

 

“Equipment Logs” has the meaning specified in Section 3.4 of the Support Agreement.

 

“Eurocurrency Reserve Requirements” means the aggregate (but
without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) Business Days prior to
the beginning of the applicable Carry Cost Period (including basic,
supplemental, marginal and emergency reserves under any regulations of the
Federal Reserve Board or other Governmental Authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Federal Reserve Board) that are required to be maintained by a member bank
of the Federal Reserve System.

 

“Excluded Taxes”, (i) for purposes of, and as used in,
the Equipment Lease, shall have the meaning set forth in Section 4(a) of
the Equipment Lease and (ii) for purposes of, and as used in, the CAA,
shall have the meaning set forth in Section 7.1(b) of
the CAA.

 

“Facility” means the new building to be constructed by the
Company on the Site to house the Equipment and all improvements on the Site relating
thereto or associated therewith, including, without limitation, the storage
silos and the warehouse.

 

“Fair Market Rental Value”

 

(i) for
purposes of, and as used in, the Equipment Lease, means the Rent which a
willing lessee (who is neither a lessee in possession nor a used equipment
dealer) would pay for the Rent of the Equipment (in use and in place) in an arm’s-length
transaction to a willing lessor under no compulsion to lease for a period
similar to the period for which such Fair Market Rental Value is being
determined, determined using the same methodology and assumptions as utilized
on the Basic Term Commencement Date for purposes of establishing Capitalized
Lessor’s Cost; provided, however,
that in such determination the Equipment shall be assumed to be in the 

 

12

 

condition
in which it is required to be maintained and returned under the Equipment
Lease; provided, further,
that Fair Market Rental Value shall be determined by the Appraisal Procedure;

 

(ii) for
purposes of, and as used in, the Support Agreement, with respect to any item of
Support Equipment means the rental amount that would be obtainable for such
item of Support Equipment, delivered installed, in place, fully operational and
in use, in an arm’s length lease between an informed and willing lessor and an
informed and willing lessee, each under no compulsion to lease, assuming that (1) the
lessee would continue to use such item of Support Equipment as part of a non
woven fabric production facility substantially equivalent to the Facility and (2) no
reduction should be made for any costs of removal.  For purposes of this definition, “in use”
refers to the value in use of an item of Support Equipment as part of an
ongoing non woven fabric production facility and reflects the extent to which
such item of Support Equipment contributes to the profitability of the business
of a non woven fabric production facility. 
Fair Market Rental Value shall be determined by Chicopee in good faith; provided, however, that in the event Beneficiary disagrees
with such determination, then Beneficiary may initiate, by written notice to
Chicopee, an Arbitration Proceeding regarding such determination; and

 

(iii) for
purposes of, and as used in, the Site Lease, the cash rent that would be
obtained in an arm’s length lease between an informed and willing lessee (under
no compulsion to lease) and an informed and willing lessor (under no compulsion
to lease) of the Site or part thereof in question for the Site Lease Term
without regard to the Equipment.

 

“Fair Market Value” for purposes of, and as used in the
Equipment Lease, shall mean the price which a willing buyer (who is not a used
equipment dealer) would pay for the Equipment (in use and in place) in an arm’s-length
transaction to a willing seller under no compulsion to sell, determined using
the same methodology and assumptions as utilized on the Basic Term Commencement
Date for purposes of establishing Capitalized Lessor’s Cost; provided, however, that
in such determination the Equipment shall be assumed to be in the condition in
which it is required to be maintained and returned under the Equipment
Lease.  Fair Market Value shall be
determined by the Appraisal Procedure.

 

“Financial Officer” shall mean (i) the Executive Vice
President of the Company and (ii) the Chief Financial Officer of the
Company.

 

“FIRREA” shall mean the Federal Financial Institution Reform,
Recovery and Enforcement Act of 1989.

 

“First EBO Date” shall have the meaning given such term in Section B
of the Schedule.

 

“First EBO Price”  shall have the
meaning given such term in Section B of the Schedule.

 

“Fiscal Quarter” means any of the quarterly accounting
periods of Lessee, ending on the Saturday closest to March 31, June 30,
September 30 and December 31 of each year.

 

“Force Majeure Event” means with respect to the obligations
of a Person, any circumstances or conditions beyond the reasonable control of
such Person, including any Act of God, strike or lockout or other labor
dispute, act of the public enemy, terrorism, war (declared or undeclared), 

 

13

 

blockade,
revolution, riot, insurrection, civil commotion, lightning, fire, storm, flood,
earthquake, explosion, government restraint, or embargo.

 

“Full Recourse Construction Agency Event of Default” shall
have the meaning set forth in Section 5.1(c)(i) of
the Construction Agency Agreement.

 

“Full Recourse Event” means (a) any fraudulent act or
omission or illegal acts or willful misconduct of the Construction Agent or any
Guarantor in connection with the (i) the negotiation, execution, delivery,
consummation and/or performance hereof or of any Operative Document; or (ii) the
acquisition, construction or operation of the Equipment (or the construction in
progress with respect thereto); (b) the misapplication of any Advance or
any portion thereof or any other funds made available to the Construction
Agent, any Guarantor or any of their respective Affiliates; or (c) an
insolvency or bankruptcy event affecting the Construction Agent or Lessee.

 

“Funding Request” shall have the meaning specified in Section 3.1(a) of the Construction Agency
Agreement.

 

“GAAP” shall have the meaning given such term in Section 5(b) of the Equipment Lease.

 

“GECC”  means General
Electric Credit Corporation of Tennessee, a Tennessee corporation.

 

“German Vendor” means REICOFIL.

 

“Governing Body” of any Person shall mean the board of
directors, board of trustees, management committee, board of managers, managing
member, managing partner, general partner or other governing entity.

 

“Governmental Approvals” shall mean any and all permits,
authorizations, certificates, registrations, consents, approvals, variances or
licenses required by any Governmental Authority or any Applicable Laws
(including Environmental Laws) to import, construct, install, operate or use
the Equipment, the Support Equipment or the Improvements, as required in
connection with the use of the Site or the Facility.

 

“Governmental Authority” shall mean any nation or government,
any state, provincial or other political subdivision thereof (whether federal,
state or local), any court and any administrative agency or other regulatory
body, instrumentality, authority or entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.

 

“Guarantors” shall mean each of PGI and PGI Polymer, Inc.

 

“Guaranty” shall mean the Guaranty, dated the Construction
Closing Date, by Guarantors for the benefit of Owner and of Lessor, in the form
of Exhibit No. 3 to the Equipment Lease.

 

“Hazardous Substance” means any of the following: (i) any
petroleum or petroleum product, explosives, regulated radioactive materials,
friable asbestos, ureaformaldehyde, polychlorinated biphenyls in regulated
concentrations, lead and radon gas; (ii) any substance, material, product,
derivative, compound or mixture, mineral, chemical, waste, gas, medical waste,
or pollutant, in 

 

14

 

each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous to the environment or human health or
safety, as defined or regulated under any Environmental Law.

 

“Impositions” mean all Real Estate Taxes, assessments, water
and sewer rents and charges, license and permit fees, and other governmental
levies and charges, general and special, ordinary and extraordinary, unforeseen
as well as foreseen, of any kind and nature.

 

“Improvements” shall mean any and all buildings, foundations,
footings, driveways, parking areas, structures and other improvements,
including, but not limited to, any and all stormwater detention ponds, utility
lines, pipes, connections and fixtures which are now located or hereinafter
constructed in whole or in part on or underneath the Land, including, without
limitation, the Facility and the Site Improvements.

 

“Incentive Plan” shall have the meaning given such term in Section 17(a)(xvi) of the Equipment Lease.

 

“Included IP” shall mean all documentation, intellectual
property, technical or confidential business information, and software a Vendor
provides with or for the Equipment and all updates to the same the Vendor
provides; provided that Included IP shall not include any Proprietary Information.

 

“Indemnified Party”, for purposes of, and as used in, the
Equipment Lease, the Site Lease and the Site Sublease, shall have the meaning
given such term in Section 15(a) of
the Equipment Lease.

 

“Independent” when used with respect to any specified Person
shall mean such a Person who (i) is in fact independent, (ii) does
not have any direct financial interest or any material indirect financial
interest in the Company or any Affiliate of the Company and (iii) is not
connected with the Company or any Affiliate of the Company as an officer,
employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.

 

“Independent Appraiser” shall mean a disinterested, licensed
professional appraiser of industrial property who (i) meets the personal
property qualifications criteria established by the Appraisal Foundation, (ii) is
a member of the Appraisal Institute or holds the senior accreditation of the
American Society of Appraisers, (iii) is in the regular employ, or is a
principal of, a nationally recognized appraisal firm, (iv) has substantial
experience in the business of appraising facilities similar to the Facility and
(v) is a licensed appraiser pursuant to Title XI of FIRREA (if FIRREA is
in effect at the time of determination).

 

“Initial Use Date” means either (i) the date of the
expiration or earlier termination of the Equipment Lease and Beneficiary’s
receipt of possession of the Equipment on the Site in accordance with the
Equipment Lease or (ii) the date as determined by the Owner, should the
Owner cause completion of the Equipment as per Section 5.1(c)(i) or Section 5.1(c)(ii) of
the CAA.  The Initial Use Date will not
occur if Chicopee purchases the Equipment pursuant to the Equipment Lease.

 

15

 

“Insurance Requirements” (i) for purposes of, and as
used in, the CAA, shall mean the terms and conditions of any insurance required
by Section 2.8 of the CAA, (ii) for
purposes of, and as used in, the Equipment Lease, shall mean the terms and
conditions of any insurance required by Section 10
of the Equipment Lease, (iii) for purposes of, and as used in the Support
Agreement, shall mean the terms and conditions of any insurance policy required
by Section 3.5 of the Support
Agreement, and (iv) for purposes of, and as used in the Site Lease and the
Site Sublease, shall mean the terms and conditions of any insurance policy
required by Section 5.8 of the Site
Lease.

 

“IRS” shall mean the Internal Revenue Service of the United
States Department of Treasury or any successor or predecessor agency thereto.

 

“Land” shall mean that certain tract or parcel of real
immovable property situated in Waynesboro, Virginia, as more fully described on
Schedule A to the Site Lease.

 

“Lease Investment Balance” shall have the meaning specified
in Section 5.1(b) of the
Construction Agency Agreement.

 

“Lessee” shall have the meaning given such term in the
preamble to the Equipment Lease.

 

“Lessor” shall have the meaning given such term in the
preamble to the Equipment Lease.

 

“Lessor Financial Disclosures” shall have the meaning given
such term in Section 5(h) of the
Equipment Lease.

 

“Lessor’s Lien” shall mean any Lien affecting the Equipment
or any part thereof arising as a result of (i) Lessor’s rights under or
pursuant to the Equipment Lease; (ii) any claim arising from any transfer
by Lessor of an interest in the Equipment or the Equipment Lease; (iii) any
claim against Lessor not related to the transactions contemplated by the
Equipment Lease; (iv) any act or omission of Lessor not expressly
contemplated by the Equipment Lease or not permitted without consent (which
consent has not been granted) by Lessee or that is in violation of any term of
the Equipment Lease or not taken as a result of the occurrence and continuance
of a Default as permitted by the Equipment Lease; or (v) taxes imposed
against Lessor or the consolidated group of taxpayers of which it is a member
which are not to be indemnified against by Lessee under the Equipment Lease; provided, however, that
there shall be excluded from this definition and no Lessor’s Lien shall exist
if such Lien is being diligently contested in good faith so long as neither
such proceedings nor Lien involves a material danger of the sale, forfeiture or
loss of the Equipment or adversely affects Lessee’s rights under the Equipment
Lease.

 

“Lessor’s Transaction Expenses” shall mean an amount equal to
(a) Capitalized Lessor’s Cost minus (b) the Equipment Cost, provided that such amount shall not be less than $0.

 

“Letter of Understanding” shall mean that certain letter of
understanding dated as of June 24, 2010, among PGI, the Lessee and the
Lessor.

 

“LIBOR Base Rate” means, for each Carry Cost Period, the
highest of (a) 2.5% per annum, (b) the offered rate per annum for deposits
of Dollars for the applicable Carry Cost Period that appears on Reuters Screen
LIBOR 01 Page as of 11:00 A.M. (London, England time) two (2)

 

16

 

Business
Days prior to the first day in such Carry Cost Period and (c) the offered
rate per annum for deposits of Dollars for an Carry Cost Period of three (3) months
that appears on Reuters Screen LIBOR 01 Page as of 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day of the
applicable Carry Cost Period. If no such offered rate exists, such rate will be
the rate of interest per annum, as determined by Agent at which deposits of
Dollars in immediately available funds are offered at 11:00 A.M. (London,
England time) two (2) Business Days prior to the first day in such Carry
Cost Period by major financial institutions reasonably satisfactory to Agent in
the London interbank market for such Carry Cost Period for the applicable
principal amount on such date of determination.

 

“LIBOR Business Day” shall mean a Business Day on which
dealings in Dollar deposits are carried on in the London interbank market.

 

“LIBOR Rate” shall mean with respect to each day during each
Carry Cost Period, a rate per annum determined for such day in accordance with
the following formula (rounded upward to the nearest 1/100th of 1%):

 

	
   

  	
  LIBOR Base Rate

  	
   

  
	
   

  	
  1.00 – Eurocurrency
  Reserve Requirements

  	
   

  

 

“Lien” shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, easement or encumbrance, lien
(statutory or other), charge, lease or other security interest or any
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any lease having substantially the same economic effect
as any of the foregoing).

 

“Limited Recourse Construction Agency Event of Default” shall
have the meaning set forth in Section 5.1(c)(ii) of
the CAA.

 

“Limited Remedy Event of Default” shall have the meaning
given such term in Section 12(f) of
the Equipment Lease.

 

“Loss” shall have the meaning given such term in Section 15(b) of the Equipment Lease.

 

“Loss Amount” shall have the meaning given such term in Section 15(b) of the Equipment Lease.

 

“Material Adverse Effect” shall mean (i) a materially
adverse effect on the operations, properties, assets, financial condition,
contingent or otherwise, or material agreements of Lessee, Construction Agent,
or any Guarantor, as the case may be or (ii) a material impairment of the
ability of Lessee, Construction Agent or any Guarantor, as the case may be, to
perform their respective obligations under or to remain in compliance with the
Operative Documents to which they are a party or under the Credit Agreement, as
the case may be.

 

17

 

“MatlinPatterson” means MatlinPatterson Global Opportunities
Partners LP (“GOF”) and each of its Affiliates that hold any equity of PGI, so
long as such entities continue to be managed or controlled by GOF or are
Affiliates or Subsidiaries of GOF.

 

“Maximum Amount” shall mean, as of any date, (a) 89.95%
of Project Costs for Equipment
Includable Under GAAP incurred as of such date, which will include the
amount in clause (b) below (excluding the costs of any Casualty Occurrence
or other loss of, theft of, or damage to all or any portion of the Equipment
that is the result of a Force Majeure Event or an act or failure to act by a
Person other than Construction Agent or any of its agents), minus (b) the
present value of all payments previously made by Construction Agent that have
not been reimbursed by either the Owner in accordance with Section 3.6 of
the CAA or by any other Person, and all payments Construction Agent is, as of
such date, expressly obligated to make in the future under the CAA as of such
date, (in each case calculated using the CAA Discount Rate), but, in the case
of this clause (b), excluding (1) any payments of all or any portion of
the Lease Investment Balance and (2) any payments that are not required to
be included in the calculation of Construction Agent’s maximum guaranty amount
under EITF 97-10.

 

“Member” shall mean each of General Electric Credit
Corporation of Tennessee, a Tennessee corporation, and ING Spunmelt Holdings
LLC, a Delaware limited liability company, and their respective successors and
permitted assigns, in each case in their capacity as members of Lessor.

 

“Memorandum of Site Lease” shall mean the Memorandum of Site
Lease, dated as of June 24, 2010, by and between Site Lessor and Site
Lessee, and recorded in the real estate records in the County where the Site is
located, together with any amendments or supplements thereto.

