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Exhibit 10.6  

EXHIBIT C  

        NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES. 

 
 

COMMON STOCK PURCHASE WARRANT    
    
    To
Purchase                        Shares of Common Stock of    
    
    Isonics Corporation    

        THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for value received,
                        (the
"Holder"), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the
date hereof (the "Initial Exercise Date") and on or prior to the close of business on the three year anniversary of the Initial Exercise Date (the
"Termination Date") but not thereafter, to subscribe for and purchase from Isonics Corporation, a
California corporation (the "Company"), up to            shares (the "Warrant Shares") of Common
Stock, no par value, of the Company (the "Common Stock"). The purchase price of one share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b). 

        Section 1.    Definitions.    Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Securities Purchase Agreement (the "Purchase Agreement"), dated February 24, 2005, among the Company and the purchasers
signatory thereto. 

        Section 2.    Exercise.    

        a)    Exercise of Warrant.    Exercise of the purchase rights represented by this Warrant may be made at any time or
times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company);  provided, however, within 5 Trading Days of the date said Notice of Exercise is delivered to the
Company, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or
cashier's check drawn on a United States bank. 

        b)    Exercise Price.    The exercise price of the Common Stock under this Warrant shall be  $6.25, subject to adjustment hereunder
(the "Exercise Price"). 

        c)    Cashless Exercise.    If at any time after one year from the date of issuance of this Warrant there is no
effective Registration Statement registering, or no current prospectus available for, the 

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resale
of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means of a "cashless exercise" in which the Holder shall be entitled to receive a certificate for
the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where: 

	

 	
 	

(A)	
 	

=	
 	

the average of the 5 Closing Prices immediately preceding the date of such election;
	

 	
 	

(B)	
 	

=	
 	

the Exercise Price of this Warrant, as adjusted; and
	

 	
 	

(X)	
 	

=	
 	

the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

        Notwithstanding
anything herein to the contrary, if on the Termination Date there is no registration statement effective pursuant to which the Holder can immediately resell the Warrant
Shares, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c). 

        d)    Exercise Limitations.    

        i.    Holder's Restrictions.    The Holder shall not have the right to exercise any portion of this Warrant, pursuant
to Section 2(c) or otherwise, to the extent that after giving effect to such issuance after exercise, the Holder (together with the Holder's affiliates), as set forth on the applicable Notice
of Exercise, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such issuance. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which
the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this
Warrant beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including,
without limitation, any other Debentures or Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act, it being acknowledged by Holder that the Company is not representing to Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and Holder is solely
responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of such Holder, and the submission of a
Notice of Exercise shall be deemed to be such Holder's determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant
is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes of this
Section 2(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's
most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public announcement by the Company or (z) any other more recent notice
by the Company or the Company's Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of 

2

 

outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the
date as of which such number of outstanding shares of Common Stock was reported. The provisions of this Section 2(d) may be waived by the Holder upon, at the election of the Holder, not less
than 61 calendar days' prior notice to the Company, and the provisions of this Section 2(d) shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may
be specified in such notice of waiver). 

        ii.    Trading Market Restrictions.    If the Company has not obtained Shareholder Approval (as defined below), then
the Company may not issue upon exercise of this Warrant in the aggregate, in excess of 19.999% of the number of shares of Common Stock outstanding on the Trading Day immediately preceding the Closing
Date, less any shares of Common Stock issued pursuant to the Debentures or upon prior exercise of this or any other Warrant issued pursuant to the Purchase Agreement (such number of shares, the
"Issuable Maximum"). If on any attempted exercise of this Warrant, the issuance of Warrant Shares would exceed the Issuable Maximum and the Company
shall not have previously
obtained the vote of shareholders (the "Shareholder Approval"), if any, as may be required by the applicable rules and regulations of the Trading Market
(or any successor entity) to approve the issuance of shares of Common Stock in excess of the Issuable Maximum pursuant to the terms hereof, then the Company shall issue to the Holder requesting a
Warrant exercise such number of Warrant Shares as may be issued below the Issuable Maximum and, with respect to the remainder of the aggregate number of Warrant Shares, this Warrant shall not be
exercisable until and unless Shareholder Approval has been obtained. Notwithstanding anything herein to the contrary, until Shareholder Approval is obtained, the Company shall fairly apportion the
shares of Common Stock available under the Issuable Maximum to the Holders pro-rata based on each Holder's original principal amount of Debentures purchased
("Pro-Rata Allocation"). The Holder shall have the sole and absolute discretion in determining, within its Pro-Rata Allocation,
whether to receive Conversion Shares or Warrant Shares. 

        e)    Mechanics of Exercise.    

        i.    Authorization of Warrant Shares.    The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 

        ii.    Delivery of Certificates Upon Exercise.    If no legend is required on the certificates for Warrant Shares
pursuant to Section 4.1(c) of the Purchase Agreement, such certificates shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder's prime
broker with the Depository Trust Company System through the Deposit Withdrawal Agent Commission system if the Company is a participant in such system, or another established clearing corporation
performing similar functions, provided the Holder requests such transmission and provided that the Holder making such request provides the transfer agent with the prime broker account information
necessary to effect such transfer, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the
Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above ("Warrant Share Delivery Date"). This
Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as 

3

 

of
the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the
issuance of such shares, have been paid. 

        iii.    Delivery of New Warrants Upon Exercise.    If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant. 

        iv.    Rescission Rights.    If the Company fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by the 2nd Trading Day after the Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise. 

        v.    Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.    In addition to
any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an
exercise on or before the 2nd Trading Day after the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a
"Buy-In"), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was
required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice and documentation indicating the
amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder's
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. 

        vi.    No Fractional Shares or Scrip.    No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to such fraction multiplied by the Exercise Price. 

        vii.    Charges, Taxes and Expenses.    Issuance of certificates for Warrant Shares shall be made without charge to
the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the 

4

 

Company,
and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided,  however, that in the
event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto and representations by the assignee and the assignor sufficient to establish the existence of an exemption from registration under the Securities Act and
applicable state law for the assignment, or an opinion from counsel experienced in securities laws that such exemptions exist. 

        viii.    Closing of Books.    The Company will not close its stockholder books or records in any manner which prevents
the timely exercise of this Warrant, pursuant to the terms hereof. 