 

“Milestone” shall mean a schedule for the delivery,
installation, construction and completion of the Facility and the Equipment
prepared by the Construction Agent and approved by the Owner and the
Engineering Consultant, set forth in Exhibit IV of the Construction Agency
Agreement, as the same may be amended from time to time as agreed by the
Construction Agent, the Owner and the Engineering Consultant.

 

“Moody’s” means Moody’s Investors Service, Inc. and its
successors and assigns, and, if Moody’s Investors Service, Inc. and its
successors and assigns no longer issues securities ratings, the term “Moody’s”
shall include at the option of Lessor, any other Person that issues
internationally accepted securities ratings, and, upon the inclusion in this
definition of such other Person, each reference in the Documents to a rating issued
by Moody’s shall be deemed automatically replaced with a reference to the
comparable rating issued by such Person.

 

“Net Economic Return” shall mean the Member’s anticipated
nominal after-tax yield reflected in the computations of Basic Term Lease Rate
Factor, the First EBO Price, the Second EBO Price and Stipulated Loss Values
set forth in the original Exhibit No. 1 to the Equipment Lease, as
such Exhibit No. 1 may be amended or replaced pursuant to the
Equipment Lease, computed utilizing the multiple investment sinking fund method
of analysis and the same assumptions, including the Pricing Assumptions and Tax
Benefits, as may be amended and replaced pursuant to the Equipment Lease and
changes in Exhibit No 1, and the same methodology and constraints as used
by such Member in making the computations of Basic Term Lease Rate Factor, the
First EBO Price, the Second EBO Price, and Stipulated Loss Values initially set
forth in the original 

 

18

 

Exhibit No. 1
to the Equipment Lease.  In the event
that the 4-year U.S. dollar fixed interest rate swap (vs. 90-day Libor), as
determined by Bloomberg Screen IRSB18 (Ask Rate), as of 11 AM two business days
prior to the Basic Term Commencement Date is other than 2.05%
(Lessor’s Funding Rate Index), the Member’s nominal after-tax yield, as
described in (a) above, shall be increased or decreased by an amount equal
to: (A) the 4 year U.S. dollar fixed interest rate swap (vs. 90-day
Libor), as determined by Bloomberg Screen IRSB18 (Ask Rate),  as of 11 AM two business days prior to the
Basic Term Commencement Date, less (B) 2.05%,
with the result of that calculation (positive or negative) multiplied by (C) 54.9545%.

 

“Non-Severable Modification” shall mean any Optional Modification
which is not readily removable without causing damage to the Equipment (or any
part thereof).

 

“Notification Date” shall have the meaning given to such term
in Section 5.1(g) of the
Construction Agency Agreement.

 

“OFAC” has the meaning given to such term in Section 17(a)(xvi) of the Equipment Lease.

 

“Officer’s Certificate” shall mean with respect to any
Person, a certificate signed by any Authorized Officer of such Person.

 

“Operating Capacity” means the ability of the Equipment to
produce Product at the rate specified in the Purchase Contract (subject to
scheduled or routine shutdown).

 

“Operative Documents” shall mean the CAA, the Site Lease, the
Site Sublease, the Support Agreement, the Easement Agreement, each SNDA, any
Additional Construction Document, any Acceptable Letter of Credit, the
Guaranty, all Purchase Documents, the Equipment Lease and Schedule, the Letter
of Understanding, the Construction Documents, the Project Documents, and all
other consents, agreements and documents relating thereto or to the Equipment,
the Facility or the Site.

 

“Optional Modification” shall have the meaning given such
term in Section 7(c) of the Equipment
Lease.

 

“Overdue Rate” means the rate of 18% per annum or the maximum
rate allowed by law.

 

“Owner” shall mean Gossamer Holdings, LLC, a Delaware limited
liability company, and its successors and assigns.

 

“Owner’s Accrued Interest” shall mean interest, accrued
monthly on each Advance by Owner, for each day during the Construction Period
after such Advance was made.  Owner’s
Accrued Interest shall be calculated on the basis of a 360-day year for the
actual days elapsed and the rate of Owner’s Accrued Interest shall mean with
respect to any Carry Cost Period, a percentage rate equal to the LIBOR Rate for
such Carry Cost Period plus 1.75%.

 

“Owner’s Lien” shall mean any Lien on the Site or the
Facility or any part thereof arising as a result of (i) Claims against or
any act or omission of the Owner that is not related to, or that is in
violation of, any Operative Document or the transactions contemplated thereby
or that is in breach of any covenant or agreement of the Owner specified
therein, (ii) Taxes imposed upon the

 

19

 

Owner
or the Owner that are not indemnified against by the Construction Agent
pursuant to any Operative Document or are not related to or that are in
violation of any Operative Document or the transactions contemplated thereby,
or (iii) Claims against or affecting the Owner arising out of the
voluntary or involuntary transfer by the Owner of any portion of the interest
of the Owner in the Facility, the Site, the Project Documents, other than as
contemplated or permitted by the Operative Documents.

 

“Parts” shall mean all appliances, components, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature which may now or from time to time be incorporated or installed
in or attached to, or were provided by the manufacturer with, the Equipment,
including after temporary removal from such Equipment.

 

“Patriot Act” means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, P.L. 107-56, as amended.

 

“Payment Date” (i) for purposes of, and as used in, the
Equipment Lease, shall have the meaning in Section 8
of the Equipment Lease and (ii) for purposes of, and as used in, the CAA,
shall have the meaning set forth in Section 2.7
of the CAA.

 

“Permitted Encumbrances”, as used in the Site Lease, the Site
Sublease and the Support Agreement, shall mean those encumbrances described in Schedule C to the Site Lease.

 

“Permitted Lien” shall mean (i) the rights of Lessor and
Lessee as herein provided, (ii) Lessor’s Liens and Owner’s Liens, (iii) Liens
for taxes, assessment or other governmental charge either not yet delinquent or
being diligently contested in good faith by appropriate proceedings and so long
as adequate reserves are maintained with respect to such Liens and available to
Lessee for the payment of such taxes, provided, however, that a contest shall
be permitted only if Lessor shall have determined in good faith that the
contest should not result in any adverse consequences to it or any Member, and
only so long as neither such proceedings nor such Liens involve any material
danger of the sale, forfeiture, loss or loss of use of the Equipment or any
part thereof, or any interest of Lessor therein or any risk of criminal
liability of Lessor and Lessee has given Lessor prior written notice of Lessee’s
intent to contest any such taxes and Lessee has agreed to indemnify Lessor for
any and all costs and expenses (including, without limitation reasonable
attorneys’ fees) which Lessor may incur as a result of such contest, (iv) inchoate
materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s, or other like
inchoate Liens imposed by law arising in the ordinary course of Lessee’s
business for sums either not delinquent or being diligently contested in good
faith and only so long as neither such proceedings nor any such Liens involve
any material danger of the sale, forfeiture, loss or loss of use of the
Facility or Equipment, or any part thereof, or any interest of Lessor therein
or any material risk of material civil liability; provided
that adequate reserves are maintained with respect to such Liens and that
Lessee has given Lessor written notice thereof, (v) the rights of others
under agreements or arrangements to the extent expressly permitted under the
Equipment Lease, (vi) Liens arising out of any judgment or award against
Lessee with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith by appropriate proceedings diligently conducted
and with respect to which there shall have been secured a stay of execution
pending such appeal or proceeding for review and so long as adequate reserves
are available to Lessee for the payment of such obligations and there is no
material danger of sale, 

 

20

 

forfeiture,
loss, or loss of use of the Equipment or material risk of material civil
liability and Lessee shall have given Lessor written notice thereof, and (vii) any
Lien against which Lessee causes to be provided a bond in such amount and under
such terms and conditions as are reasonably satisfactory to Lessor.

 

“Person” shall mean any natural person, corporation,
cooperative, partnership, limited liability company, joint venture, joint-stock
company, firm, association, trust, unincorporated organization, Governmental
Authority or any other entity, whether acting in an individual, fiduciary or
other capacity.

 

“PGI” shall mean Polymer Group, Inc. a Delaware
corporation.

 

“Phase I ESA” means the performance of a Phase I Environmental
Site Assessment by an Environmental Consultant in accordance with the ASTM
Standard

 

“Phase II ESA” means the collection of subsurface (e.g.,
soil, sediment, groundwater or surface water) or indoor air samples necessary
in order to determine if a REC identified in a Phase I ESA and resulting from
the operation of the Facility or Equipment has or may have caused a Release of
Hazardous Substances at the Site, except for de minimis and
surficial Releases to a non-pervious surface or to soil or Releases authorized
by an Environmental Permit.

 

“Preliminary Appraisal” shall mean the appraisals, dated the
Construction Closing Date, prepared by an Appraiser and addressed to the Owner,
which Preliminary Appraisal shall set forth such Appraiser’s preliminary analysis
and conclusions regarding the matters to be provided in the Appraisal, and
conclude that such Appraiser reasonably expects that on the Basic Term
Commencement Date the conclusions set forth in the Appraisal will be accurate.

 

“Preliminary Specifications” means the preliminary
specifications for the Facility as set forth on Schedule F
to the Site Lease.

 

“Pricing Assumptions” shall have the meaning given such term
in Section 3(a) of the Equipment
Lease.

 

“Prior Levels” mean the greater of (i) the frequency,
duration, volume, scope and capacity that the Support Equipment is necessary or
the Support Items are necessary to be supplied or consumed in connection with
the Process required for the Equipment to achieve Operating Capacity or (ii) the
frequency, duration, volume, scope and capacity that the Support Equipment was
used or the Support Items were supplied or consumed (on average) in connection
with the Process during the thirty-six (36) month period of continuous
commercial operation of the Equipment (or for such shorter continuous period if
all of the Equipment is not in place during such entire thirty-six (36) month
period) occurring immediately prior to the beginning of the Support Term.

 

“Process” the use and operation of the Equipment, Support
Equipment and Support Items for the timely and efficient production at
Operating Capacity, shipping and sale  of the
Product, in each case in a manner that complies with Applicable Laws, Insurance
Requirements and Prudent Practice; provided, however, that “Process” shall not include the
handling or offsite disposal of 

 

21

 

any Hazardous Substances or Chicopee’s Environmental
Permits and shall not include Proprietary Information.

 

“Product” means spunbond non woven fabric.

 

“Project Costs” shall mean, without duplication, the amounts
advanced for payment of fees, expenses, costs and other items related to
purchasing, importing, designing, engineering, surveying, developing,
financing, constructing, installing, starting-up and testing the Equipment, in
accordance with, and set forth on, the Construction Budget and the other
Project Documents and specified below:

 

(i)            the cost to purchase from each
Vendor the Equipment, as specified in the Construction Budget;

 

(ii)           all contractor payments listed in the
Construction Budget in respect of the Equipment;

 

(iii)          all expenses relating to environmental
audits, inspections or studies with respect to the Site, the Facility or the
Equipment;

 

(iv)          fees and other expenses relating to
the Appraisal;

 

(v)           fees and expenses of the
Environmental Consultant, the Engineering Consultant and any other Consultants;

 

(vi)          all Carry Costs on Advances,
Commitment Fees and any Breakage Costs accrued monthly and/or payable in
respect of the Advances;

 

(vii)         any Tax if and to the extent such Tax (1) relates
to the Equipment and (2) is indemnifiable pursuant to Section 7.1(b) of
the Construction Agency Agreement;

 

(viii)        all Transaction Expenses, to the extent
not otherwise included in this definition;

 

(ix)           all fees and costs of
obtaining title insurance with respect to the Equipment;

 

(x)            engineering and design costs with
respect to the Equipment;

 

(xi)           All insurance premiums and
deductibles paid by Owner in respect of insurance obtained in accordance with Section 2.8
(a)(i);

 

(xii)          such other items with respect to the
Equipment as the Owner may approve in writing; and

 

(xiii)         any other amounts to be funded from
proceeds of Advances pursuant to the Operative Documents.

 

22

 

“Project Costs for Equipment Includable Under GAAP” shall
mean, without duplication, the amounts advanced for payment of costs and other
items related to purchasing, importing, designing, engineering, surveying,
developing, constructing, installing, starting-up and testing the Equipment, in
accordance with, and set forth on, the Construction Budget and the other
Project Documents and, subject to being includable under GAAP, including but
not limited to the items specified below (with respect to the Equipment only):

 

(i)            the cost to purchase Equipment from
any vendor or supplier;

 

(ii)           all contractor payments made in
respect of the Equipment;

 

(iii)          all costs relating to environmental
audits, inspections or studies with respect to the Equipment;

 

(iv)          fees and costs of Owner’s insurance
consultants and insurance brokers with respect to the insurance obtained in
accordance with Section 2.8(a)(i) of the CAA;

 

(v)           fees and costs of the Environmental
Consultant, the Engineering Consultant, the Appraiser, and any other
Consultants with respect to the Equipment;

 

(vi)          Owners Accrued Interest (excluding
interest on equity capital);

 

(vii)         sales, use, personal property, tangible
or intangible taxes incurred in connection with the Equipment during the
Construction Period;

 

(viii)        engineering and design costs with
respect to the Equipment;

 

(ix)           all insurance premiums and
deductibles paid by Owner in respect of insurance obtained in accordance with Section 2.8(a)(i) of
the CAA;

 

(x)            all fees and costs of
obtaining title insurance with respect to the Equipment;

 

(xi)           Owner’s legal expenses
related to documenting all vendor and contractor legal agreements; and

 

(xii)          such other items with
respect to the Equipment as the Owner and Construction Agent may approve in
writing as being properly includable under GAAP.

 

“Project Documents” shall mean, collectively, the Purchase
Documents, the Construction Documents and, when entered into, each Additional
Construction Document, and all Third Party Contracts, if any, together with any
replacement or substitute agreement for any of the foregoing.

 

“Project Obligations” shall have the meaning set forth in Section 2.1 of the Construction Agency Agreement.

 

“Proprietary Information” shall mean (i) Appendix 3.4 to the Purchase Contract, (ii) all trade
secrets, know how and other intellectual property of Lessee or any Affiliate of
Lessee or any 

 

23

 

supplier
or customer of any of them, including any special settings and adjustments
Lessee makes to the Equipment or to the Included IP, and any Severable
Modifications which are Optional Modifications, and (iii) all proprietary
business information of Lessee or any Affiliate of Lessee or any supplier or
customer of any of them regarding the Equipment, Lessee’s manufacturing
operations or techniques, or Lessee’s products or product specifications, provided however that “Proprietary Information” shall not
include (a) the Equipment, (b) any initial settings established by
the German Vendor in accordance with Appendix 3.1 of the Purchase Contract or
by any other Vendor, or (c) except to the extent included in subsections
(i), (ii), or (iii) above, any information, documents and records relating
thereto, as of the Basic Term Commencement Date.  All of the foregoing shall be Proprietary
Information, regardless of the source of disclosure to Lessor, whether or not (a) obtained
in due diligence, in reports from Lessee, or through observations at the Site
or the Facility, (ii) marked “confidential”, or (iii) in oral,
written, electronic or other form.

 

“Prudent Practice” shall mean, at a particular time, either
(i) any of the practices, methods and acts engaged in or approved by a
significant portion of the competitive engineered nonwoven fabrics industry
operating in the United States at such time, but, in any event, a standard of
care and usage no less than that which the Company and its Affiliates would
apply with respect to other equipment and facilities similar to the Equipment
or the Facility owned, leased or operated by them or (ii) with respect to
any matter to which the practices referred to in clause (i) do not apply,
any of the practices, methods and acts that, in the exercise of reasonable
judgment in light of the facts known at the time the decision was made, could
have been expected to accomplish the desired result at a reasonable cost
consistent with good competitive engineered nonwoven fabrics business
practices, reliability, safety and expedition. 
“Prudent Practice” is not intended to be the optimum practice, method or
act to the exclusion of all others, but rather to be a spectrum of possible
practices, methods or acts having due regard for, among other things,
manufacturers’ warranties, the requirements of insurance policies and the
requirements of governmental bodies of competent jurisdiction.

 

“Purchase Contract” means that certain contract dated June 24,
2010, between REICOFIL and Owner.

 

“Purchase Documentation” shall have the meaning set forth in Section 3.3 of the Construction Agency Agreement,
including the Purchase Contract.

 

“Purchase Documents” shall mean the Purchase Contract and
each other bill of sale, invoice, purchase agreement, purchase order, patent
and license and warranty assignment or agreement, that evidences, in whole or
in part, Owner’s title to or rights to the Equipment.

 

“Purchase Document Event” shall mean any Casualty Occurrence
(including the occurrence of any major or material damage to the Equipment) or
breach or any other event which (A) entitles any Vendor to terminate any
Purchase Document,  (B) entitles
Owner to terminate any Purchase Document, 
(C) results in any claim, loss, damage, penalty, injury, demand,
action or suit of any Vendor against Owner or Construction Agent or of Owner or
Construction Agent against any Vendor or (D) would delay delivery of the
completed Equipment to a date after the Construction Termination Date.  Owner shall, in addition, have the rights and
remedies set forth in Section 5.1 of the CAA upon the occurrence of any
Purchase Document Event.

 

24

 

“Rating Agencies” shall mean S&P and Moody’s or, if at
the time the rating of any such Rating Agency is required such Rating Agency no
longer provides the relevant rating (other than as a result of the rated Person
choosing not to have such rating), such other rating agency of national
recognition.

 

“Real Estate Taxes” means all
taxes, assessments, betterments, use fees and charges, sewer entrance fees and
all other public charges levied, assessed or imposed at any time by any
Governmental Authority or agreed or governmentally imposed “in lieu of” or
similar charges, upon or against the Site.

 

“REC” shall mean “recognized environmental condition” as that
term is defined by the ASTM Standard.

 

“REICOFIL” shall
mean Reifenhäuser REICOFIL GmbH & Co. KG, a German limited
liability company and partnership.

 

“Release” shall mean disposing, discharging, injecting,
spilling, leaking, leaching, dumping, pumping, pouring, emitting, escaping,
emptying, seeping, placing and the like, into or upon any land, soil, subsoil,
real property or water, surface water or groundwater or air, or otherwise
entering into the environment.

 

“Rent” means all amounts payable by Lessee hereunder,
including Basic Term Rent with respect to the Equipment (as provided in Section 2(a) of the Equipment Lease) and any
Supplemental Rent (including the corresponding value added tax).

 

“Rent Payment Date” with respect to the Equipment shall have
the meaning given such term in Section E of the Schedule.

 

“Requested Funding Date” shall have the meaning specified in Section 3.1(a) of the Construction Agency
Agreement.

 

“Required Amount” shall mean (i) from the Construction
Closing Date to but excluding the Basic Term Commencement Date, an amount equal
to 10% of the Commitment, and (ii) from and after the Basic Term
Commencement Date,  an amount equal 10% of
Capitalized Lessor’s Cost.

 

“Required Modification” shall have the meaning given such
term in Section 7(b) of the Equipment
Lease.

 

“Requirements” shall have the meaning set forth in Section 2.2(b) of the Site Lease.

 

“Responsible Officer” of an entity means any corporate
officer (or in the case of a non-corporate entity, any comparable authority) of
such entity who is designated as the recipient of a notice pursuant to the
provisions of any Document or who, in the normal performance of such officer’s
operational responsibilities, would have knowledge of the matter at issue and
the relevant provisions of any applicable Document.

 

25

 

“Restoration or Replacement Plan” means a plan and time
schedule for the application of insurance proceeds in the case of a casualty
event and any other funds available to the Lessee with which to restore or
replace any property affected by a casualty event.

 

“S&P” means Standard & Poor’s Rating Group, a
division of The McGraw-Hill Companies, inc., and its successors and assigns
and, if Standard & Poor’s Ratings Group and its successors and assigns
no longer issues securities ratings, the term “S&P” shall include, at the
option of Lessor, any other Person that issues internationally accepted
securities ratings, and, upon the inclusion in this definition of such other
Person, each reference in the Documents to a rating issued by S&P shall be
deemed automatically replace with a reference to the comparable rating issued
by such Person.

 

“Schedule” means the schedule to the Equipment Lease executed
and delivered pursuant to Section 1(b) of
the Equipment Lease in substantially the form attached to the Equipment Lease
as Exhibit No. 1.

 

“Second EBO Date”  shall have the
meaning given such term in Section B of the Schedule.

 

“Second EBO Price”  shall have the
meaning given such term in Section B of the Schedule.

 

“Security Deposit” shall mean a cash amount equal to 10% of
Capitalized Lessor’s Cost.

 

“Security Deposit Pledge Agreement” means that certain
Security Deposit Pledge Agreement dated as of the Basic Term Commencement Date
by and among the Lessee and the Lessor.

 

“Seller” shall have the meaning given such term in Annex B of
the Schedule.

 

“Severable Modification” means any Optional Modification or
Required Modification other than a Non-Severable Modification.

 

“Significant Vendor” means any Vendor party to any Project
Document in respect of good, services or any combination thereof that has a
contract price, purchase price or similar price equal to or greater than
$500,000.

 

“Site” shall mean the Land plus the Improvements and so much
of the Adjacent Property as is reasonably necessary for access to the Land and
the Improvements and reasonably necessary for the use thereof consistent with
the proposed use and operation of the Equipment at the Site.

 

“Site Improvements” shall have the meaning given such term in
Section 2.3 of the Site Lease.

 

“Site Lease” shall mean the Site Lease, dated as of June 24,
2010, by and between the Site Lessor/Owner and the Site Lessee/Company.

 

“Site Lease Base Rent” during the Site Lease Term shall mean (A) during
the period from the date of the Site Lease to the Transition Date, the amount
specified in Schedule D to the Site Lease and (B) during
the remainder of the Site Lease Term, Fair Market Rental Value of the Site
(determined annually).

 

26

 

“Site Lease Basic Term” means the period beginning on the
Site Lease Commencement Date and ending on the earliest to occur of (a) the
day on which the Equipment located on the Site is purchased by Site Lessor
pursuant to the Equipment Lease, and all obligations of Site Lessor under the
Documents are indefeasibly paid in full, (b) the date on which the
Equipment is removed from the Site, (c) the last day of the calendar month
thirty-five (35) years after the Site Lease Commencement Date, provided, however, if the Basic Term of the schedule under
the Equipment Lease is extended or renewed, the Site Lease Basic Term will
automatically be extended for the same period of time, and (d) the day
that Site Lessee is entitled to recover possession of the Equipment located on
the Site pursuant to Section 8
of the Equipment Lease and all obligations of Site Lessor under the Documents
are indefeasibly paid in full.

 

“Site Lease Commencement Date” means the first business day
after the date that (i) the Facility is substantially completed by Site
Lessor, (ii) Site Lessor has provided Site Lessee with a certificate of
occupancy for the Facility, and (iii) Site Lessor has provided Site Lessee
with exclusive possession of the Site.

 

“Site Lease Event of Default”  shall
have the meaning specified in Section 9.1
of the Site Lease.

 

“Site Lease Renewal Term” shall have the meaning specified in
Section 9.4 of the Site Lease.

 

“Site Lease Rent”
shall mean the Site Lease Base Rent and Site Lease Supplemental
Rent.

 

“Site Lease Supplemental Rent” means all amounts necessary to reimburse Site Lessor for any actual
and reasonable out-of-pocket costs for Real Estate Taxes, Utilities, and Site
Lessor insurance premiums with respect to the Site; and Site Lessor’s actual
and reasonable out-of-pocket maintenance costs which are paid by Site Lessor
with respect to the Site.  For any of the
foregoing reimbursable items not incurred solely with respect to the Site, the
amount of Site Lease Supplemental Rent attributable to such item shall be the
portion of such item used by, or otherwise attributable to, the Site.  To the extent such items are calculated for
any period beginning before the Site Lease Commencement Date or after the
Transition Date, then such items shall be equitably prorated.

 

“Site Lease Term” means the Site
Lease Basic Term together with each Site Lease Renewal Term.

 

“Site Lessee” shall mean Gossamer Holdings, LLC, as site
lessee of the Site under the Site Lease.

 

“Site Lessor” shall mean Chicopee, Inc., as site lessor of
the Site under the Site Lease.

 

“Site Sublease” shall mean the Site Sublease, dated as of June 24,
2010 by and between the Lessor, as Site Sublessor, and Lessee, as Site
Sublessee.

 

“Site Sublease Base Rent”
shall mean the amount specified in Schedule D to the Site Sublease.

 

“Site Sublease Term” shall mean the
period beginning on the Site Lease Commencement Date and ending on the date of
expiration or earlier termination of the Equipment Lease Term, 

 

27

 

regardless
of whether the Equipment Lease Term expires or terminates due to the passage of
time, the occurrence of a Default and the exercise of available remedies
thereunder, the exercise of a purchase option under the Equipment Lease or for
any other reason.

 

“Site Sublessee” shall mean Chicopee, Inc., as sublessee
of the Site under the Site Sublease.

 

“Site Sublessor” shall mean Gossamer Holdings, LLC, as
sublessor of the Site under the Site Sublease.

 

“SNDA” means each mortgagee waiver or secured party disclaimer
of interest executed and delivered pursuant to Section 1(b),
Section 6(e)(v) or Section 17(b)(vi) of the
Equipment Lease or otherwise in form and substance reasonably satisfactory to
Lessor.

 

“Special SLV Amount” shall have the meaning set forth in Section 12(e) of the Equipment Lease

 

“Stipulated Loss Value” shall mean with respect to the
Equipment as of any date of determination on or prior to the last day of the
Basic Term, the amount determined by multiplying Capitalized Lessor’s Cost for
the Equipment by the percentage specified in Annex C to the Schedule applicable
to such Equipment, determined as of the Rent Payment Date prior to the Casualty
Occurrence.  In the event that the
Equipment Lease is for any reason extended beyond the Basic Term, then the last
percentage figure shown on Annex C to the Schedule shall control throughout any
such extended term.

 

“Stock” shall mean the voting stock, membership interests or
similar equity interests of any Person.

 

“Subsidiary” means, with respect to any Person, a
corporation, limited liability company, partnership or other entity of which
such Person and/or its other subsidiaries own, directly or indirectly, more
than 50% of the Stock.

 

“Supplemental Rent” shall mean, without duplication, any and
all liabilities, obligations, losses, damages, settlements, penalties, claims,
actions, suits, costs, expenses (including all operating costs and expenses of
Lessor) and disbursements (including, without limitation, reasonable fees and
disbursements of legal counsel, accountants, appraisers, inspectors or other
professionals, and costs of investigation) incurred by each of the Members or
the Lessor), and all other amounts, liabilities, indemnities and obligations
(other than Basic Term Rent) that Lessee assumes or becomes obligated or agrees
to pay under the Operative Documents to or on behalf of Lessor or any other
Person, including, without limitation, payments of Stipulated Loss Value, the
purchase price to be paid by Lessee with respect to any Equipment, and payments
of indemnities under Section 4
and Section 15 of the Equipment Lease
and under Section 7.1 of the CAA.

 

“Support Agreement” shall mean that certain Support Agreement
dated as of June 24, 2010 between the Site Lessor, as grantor, and the
Owner, as beneficiary, as amended.

 

“Support Equipment” shall mean (i) all vehicles, (ii) site,
process and maintenance equipment and tools, including, without limitation,
repelletizing equipment, pyrolising oven, ultrasonic die pack cleaning system
and high pressure hot water cleaning system, (iii) other rolling stock, (iv)

 

28

 

the
test, measurement and laboratory equipment, (v) the office furnishings,
business machines and electronics, and (vi) information systems and
computers, all as more specifically to be set forth on Exhibit A to the Support Agreement; provided that in
no event shall “Support Equipment” include Proprietary Information.

 

“Support Items” shall have the meaning specified in Section 2.3(a) of the Support Agreement.

 

“Support Price” as of the end of each month is an amount
equal to the Beneficiary’s Allocated Cost of the Support Items provided in such
period.

 

“Support Rights” shall have the meaning as specified in Section 2.1 of the Support Agreement.

 

“Support Term” means the period beginning on the Initial Use
Date and ending on the earlier to occur of (a) the day the Beneficiary
elects to terminate the Support Agreement in accordance with its terms, (b) the
termination of the Support Agreement by Chicopee pursuant to its terms,
including Section 5.3, and (c) the expiration or earlier termination of the Site
Lease Term.

 

“Survey” shall have the meaning set forth in Section 2.2(b) of the Site Lease.

 

“Syndication Agent” (i) for purposes of, and as used in,
the Equipment Lease, shall have the meaning given such term in Section 13(e) of the Equipment Lease and (ii) for
purposes of, and as used in, the CAA, shall have the meaning given such term in
Section 8.3(b) of the CAA.

 

“Tax Benefits” shall mean each of the benefits and
assumptions (and the representations) set forth in Section D of Exhibit No. 1
“Tax Benefits, Assumptions and Representations” of the Equipment Lease.

 

“Tax” or “Taxes”(i) for
purposes of, and as used in, the Equipment Lease, the Site Lease and the Site
Sublease, shall have the meaning given such term in Section 4(b) of
the Equipment Lease and (ii) for purposes of, and as used in, the CAA,
shall have the meaning specified in Section 7.1(b) of
the CAA.

 

“Tax Claim” shall have the meaning given such term in Section 4(c) of the Equipment Lease.

 

“Taxing Authority” shall have the meaning given such term in Section 4(a) of the Equipment Lease.

 

“Term” shall mean the Basic Term.

 

“Third Party Contract” shall have the meaning set forth in Section 2.1(c) of the CAA.

 

“Transaction Expenses” shall mean the following costs and
expenses incurred in connection with the negotiation, due diligence and
consummation of the transactions contemplated by the Operative Documents on the
Construction Closing Date and through and including the Basic Term Commencement
Date, including:

 

(i)            the Commitment Fee, the cost of the Preliminary Appraisal
and the Appraisal, all costs and fees, including filing and recording fees and
recording, transfer,

 

29

 

mortgage, intangible and similar Taxes in connection
with the execution and delivery, filing and recording of the Site Lease, any
other Operative Document or Project Document and any other document required to
be filed or recorded pursuant to the provisions of the Operative Documents or
the Project Documents and any Uniform Commercial Code filing fees in respect of
the perfection of any security interests created by the Operative Documents or
as otherwise reasonably required by the Owner;

 

(ii)           all costs and fees, including filing and recording fees
and recording, transfer, mortgage, intangible and similar Taxes in connection
with the execution and delivery, filing and recording the Equipment Lease or
the Site Lease and any other document required to be filed or recorded pursuant
to the provisions of the Equipment Lease or the Site Lease;

 

(iii)          the fees and expenses of the Engineering Consultant, the
Environmental Consultant, the Appraisers and any other consultants retained by
the Owner;

 

(iv)          the reasonable legal fees, expenses and disbursements of
counsel to the Owner, the Lessor and any Member;

 

(v)           all fees and expenses of Lessor and any Member relating to
the formation of Lessor, the negotiation, execution and delivery of Lessor’s
operating agreement, and all ongoing operating costs and expenses of Lessor and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation of Lessor) incurred by each of the Members or the
Lessor),;

 

(vi)          reasonable out-of-pocket costs and expenses of each Member;
and

 

(vii)         any other reasonable, documented out-of-pocket expenses of
the Owner and any Member relating to the Operative Documents and all other
reasonable, documented out-of-pocket expenses of the Owner; and

 

(viii)        all fees and costs in connection with
the issuance of Acceptable Letters of Credit.

 

“Transactions” (i) for purposes of, and as used in, the
Equipment Lease, shall have the meaning set forth in Section 21(m) of
the Equipment Lease and (ii) for purposes of, and as used in, the CAA,
shall have the meaning set forth in Section 8.16
of the CAA.