        (f)    Call Provision.    Subject to the provisions of this Section 2(f), if any time one year after the
Effective Date the Closing Price for each of 30 consecutive Trading Days (the "Measurement Period", which period shall not have commenced until after
the Effective Date) exceeds 250% of the Exercise Price (subject to adjustment as set forth herein) (the "Threshold Price"), then the Company may, within
three Trading Days of the end of such period, call for cancellation of all or any portion of this Warrant for which a Notice of Exercise has not yet been delivered (such right, a
"Call"). To exercise this right, the Company must deliver to the Holder an irrevocable written notice (a "Call
Notice"), indicating therein the portion or unexercised portion of this Warrant to which such notice applies. If the conditions set forth below for such Call are satisfied from
the period from the date of the Call Notice through and including the Call Date (as defined below), then any portion of this Warrant subject to such Call Notice for which a Notice of Exercise shall
not have been received by the Call Date will be cancelled at 6:30 p.m. (New York City time) on the tenth Trading Day after the date the Call Notice is received by the Holder (such date, the
"Call Date"). Any unexercised portion of this Warrant to which the Call Notice does not pertain will be unaffected by such Call Notice. In furtherance
thereof, the Company covenants and agrees that it will honor all Notices of Exercise with respect to Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m. (New York City
time) on the Call Date. The parties agree that any Notice of Exercise delivered following a Call Notice shall first reduce to zero the number of Warrant Shares subject to such Call Notice prior to
reducing the remaining Warrant Shares available for purchase under this Warrant. For example, if (x) this Warrant then permits the Holder to acquire 100 Warrant Shares, (y) a Call Notice
pertains to 75 Warrant Shares, and (z) prior to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice of Exercise in respect of 50 Warrant Shares, then
(1) on the Call Date the right under this Warrant to acquire 25 Warrant Shares will be automatically cancelled, (2) the Company, in the time and manner required under this Warrant, will
have issued and delivered to the Holder 50 Warrant Shares in respect of the exercises following receipt of the Call Notice, and (3) the Holder may, until the Termination Date, exercise this
Warrant for 25 Warrant Shares (subject to adjustment as herein provided and subject to subsequent Call Notices). Subject again to the provisions of this Section 2(f), the Company may deliver
subsequent Call Notices for any portion of this Warrant for which the Holder shall not have delivered a Notice of Exercise. Notwithstanding anything to the contrary set forth in this Warrant, the
Company may not deliver a Call Notice or require the cancellation of this Warrant (and any Call Notice will be void), unless, from the beginning of the 30 consecutive Trading Days used to determine
whether the Common Stock has achieved the Threshold Price through the Call Date, (i) the Company shall have honored in accordance with the terms of this Warrant all Notices of Exercise
delivered by 6:30 p.m. (New York City time) on the Call Date, (ii) the Registration Statement shall be effective as to all Warrant Shares and the prospectus thereunder available for use
by the Holder for the resale of all such Warrant Shares and (iii) the Common Stock shall be listed or quoted for trading on the Trading Market. The 

5

 

Company's
right to Call the Warrant shall be exercised ratably among the Holders based on each Holder's initial purchase of Common Stock pursuant to the Purchase Agreement. 

        Section 3.    Certain Adjustments.    

        a)    Stock Dividends and Splits.    If the Company, at any time while this Warrant is outstanding: (A) pays a
stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this
Warrant or upon any Exempt Issuance), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a subdivision, combination or re-classification. 

        b)    Subsequent Equity Sales.    If the Company or any Subsidiary thereof, as applicable, at any time while this
Warrant is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the "Base Share Price" and such issuances collectively, a "Dilutive
Issuance"), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price),
then, the Exercise Price shall be reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to
this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the
"Dilutive Issuance Notice"). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this
Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. 

        c)    Pro Rata Distributions.    If the Company, at any time prior to the Termination Date, shall distribute to all
holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash or cash dividends) or rights or warrants to subscribe for or purchase any security
other than the Common Stock (which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect 

6

 

immediately
prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Price determined as of
the record date mentioned above, and of which the numerator shall be such Closing Price on such record date less the then per share fair market value at such record date of the portion of such assets
or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. 

        d)    Fundamental Transaction.    If, at any time while this Warrant is outstanding, (A) the Company effects
any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions,
(C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then, upon any subsequent conversion
of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise absent such Fundamental Transaction, at the option of the Holder,
(a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Alternate
Consideration receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the value of this Warrant as determined in accordance with the
Black-Scholes option pricing formula (the "Alternate Consideration"). For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to exercise such warrant into
Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the
provisions of this Section 3(d) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. 

7

  

        e)    Exempt Issuance.    Notwithstanding the foregoing, no adjustments, Alternate Consideration nor notices shall be
made, paid or issued under Section 3(b) in respect of an Exempt Issuance. 

        f)    Calculations.    All calculations under this Section 3 shall be made to the nearest cent or the nearest
1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not include shares of Common Stock owned or held by or for the account of the Company,
and the description of any such shares of Common Stock shall be considered on issue or sale of Common Stock. For purposes of this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. 

        g)    Voluntary Adjustment By Company.    The Company may at any time during the term of this Warrant reduce the then
current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 

        h)    Notice to Holders.    

        i.    Adjustment to Exercise Price.    Whenever the Exercise Price is adjusted pursuant to this Section 3, the
Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company
issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment
price in the case of an MFN Transaction (as defined in the Purchase Agreement. 

        ii.    Notice to Allow Exercise by Holder.    If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last addresses as it shall appear upon
the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this
Warrant during the 

8

 

20-day
period commencing on the date of such notice to the effective date of the event triggering such notice. 

        Section 4.    Transfer of Warrant.    

        a)    Transferability.    Subject to compliance with any applicable securities laws and the conditions set forth in
Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued. 

        b)    New Warrants.    This Warrant may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 

        c)    Warrant Register.    The Company shall register this Warrant, upon records to be maintained by the Company for
that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder
of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 

        d)    Transfer Restrictions.    If, at the time of the surrender of this Warrant in connection with any transfer of
this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act
and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a qualified
institutional buyer as defined in Rule 144A(a) under the Securities Act. 

        Section 5.    Miscellaneous.    

        a)    Title to Warrant.    Prior to the Termination Date and subject to compliance with applicable laws and
Section 4 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably
satisfactory to the Company. 

9

 

        b)    No Rights as Shareholder Until Exercise.    This Warrant does not entitle the Holder to any voting rights or
other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 

        c)    Loss, Theft, Destruction or Mutilation of Warrant.    The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 

        d)    Saturdays, Sundays, Holidays, etc.    If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday. 

        e)    Authorized Shares.    

        The
Company covenants that (i) prior to the time as the shareholders of the Company approve an increase in the Company's authorized capital stock
("Approval Date"), it will reserve from its authorized and unissued Common Stock the number of shares set forth on  Schedule 3.1(f) of the Purchase
Agreement and (ii) after the Approval Date, it will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. 

        Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above
the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 

        Before
taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all 

10

 

such
authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 

        f)    Jurisdiction.    All questions concerning the construction, validity, enforcement and interpretation of this
Warrant shall be determined in accordance with the provisions of the Purchase Agreement. 

        g)    Restrictions.    The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if
not registered, will have restrictions upon resale imposed by state and federal securities laws. 

        h)    Nonwaiver and Expenses.    No course of dealing or any delay or failure to exercise any right hereunder on the
part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.
If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 

        i)    Notices.    Any notice, request or other document required or permitted to be given or delivered to the Holder
by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement. 

        j)    Limitation of Liability.    No provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 

        k)    Remedies.    Holder, in addition to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 

        l)    Successors and Assigns.    Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be
for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. 

        m)    Amendment.    This Warrant may be modified or amended or the provisions hereof waived with the written consent
of the Company and the Holder. 

        n)    Severability.    Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. 

        o)    Headings.    The headings used in this Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant. 

******************** 

11

 

        IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. 

	Dated: February    , 2005	 	 	 	 
	

 	
 	
ISONICS CORPORATION
	

 	
 	

By:	
 	

	 	 	 	 	Name:
	 	 	 	 	Title:

12

NOTICE OF EXERCISE  

TO: ISONICS CORPORATION 

        (1)   The
undersigned hereby elects to purchase            Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. 

        (2)   Payment
shall take the form of (check applicable box): 

	o
	in
lawful money of the United States; or

	o
	the
cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c). 