 

“Transition Date”,
as used in the Site Lease and Site Sublease, means the date of
expiration or earlier termination of (a) the Equipment Lease Term with
respect to the Equipment located on the Site, and (b) the Site Sublease
Term and Site Lessee’s receipt of possession of the Equipment at the Site.  The Transition Date shall not occur if
Chicopee purchases the Equipment pursuant to the Equipment Lease.

 

“UCC” shall mean the Uniform Commercial Code as enacted in
any applicable jurisdiction.

 

“United States” or “U.S.” shall
mean the United States of America.

 

30

 

“Utilities” shall mean
sewer usage or rental, refuse removal, and utilities, including, without
limitation, gas, water, and electricity.

 

“Vendor” shall mean (i) any Person (including the
Company and its Affiliates) who holds legal title to each item of Equipment
prior to the purchase and acquisition thereof by the Owner, (ii) CH
Robinson International, Inc., and (iii) any vendor, supplier or
contractor who enters into a Project Document.

 

Rules of Construction.  Unless otherwise specified, references in any
Document or any of the Appendices thereto to a Section, subsection or clause
refer to such Section, subsection or clause as contained in such Document and
to any Section, subsection or clause substituted therefor from time to time.  Any term defined in this Master List of
Defined Terms by reference to another document, instrument or agreement shall
continue to have the meaning ascribed thereto whether or not such other
document, instrument or agreement is in effect. 
The words “herein,” “hereof” and “hereunder” and other words of similar
import used in any Document refer to such Document as a whole, including all
annexes, exhibits and schedules, as the same may from time to time be amended,
restated, modified or supplemented, and not to any particular section,
subsection or clause contained in such Document or any such annex, exhibit or
schedule.  Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall include
the singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, feminine and neuter genders.  The words “including,” “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; the rule of ejusdem  generis shall not be
applicable to limit a general statement, followed by or referable to an
enumeration of specific matters, to matters similar to those specifically
mentioned; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Documents) or,
in the case of Governmental Authorities, Persons succeeding to the relevant
functions of such Persons; references to any document, instrument, or agreement
includes each amendment or supplement to, or restatement, replacement,
substitution, successor, modification or novation of, any such document,
instrument or agreement unless otherwise specified in such definition or in the
context in which such reference is used; all references to any statute,
regulation, proclamation, ordinance or law shall include all amendments of the
same and any successor statutes, regulations, proclamations, ordinances, and
laws; and a reference to a statute shall include all regulations, policies,
protocols, codes, proclamations, and ordinances issued or otherwise applicable
under that statute unless, in any such case, otherwise expressly provided in
any such statute.  Any reference to “days”
shall mean calendar days unless “Business Days” or “LIBOR Business Days” (as
defined herein) are expressly specified.

 

31

 

APPENDIX
II

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

Financial
Covenants

 

Interest Expense Coverage
Ratio. The Interest Expense Coverage Ratio of PGI for any Test Period shall
not be less than the ratio of 3.00 to 1.00.

 

Total Leverage Ratio.  The
Total Leverage Ratio of PGI at the end of any Test Period shall not exceed the
ratio of 3.50 to 1.00.

 

Capital Expenditures.  PGI will not, and will not permit any of its
Subsidiaries to, make or commit to make any Capital Expenditures, except that:

 

(a)           PGI and its Subsidiaries may make or commit to make
Capital Expenditures not exceeding $50.0 million (the “Base Amount”) for Fiscal
Year 2009 of the Borrower each Fiscal Year of the Borrower thereafter, provided
that for any period set forth above, the Base Amount set forth above may be
increased for any such period by carrying over to any such period any portion
of the Base Amount (without giving effect to any increase) not spent in the
immediately preceding period, and that Capital Expenditures in any period shall
be deemed first made from the Base Amount applicable to such period in any
given period.

 

(b)           PGI and its Subsidiaries may make additional
Capital Expenditures (i) to the extent funded by the Net Proceeds from
Equity Issuances (excluding issuances of Disqualified Equity Interests of PGI),
subject to first complying with Section 2.05(c)(i), and (ii) at any
time in an amount not to exceed the Cumulative Retained Excess Cash Flow Amount
at such time.

 

(c)           PGI and its Subsidiaries may make
additional Capital Expenditures not to exceed the QRTC Amount in the
aggregate;  provided  that the aggregate amount of Capital
Expenditures made pursuant to this clause (c) plus the aggregate amount of
Investments outstanding under Section 6.04(viii) shall not exceed the
QRTC Amount at any one time.

 

For purposes of this
Appendix II, “Capital Expenditures”, “Interest Expense Coverage Ratio”, “Total
Leverage Ratio” and “Test Period” and all additional definitions necessary to
calculate or determine the same shall have the meanings ascribed to such terms
in the Credit Agreement (as defined below) and the definitions of “Capital
Expenditures”, “Interest Expense Coverage Ratio”, “Total Leverage Ratio” and “Test
Period” and all additional definitions necessary to calculate or determine the
same are hereby incorporated by reference as if such definitions were set forth
in this Appendix II in full.

 

Solely for purposes of this
Appendix II, “Credit Agreement” shall mean
the Credit Agreement dated as of November 22, 2005, as amended December 8,
2006, as further amended September 17, 2009, among Polymer Group, Inc.,
as Borrower, the Lenders referred to therein, Citicorp North America, Inc.,
as Administrative Agent, Documentation Agent, Collateral Agent and Syndication
Agent, and Citigroup Global Markets Inc., as Sole Lead Arranger and Sole
Bookrunner, but without giving effect to any amendments, modifications or supplements
to, or 

 

 

restatements or replacements
of, the Credit Agreement occurring after the Construction Closing Date.

 

 

EXHIBIT NO.
1

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

SCHEDULE

 

DATED
THIS      DAY OF
                              ,
20   

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

	
  Lessor & Mailing
  Address:

  	
   

  	
  Lessee & Mailing
  Address:

  
	
   

  	
   

  	
   

  
	
  GOSSAMER
  HOLDINGS, LLC

  	
   

  	
  CHICOPEE, INC.

  
	
  201
  Merritt Seven

  	
   

  	
  9335
  Harris Corners Parkway

  
	
  Norwalk,
  CT 06851 USA

  	
   

  	
  Suite 300

  
	
   

  	
   

  	
  Charlotte
  NC 28269

  

 

This Equipment Schedule is
executed pursuant to, and incorporates by reference the terms and conditions
of, and capitalized terms not defined herein shall have the meanings assigned
to them in, the Lease Agreement identified above (“Agreement”;
said Agreement and this Schedule being collectively referred to as “Lease”).  This
Equipment Schedule, incorporating by reference the Agreement, constitutes a
separate instrument of lease.

 

A.            Equipment.

 

Pursuant to the terms of the
Lease, Lessor agrees to acquire and lease to Lessee the Equipment listed on
Annex A attached hereto and made a part hereof.

 

B.            Financial Terms.

 

	
   

  	
  (a)

  	
  Capitalized Lessor’s Cost:

  	
  $56,486,000 Dollars

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Basic Term Lease Rate
  Factor:

  	
  1.321019%

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Basic Term:

  	
  Eighty-four 84 months

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Basic Term Commencement
  Date:

  	
  October 8, 2011

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Change Date

  	
  The first day following
  the close of business at the end of the 48th month of the Basic Term

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Equipment Location:

  	
  See Annex A

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Lessee Federal Tax ID No.

  	
  57-1013629

  

 

 Exhibit 1-1  

 

	
   

  	
  (h)

  	
  First EBO Date

  	
  October 8, 2013

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  First EBO Price

  	
  The greater of
  (i) 82.417714% of Capitalized Lessor’s Cost, plus any applicable
  Breakage Costs and (ii) the then Fair Market Value of the Equipment.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Second EBO Date

  	
  October 8, 2015

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (k)

  	
  Second EBO Price

  	
  The greater of
  (i) 61.177977% of the Capitalized Lessor’s Cost and (ii) the then
  Fair Market Value of the Equipment.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (l)

  	
  Stipulated Loss Value:

  	
  See Annex C attached for
  calculation of the Stipulated Loss Values for the Equipment during the Basic
  Term.

  

 

C.            Pricing Assumptions.

 

	
   

  	
  (a)

  	
  Basic Term Commencement
  Date:

  	
  October 8, 2011

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Equipment Cost

  	
  $55,096,000

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Capitalized Lessor’s Cost:

  	
  $56,486,000

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Lessor’s Tax Basis:

  	
  $55,096,000

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Lessor’s Transaction
  Expenses:

  	
  $1,390,000

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Lessor’s Funding Rate
  Index:

  	
  2.05% - The 4 year US
  dollar fixed interest rate swap

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Appraised Equipment Useful
  Life:

  	
  Not less than 10 years
  from Basic Term Commencement Date

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h) 

  	
  Appraised Fair Market
  Value (without regard to inflation) at Lease End: 

  	
  Not less than 20% of
  Equipment Cost 

  

 

D.            Tax Benefits, Assumptions and Representations.

 

Part 1. Tax Benefits
and Assumptions

 

The Net Economic Return of
the Lessor and each Member was computed based, in part, on the assumption that
the transactions contemplated by the Operative Documents will have the
following consequences for United States Federal and state and local income tax
purposes:

 

 Exhibit 1-2  

 

(a)           Provided that no election to treat
the Lessor as a corporation has been made, and provided neither Lessor nor any
Member takes any action to cause the tax treatment of the Lessor to change, the
Lessor will be treated as a partnership and the Members will be treated as the
only partners therein, and each Member will be entitled and required to take
into account, in computing its taxable income, its distributive share (based on
the allocations of such items between each Member as set forth in the LLC
Agreement of the Lessor) of all items of income, gain, loss, or deduction with
respect to the Equipment and the Lease.

 

(b)           Lessor will be treated as the owner
of the Equipment as of the date purchased, and the Lease will be treated as a “true
lease,” such that the Lessor will be treated as lessor and the lessee will be
treated as the lessee of the Equipment.

 

(c)           The Lessor will be entitled to cost
recovery deductions pursuant to Section 168(b) of the Code with
respect to one hundred percent of the Lessor’s Tax Basis commencing on the date
the entire Equipment is “placed in service” for purposes of section 168 of the
Code, computed on the basis that all of the Equipment is “7-year property”
within the meaning of section 168(c) of the Code, resulting in deductions
in each of the years set out below equal to the percentages of the Equipment
Cost set out below (provided that neither Lessor nor any Member makes any
election to exclude such treatment):

 

	
  2011

  	
   

  	
  14.29

  	
  %

  
	
  2012

  	
   

  	
  24.49

  	
  %

  
	
  2013

  	
   

  	
  17.49

  	
  %

  
	
  2014

  	
   

  	
  12.49

  	
  %

  
	
  2015

  	
   

  	
  8.93

  	
  %

  
	
  2016

  	
   

  	
  8.92

  	
  %

  
	
  2017

  	
   

  	
  8.93

  	
  %

  
	
  2018

  	
   

  	
  4.46

  	
  %

  

 

(d)           The Lessor will be entitled to
deductions for the amortization of 100% Lessor’s Transaction Costs computed on
a straight-line basis over the Term of the Lease.

 

(e)           Each Member will at all times be
subject to income tax at a Federal income tax rate of 35% and state and local
income tax rate of 7%, for a combined rate of 39.55%.

 

(f)            Lessor will not be required to report
any income during the term of the Lease, other than Basic Term Rent for the
periods to which it is allocated under the last sentence of Section 2(a) of
the Agreement, any payment of Stipulated Loss Value on the date payable in
accordance with the Lease,  or the
payment of purchase price by Lessee in connection with the exercise by Lessee
of a purchase option under the Lease.

 

Part 2. Lessee
Representations and Warranties

 

In
order to induce the Lessor and each Member to enter into the transactions
contemplated by the Operative Agreements, the Lessee hereby represents,
warrants to, and covenants with the Lessor and each Member that:

 

 Exhibit 1-3  

 

(a)       On the Basic Term Commencement Date, the
Equipment (and each component thereof) constitutes “7-year property” as defined
in section 168(e) of the Code, and on such date the entire Equipment will
be “placed in service” for purposes of section 168 of the Code;

 

(b)       The Equipment on the
Basic Term Commencement Date constitutes an “integrated facility”, which means
that the Equipment as designed and constructed is a fully-integrated and
self-contained facility, and each component of the Equipment is interrelated to
each other component of the Equipment in function and design, and no component
is designed or intended for use in commercial operation independently of the
other components;

 

(c)       On the Basic Term
Commencement Date, the Equipment will not require any improvements,
modifications or additions in order for the Equipment to be rendered complete
for its intended use by the Lessee (other than ancillary items of equipment of
a kind not necessary for the Equipment to operate and be treated as placed in
service);

 

(d)       Taking into account the
Site Lease and Support Agreement, the use of the Equipment by a person (other
than the Lessee or any affiliate of the Lessee) at the end of the Term of the
Lease is reasonably expected to be commercially feasible (where such
determination is made based on the standards that would be applied by
reasonably prudent businessmen on the basis of present knowledge and generally
accepted engineering standards), such that the Equipment is not and will not be
treated as “limited use” property for purposes of Rev. Proc. 2001-28;

 

(e)       All information supplied
by the Lessee or any Affiliate or agent of the Lessee  to the Lessor, any Member (or any Affiliate
of any Member), any independent appraiser or engineer or any independent
counsel with respect to the description, nature, function, testing and cost of
the Equipment, and with respect to the state of readiness of the Equipment when
delivered and accepted under the Lease, including, but not limited to, facts
relating to its intended use, economic life and residual value, was complete
and accurate at the time given and as of the Basic Term Commencement Date;

 

(f)        The remaining useful
life of the Equipment at the end of the Basic Term is reasonably expected to be
at least 20% of its original useful life as of the Basic Term Commencement
Date, and the Equipment is reasonably expected to have a fair market value of
at least 20% of the Equipment Cost (exclusive of the effects of inflation or
deflation) at the end of the Basic Term;

 

(g)       The Lessee will not
construct or install on the Equipment any component, improvement, alteration or
addition, unless such construction or installation will not adversely affect
the status of the Lease as a true lease for federal and state income tax
purposes or otherwise result in the Lessor or any Member being required to
include an amount in gross income for federal or state income tax purposes;

 

(h)       Neither the Lessee nor
any Affiliate of the Lessee will take a position on any tax return, amended tax
return or claim for refund or in connection with the examination of any such
return which is inconsistent with the intentions of the Lessor as set out in Section 1
hereof, and the Lessee will take such action and execute such documents as the
Lessor may 

 

 Exhibit 1-4  

 

reasonably
request to establish and protect the Lessor’s and each Member’s entitlement to
such benefits;

 

(i)        On the Basic Term
Commencement Date, the Equipment (and each component thereof) is not property
described in section 168(g)(1)(A), (B), (C) or (D) of the Code, and
at no time during the Term of the Lease will the Equipment (or any component
thereof) become property described in section 168(g)(1)(A), (B), (C) or (D) of
the Code, other than as the result of any action by the Lessor or any Member;

 

(j)        The Lessor shall not be
required to include in gross income for Federal or state income tax purposes
(including as a result of any recapture of MACRS deductions or corresponding
state deductions) at any time during the Term any amount as a result of (A) any
modification, replacement, maintenance or repairs with respect to the
Equipment; or (B) any agreement between the Lessee  and any supplier, vendor, contractor,
engineer or manufacturer;

 

(k)       The Equipment is
separate and distinct from any other equipment owned by the Lessee or any other
Person (other than the Lessor) and located on the Site (“Lessee’s Equipment”),
and is fully operable by a separate owner or operator, independent of the
Lessee’s Equipment;

 

(l)        Neither the physical
attributes of the Equipment, any purchase price available to the Lessee under
the Lease, the return conditions and requirement set forth in the Lease, the
costs to and potential obligations of the Lessee under the Operative Agreements
in the event the Lessee does not exercise any purchase option, the close
proximity and common housing of the Equipment and the Lessee’s Equipment, the
Basic Rent due under the Lease after any purchase option date, nor any other
factor known to the Lessee would created a material inducement to (or economically
compel) the Lessee to exercise any of the purchase options set forth in the
Lease; and

 

(m)      The close proximity and
common housing of the Equipment and the Lessee’s Equipment does not and will
not have any adverse effect on the ability of the Lessor to realize the full
anticipated residual value of the Equipment.

 

E.             Term and Rent.

 

(a)       Basic Term Rent.  Commencing on the Basic Term Commencement
Date and monthly thereafter on the corresponding day which is one month later
during the Basic Term (for a total of 84 installment payments of Rent), Lessee
shall pay as Rent for the Equipment (“Basic Term Rent”)
the product of the Basic Term Lease Rate Factor for the applicable Rent Payment
Date (as defined below) times the Capitalized Lessor’s Cost of the Equipment on
this Schedule.  Rent shall be allocated
and accrued for use of the Equipment for federal income tax purposes to the one
month period beginning on the date such Rent is scheduled to be paid.  Each date for the payment of Rent during the
Basic Term is herein referred to as a “Rent  Payment Date.”

 

(b)       If any Rent Payment Date
is not a Business Day, the Rent otherwise due on such date shall be payable on
the immediately preceding Business Day.

 

 Exhibit 1-5  

 

(c)       On the Change Date, the
Basic Term Lease Rate Factor shall be adjusted, up or down, in the event that
the 3-year US dollar fixed interest rate swap (vs. 90-day Libor), as determined
by Bloomberg Screen IRSB18 (Ask Rate), as of 11 AM two business days prior to
the Change Date is other than 1.60%. 
Such Basic Term Lease Rate Factor will be adjusted as follows:

 

(i)            The “Adjusted Lease Rate Factor” will be calculated so that
Lessor’s nominal pre-tax yield, calculated from the Change Date through the end
of the Basic Term, shall be increased or decreased by an amount equal to: (A) the
3 year US dollar fixed interest rate swap (vs. 90-day Libor), as determined by
Bloomberg Screen IRSB18 (Ask Rate), as of 11 AM two business days prior to the
Change Date, less (B) 1.60%; and

 

(ii)           The “New Basic Term Lease Rate Factor” will be equal to (C) the
Adjusted Lease Rate Factor plus (D) the Basic Term Lease Rate Factor in
effect prior to the Change Date, with the sum of C and D to be divided by 2.
This Schedule shall be amended to replace the value listed for the Basic Term
Lease Rate Factor with the New Basic Term Lease Rate Factor, and such
adjustment shall be effective from the Change Date through the end of the Basic
Term.

 

This Schedule is not binding
or effective with respect to the Agreement or Equipment until executed on
behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee,
respectively.

 

F.             Site.

 

	
  Site

  	
   

  	
  Owner
  of Equipment 

  at the Site

  	
   

  	
  Landlord

  	
   

  	
  Mortgagee

  
	
  Waynesboro, Virginia

  	
   

  	
  Gossamer Holdings, LLC

  	
   

  	
  Chicopee, Inc.

  	
   

  	
  Citicorp North
  America, Inc.

  

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

 Exhibit 1-6  

 

IN WITNESS WHEREOF, Lessee and
Lessor have caused this Schedule to be executed by their duly authorized
representatives as of the date first above written.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
  GOSSAMER
  HOLDINGS, LLC

  	
   

  	
  CHICOPEE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY: 

  	
  GENERAL ELECTRIC CREDIT
  CORPORATION OF TENNESSEE, its member 

  	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  ING SPUNMELT HOLDINGS LLC,
  its member

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  

 

 Exhibit 1-7  

 

ANNEX A

TO

SCHEDULE
NO.     

 

DATED
THIS      DAY OF
                              ,
20    

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

DESCRIPTION
OF EQUIPMENT

 

An integrated manufacturing
line in terms of design, function and manufacturing capabilities including (i) one
complete REICOFIL 4 SSMMS line for the production of heat sealed polypropylene
nonwoven fabrics, consisting of a 5-beam REICOFIL 4 Composite Extrusion Line, (ii) the
Packaging and Wrapping system consisting of an automated bundle sorting and
wrapping system that will accept custom-slit rolls from the production line,
allow an operator to sort rolls into appropriately sized bundles, then
automatically apply end protection and wrap each bundle with polyethylene
stretch film, (iii) the Mixing and dosing system consisting of a
batch-style mixing system used to prepare chemical solutions for application by
the production equipment, (iv) the Equipment lighting consisting of sealed
fluorescent lighting fixtures placed on the machine platform to illuminate all
levels of the production equipment (including without limitation with respect
to the items described in clauses (i) — (iv), the items described in Exhibit I
attached to this Annex A), (v) all parts or components of any of the
Equipment, including ones that are temporarily removed from the Equipment, (vi) all
manuals, Included IP, other licenses and records (other than Rent records
and Proprietary Information) with respect to such Equipment, and (vii) all
substitutions and replacements of any and all thereof, including, but not
limited to, any replacement equipment which may from time to time be
substituted for the Equipment leased hereunder; together in each case with any
and all Parts permanently incorporated or installed in or attached thereto or
any and all Required Modifications and Optional Modifications that are
Non-Severable Modifications, in each case, to which title thereto vests in the
Lessor pursuant to the terms of the Equipment Lease.

 

 

	
  Initials:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Lessor

  	
   

  	
  Lessee

  	
   

  

 

 Annex A-1  

 

Exhibit I
to ANNEX A

TO

SCHEDULE
NO.     

 

DATED
THIS      DAY OF
                              ,
20    

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

 

[to
come on Basic Term Commencement Date]

 

 Annex A-2  

 

ANNEX B

TO

SCHEDULE
NO.     

 

DATED
THIS      DAY OF
                              ,
200   

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

CERTIFICATE
OF ACCEPTANCE

 

To:          Gossamer Holdings, LLC, its successors and assigns

 

Pursuant to the provisions
of the above referenced Schedule and Lease Agreement (collectively, the “Lease”), Lessee hereby certifies and warrants that:

 

(a) all Equipment
listed in the related Bill of Sale is in good condition and appearance,
installed (if applicable) and in working order; and

 

(b) Lessee accepts the
Equipment for all purposes of the Lease, the purchase documents and all
attendant documents.

 

Lessee does further certify
that as of the date hereof (i) Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or under the Lease
are true and correct on the date hereof; and (iii) Lessee has reviewed and
approves of the purchase documents for the Equipment, if any.

 

DESCRIPTION
OF EQUIPMENT

 

	
  Manufacturer

  	
   

  	
  Type
  and Model

  of Equipment

  
	
  REICOFIL

  	
   

  	
  4 SSMMS line for the
  production of heat sealed polypropylene nonwoven fabrics, consisting of a
  5-beam REICOFIL 4 Composite Extrusion Line

  
	
  [                          ]

  	
   

  	
  [Package Wrapping System]

  
	
  [                          ]

  	
   

  	
  [Mixing and Dosing System]

  
	
  [                          ]

  	
   

  	
  [Equipment Lighting]

  

 

 Annex B-1  

 

The party below has caused
this Certificate of Acceptance to be executed by its duly authorized
representative.

 

 

	
  Dated:                         ,
  20   

  	
   

  	
   

  
	
   

  	
   

  	
  Lessee’s Authorized
  Representative

  

 

 Annex B-2  

 

ANNEX C

TO

SCHEDULE
NO.    

 

DATED
THIS      DAY OF
                              ,
20   

 

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

STIPULATED
LOSS VALUE TABLE

 

	
  Date

  	
   

  	
  # of base

  payments

  	
   

  	
  Stipulated

  Loss Value

  percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10/8/2011

  	
   

  	
  1

  	
   

  	
  107.52267950

  	
   

  
	
  11/8/2011

  	
   

  	
  2

  	
   

  	
  106.86474946

  	
   

  
	
  12/8/2011

  	
   

  	
  3

  	
   

  	
  106.19918977

  	
   

  
	
  1/8/2012

  	
   

  	
  4

  	
   

  	
  105.52594518

  	
   

  
	
  2/8/2012

  	
   

  	
  5

  	
   

  	
  104.84545459

  	
   

  
	
  3/8/2012

  	
   

  	
  6

  	
   

  	
  104.15766366

  	
   

  
	
  4/8/2012

  	
   

  	
  7

  	
   

  	
  103.46241269

  	
   

  
	
  5/8/2012

  	
   

  	
  8

  	
   

  	
  102.75968571

  	
   

  
	
  6/8/2012

  	
   

  	
  9

  	
   

  	
  102.04946676

  	
   

  
	
  7/8/2012

  	
   

  	
  10

  	
   

  	
  101.33173986

  	
   

  
	
  8/8/2012

  	
   

  	
  11

  	
   

  	
  100.60659537

  	
   

  
	
  9/8/2012

  	
   

  	
  12

  	
   

  	
  99.87391100

  	
   

  
	
  10/8/2012

  	
   

  	
  13

  	
   

  	
  99.13367077

  	
   

  
	
  11/8/2012

  	
   

  	
  14

  	
   

  	
  98.38594361

  	
   

  
	
  12/8/2012

  	
   

  	
  15

  	
   

  	
  97.63058366

  	
   

  
	
  1/8/2013

  	
   

  	
  16

  	
   

  	
  96.86755244

  	
   

  
	
  2/8/2013

  	
   

  	
  17

  	
   

  	
  96.09692060

  	
   

  
	
  3/8/2013

  	
   

  	
  18

  	
   

  	
  95.31865026

  	
   

  
	
  4/8/2013

  	
   

  	
  19

  	
   

  	
  94.53268299

  	
   

  
	
  5/8/2013

  	
   

  	
  20

  	
   

  	
  93.73898079

  	
   

  
	
  6/8/2013

  	
   

  	
  21

  	
   

  	
  92.93750565

  	
   

  
	
  7/8/2013

  	
   

  	
  22

  	
   

  	
  92.12821959

  	
   

  
	
  8/8/2013

  	
   

  	
  23

  	
   

  	
  91.31110555

  	
   

  
	
  9/8/2013

  	
   

  	
  24

  	
   

  	
  90.48610459

  	
   

  
	
  10/8/2013

  	
   

  	
  25

  	
   

  	
  89.65317870

  	
   

  
	
  11/8/2013

  	
   

  	
  26

  	
   

  	
  88.81231475

  	
   

  
	
  12/8/2013

  	
   

  	
  27

  	
   

  	
  87.96345703

  	
   

  
	
  1/8/2014

  	
   

  	
  28

  	
   

  	
  87.09396856

  	
   

  
	
  2/8/2014

  	
   

  	
  29

  	
   

  	
  86.21643907

  	
   

  
	
  3/8/2014

  	
   

  	
  30

  	
   

  	
  85.33083425

  	
   

  
	
  4/8/2014

  	
   

  	
  31

  	
   

  	
  84.43781707

  	
   

  

 

 Annex C-1  

 

	
  5/8/2014

  	
   

  	
  32

  	
   

  	
  83.53735635

  	
   

  
	
  6/8/2014

  	
   

  	
  33

  	
   

  	
  82.62942089

  	
   

  
	
  7/8/2014

  	
   

  	
  34

  	
   

  	
  81.71397950

  	
   

  
	
  8/8/2014

  	
   

  	
  35

  	
   

  	
  80.79029120

  	
   

  
	
  9/8/2014

  	
   

  	
  36

  	
   

  	
  79.85903458

  	
   

  
	
  10/8/2014

  	
   

  	
  37

  	
   

  	
  78.92017846

  	
   

  
	
  11/8/2014

  	
   

  	
  38

  	
   

  	
  77.97295389

  	
   

  
	
  12/8/2014

  	
   

  	
  39

  	
   

  	
  77.01803364

  	
   

  
	
  1/8/2015

  	
   

  	
  40

  	
   

  	
  76.05536964

  	
   

  
	
  2/8/2015

  	
   

  	
  41

  	
   

  	
  75.08417846

  	
   

  
	
  3/8/2015

  	
   

  	
  42

  	
   

  	
  74.10440720

  	
   

  
	
  4/8/2015

  	
   

  	
  43

  	
   

  	
  73.11678941

  	
   

  
	
  5/8/2015

  	
   

  	
  44

  	
   

  	
  72.12127727

  	
   

  
	
  6/8/2015

  	
   

  	
  45

  	
   

  	
  71.11782297

  	
   

  
	
  7/8/2015

  	
   

  	
  46

  	
   

  	
  70.10637870

  	
   

  
	
  8/8/2015

  	
   

  	
  47

  	
   

  	
  69.08608981

  	
   

  
	
  9/8/2015

  	
   

  	
  48

  	
   

  	
  68.05771531

  	
   

  
	
  10/8/2015

  	
   

  	
  49

  	
   

  	
  67.02120737

  	
   

  
	
  11/8/2015

  	
   

  	
  50

  	
   

  	
  65.97572114

  	
   

  
	
  12/8/2015

  	
   

  	
  51

  	
   

  	
  64.92205107

  	
   

  
	
  1/8/2016

  	
   

  	
  52

  	
   

  	
  63.86017196

  	
   

  
	
  2/8/2016

  	
   

  	
  53

  	
   

  	
  62.78923091

  	
   

  
	
  3/8/2016

  	
   

  	
  54

  	
   

  	
  61.70920001

  	
   

  
	
  4/8/2016

  	
   

  	
  55

  	
   

  	
  60.61938052

  	
   

  
	
  5/8/2016

  	
   

  	
  56

  	
   

  	
  59.51974240

  	
   

  
	
  6/8/2016

  	
   

  	
  57

  	
   

  	
  58.41025560

  	
   

  
	
  7/8/2016

  	
   

  	
  58

  	
   

  	
  57.29089007

  	
   

  
	
  8/8/2016

  	
   

  	
  59

  	
   

  	
  56.16229530

  	
   

  
	
  9/8/2016

  	
   

  	
  60

  	
   

  	
  55.02376172

  	
   

  
	
  10/8/2016

  	
   

  	
  61

  	
   

  	
  53.87525929

  	
   

  
	
  11/8/2016

  	
   

  	
  62

  	
   

  	
  52.71745182

  	
   

  
	
  12/8/2016

  	
   

  	
  63

  	
   

  	
  51.54963237

  	
   

  
	
  1/8/2017

  	
   

  	
  64

  	
   

  	
  50.37177937

  	
   

  
	
  2/8/2017

  	
   

  	
  65

  	
   

  	
  49.18456127

  	
   

  
	
  3/8/2017

  	
   

  	
  66

  	
   

  	
  47.98795807

  	
   

  
	
  4/8/2017

  	
   

  	
  67

  	
   

  	
  46.78460595

  	
   

  
	
  5/8/2017

  	
   

  	
  68

  	
   

  	
  45.57449085

  	
   

  
	
  6/8/2017

  	
   

  	
  69

  	
   

  	
  44.35759868

  	
   

  
	
  7/8/2017

  	
   

  	
  70

  	
   

  	
  43.13391536

  	
   

  
	
  8/8/2017

  	
   

  	
  71

  	
   

  	
  41.90074685

  	
   

  
	
  9/8/2017

  	
   

  	
  72

  	
   

  	
  40.66075904

  	
   

  
	
  10/8/2017

  	
   

  	
  73

  	
   

  	
  39.41393786

  	
   

  
	
  11/8/2017

  	
   

  	
  74

  	
   

  	
  38.15757142

  	
   

  
	
  12/8/2017

  	
   

  	
  75

  	
   

  	
  36.89434346

  	
   

  
	
  1/8/2018

  	
   

  	
  76

  	
   

  	
  35.62423990

  	
   

  
	
  2/8/2018

  	
   

  	
  77

  	
   

  	
  34.34453103

  	
   

  
	
  3/8/2018

  	
   

  	
  78

  	
   

  	
  33.05512290

  	
   

  
	
  4/8/2018

  	
   

  	
  79

  	
   

  	
  31.76697002

  	
   

  
	
  5/8/2018

  	
   

  	
  80

  	
   

  	
  30.48007238

  	
   

  
	
  6/8/2018

  	
   

  	
  81

  	
   

  	
  29.19442999

  	
   

  

 

 Annex C-2  

 

	
  7/8/2018

  	
   

  	
  82

  	
   

  	
  27.91004284

  	
   

  
	
  8/8/2018

  	
   

  	
  83

  	
   

  	
  26.61592287

  	
   

  
	
  9/8/2018

  	
   

  	
  84

  	
   

  	
  25.32306555

  	
   

  
	
  10/8/2018

  	
   

  	
   

  	
   

  	
  25.00000000

  	
   

  

 

 Annex C-3  

 

EXHIBIT NO.
2

TO

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

FORM OF
ACCEPTABLE LETTER OF CREDIT

 

	
   

  	
   

  	
  VALUE DATE: 

  
	
   

  	
   

  	
  L/C NO.: 

  
	
   

  	
   

  	
  APPLICANT REFERENCE NO: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TO:

  	
   

  	
  APPLICANT:

  
	
  GOSSAMER HOLDINGS, LLC

  	
   

  	
  CHICOPEE, INC.