        (3)   Please
issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: 

The Warrant Shares shall be delivered to the following: 

        (4)    Accredited Investor.    The undersigned is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act of 1933, as amended. The undersigned further represents and warrants that it has reviewed all of the reports filed by the Company with the Securities and Exchange
Commission, the press releases issued by the Company, and such other information regarding the Company as it has determined appropriate or necessary in the circumstances, that it has received such
additional information regarding the Company that it has requested, and that it has consulted with its legal, tax, investment, financial, and other advisors regarding the conversion described in this
Notice of Exercise. 

[SIGNATURE
OF HOLDER] 

	Name of Investing Entity:	 	 	 
	 	 	

	Signature of Authorized Signatory of Investing Entity:	 
	 	 	 	 	

	Name of Authorized Signatory:	 	 
	 	 	 	

	Title of Authorized Signatory:	 	 
	 	 	 	

	Date:	 	 	 	 
	 	

ASSIGNMENT FORM  

(To
assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.) 

        FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to 

	
	 	whose address is	 	 	 	 	 	 
	

	
 	

..	
 	

 	
 	

 
	

Dated:	
 	

 
	
 	

,	
 	

 
	
 	

 
	

Holder's Signature:	
 	

 	
 	

 	
 	

 	
 	

 
	 	 	
	 	 
	

Holder's Address:	
 	

 	
 	

 	
 	

 	
 	

 
	 	 	
	 	 
	

 	
 	

	
 	

 

	

Signature Guaranteed:	
 	

 	
 	

 
	 	 	
	 	 

NOTE:
The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed
by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. 

QuickLinks

COMMON STOCK PURCHASE WARRANT To Purchase Shares of Common Stock of Isonics CorporationEXHIBIT
10.1

 

 

CREDIT AGREEMENT

 

DATED AS OF
DECEMBER     , 2004

 

by and among

 

VERTIS, INC.,

 

VERTIS LIMITED,

and

VERTIS DIGITAL SERVICES LIMITED

 

as Borrowers

 

and

 

THE OTHER PERSONS
PARTY HERETO THAT

ARE DESIGNATED AS
CREDIT PARTIES

 

and

 

GENERAL ELECTRIC
CAPITAL CORPORATION

as Agent, L/C
Issuer, Swing Line Lender and a Lender

 

and

 

THE OTHER
FINANCIAL INSTITUTIONS PARTY HERETO

as Lenders

 

and

 

GECC CAPITAL
MARKETS GROUP, INC.

as Lead Arranger

 

and

 

BANK OF AMERICA,
N.A.

as Documentation
Agent and Joint-Lead Arranger

 

 

 

TABLE
OF CONTENTS

 

	
  SECTION 1.

  	
  AMOUNTS AND TERMS
  OF LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  Loans

  	
   

  
	
  1.2.

  	
  Interest and Applicable
  Margins

  	
   

  
	
  1.3.

  	
  Fees

  	
   

  
	
  1.4.

  	
  Receipt
  of Payments

  	
   

  
	
  1.5.

  	
  Prepayments

  	
   

  
	
  1.6.

  	
  Maturity

  	
   

  
	
  1.7.

  	
  Loan Accounts

  	
   

  
	
  1.8.

  	
  Yield
  Protection

  	
   

  
	
  1.9.

  	
  Taxes

  	
   

  
	
  1.10.

  	
  Borrower Representative

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  CONDITIONS TO LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Conditions to Initial Loans

  	
   

  
	
  2.2.

  	
  Conditions to All Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Organization,
  Powers, Capitalization and Good Standing

  	
   

  
	
  3.2.

  	
  Disclosure

  	
   

  
	
  3.3.

  	
  No Material Adverse Effect

  	
   

  
	
  3.4.

  	
  No Conflict

  	
   

  
	
  3.5.

  	
  Financial
  Statements and Financial Projections

  	
   

  
	
  3.6.

  	
  Solvency

  	
   

  
	
  3.7.

  	
  Use of Proceeds;
  Margin Regulations

  	
   

  
	
  3.8.

  	
  Brokers

  	
   

  
	
  3.9.

  	
  Compliance
  with Laws

  	
   

  
	
  3.10.

  	
  Intellectual Property

  	
   

  
	
  3.11.

  	
  Investigations, Audits, Etc

  	
   

  
	
  3.12.

  	
  Employee
  Matters

  	
   

  
	
  3.13.

  	
  Litigation; Adverse Facts

  	
   

  
	
  3.14.

  	
  Ownership of Property;
  Liens

  	
   

  
	
  3.15.

  	
  Environmental Matters

  	
   

  
	
  3.16.

  	
  ERISA

  	
   

  
	
  3.17.

  	
  Deposit and
  Disbursement Accounts

  	
   

  
	
  3.18.

  	
  Agreements and Other
  Documents

  	
   

  
	
  3.19.

  	
  Insurance

  	
   

  
	
  3.20.

  	
  Taxes
  and Tax Returns

  	
   

  
	
  3.21.

  	
  Senior
  Indebtedness and Designated Senior Indebtedness

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Compliance
  With Laws and Contractual Obligations

  	
   

  

 

 

	
  4.2.

  	
  Insurance

  	
   

  
	
  4.3.

  	
  Inspection;
  Lender Meeting

  	
   

  
	
  4.4.

  	
  Organizational Existence

  	
   

  
	
  4.5.

  	
  Environmental Matters

  	
   

  
	
  4.6.

  	
  Landlords’
  Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases

  	
   

  
	
  4.7.

  	
  Further
  Assurances

  	
   

  
	
  4.8.

  	
  Payment
  of Taxes

  	
   

  
	
  4.9.

  	
  Cash Management Systems

  	
   

  
	
  4.10.

  	
  Covenants Regarding
  Accounts

  	
   

  
	
  4.11.

  	
  Certain
  Provisions With Respect to Receivables Facility

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Indebtedness

  	
   

  
	
  5.2.

  	
  Liens and Related Matters

  	
   

  
	
  5.3.

  	
  Investments

  	
   

  
	
  5.4.

  	
  Contingent Obligations

  	
   

  
	
  5.5.

  	
  Restricted Payments

  	
   

  
	
  5.6.

  	
  Restriction on
  Fundamental Changes

  	
   

  
	
  5.7.

  	
  Disposal of
  Assets or Subsidiary Stock

  	
   

  
	
  5.8.

  	
  Transactions with
  Affiliates

  	
   

  
	
  5.9.

  	
  Conduct of Business

  	
   

  
	
  5.10.

  	
  Changes Relating
  to Indebtedness

  	
   

  
	
  5.11.

  	
  Fiscal
  Year

  	
   

  
	
  5.12.

  	
  Press
  Release; Public Offering Materials

  	
   

  
	
  5.13.

  	
  Subsidiaries

  	
   

  
	
  5.14.

  	
  Deposit Accounts

  	
   

  
	
  5.15.

  	
  Hazardous Materials

  	
   

  
	
  5.16.

  	
  ERISA

  	
   

  
	
  5.17.

  	
  Sale-Leasebacks

  	
   

  
	
  5.18.

  	
  Prepayments of
  Other Indebtedness

  	
   

  
	
  5.19.

  	
  Special Purpose Vehicle

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  FINANCIAL
  COVENANTS/REPORTING

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Financial Covenant

  	
   

  
	
  6.2.

  	
  Financial
  Statements and Other Reports

  	
   

  
	
  6.3.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  DEFAULT, RIGHTS AND
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Event
  of Default

  	
   

  
	
  7.2.

  	
  Suspension
  or Termination of Commitments

  	
   

  

 

ii

 

	
  7.3.

  	
  Acceleration and
  other Remedies

  	
   

  
	
  7.4.