  
	
  201 MERRITT SEVEN

  	
   

  	
  9335 HARRIS CORNERS PKWY,

  
	
  NORWALK, CT 06851 USA

  	
   

  	
  SUITE 300

  
	
  ATTENTION: ANNIE SCHORR

  	
   

  	
  CHARLOTTE, NC 28269

  
	
   

  	
   

  	
  ATTENTION: DENNIS NORMAN

  

 

WITH A COPY TO:

GOSSAMER HOLDINGS, LLC

C/O ING
SPUNMELT HOLDINGS LLC

200 GALLERIA PARKWAY, STE.
950

ATLANTA, GEORGIA  30339 USA

ATTENTION: JERRY L. MCDONALD

 

WE HAVE ESTABLISHED OUR
IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR AS DETAILED HEREIN SUBJECT
TO ISP98.

 

	
  DOCUMENTARY CREDIT NUMBER:

  	
   

  	
  [                          ]

  
	
   

  	
   

  	
   

  
	
  DATE OF ISSUE:

  	
   

  	
  - VALUE DATE -

  
	
   

  	
   

  	
   

  
	
  BENEFICIARY:

  	
   

  	
  GOSSAMER HOLDINGS, LLC

  
	
   

  	
   

  	
  201 MERRITT SEVEN

  
	
   

  	
   

  	
  NORWALK, CT 06851 USA

  
	
   

  	
   

  	
   

  
	
  APPLICANT:

  	
   

  	
  CHICOPEE, INC.

  
	
   

  	
   

  	
  9335 HARRIS CORNERS PKWY,

  
	
   

  	
   

  	
  SUITE 300

  
	
   

  	
   

  	
  CHARLOTTE, NC 28269

  
	
   

  	
   

  	
   

  
	
  DATE AND PLACE OF EXPIRY:

  	
   

  	
  [INSERT SPECIFIC DATE] at
  the office of our Servicer, Citicorp North America, Inc., 3800 Citibank
  Center, Building B, 3rd Floor, Tampa, Fl 33610

  

 

 Exhibit 2-1  

 

	
  DOCUMENT CREDIT AMOUNT:

  	
   

  	
  USD
  [                            ]

  
	
   

  	
   

  	
   

  
	
  AVAILABLE WITH:

  	
   

  	
  [ISSUING BANK]

  
	
   

  	
   

  	
  [LOCATION]

  
	
   

  	
   

  	
  BY PAYMENT AT SIGHT

  

 

IT IS A CONDITION OF THIS
LETTER OF CREDIT THAT IT SHALL BE AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR
ADDITIONAL 12 MONTH PERIODS FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE,
UNLESS AT LEAST 30 DAYS PRIOR TO THE CURRENT EXPIRY DATE WE SEND NOTICE IN
WRITING TO YOU WITH A COPY TO GOSSAMER HOLDINGS INC. C/O ING SPUNMELT HOLDINGS
LLC , 200 GALLERIA PARKWAY, STE. 950, ATLANTA, GEORGIA  30339 USA, ATTENTION: JERRY L. MCDONALD, BY
COURIER OR ANY OTHER RECEIPTED MEANS AT THE ABOVE ADDRESS, THAT WE ELECT NOT TO
AUTOMATICALLY EXTEND THIS LETTER OF CREDIT FOR ANY ADDITIONAL PERIOD. PROVIDED
HOWEVER, THE NON-RECEIPT OF THE ELECTION NOT TO RENEW BY THE BENEFICIARY’S CARE
OF PARTY WILL NOT INVALIDATE OUR NON-RENEWAL OF THIS LETTER OF CREDIT.

 

IN THE EVENT THIS LETTER OF
CREDIT IS SUBSEQUENTLY AMENDED BY US TO RESCIND A NOTICE OF NON-EXTENSION AND
TO EXTEND THE EXPIRY DATE HEREOF TO A FUTURE DATE, SUCH EXTENSION SHALL BE FOR
THAT SINGLE PERIOD ONLY AND THIS LETTER OF CREDIT WILL NOT BE SUBJECT TO ANY
FUTURE AUTOMATIC EXTENSIONS UNLESS AN AUTOMATIC EXTENSION PROVISION IS
EXPRESSLY INCORPORATED INTO SUCH AMENDMENT.

 

ADDITIONAL DETAILS:

 

WE HEREBY ESTABLISH THIS
IRREVOCABLE STANDBY LETTER OF CREDIT NO.
[                  ]
IN FAVOR OF THE ABOVE MENTIONED BENEFICIARY FOR AN AGGREGATE AMOUNT NOT TO
EXCEED THE AMOUNT INDICATED ABOVE, EXPIRING AT THE OFFICE OF OUR SERVICER WITH
THEIR CLOSE OF BUSINESS ON
[                            ].  YOU ARE HEREBY IRREVOCABLY AUTHORIZED TO MAKE
ONE OR MORE DEMANDS UNDER THIS LETTER OF CREDIT, THE AGGREGATE AMOUNT OF WHICH
DEMAND(S) SHALL NOT EXCEED THE AMOUNT STATED ABOVE.

 

THIS LETTER OF CREDIT IS
AVAILABLE WITH [ISSUING BANK] , AND IS EFFECTIVE IMMEDIATELY, AGAINST
PRESENTATION OF BENEFICIARY DRAFT(S) AT SIGHT DRAWN ON [ISSUING BANK] ,
WHEN ACCOMPANIED BY THE DOCUMENTS INDICATED HEREIN.

 

1.  BENEFICIARY’S DATED STATEMENT PURPORTEDLY
SIGNED BY ONE OF ITS AUTHORIZED SIGNATORIES INDICATING THIS LETTER OF CREDIT
NUMBER AND READING AS FOLLOWS:

 

 Exhibit 2-2  

 

“BENEFICIARY HEREBY DEMANDS
PAYMENT OF USD
                              
UNDER THE [ISSUING BANK]  IRREVOCABLE
STANDBY LETTER OF CREDIT NUMBER
[                              ]
BECAUSE OF ONE OR MORE OF THE FOLLOWING:

 

(I) “THE AMOUNT OF THIS
DRAWING REPRESENTS AMOUNTS DUE FROM CHICOPEE, INC. (“CHICOPEE”) UNDER THE
TERMS OF THE CONSTRUCTION AGENCY AGREEMENT (“CAA”), DATED AS OF JUNE
[    ], 2010 BETWEEN CHICOPEE AND BENEFICIARY AND/OR THE
EQUIPMENT LEASE AGREEMENT (“LEASE”), DATED AS OF JUNE
[    ,] 2010, BETWEEN CHICOPEE AND BENEFICIARY,” OR

 

(II) “A PETITION HAS
BEEN FILED BY OR AGAINST POLYMER GROUP, INC. OR CHICOPEE, INC., UNDER
ANY BANKRUPTCY, INSOLVENCY OR SIMILAR LAW,” OR

 

(III) “BENEFICIARY HAS
RECEIVED A NOTICE FROM [ISSUING BANK]  TO
THE EFFECT THAT THE [ISSUING BANK] 
IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER
[                              ]
WILL NOT BE AUTOMATICALLY RENEWED OR EXTENDED.”

 

2.  THE ORIGINAL LETTER OF CREDIT AND ALL
CORRESPONDING AMENDMENTS, IF ANY.

 

THIS LETTER OF CREDIT IS
TRANSFERABLE IN ITS ENTIRETY (BUT NOT IN PART) AND [ISSUING BANK] ONLY IS
AUTHORIZED TO ACT AS THE TRANSFERRING BANK. 
WE SHALL NOT RECOGNIZE ANY TRANSFER OF THIS LETTER OF CREDIT UNTIL THIS ORIGINAL
LETTER OF CREDIT, TOGETHER WITH ANY AMENDMENTS AND A SIGNED AND COMPLETED
TRANSFER FORM, ATTACHED HERETO AS PER ANNEX A, IS RECEIVED BY US AND OUR
TRANSFER CHARGES OF 1⁄4 OF 1 PERCENT OF THE TRANSFERRED AMOUNT, MINIMUM $150.00
ARE PAID BY BANK OR CERTIFIED CHECK.  THE
CORRECTNESS OF THE SIGNATURE AND TITLE OF THE PERSON SIGNING THE TRANSFER FORMS
MUST BE VERIFIED BY YOUR BANK.  IN CASE
OF ANY TRANSFER UNDER THIS LETTER OF CREDIT, THE DRAFT AND ANY REQUIRED
STATEMENT MUST BE EXECUTED BY THE TRANSFEREE. 
THIS LETTER OF CREDIT MAY NOT BE TRANSFERRED TO ANY PERSON WITH
WHICH U.S. PERSONS ARE PROHIBITED FROM DOING BUSINESS UNDER U.S. FOREIGN ASSETS
CONTROL REGULATIONS OR OTHER APPLICABLE U.S. LAWS AND REGULATIONS.

 

TRANSFER CHARGES ARE FOR THE
ACCOUNT OF THE APPLICANT.

 

PARTIAL AND
MULTIPLE DRAWINGS PERMITTED.

 

WE HEREBY AGREE WITH YOU
THAT ALL DRAFTS AND DOCUMENTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THIS LETTER OF CREDIT WILL BE DULY HONORED AND PAYMENT WILL BE
MADE HEREUNDER ON THE BUSINESS DAY NEXT SUCCEEDING THE BUSINESS DAY OF RECEIPT
OF THE BENEFICIARY’S DEMAND (WHETHER DELIVERED IN PERSON, OR

 

 Exhibit 2-3  

 

BY COURIER).  
[ISSUING BANK]  WILL EFFECT
PAYMENT BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS (IN UNITED STATES
DOLLARS) TO THE BENEFICIARY’S ACCOUNT NO. 50286772 AT DEUTSCHE BANK, NEW YORK
BRANCH, ABA NUMBER 021001033, ACCOUNT NAME: GOSSAMER HOLDINGS, LLC, CUSTOMER:
POLYMER GROUP, INC., OR TO SUCH OTHER ACCOUNT AS THE BENEFICIARY MAY DIRECT
IN WRITING.

 

WE AGREE, FOLLOWING OUR
RECEIPT THEREOF, TO EXAMINE ALL DOCUMENTS PURPORTING TO REPRESENT THE
BENEFICIARY’S DEMAND TO ASCERTAIN THAT SUCH DOCUMENTS CONFORM TO THE TERMS
AND CONDITIONS HEREOF.  WE SHALL, WITHOUT
DELAY (BUT IN ANY EVENT, BEFORE THE END OF THE BUSINESS DAY NEXT FOLLOWING THE
DATE OF OUR RECEIPT OF THE DOCUMENTS), GIVE NOTICE TO YOU IF ANY DEMAND FOR
PAYMENT HEREUNDER IS NOT IN ACCORDANCE WITH THE TERMS AND CONDITIONS HEREOF,
STATING THE REASONS THEREFOR AND THAT THE RELEVANT DOCUMENT OR DOCUMENTS ARE
BEING HELD AT YOUR DISPOSAL OR ARE BEING RETURNED TO YOU, AS YOU MAY ELECT.  WHEREUPON YOU SHALL BE ENTITLED TO SUBMIT,
SUBJECT TO THE TERMS HEREOF, CORRECTED DOCUMENTS WHICH CONFORM TO THE
TERMS HEREOF.  PAYMENTS MADE IN RESPECT
OF ANY DRAWING SHALL REDUCE BY THE AMOUNT OF SUCH DRAWING THE AMOUNT INDICATED
ABOVE.  ALL AMOUNTS TO BE PAID UNDER THIS
LETTER OF CREDIT SHALL BE MADE WITHOUT ANY SET-OFF OR COUNTERCLAIM.

 

WE HEREBY AGREE WITH YOU
THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS LETTER OF CREDIT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK CITY.  BY US SIGNING THIS LETTER OF CREDIT, AND BY
YOU MAKING A PRESENTATION HEREUNDER, EACH OF US IRREVOCABLY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS FOR PURPOSES OF THIS LETTER OF
CREDIT.  EACH OF US IRREVOCABLY WAIVES TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION EITHER OF US MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.  EACH OF US HEREBY AGREES TO
RECEIVE AND ACCEPT SERVICE OF PROCESS SENT BY REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT COURIER TO THE ADDRESS TO WHICH NOTICES HEREUNDER ARE GIVEN.

 

WE HEREBY AGREE WITH YOU
THAT WE SHALL HAVE NO DUTY OR RIGHT TO INQUIRE AS TO THE BASIS UPON WHICH
BENEFICIARY HAS DETERMINED TO PRESENT US ANY DRAFT UNDER THIS LETTER OF CREDIT.

 

THIS LETTER
OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNATIONAL STANDBY PRACTICES 1998, INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 590, AND, TO THE EXTENT NOT INCONSISTENT THEREWITH, THE LAWS OF
THE STATE OF NEW YORK AS IN EFFECT FROM TIME TO TIME.

 

 Exhibit 2-4  

 

THE NUMBER AND THE DATE OF
OUR CREDIT AND THE NAME OF OUR BANK MUST 
BE QUOTED ON ALL DRAFTS REQUIRED.

 

PLEASE DIRECT ALL DRAWINGS
AND CORRESPONDENCE IN CONNECTION WITH THIS LETTER OF CREDIT TO [ISSUING BANK],
ATTENTION
[                ],
[ADDRESS].

 

 

	
   

  	
   

  
	
   

  	
  Authorized Signature

  

 

 Exhibit 2-5  

 

ANNEX A

Transfer
of Letter of Credit in its Entirety

Relinquishing
all  Rights as Beneficiary

 

( This form is to be used
when the Letter of Credit is to be Transferred in its entirety and , no
substitution of invoices is involved and, no rights are to be retained by the
undersigned Beneficiary. )

 

	
  Citibank,
  N.A.

  	
  Date:

  
	
  c/o Citicorp North
  America, Inc.

  	
   

  
	
  3800 Citibank Center,

  	
   

  
	
  Building B, 3rd Floor

  	
   

  
	
  Tampa, Florida 33610

  	
   

  
	
  Attn. Standby Unit

  	
   

  

 

	
   

  	
  Re: L/C No.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Issued by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Citibank,
  N.A. Ref:

  	
   

  	
   

  
					

 

Gentlemen:

 

Receipt is acknowledged of
the original instrument which you forwarded to us relative to the issuance of a
Letter of Credit ( herein called the “Credit” ) 
bearing your reference number as above in favor of ourselves and/or
Transferees and we hereby request you to transfer the said Letter of Credit, in
its entirety, to:

 

	
   

  	
   

  
	
   

  	
   

  
	
  whose address is

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
			

 

( Optional )  Please advise Beneficiary through the  below indicated Advising Bank:

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

We are returning the
original instrument to you herewith in order that you may deliver it to the
Transferees together with your customary letter of transfer.

 

It is understood that any
amendments to the Letter of Credit which you may receive are to be advised by
you directly to the Transferees and that the drafts and documents of the
Transferees, if issued in accordance with the conditions of the Letter of
Credit, are to be forwarded by you directly to the party for whose account the
credit was opened (or any intermediary) without our intervention.