  	
  Performance by Agent

  	
   

  
	
  7.5.

  	
  Application of Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  ASSIGNMENT AND
  PARTICIPATION

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
  Assignment and
  Participations

  	
   

  
	
  8.2.

  	
  Agent

  	
   

  
	
  8.3.

  	
  Set Off and Sharing of Payments

  	
   

  
	
  8.4.

  	
  Disbursement of Funds

  	
   

  
	
  8.5.

  	
  Disbursements of Advances; Payment

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Indemnities

  	
   

  
	
  9.2.

  	
  Amendments and Waivers

  	
   

  
	
  9.3.

  	
  Notices

  	
   

  
	
  9.4.

  	
  Failure or Indulgence Not Waiver; Remedies
  Cumulative

  	
   

  
	
  9.5.

  	
  Marshaling; Payments Set Aside

  	
   

  
	
  9.6.

  	
  Severability

  	
   

  
	
  9.7.

  	
  Lenders’ Obligations Several; Independent Nature of
  Lenders’ Rights

  	
   

  
	
  9.8.

  	
  Headings

  	
   

  
	
  9.9.

  	
  Applicable Law

  	
   

  
	
  9.10.

  	
  Successors and Assigns

  	
   

  
	
  9.11.

  	
  No Fiduciary Relationship; Limited Liability

  	
   

  
	
  9.12.

  	
  Construction

  	
   

  
	
  9.13.

  	
  Confidentiality

  	
   

  
	
  9.14.

  	
  CONSENT TO JURISDICTION

  	
   

  
	
  9.15.

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  9.16.

  	
  Survival of Warranties and Certain Agreements

  	
   

  
	
  9.17.

  	
  Entire Agreement

  	
   

  
	
  9.18.

  	
  Counterparts; Effectiveness

  	
   

  
	
  9.19.

  	
  Replacement of Lenders

  	
   

  
	
  9.20.

  	
  Delivery of Termination Statements and Mortgage
  Releases

  	
   

  
	
  9.21.

  	
  Subordination of Intercompany Debt

  	
   

  
	
  9.22.

  	
  Judgment Currency

  	
   

  
	
  9.23.

  	
  Provisions regarding the Existing Security
  Agreement; Collateral Agent

  	
   

  
	
  9.24.

  	
  Curative Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  CROSS-GUARANTY

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
  Cross-Guaranty

  	
   

  
	
  10.2.

  	
  Waivers by Borrowers

  	
   

  
	
  10.3.

  	
  Benefit of Guaranty

  	
   

  
	
  10.4.

  	
  Waiver of Subrogation, Etc.

  	
   

  

 

iii

 

	
  10.5.

  	
  Election of Remedies

  	
   

  
	
  10.6.

  	
  Limitation

  	
   

  
	
  10.7.

  	
  Contribution with Respect to Guaranty Obligations

  	
   

  
	
  10.8.

  	
  Liability Cumulative

  	
   

  

 

iv

 

INDEX OF
APPENDICES

 

	
  Annexes

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex A

  	
  -

  	
  Definitions

  
	
  Annex B

  	
  -

  	
  Pro Rata Shares and
  Commitment Amounts

  
	
  Annex C

  	
  -

  	
  Closing Checklist

  
	
  Annex D

  	
   

  	
  Reserved

  
	
  Annex E

  	
  -

  	
  Lenders’ Bank Accounts

  
	
  Annex F

  	
  -

  	
  Compliance and Pricing
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)(i)

  	
  -

  	
  Revolving Note

  
	
  Exhibit 1.1(a)(ii)

  	
  -

  	
  Notice of Revolving
  Credit Advance

  
	
  Exhibit 1.1(d)(ii)

  	
  -

  	
  Notice of Alternative
  Currency Advance

  
	
  Exhibit 1.1(c)

  	
  -

  	
  Request for Letter of
  Credit Issuance

  
	
  Exhibit 1.1(d)

  	
  -

  	
  Swing Line Note

  
	
  Exhibit 1.1(e)

  	
  -

  	
  Alternative Currency
  Swing Line Note

  
	
  Exhibit 1.2(e)

  	
  -

  	
  Notice of
  Continuation/Conversion

  
	
  Exhibit 6.2(e)

  	
  -

  	
  Borrowing Base
  Certificate

  
	
  Exhibit 8.1

  	
  -

  	
  Assignment Agreement

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule A-1

  	
  -

  	
  Restricted Subsidiaries

  
	
  Schedule 1.1(e)

  	
  -

  	
  European Disbursement
  Accounts

  
	
  Schedule 3.1(a)

  	
  -

  	
  Jurisdictions of
  Organization and Qualifications

  
	
  Schedule 3.1(b)

  	
  -

  	
  Capitalization

  
	
  Schedule 3.7

  	
  -

  	
  Use of Proceeds

  
	
  Schedule 3.10

  	
  -

  	
  Intellectual Property

  
	
  Schedule 3.11

  	
  -

  	
  Investigations and
  Audits

  
	
  Schedule 3.12

  	
  -

  	
  Employee Matters

  
	
  Schedule 3.13

  	
  -

  	
  Litigation

  
	
  Schedule 3.14

  	
  -

  	
  Real Estate

  
	
  Schedule 3.15

  	
  -

  	
  Environmental Matters

  
	
  Schedule 3.16

  	
  -

  	
  ERISA

  
	
  Schedule 3.17

  	
  -

  	
  Deposit and
  Disbursement Accounts

  
	
  Schedule 3.18

  	
  -

  	
  Agreements and Other
  Documents

  
	
  Schedule 3.19

  	
  -

  	
  Insurance

  
	
  Schedule 5.1

  	
  -

  	
  Existing Indebtedness

  
	
  Schedule 5.2

  	
  -

  	
  Liens

  
	
  Schedule 5.3

  	
  -

  	
  Investments

  
	
  Schedule 5.4

  	
  -

  	
  Contingent Obligations

  
	
  Schedule 5.5

  	
  -

  	
  Indebtedness

  
	
  Schedule 5.8

  	
  -

  	
  Affiliate Transactions

  

 

 

	
  Schedule 5.9

  	
  -

  	
  Business Description

  

 

 

ii

 

CREDIT
AGREEMENT

 

This CREDIT AGREEMENT is dated as of December     ,
2004 and entered into by and among Vertis, Inc., a Delaware corporation (“Vertis”
or the “Domestic Borrower”), Vertis Limited, a company incorporated
under the laws of England and Wales and registered under number 3435268 (“Vertis
Limited”) and Vertis Digital Services Limited, a company incorporated under
the laws of England and Wales and registered under number 3526757 (“Digital
Limited”, and with Vertis Limited, each a “European Borrower” and
collectively, the “European Borrowers”; Vertis and the European
Borrowers are referred to herein collectively as the “Borrowers” and
individually as a “Borrower”), the other persons designated as “Credit
Parties”, the financial
institutions who are or hereafter become parties to this Agreement as Lenders
(the “Lenders” and each a “Lender”), GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation (in its
individual capacity “GE Capital”), as the initial L/C Issuer and as
Agent and BANK OF AMERICA, N.A., as Documentation Agent and Joint-Lead
Arranger.

 

R
E  C  I  T  A  L  S:

 

WHEREAS, Borrowers desire that Lenders extend a
revolving credit facility to Borrowers to fund the repayment of certain
indebtedness of Borrowers, to provide working capital financing for Borrowers
and to provide funds for other general corporate purposes of Borrowers; and

 

WHEREAS, Borrowers desire to secure all of their
Obligations (as hereinafter defined) under the Loan Documents (as hereinafter
defined) by granting to Agent, for the benefit of Agent and Lenders, a security
interest in and lien upon substantially all of their
personal and real property other than the accounts receivable sold pursuant to
the Permitted Receivables Financing; and

 

WHEREAS, Vertis Holdings, Inc., a Delaware corporation
that owns all of the Stock of Vertis (“Holdings”) is willing to guaranty
all of the Obligations and to pledge to Agent, for the benefit of Agent and
Lenders, all of the Stock of Vertis, the other Borrowers and Holdings’ other
Subsidiaries (other than the Receivables Subsidiary, certain Domestic
Subsidiaries that are not material Subsidiaries and the non-Domestic
Subsidiaries that are not Credit Parties), and substantially all of its other
personal and real property to secure the Obligations; and

 

WHEREAS, each of Borrowers’ respective Subsidiaries,
other than the Receivables Subsidiary, certain Domestic Subsidiaries that are
not material Subsidiaries and the non-Domestic Subsidiaries that are not Credit
Parties, is willing to guaranty all of the Obligations of Borrowers and to
grant to Agent, for the benefit of Agent and Lenders, a security interest in
and lien upon substantially all of its personal and real property to secure the
Obligations; and

 

WHEREAS, all capitalized terms herein shall have the
meanings ascribed thereto in Annex A hereto, which is incorporated
herein by reference.

 

 

NOW, THEREFORE, in consideration of the premises and
the agreements, provisions and covenants herein contained, Borrowers, Credit
Parties, Lenders and Agent agree as follows:

 

SECTION 1.

AMOUNTS AND TERMS
OF LOANS

 

1.1.          Loans. 
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Borrowers and the other Credit
Parties contained herein:

 

(a)           Domestic
Revolving Loans.

 

(i)            Each Revolving Lender agrees, severally and not
jointly, to make available to Domestic Borrower from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each a “Revolving
Credit Advance”) requested by Borrower Representative on behalf of the
Domestic Borrower hereunder.  The Pro
Rata Share of the Revolving Loan of any Revolving Lender (including, without
duplication, Swing Line Loan) shall not at any time exceed its separate
Revolving Loan Commitment. Revolving Credit Advances may be repaid and
reborrowed; provided, that the amount of any Revolving Credit Advance to be
made at any time shall not exceed Borrowing Availability.  Borrowing Availability may be further reduced
by Reserves imposed by Agent in its reasonable credit judgment based on a
change in circumstances; provided, that, as long as Holdings,
Borrowers and their Subsidiaries on a consolidated basis shall have, as of the
end of the immediately preceding calendar quarter, EBITDA, adjusted to reflect
restructuring charges, non-recurring charges and including other adjustments,
if any, all as set forth in Section 6.1(a) of Schedule 1 to Annex
F, for the twelve (12) month period then ended of greater than
$180,000,000, Agent’s right to impose any Reserves not previously imposed or to
alter the manner in which previously imposed Reserves are determined shall
require prior written consent of the Borrowers. 
The Revolving Loan, including, without limitation, the Alternative
Currency Revolving Credit Subfacility, shall be repaid in full on the
Commitment Termination Date.  Each
Borrower shall execute and deliver to each Revolving Lender a note to evidence
the total Revolving Loan Commitment of that Revolving Lender.  Each note shall be in the maximum principal
amount of the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(a)(i)
(as amended, modified, extended, substituted or replaced from time to time,
each a “Revolving Note” and, collectively, the “Revolving Notes”).  Other than pursuant to Section 1.1(a)(ii),
if the aggregate outstanding Revolving Loan (including, without limitation, the
amount outstanding under the Alternative Currency Revolving Credit Subfacility)
exceeds the Borrowing Base as set forth in the most recently delivered
Borrowing Base Certificate or the total aggregate Revolving Loan Commitment of
all Lenders (any such excess amount of Revolving Loan is herein referred to as
an “Overadvance”), Lenders shall not be obligated to make Revolving
Credit Advances, no additional Letters of Credit shall be issued and, except as
provided in Section 1.1(a)(ii) below, the Revolving Loan must be repaid
immediately and/or Letters of Credit cash collateralized in an amount
sufficient to eliminate any Overadvance. 
All Overadvances shall constitute Index Rate Loans and shall bear interest
payable upon demand at the Default Rate. 
For funding requests for Revolving Credit Advances to be funded as Index
Rate Loans of less than $5,000,000, written notice must be provided by 

 

2

 

1:00 p.m. (New York time) on the
Business Day on which the Revolving Credit Advance is to be made.  For funding requests of Revolving Credit
Advances to be funded as Index Rate Loans of $5,000,000 or greater, written
notice must be provided by 1:00 p.m. (New York time) on the Business Day
immediately preceding the day on which the Revolving Credit Advance is to be
made.  All Revolving Credit Advances to
be funded as LIBOR Loans require three (3) Business Days prior written notice.
Written notices for funding requests shall be in the form attached as Exhibit
1.1(a)(ii) (“Notice of Revolving Credit Advance”).  Any Loan or group of Loans having the same
proposed LIBOR Period to be made or continued as, or converted into, a LIBOR
Loan must be in a minimum amount of $5,000,000 and integral multiples of
$500,000 in excess of such amount.

 

(ii)           If Borrower Representative on behalf of Borrowers
requests that Revolving Lenders make, or permit to remain outstanding an
Overadvance, Agent may, in its sole discretion, elect to make, or permit to
remain outstanding such Overadvance; provided, however, that
Agent may not cause Revolving Lenders to make, or permit to remain outstanding,
(a) a Revolving Loan balance in excess of the Maximum Amount or
(b) an Overadvance in an aggregate amount in excess of $10,000,000.  If
an Overadvance is made, or permitted to remain outstanding, pursuant to the
preceding sentence, then all Revolving Lenders shall be bound to make, or
permit to remain outstanding, such Overadvance based upon their Pro Rata Shares
of the Revolving Loan Commitment in accordance with the terms of this
Agreement.

 

(b)           Domestic Swing Line
Facility.

 

(i)            Subject to the terms and conditions hereof, the Swing
Line Lender hereby agrees to make available at any time and from time to time
until the Commitment Termination Date advances (each, a “Swing Line Advance”).  The provisions of this Section 1.1(b)
shall not relieve Revolving Lenders of their obligations to make Revolving
Credit Advances under Section 1.1(a). 
Except as provided in Section 1.1(a)(ii) above, the aggregate
amount of Swing Line Advances outstanding shall not exceed at any time the
lesser of (A) the Swing Line Commitment and (B) Borrowing Availability (“Swing
Line Availability”).  Until the
Commitment Termination Date, Borrowers may from time to time borrow, repay and
reborrow under this Section 1.1(b). 
Whenever any Borrower desires that the Swing Line Lender make a Swing
Line Advance hereunder, Borrower Representative shall give the Swing Line
Lender, not later than 3:30 P.M. (New York time), on the date that a Swing Line
Advance is to be made, written notice or telephonic notice promptly confirmed
in writing of each Swing Line Advance to be made hereunder.  Each such notice shall be irrevocable and
specify (A) the date of borrowing (which shall be a Business Day), (B) the
applicable Borrower and (C) the aggregate principal amount of the Swing Line
Advance to be made pursuant to such borrowing. 
Unless the Swing Line Lender has received at least one (1) Business Day’s
prior written notice from Requisite Lenders instructing it not to make a Swing
Line Advance, the Swing Line Lender shall, notwithstanding the failure of any
condition precedent set forth in Section 2.2, be entitled to fund that
Swing Line Advance, and to have each Revolving Lender make Revolving Credit
Advances in accordance with Section 1.1(b)(iii) or purchase
participating interests in accordance with Section 1.1(b)(iv).  Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan.  Borrowers shall repay
the aggregate outstanding principal amount of the Swing Line Loan upon demand
therefor by Agent. The entire unpaid balance of the Swing Line Loan and all
other noncontingent

 

3

 

Obligations (other than as set forth
in Section 1.5) shall be immediately due and payable in full in
immediately available funds on the Commitment Termination Date if not sooner
paid in full.