 

 Exhibit 2-6  

 

	
  SIGNATURE GUARANTEED

  	
   

  	
  Sincerely yours,

  
	
   

  	
   

  	
   

  
	
  The First Beneficiary’s
  signature(s) with title(s) conforms with that on file with us and
  such is/are authorized for the execution of this instrument. 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name of Bank)

  	
   

  	
  (Name of First
  Beneficiary)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Bank Address)

  	
   

  	
  (Telephone Number)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City, State, Zip Code)

  	
   

  	
  (Authorized Name and
  Title)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Telephone Number)

  	
   

  	
  (Authorized Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Authorized Name and Title)

  	
   

  	
  (Authorized Name and
  Title)

  
	
   

  	
   

  	
  ( If applicable )

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Authorized Signature)

  	
   

  	
  (Authorized Signature)

  
	
   

  	
   

  	
  ( If applicable )

  

 

 Exhibit 2-7  

 

EXHIBIT NO.
3

TO

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

FORM OF
GUARANTY

 

See
attached.

 

 Exhibit 3-1  

 

GUARANTY

 

GUARANTY
(this “Guaranty”), dated as of June 24, 2010, by POLYMER GROUP, INC.
(“PGI”) and PGI POLYMER, INC. (“Polymer” and together with
PGI, the “Guarantors” and individually, each a “Guarantor”), in
favor of Gossamer Holdings, LLC, as Owner and Lessor (in such capacity,
together with its successors and permitted assigns, the “Beneficiary”).

 

W I T N E S S E T H :

 

WHEREAS,
Chicopee, Inc., a Delaware corporation (the “Company”), as Construction
Agent, and the Beneficiary, as Owner, have entered into a Construction Agency
Agreement, dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the “CAA”) for the purchase,
delivery, construction and installation of the Equipment (as defined therein);
and

 

WHEREAS,
the Company, as lessee, and the Beneficiary, as lessor, have entered into an
Equipment Lease Agreement dated as of the date hereof (collectively, with all
schedules entered into in connection therewith and as such agreement or any
schedule is amended, restated, supplemented or otherwise modified from time to
time, the “Equipment Lease”) for the lease by Beneficiary to the Company
of the Equipment; and

 

WHEREAS,
the Company is a wholly-owned subsidiary of Polymer, and Polymer is a
wholly-owned subsidiary of PGI; and

 

WHEREAS,
each Guarantor will receive substantial direct and indirect benefits by reason
of the CAA, the Equipment Lease and the transactions contemplated thereby
(which benefits are hereby acknowledged);

 

NOW,
THEREFORE, in order to induce the Beneficiary to execute and deliver the CAA,
the Equipment Lease (including the schedule thereto) and the other Operative
Documents, and in consideration thereof, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, each Guarantor
hereby agrees as follows:

 

1.             Capitalized
Terms.  Capitalized terms used but not
defined in this Guaranty shall have the meaning ascribed to such terms in
Appendix I to the Equipment Lease.

 

2.             Guaranty.  Each
Guarantor hereby, jointly and severally, absolutely, unconditionally and
irrevocably guarantees to the Beneficiary, as primary obligor and not
merely as surety, the full and prompt payment and performance when due of all
obligations of the Company under the CAA, the Equipment Lease and each other
Operative Document to which the Company is a party (the “Guaranteed
Obligations”).

 

 Exhibit 3-2  

 

All payments by Guarantor
hereunder shall be made in U.S. Dollars, to:

 

	
   

  	
  Bank:

  	
  Deutsche
  Bank

  
	
   

  	
  Branch:

  	
  New
  York

  
	
   

  	
  Bank
  Account #:

  	
  50286772

  
	
   

  	
  ABA:

  	
  021001033

  
	
   

  	
  Account Name:

  	
  Gossamer
  Holdings, LLC

  
	
   

  	
  Customer:

  	
  Polymer
  Group, Inc.

  

 

3.             Nature of Guarantor’s
Obligations.  This Guaranty shall
constitute a guarantee of payment and performance and not of collection.  Each Guarantor, jointly and severally,
guarantees that the Guaranteed Obligations will be paid and performed strictly
in accordance with the terms of the CAA, the Equipment Lease and the other
Operative Documents (including, without limitation, payment by the Company of
all amounts due to the Beneficiary pursuant to the terms of any of the
Operative Documents and regardless of any defense to, or excuse from, payment
or performance which the Company may have under Applicable Laws).  The obligations of each Guarantor hereunder
are joint and several, irrevocable,
absolute, unconditional, present and continuing obligations which are not
conditional upon the exercise of any remedies against the Company or the making
of a demand against the Company or the filing of a suit to obtain or assert a
claim for personal judgment against the Company for the Guaranteed Obligations
or the making of an effort at collecting the Guaranteed Obligations from the
Company, or any attempt to foreclose or realize upon any security for
obligations of the Company or the taking of any other action with respect to
the Company, it being expressly acknowledged and agreed that Guarantor shall be
directly obligated hereunder, for all amounts payable by the Company under the
CAA, the Equipment Lease and the other Operative Documents and for breaches of
or failures to perform or observe, or any other noncompliance with any
covenant, condition or agreement or other obligation to be performed by the
Company under any of the CAA, the Equipment Lease or the other Operative
Documents or the inaccuracy of any representation or warranty of the Company in
any of the CAA, the Equipment Lease or the other Operative Documents.  The liability of each Guarantor under this
Guaranty shall not be subject to any counterclaim, setoff, deduction, release,
recoupment or defense (statutory or otherwise) (other than the defense of
payment in full of the Guaranteed Obligations) under the laws of the United
States or any State thereof or otherwise and shall remain in full force and
effect and shall be irrevocable, absolute and unconditional, irrespective of:

 

(i)             any
lack of validity, genuineness, regularity or enforceability of the CAA, the
Equipment Lease or any of the other Operative Documents or any other agreement
or instrument relating thereto;

 

(ii)            any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Guaranteed Obligations, or any other amendment, or waiver of or
any consent to departure from the CAA, the Equipment Lease or the other
Operative Documents;

 

 Exhibit 3-3  

 

(iii)           the
existence, value, condition, loss, subordination, exchange, release or
non-perfection of any collateral, or any release or amendment, modification,
changes or waiver of or consent to departure from any other guarantee, for all
or any of the Guaranteed Obligations;

 

(iv)          any
bankruptcy or insolvency of, or any merger or consolidation of, or any sale of
shares in, the Company;

 

(v)           any
failure or delay by the Beneficiary to pursue remedies under the CAA, the
Equipment Lease or any of the other Operative Documents or under law against
the Company;

 

(vi)          the
pursuit by the Beneficiary of whatsoever remedies there may be against the
Company, any other guarantor or any security or any other credit support for
any or all of the Guaranteed Obligations;

 

(vii)         any
claim as a result of any other dealing between the Beneficiary and the Company;

 

(viii)        any
defect in the title, condition, design, operation or fitness for use of, or
damage or loss or destruction of, the Equipment (or any part thereof), whether
or not due to the fault of the Company or any other Person,

 

(ix)           any
assignment, sublease, transfer or other arrangement by which the Company transfers
possession or loses control of the use of any of the Equipment (other than as
permitted by the CAA, the Equipment Lease or any other Operative Document);

 

(x)            any
release of, extension of time for payment or performance by or any other
indulgence granted to the Company or any other Person with respect to the
Guaranteed Obligations by operation of law or otherwise; or

 

(xi)           any
other occurrence or circumstances whatsoever, whether similar or dissimilar to
the foregoing and any other circumstances (other than actual payment or
performance) that might otherwise constitute a legal, statutory or equitable
defense or discharge of the liabilities of a guarantor or surety, or of the
Company under the CAA, the Equipment Lease or the other Operative Documents
that might otherwise limit recourse against Guarantor under this Guaranty or
otherwise to the extent such defense or discharge can be waived under
applicable law.

 

4.             Authorization; Other
Agreements.  The
Beneficiary is hereby authorized, without notice to or demand upon any
Guarantor and without discharging or otherwise affecting the obligations of any
Guarantor hereunder and without incurring any liability hereunder, from time to
time, to do each of the following:

 

(i)           modify, amend, supplement or otherwise change, (ii) accelerate or
otherwise change the time of payment or (iii) waive or otherwise consent
to

 

 

 Exhibit 3-4  

 

noncompliance with, any Guaranteed Obligation
or any of the CAA, the Equipment Lease or any other Operative Document;

 

(ii)          apply to the Guaranteed Obligations
any sums by whomever paid or however realized to any Guaranteed Obligation in
such order as provided in the CAA, the Equipment Lease or the other Operative
Documents;

 

(iii)         refund at any time any payment received
by the Beneficiary in respect of any Guaranteed Obligation;

 

(iv)         sell, exchange, enforce, waive,
substitute, liquidate, terminate, release, abandon, fail to perfect,
subordinate, accept, substitute, surrender, exchange, affect, impair or
otherwise alter or release any collateral for any Guaranteed Obligation or any
other guaranty therefor in any manner, (ii) receive, take and hold
additional collateral to secure any Guaranteed Obligation, (iii) add,
release or substitute any one or more other Guarantors, makers or endorsers of
any Guaranteed Obligation or any part thereof and (iv) otherwise deal in
any manner with the Company and any other Guarantor, maker or endorser of any
Guaranteed Obligation or any part thereof; and

 

(v)          settle, release, compromise, collect
or otherwise liquidate the Guaranteed Obligations.

 

5.             Reinstatement.  This Guaranty shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, in whole or in
part, of any of the sums due to the Beneficiary pursuant to the terms of the
CAA, the Equipment Lease or any of the other Operative Documents is rescinded
or must otherwise be restored or returned upon the bankruptcy, insolvency,
reorganization, arrangement, adjustment, composition, dissolution, liquidation
or the like, of the Company, or upon or as a result of, the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Company or any substantial part of its property, or otherwise, all as
though such payment had not been made notwithstanding any termination of this
Guaranty, the CAA, the Equipment Lease or any of the other Operative
Documents.  Indefeasible fulfillment by
the Company or any Guarantor of any of the Guaranteed Obligations shall dispose
of any claim hereunder with respect to, and to the extent of, such Guaranteed
Obligations and indefeasible payment and performance in full by the Company or
any Guarantor acknowledged in writing by the Beneficiary shall terminate this
Guaranty.

 

6.             Reliance.  Each Guarantor hereby assumes responsibility
for keeping itself informed of the financial condition of the Company, each
other Guarantor and any other guarantor, maker or endorser of any Guaranteed
Obligation or any part thereof, and of all other circumstances bearing upon the
risk of nonpayment of any Guaranteed Obligation or any part thereof, that
diligent inquiry would reveal, and each Guarantor hereby agrees that the
Beneficiary shall not have any duty to advise any Guarantor of information
known to it regarding such condition or any such circumstances.  In the event the Beneficiary, in its sole
discretion, undertakes at any time or from time to time to provide

 

 Exhibit 3-5  

 

any
such information to any Guarantor, the Beneficiary shall be under no obligation
to (a) undertake any investigation not a part of its regular business
routine, (b) disclose any information that the Beneficiary, pursuant to
accepted or reasonable commercial finance or banking practices, wishes to
maintain confidential or (c) make any future disclosures of such
information or any other information to any Guarantor

 

7.             Waiver, Subrogation
and Subordination.

 

(i)             Each
Guarantor hereby waives (a) notice of any of the foregoing matters,
(b) promptness, diligence, demand, protest, proof or notice of nonpayment
and notice of acceptance and (c) any other notice with respect to any of
the Guaranteed Obligations and this Guaranty except for such notices as are
required to be made to Guarantor by the express terms of this Guaranty, the
CAA, the Equipment Lease or the other Operative Documents.

 

(ii)          Notwithstanding
any payment or payments made by any Guarantor, no Guarantor shall be subrogated
to any rights of the Beneficiary against the Company until all of the
Guaranteed Obligations then due shall have been finally, indefeasibly and
unconditionally paid and performed in full. 
Any claim of any Guarantor against the Company or arising from payments
made by any Guarantor by reason of this Guaranty shall be in all respects
subordinated to the final, indefeasible, unconditional, full and complete
payment or discharge of all of the Guaranteed Obligations, and no payment by
any Guarantor shall give rise to any claim of any Guarantor against the
Beneficiary.

 

(iii)         So
long as the Guaranteed Obligations remain outstanding, if any amount shall be
paid to any Guarantor relating to any of the rights waived in this Paragraph 7,
such amount shall be held by such Guarantor in trust for the benefit of the
Beneficiary, and shall from there be turned over to the Beneficiary in the
exact form received by such Guarantor (duly endorsed by such Guarantor to the
Beneficiary, if required), to be applied against the Guaranteed Obligations,
whether matured or unmatured, in such order as may be specified by the CAA, the
Equipment Lease and the other Operative Documents.

 

8.             Taxes on
Payments.  All payments hereunder shall
be made free and clear of, and without any deduction or withholding for or on account
of, any taxes, levies, fees, imposts, duties, assessments or other charges,
together with all penalties, fines, additions to tax and interest thereon;
provided, that if any such taxes are required under applicable law, regulation
or otherwise to be deducted or withheld from any payment to the Beneficiary
hereunder, then each Guarantor shall pay an additional amount such that after
deduction for any withholdings (including withholdings on such additional
amount), the Beneficiary shall receive the same amount it would have received
in the absence of such withholdings. 
Each Guarantor, jointly and severally, shall indemnify and hold the
Beneficiary harmless on an after-tax basis for any incremental taxes imposed against,
or suffered by, the Beneficiary that result from payments being made pursuant
to this Guaranty rather than pursuant to the CAA, the Equipment Lease or the
other Operative Documents.

 

 Exhibit 3-6  

 

9.             Rights of Third
Parties.  This Guaranty is made for the
benefit of, and shall be enforceable by the Beneficiary and its successors and
permitted assigns to the extent of its interest in the Guaranteed
Obligations.  This Guaranty shall not be
construed to create any right in any Person other than the Beneficiary and its
respective permitted successors and assigns or to be a contract in whole or in
part for the benefit of any Person other than the Beneficiary and its
successors and permitted assigns.

 

10.           Rights to Deal with
the Company.  At any time and from time
to time, without terminating, affecting or impairing the validity of this
Guaranty or the obligations of the Guarantors hereunder, the Beneficiary may
deal with the Company in the same manner and as fully as if this Guaranty did
not exist and shall be entitled, among other things, to grant the Company such
extension or extensions of time to perform, or to waive any obligation of the
Company to perform, any act or acts as the Beneficiary may deem advisable, and
no such waiver or extension shall in any way limit or otherwise affect any of
the Guarantors’ obligations hereunder.

 

11.           Notices.  All notices required to be given hereunder
shall be deemed adequately given if sent by certified mail to the addressee at
its address stated herein, or at such other place as such addressee may have
designated in writing.  All notices,
demands or other communications to be given or delivered under or by reason of
the provisions of this Guaranty must be in writing and shall be sent in the
manner specified in the Equipment Lease for notices to the Company and to the
address specified below:

 

Polymer Group, Inc.

9335 Harris Corners Parkway

Suite 300

Charlotte, North Carolina, 28269

Attn:  Chief
Financial Officer

 

12.           No Waiver;
Remedies.  No failure on the part of the
Beneficiary to exercise, and no delay in exercising any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.  The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

 

13.           Continuing Guaranty;
Transfer of Interest.  This Guaranty is a
continuing guarantee and shall (i) remain in full force and effect all of
the Guaranteed Obligations then due shall have been finally, indefeasibly and
unconditionally paid and performed in full, (ii) be binding upon each
Guarantor, and its successors and permitted assigns, and (iii) inure to
the benefit of and be enforceable by the Beneficiary and its respective
successors and permitted assigns.  Each
Guarantor shall execute and deliver to the Beneficiary, upon such Person’s
request, such instruments and assurances and take such other actions as may be
reasonably necessary written to confirm or evidence the rights hereunder of any
successor or assignee to or of such Person.