 

(ii)           Borrowers shall execute and deliver to the Swing Line
Lender a promissory note to evidence the Swing Line Commitment. Such note shall
be in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(b) (as amended, modified, extended, substituted or replaced from time
to time, the “Swing Line Note”). The Swing Line Note shall represent the
obligation of Borrowers to pay the amount of the Swing Line Commitment or, if
less, the aggregate unpaid principal amount of all Swing Line Advances made to
Borrowers together with interest thereon as prescribed in Section 1.2.

 

(iii)          The Swing Line Lender, at any time and from time to
time in its sole and absolute discretion but no less frequently than once weekly, may on
behalf of Borrowers (and each Borrower hereby irrevocably authorizes the Swing
Line Lender to so act on its behalf) request each Revolving Lender to make a
Revolving Credit Advance to Borrowers (which shall be an Index Rate Loan) in an
amount equal to that Revolving Lender’s Pro Rata Share of the principal amount
of the Swing Line Loan (the “Refunded Swing Line Loan”) outstanding on
the date such notice is given.  Unless
any of the events described in Sections 7.1(f) and 7.1(g) has occurred
(in which event the procedures of Section 1.1(b)(iv) shall apply) and
regardless of whether the conditions precedent set forth in this Agreement to
the making of a Revolving Credit Advance are then satisfied, each Revolving
Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving
Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m. (New York
time), in immediately available funds on the Business Day next succeeding the
date that notice is given.  The proceeds of
those Revolving Credit Advances shall be immediately paid to the Swing Line
Lender and applied to repay the Refunded Swing Line Loan.

 

(iv)          If, prior to refunding a Swing Line Loan with a
Revolving Credit Advance pursuant to Section 1.1(b)(iii), one of the
events described in Sections 7.1(f) or 7.1(g) has occurred, then,
subject to the provisions of Section 1.1(b)(v) below, each Revolving
Lender shall, on the date such Revolving Credit Advance was to have been made
for the benefit of any Borrower, purchase from the Swing Line Lender an
undivided participation interest in the Swing Line Loan in an amount equal to
its Pro Rata Share (determined with respect to the Revolving Loan) of such
Swing Line Loan.  Upon request, each
Revolving Lender shall promptly transfer to the Swing Line Lender, in
immediately available funds, the amount of its participation interest.

 

(v)           Each Revolving Lender’s obligation to make Revolving
Credit Advances in accordance with Section 1.1(b)(iii) and to purchase
participation interests in accordance with Section 1.1(b)(iv) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
that such Revolving Lender may have against the Swing Line Lender, any Borrower
or any other Person for any reason whatsoever; (B) the occurrence or
continuance of any Default or Event of Default; (C) any inability of any
Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement
at any time or (D) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. 
Swing Line Lender shall be entitled to recover, on demand, from each
Revolving Lender the amounts required pursuant to

 

4

 

Sections 1.1.(b)(iii) or 1.1(b)(iv), as the case may be.  If any Revolving Lender does not make
available such amounts to Agent or the Swing Line Lender, as applicable, the
Swing Line Lender shall be entitled to recover, on demand, such amount on
demand from such Revolving Lender, together with interest thereon for each day
from the date of non-payment until such amount is paid in full at the Federal
Funds Rate for the first two Business Days and at the Index Rate thereafter.

 

(c)           Letters
of Credit.  The Revolving Loan
Commitment may, in addition to advances under the Revolving Loan and the
Alternative Currency Revolving Credit Subfacility, be utilized (subject to the
limitations imposed by Section 1.1(a)), upon the request of Borrower
Representative on behalf of the applicable Borrower to Agent, for the issuance
of Letters of Credit, which shall be issued in Dollars on behalf of any
Domestic Borrower or, to the extent available, Pounds Sterling on behalf of any
European Borrower.  Immediately upon the
issuance by an L/C Issuer of a Letter of Credit, and without further action on
the part of Agent or any of the Lenders, each Revolving Lender shall be deemed
to have purchased from such L/C Issuer a participation in such Letter of Credit
(or in its obligation under a risk participation agreement with respect
thereto) equal to such Revolving Lender’s Pro Rata Share of the aggregate
amount available to be drawn under such Letter of Credit.

 

(i)            Maximum Amount.  The aggregate
amount of Letter of Credit Obligations with respect to all Letters of Credit
outstanding or unreimbursed at any time shall not exceed $45,000,000, or the
Dollar Equivalent thereof (“L/C Sublimit”).

 

(ii)           Reimbursement.  Borrowers
shall be irrevocably and unconditionally obligated forthwith without
presentment, demand, protest or other formalities of any kind (including for
purposes of Section 10), to reimburse any L/C Issuer on demand in
immediately available funds for any amounts paid by such L/C Issuer with respect
to a Letter of Credit, including all reimbursement payments, Fees, Charges,
costs and expenses paid by such L/C Issuer. 
Borrowers hereby authorize and direct Agent, at Agent’s option, to debit
Borrowers’ accounts (by increasing the outstanding principal balance of the
Revolving Credit Advances, Alternative Currency Revolving Credit Advances,
Swing Line Advances or Alternative Currency Swing Line Advances made to such
Borrower, as applicable) in the amount of any payment made by an L/C Issuer
with respect to any Letter of Credit. 
All amounts paid by an L/C Issuer with respect to any Letter of Credit
that are not immediately repaid by Borrowers with the proceeds of a Revolving
Credit Advance, Swing Line Advance, Alternative Currency Revolving Credit Advance,
Alternative Currency Swing Line Advances or otherwise shall bear interest
payable on demand at the interest rate applicable to Revolving Credit Advances
that are Index Rate Loans plus, at the election of Agent or Requisite Lenders,
an additional two percent (2.00%) per annum. 
Each Revolving Lender agrees to fund its Pro Rata Share of any Revolving
Loan made pursuant to this Section 1.1(c)(ii).  In the event Agent elects not to debit a
Borrower’s account and Borrowers fail to reimburse the L/C Issuer in full on
the date of any payment in respect of a Letter of Credit, Agent shall promptly
notify each Revolving Lender of the amount of such unreimbursed payment and the
accrued interest thereon and each Revolving Lender, on the next Business Day
prior to 3:00 p.m. (New York time), shall deliver to Agent an amount equal to
its Pro Rata Share thereof in same day funds.  Each Revolving Lender hereby absolutely and
unconditionally agrees to pay to the L/C Issuer upon demand by the L/C Issuer
such Revolving Lender’s Pro Rata Share of each payment made by the L/C Issuer
in respect of a Letter of Credit and not immediately reimbursed by Borrowers or
satisfied through a debit of 

 

5

 

Borrowers’ account.  Each Revolving Lender acknowledges and agrees
that its obligations pursuant to this subsection in respect of Letters of
Credit are absolute and unconditional and shall not be affected by any
circumstance whatsoever, including setoff, counterclaim, the occurrence and continuance
of a Default or an Event of Default or any failure by Borrowers to satisfy any
of the conditions set forth in Section 2.2.  If any Revolving Lender fails to make
available to the L/C Issuer the amount of such Revolving Lender’s Pro Rata
Share of any payments made by the L/C Issuer in respect of a Letter of Credit
as provided in this Section 1.1(c)(ii), the L/C Issuer shall be entitled
to recover such amount on demand from such Revolving Lender together with
interest at the Index Rate or at the Alternative Currency Index Rate, as
applicable.

 

(iii)          Request for Letters of Credit. 
Borrower Representative shall give Agent at least three (3) Business
Days prior written notice specifying the date a Letter of Credit is requested
to be issued, the amount and the name and address of the beneficiary and a
description of the transactions proposed to be supported thereby, the Borrower
for whose account such Letter of Credit is to be issued, the Applicable
Currency and the expiry date (or extended expiry date) of the Letter of
Credit.  Each request by Borrower
Representative for the issuance of a Letter of Credit shall be in the form of Exhibit
1.1(c).  If Agent informs Borrower
Representative that the L/C Issuer cannot issue the requested Letter of Credit
directly, Borrower Representative may request that L/C Issuer arrange for the
issuance of the requested Letter of Credit under a risk participation agreement
with another financial institution reasonably acceptable to Agent, L/C Issuer
and Borrower Representative.  The
issuance of any Letter of Credit under this Agreement shall be subject to
satisfaction of the conditions set forth in Section 2.2 and the
conditions that the Letter of Credit (i) supports a transaction benefiting
the Credit Parties (other than Holdings) or their wholly-owned Subsidiaries and
(ii) is in a form, is for an amount and contains such terms and conditions
as are reasonably satisfactory to the L/C Issuer and, in the case of standby
letters of credit, Agent.  The initial
notice requesting the issuance of a Letter of Credit shall be accompanied by
the form of the Letter of Credit and the Master Standby Agreement or Master
Documentary Agreement, as applicable, and an application for a letter of
credit, if any, then required by the L/C Issuer completed in a manner
reasonably satisfactory to such L/C Issuer. 
If any provision of any application or reimbursement agreement is
inconsistent with the terms of this Agreement, then the provisions of this
Agreement, to the extent of such inconsistency, shall control.

 

(iv)          Expiration Dates of Letters of Credit. 
The expiration date of each Letter of Credit shall be on a date that is
not later than the earlier of (a) twelve months from its date of issuance
or (b) the thirtieth (30th) day prior to the date set forth in
clause (a) of the definition of the term Commitment Termination Date.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiration date for one (1) or more successive periods of up
to twelve (12) months for each period; provided that the L/C Issuer has the
right to terminate such Letter of Credit on each such expiration date and no
renewal term may extend the term of the Letter of Credit to a date that is
later than the thirtieth (30th) day prior to the date set forth in clause (a)
of the definition of the term Commitment Termination Date.  Upon direction by Agent or Requisite Lenders,
the L/C Issuer shall not renew any such Letter of Credit at any time during the
continuance of an Event of Default; provided that, in the case of a direction
by Agent or Requisite Lenders, the L/C Issuer receives such directions prior to
the date notice of 

 

6

 

non-renewal is required to be given
by the L/C Issuer and the L/C Issuer has had a reasonable period of time to act
on such notice.

 

(v)           Obligations Absolute. 
The obligation of Borrowers to reimburse the L/C Issuer, Agent and
Lenders for payments made in respect of Letters of Credit issued by the L/C
Issuer shall be unconditional and irrevocable and shall be paid under all
circumstances strictly in accordance with the terms of this Agreement,
including the following circumstances: (a) any lack of validity or
enforceability of any Letter of Credit; (b) any amendment or waiver of or
any consent or departure from all or any of the provisions of any Letter of
Credit or any Loan Document; (c) the existence of any claim, set-off,
defense or other right which Borrowers, any of their Subsidiaries or Affiliates
or any other Person may at any time have against any beneficiary of any Letter
of Credit, Agent, any L/C Issuer, any Lender or any other Person, whether in
connection with this Agreement, any other Loan Document or any other related or
unrelated agreements or transactions; (d) any draft or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (e) payment under any Letter of Credit against
presentation of a draft or other document that does not substantially comply
with the terms of such Letter of Credit; or (f) any other act or omission
to act or delay of any kind of any L/C Issuer, Agent, any Lender or any other
Person or any other event or circumstance whatsoever that might, but for the
provisions of this Section 1.1(c)(v), constitute a legal or equitable
discharge of Borrowers’ obligations hereunder. 
Without limiting the generality of the foregoing, it is expressly
understood and agreed by Borrowers that the absolute and unconditional
obligation of Borrowers to Agent and Lenders hereunder to reimburse payments
made under a Letter of Credit will not be excused by the gross negligence or
willful misconduct of the L/C Issuer. 
However, the foregoing shall not be construed to excuse an L/C Issuer
from claims which Borrowers may assert against the L/C Issuer subject to the
terms of the Master Standby Agreement or the Master Documentary Agreement.

 

(vi)          Obligations of L/C Issuers. 
Each L/C Issuer (other than GE Capital) hereby agrees that it will not
issue a Letter of Credit hereunder until it has provided Agent with written
notice specifying the amount and intended issuance date of such Letter of
Credit.  Each L/C Issuer (other than GE
Capital) further agrees to provide to Agent: 
(a) a copy of each Letter of Credit issued by such L/C Issuer
promptly after its issuance; (b) a weekly report summarizing available
amounts under Letters of Credit issued by such L/C Issuer, the dates and
amounts of any draws under such Letters of Credit, the effective date of any
increase or decrease in the face amount of any Letters of Credit during such
week and the amount of any unreimbursed draws under such Letters of Credit; and
(c) such additional information reasonably requested by Agent from time to
time with respect to the Letters of Credit issued by such L/C Issuer.

 

(d)           European
Borrowers Alternative Currency Revolving Credit Subfacility.

 

(i)            The Revolving Loan Commitment may, in addition to
advances under the Revolving Loan and the issuance of any Letters of Credit, be
utilized (subject to the limitations imposed by Section 1.1(a) and this Section
1.1(d)), upon the request of Borrower Representative, for advances under
the Alternative Currency Revolving Credit Subfacility as set forth herein.  Each Revolving Lender agrees, severally and
not jointly, to make available to the 

 

7

 

European Borrowers from time to time
until the Commitment Termination Date its Pro Rata Share of advances
denominated in an Alternative Currency (each an “Alternative Currency
Revolving Credit Advance”) requested by Borrower Representative on behalf
of the European Borrowers hereunder, which request shall specify both the
Alternative Currency and the European Borrower to which the Alternative
Currency Revolving Credit Advance is being made.  The Pro Rata Share of the Alternative
Currency Revolving Credit Advances of any Revolving Lender shall not at any
time exceed the Assigned Dollar Value of such Lender’s Unused Alternative
Currency Revolving Credit Sub-Commitment at such time; provided, however,
that the aggregate amount of all Alternative Currency Revolving Credit Advances
at any time outstanding shall not at any time exceed the Assigned Dollar Value
of $150,000,000 (the “Alternative Currency Revolving Credit Subfacility”),
and, provided, further, that the aggregate amount of all
Alternative Currency Revolving Credit Borrowings shall in no event exceed the
aggregate of the Unused Alternative Currency Revolving Credit Sub-Commitments
of the Revolving Lenders at such time. 
Each Alternative Currency Revolving Credit Borrowing shall be in the
Assigned Dollar Value of approximately Two Million Dollars ($2,000,000) or an
integral multiple of approximately One Million Dollars ($1,000,000) in excess
thereof on the date of the applicable Notice of Alternative Currency Borrowing
or, if less, the then Dollar Equivalent amount of the aggregate Unused
Alternative Currency Revolving Credit Sub-Commitments other than, in the case
of continuations or conversions of any Alternative Currency Revolving Credit
Borrowing, to the extent a failure to comply with the foregoing is solely a
result of currency fluctuations. Each Alternative Currency Revolving Credit
Borrowing shall consist of Alternative Currency Revolving Credit Advances made
simultaneously by the Revolving Lenders ratably according to their Alternative
Currency Revolving Credit Sub-Commitments.