 

 Exhibit 3-7  

 

14.           Amendments and
Waivers.  No amendment or waiver of any
provision of this Guaranty or consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Beneficiary, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

 

15.           Enforcement
Expenses.  Each Guarantor, jointly and
severally, agrees to pay to the Beneficiary any and all reasonable costs and
expenses (including reasonable legal fees) incurred by the Beneficiary in
enforcing its rights under this Guaranty.

 

16.           Representations,
Warranties and Covenants.  (a)  Each
Guarantor hereby represents and warrants to the Beneficiary that on the date
hereof and on the date of execution of each Funding Request under the CAA and
the Schedule under the Equipment Lease:

 

(i)             such
Guarantor it is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and is duly qualified to
transact business as a foreign corporation in good standing wherever necessary
to carry on its present business and operations, except where the failure to be
so qualified or to be in good standing would not have a Material Adverse
Effect.

 

(ii)            this
Guaranty has been duly authorized, executed and delivered by such Guarantor and
constitutes a valid, legal and binding agreement, enforceable against it in
accordance with its terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws or other laws affecting creditor’s rights generally, public
policy and equitable principles (whether considered in a proceeding in equity
or in law).

 

(iii)           no
approval, consent, giving notice to or withholding of objections is required
from any Governmental Authority with respect to the entry into or performance
by such Guarantor of this Guaranty except (a) such as have already been
obtained or made and are in full force and effect or (b) approval, consent
or action the act of which obtaining or performing could reasonably be expected
to have a Material Adverse Effect.

 

(iv)          such
Guarantor has the corporate power and authority to enter into, and perform its
obligations under, this Guaranty.  The
entry into and performance by such Guarantor of this Guaranty will not: (i) violate
any judgment, order, law or regulation applicable to such Guarantor or any
provision of such Guarantor’s charter or other organizational documents; or (ii) result
in any breach of, constitute a default under or result in the creation of any
Lien upon any of the Equipment pursuant to any material indenture, mortgage,
deed of trust, bank loan or credit agreement or other instrument (other than
this Guaranty) to which such Guarantor is a party.

 

(v)           there
are no suits or proceedings pending or to such Guarantor’s knowledge threatened
in court or before any commission, board or other administrative

 

 Exhibit 3-8  

 

agency
against or affecting such Guarantor, which are reasonably likely to result in a
Material Adverse Effect.

 

(vi)          such
Guarantor is (i) in compliance in all material respects with all
applicable laws and regulations relating to (x) the regulations
promulgated by the Office of Foreign Assets Control (“OFAC”), U.S. Department
of the Treasury relating to dealings with certain persons listed on the
publicly available Specially Designated Nationals and Blocked Persons List
maintained by OFAC, (y) Section 1(b), (c) or (d) of
Executive Order No. 13224 (September 23, 2001) and (z) the
prevention and detection of money laundering violations under the US Bank
Secrecy Act (Financial Recordkeeping and Reporting of Currency and Foreign
Transactions Act of 1970, 31 U.S.C. 1051 et. seq.) (“BSA”), under all
regulations promulgated under the BSA and under all published U.S. government
guidance, and (ii) in compliance with all other Applicable Laws the
non-compliance with which, with respect to this clause (ii) only, could
reasonably be expected to result in a Material Adverse Effect.

 

(b)           Each
Guarantor hereby covenants and agrees for the benefit of the Beneficiary that
such Guarantor shall remain (i) in compliance in all material respects
with all applicable laws and regulations relating to (x) the regulations
promulgated by OFAC relating to dealings with certain persons listed on the publicly
available Specially Designated Nationals and Blocked Persons List maintained by
OFAC, (y) Section 1(b), (c) or (d) of Executive Order No. 13224
(September 23, 2001) and (z) the prevention and detection of money
laundering violations under the BSA, under all regulations promulgated under
the BSA and under all published U.S. government guidance, and (ii) in
compliance with all other Applicable Laws the non-compliance with which, with respect
to this clause (ii) only, could reasonably be expected to result in a
Material Adverse Effect.

 

17.           Waiver of Jury
Trial.  EACH OF THE UNDERSIGNED HEREBY
UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS GUARANTY, THE
OBLIGATIONS GUARANTEED HEREBY, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS
BETWEEN US RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN US.  The scope of this waiver is intended to be
all encompassing of any and all disputes that may be filed in any court
(including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims).  THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, THE
OBLIGATIONS GUARANTEED HEREBY, OR ANY RELATED DOCUMENTS.  In the event of litigation this Guaranty may
be filed as a written consent to a trial by the court.

 

 Exhibit 3-9  

 

18.           Complete
Agreement.  This Guaranty is intended by
the parties as a final expression of the guaranty of the undersigned and is
also intended as a complete and exclusive statement of the terms thereof.  No course of dealing, course of performance
or trade usage, nor any parol evidence of any kind, shall be used to supplement
or modify any of the terms hereof.  There
are no conditions to the full effectiveness of this Guaranty.  This Guaranty and each of its provisions may
only be waived, modified, varied, released, terminated or surrendered, in whole
or in part, by a duly authorized written instrument signed by you.  No failure by the Beneficiary to exercise its
rights hereunder shall give rise to any estoppel against it, or excuse any
Guarantor from performing hereunder. 
Waiver of any right to demand performance hereunder shall not be a
waiver of any subsequent or other right to demand performance hereunder.

 

19.           Governing Law.  THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. 
The parties agree that any action or proceeding arising out of or
relating to this Guaranty may be commenced in the United States District Court
for the Southern District of New York and the parties irrevocably submit to the
jurisdiction of such court and agree not to assert, by way of motion, as a
defense or otherwise, in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient form, that the venue of such
suit, action or proceeding is improper, or that this Guaranty or the subject
matter hereof or the transaction contemplated hereby may not be enforced in or
by such court.  Each of the parties
hereto agree 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; provided that this sentence will not be
construed as a waiver of any right to appeal a judgment.

 

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

 

21.           Counterparts.  This Guaranty may be executed in counterparts
each of which shall constitute an original but all of which when taken together
shall constitute a single contract. 
Delivery of an executed signature page to this Guaranty by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Guaranty.

 

22.           Each of Beneficiary
and each of its Members that are subject to the Patriot Act hereby notifies
each Guarantor that pursuant to the requirements of the Patriot Act, it is
required to obtain, verify and record information that identifies each
Guarantor, which

 

 Exhibit 3-10  

 

information
includes the name and address of each Guarantor and other information that will
allow the Beneficiary and each of its Members to identify each Guarantor in
accordance with the Patriot Act.

 

(Signatures on next page)

 

 Exhibit 3-11  

 

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

 

	
   

  	
   

  	
  GUARANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  POLYMER
  GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PGI
  POLYMER, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED AND AGREED

  	
   

  	
   

  
	
  as of the date first above written:

  	
   

  	
   

  
	
  GOSSAMER HOLDINGS, LLC,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  as the Beneficiary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY: GENERAL ELECTRIC CREDIT CORPORATION OF
  TENNESSEE, its member

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY: ING SPUNMELT HOLDINGS LLC, its member

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  

 

[Signature Page to Guaranty]

 

 Exhibit 3-12  

 

EXHIBIT NO.
4

TO

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

FORM OF
CONFIDENTIALITY AGREEMENT

 

                      ,
20     

 

ADDRESS

 

Re:  Confidentiality Letter

 

Dear
                :

 

[                          ]
(“Investor”) is entering into discussions with Gossamer Holdings, LLC (the “Company”)
concerning the financing of a 5 beam composite spunmelt nonwoven production
line manufactured, primarily by, and purchased from Reifenhäuser REICOFIL GmbH &
Co. KG and other vendors (together with related equipment, as applicable)
located at 1020 Shenandoah Village Drive, Waynesboro, Virginia, 22980-9292 (the
“Financing”).  In connection therewith,
the Company will provide Investor with certain “Confidential Information” (as
defined below) pursuant to the terms hereof.

 

“Confidential Information”
means (i) any written or oral information provided by or through the
Company in connection with the Financing relating to the business, finances,
operations or affairs of the Company (other than information described in
paragraph (c) below) and (ii) the fact that discussions or
investigations with respect to the Financing are taking place.

 

Investor will maintain as
confidential any Confidential Information using the same standard of care as it
uses in protecting its own confidential information of a similar nature and otherwise
on the following terms and conditions and will only use Confidential
Information to evaluate the Financing:

 

(a)           Investor may disclose Confidential Information on a
confidential, “need-to-know” basis to its and its affiliates’ employees,
officers, directors and agents (including attorneys) (“Representatives”) in
connection with the Financing, but Investor shall direct each Representative to
treat the Confidential Information confidentially.  Such persons and entities will not be deemed
Representatives hereunder unless (and solely to the extent that) Investor
furnishes such information to such persons or entities.

 

(b)           Investor may disclose without liability any Confidential
Information if such disclosure is (i) in connection with any syndication,
assignment or participation of the interest of Investor or an affiliate in the
Financing (including to a rating agency) so long as such Confidential
Information is disclosed to the recipient thereof (other than any rating
agency) subject to confidentiality provisions substantially the same terms as
those hereof or (ii) 

 

 Exhibit 4-1  

 

reasonably believed by it to
be compelled or required by any law, court decree, subpoena, legal or
administrative order or process, or legitimate request of any governmental
agency or authority (collectively, an “Order”). 
Unless prohibited by the terms of an Order, Investor shall notify
the Company of the receipt of any such Order and shall reasonably cooperate, at
the Company’s expense, with any attempt by the Company to obtain an appropriate
protective order.

 

(c)           Investor shall not be precluded from disclosing or using
any Confidential Information, (i) which was in its or one of its affiliate’s
possession prior to any disclosure by the Company on a non-confidential basis, (ii) which
is publicly available through no fault or breach by Investor or any person or
entity to whom Investor discloses any Confidential Information, (iii) which
becomes available to Investor from sources not known by it after reasonable
inquiry to be subject to disclosure restrictions, or (iv) which is
independently developed by Investor or its Representatives.

 

(d)           Any Confidential Information shall be upon the Company’s
written request, either returned or destroyed; however, Investor shall not
be required to expunge from its records internally generated documents
(including electronic copies) containing Confidential Information which it
maintains under its normal record retention policy, but Investor shall continue
to maintain as confidential all such documents pursuant to the terms of this
agreement.

 

Except for the maintenance
of confidentiality on the above terms, the commencement of discussions shall
not create any other obligation either (i) to or of the Company of any
kind, or (ii) to or of Investor of any kind, and no such obligation can be
created except by a duly authorized, executed and delivered written
agreement.  This agreement shall remain
effective for a term of 18 months from the last disclosure of Confidential
Information to Investor hereunder.  This
agreement shall be governed by, and construed in accordance with, the laws of
the State of New York (without regard to its conflicts of law provisions).

 

In the event that Investor
acquires an equity interest in the Company, on and after the date of such
acquisition, this Confidentiality Letter shall be superseded and replaced by
the terms of Section 22 of that certain Equipment Lease Agreement dated as
of June 24, 2010 among Chicopee, Inc. as lessee and the Company as
lessor.

 

	
   

  	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Gossamer Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
  Accepted and agreed to

  	
   

  	
   

  
	
  this
           day of
                          ,
  20    :

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  

 

 Exhibit 4-2  

 

EXHIBIT NO.
5

TO

TO
LEASE AGREEMENT DATED AS OF JUNE 24, 2010

 

FORM OF
SECURITY DEPOSIT PLEDGE AGREEMENT

 

See
attached.

 

 Exhibit 5-1  

 

SECURITY
DEPOSIT PLEDGE AGREEMENT

 

This
Security Deposit Pledge Agreement (this “Agreement”) is made and entered into
as of
                    ,
2011 by and between Chicopee, Inc., a Delaware corporation (“Lessee”), and
Gossamer Holdings, LLC (together with all of its successors and assigns, if any,
“Lessor”).

 

In
consideration of, and as an inducement for Lessor to lease to Lessee certain
Equipment under the Equipment Lease Agreement, dated as of June 24, 2010
(the “Equipment Lease Agreement” and the Schedule thereto being referred to as
the “Lease”), and to secure the payment and performance of all of Lessee’s
obligations under the Lease, Lessee has agreed to deposit with and pledge to
Lessor in cash an amount equal to
                
Dollars ($                          )
(the “Collateral”).

 

NOW,
THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree that such pledge shall be made upon the terms and
conditions set forth below:

 

1.     Capitalized terms used but not defined
herein shall have the meanings set forth in the Lease.

 

2.     Lessee delivers the Collateral to Lessor to
secure Lessee’s performance of its obligations under the Lease, including, but
not limited to, the timely payment of Rent.

 

3.     Lessee has transferred the Collateral to
Lessor by wire transfer of immediately available funds in United States Dollars
to Lessor’s account at:

 

	
   

  	
   

  	
   

  
	
   

  	
  Bank:

  	
  Deutsche
  Bank

  
	
   

  	
  Branch:

  	
  New
  York

  
	
   

  	
  Bank
  Account #:

  	
  50286772

  
	
   

  	
  ABA:

  	
  021001033

  
	
   

  	
  Account Name:

  	
  Gossamer
  Holdings, LLC

  
	
   

  	
  Customer:

  	
  Polymer Group, Inc.

  

 

4.     The Collateral deposited with Lessor will
not accrue interest.  Lessor may
commingle the Collateral with its other funds or the funds of any of its
Members.

 

5.     After any Default by Lessee under the Lease
and while the same is continuing, upon, or at any time after said Default,
Lessor may apply the Collateral towards the satisfaction of Lessee’s
obligations under the Lease and the payment of all costs and expenses incurred
by Lessor or any Member as a result of such Default, including but not limited
to, costs of repossessing equipment and attorneys’ fees.  Such application shall not excuse the
performance at the time and in the manner prescribed of any obligation of
Lessee or cure a Default of Lessee.  Upon
the application by Lessor of any amount of the Collateral pursuant to the terms
of this paragraph, Lessee shall be obligated to pay to Lessor an amount
sufficient to cause the Collateral to equal the amount first set forth above within
3 Business Days following the application of any amount of the Collateral.

 

 Exhibit 5-2  

 

6.     Lessor shall have no duty to first commence
an action against or seek recourse from Lessee, in the event of a Default under
the Lease, before enforcing the provisions of, and proceedings under the
provisions of this Agreement.  The
obligations of Lessee under this Agreement shall be absolute and unconditional
and shall remain in full force and effect without regard to, and shall not be
released or discharged or in any way affected by:

 

(a)   any amendment or modification of or
supplement to the Lease or any other Operative Document;

 

(b)   any exercise or non-exercise of any right,
remedy or privilege under or in respect to this Agreement, the Lease, or any
other instrument provided for in the Lease, or any waiver, consent,
explanation, indulgence or actions or inaction with respect to any such
instrument; or

 

(c)   any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or similar proceeding of
Lessee.

 

7.     Upon the termination of the Lease and the
satisfaction of all of the obligations of Lessee thereunder, Lessor shall
deliver to Lessee the Collateral (less any portion of same cashed, sold,
assigned or delivered pursuant to and under the conditions specified in
paragraph 5 hereof), and this Agreement shall thereupon be without further
effect.

 

8.     Lessor may, without the consent of Lessee,
assign this Agreement.  Lessee agrees
that if Lessee receives written notice of an assignment from Lessor, Lessee
will pay all amounts due hereunder to such assignee or as instructed by
Lessor.  Lessee also agrees to confirm in
writing receipt of the notice of assignment as may be reasonably requested by
assignee.  Lessee hereby waives and
agrees not to assert against any such assignee any defense, set-off, recoupment
claim or counterclaim which Lessee has or may at any time have against Lessor
for any reason whatsoever.

 

9.     This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.

 

[signature page follows]

 

 Exhibit 5-3  

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed as of
the date first above written.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
  GOSSAMER
  HOLDINGS, LLC

  	
   

  	
  CHICOPEE,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:
  

  	
  GENERAL
  ELECTRIC CREDIT CORPORATION OF TENNESSEE, its member 

  	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  ING
  SPUNMELT HOLDINGS LLC, its member

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 Exhibit 5-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]