 

(ii)           Each Alternative Currency Revolving Credit Borrowing
shall be made on notice, given not later than 1:00 P.M. (New York, New York
time) on the 3rd Business Day prior to the date of the proposed Borrowing by
the Borrower Representative to the Agent. 
Each such notice of an Alternative Currency Revolving Credit Borrowing
(a “Notice of Alternative Currency Borrowing”) shall be in substantially
the form of Exhibit 1.1(d)(ii) hereto, specifying therein the requested
(i) date of such Alternative Currency Revolving Credit Borrowing, (ii)
Applicable Currency, (iii) aggregate amount of such Alternative Currency
Revolving Credit Borrowing and (iv) the European Borrower requesting such
Alternative Currency Revolving Credit Borrowing.

 

(e)           Alternative
Currency Swing Line Facility.

 

(i)            Subject to the terms and conditions hereof, the
Alternative Currency Swing Line Lender hereby agrees to make available at any
time and from time to time until the Commitment Termination Date advances
(each, an “Alternative Currency Swing Line Advance”).  The provisions of this Section 1.1(e)
shall not relieve Revolving Lenders of their obligations to make Revolving
Credit Advances under Section 1.1(b) or Alternative Revolving Credit
Advances under Section 1.1(d). 
Except as provided in Section 1.1(a)(ii) above, the aggregate
amount of Alternative Currency Swing Line Advances outstanding shall not exceed
at any time the lesser of (A) the Alternative Currency Swing Line
Commitment and (B) Borrowing Availability (“Alternative Currency Swing Line
Availability”).  Until the Commitment
Termination Date, European Borrowers may from time to time borrow, repay and
reborrow 

 

8

 

under this Section 1.1(e).  Whenever any Borrower desires that the
Alternative Currency Swing Line Lender make an Alternative Currency Swing Line
Advance hereunder, Borrower Representative shall give the Alternative Currency
Swing Line Lender not later than 10:00 A.M. (New York time) on the Business Day
prior to the date that an Alternative Currency Swing Line Advance is to be
made, written notice or telephonic notice promptly confirmed in writing of each
Alternative Currency Swing Line Advance to be made hereunder.  Each such notice shall be irrevocable and
specify (A) the date of Borrowing (which shall be a Business Day), (B) the
applicable Borrower and (C) the aggregate principal amount of the Alternative
Currency Swing Line Advance to be made pursuant to such Borrowing.  Unless the Alternative Currency Swing Line
Lender has received at least one (1) Business Day’s prior written notice from
Requisite Lenders instructing it not to make an Alternative Currency Swing Line
Advance, the Alternative Currency Swing Line Lender shall, notwithstanding the
failure of any condition precedent set forth in Section 2.2, be entitled
to fund that Alternative Currency Swing Line Advance, and to have each
Revolving Lender make Alternative Currency Revolving Credit Advances in
accordance with Section 1.1(e)(iii) or purchase participating interests
in accordance with Section 1.1(e)(iv). 
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Alternative Currency Swing Line Loan shall constitute an Index
Rate Loan.  European Borrowers shall
repay the aggregate outstanding principal amount of the Alternative Currency Swing
Line Loan upon demand therefor by Agent. The entire unpaid balance of the
Alternative Currency Swing Line Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full.

 

(ii)           European Borrowers shall execute and
deliver to the Alternative Currency Swing Line Lender a promissory note to
evidence the Alternative Currency Swing Line Commitment. Such note shall be in
the principal amount of the Alternative Currency Swing Line Commitment of the
Alternative Currency Swing Line Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(e) (as amended, modified,
extended, substituted or replaced from time to time, the “Alternative
Currency Swing Line Note”). The Alternative Currency Swing Line Note shall
represent the obligation of European Borrowers to pay the amount of the
Alternative Currency Swing Line Commitment or, if less, the aggregate unpaid
principal amount of all Alternative Currency Swing Line Advances made to
Borrowers together with interest thereon as prescribed in Section 1.2.

 

(iii)          The Alternative Currency Swing Line
Lender, at any time and from time to time in its sole and absolute discretion but no less frequently than once every two
weeks, may on behalf of Borrowers (and each Borrower hereby irrevocably
authorizes the Alternative Currency Swing Line Lender to so act on its behalf)
request each Revolving Lender to make an Alternative Currency Revolving Credit
Advance to European Borrowers (which shall be a LIBOR Loan at the Alternative
Currency LIBOR Rate) in an amount equal to that Revolving Lender’s Pro Rata
Share of the difference between (A) the principal amount of the Alternative
Currency Swing Line Loan (such amount, the “Refunded Alternative Currency
Swing Line Loan”) outstanding on the date such notice is given and (B) the
then Pounds Sterling equivalent of $2,500,000. 
Prior to sending such notice the Alternative Currency Swing Line Lender
shall contact the Borrower Representative which shall specify the LIBOR Period
for the Alternative Currency Revolving Credit Advance to be made by each Lender
in order to repay the Refunded Alternative Currency Swing Line Loan and,
accordingly, such notice sent by the 

 

9

 

Alternative Currency Swing Line
Lender to each Lender shall specify both such Lender’s Pro Rata Share of the
Refunded Alternative Currency Advance and the LIBOR Period selected by the
Borrower Representative for the Alternative Currency Revolving Credit Advances
to be made by the Lenders in the amount of the Refunded Alternative Currency
Swing Line Loan. Unless any of the events described in Sections 7.1(f) and
7.1(g) has occurred (in which event the procedures of Section 1.1(e)(iv)
shall apply) and regardless of whether the conditions precedent set forth in
this Agreement to the making of an Alternative Currency Revolving Credit
Advance are then satisfied, each Revolving Lender shall disburse directly to
Agent, its Pro Rata Share of an Alternative Currency Revolving Credit Advance
on behalf of the Alternative Currency Swing Line Lender, prior to 3:00 p.m.
(New York time), in immediately available funds on the third (3rd) Business Day
next following the date that such notice is given by the Alternative Currency
Swing Line Lender.  The proceeds of those
Alternative Currency Revolving Credit Advances shall be immediately paid to the
Alternative Currency Swing Line Lender and applied to repay the Refunded Alternative
Currency Swing Line Loan.

 

(iv)          If, prior to refunding an
Alternative Currency Swing Line Loan with an Alternative Currency Revolving
Credit Advance pursuant to Section 1.1(e)(iii), one of the events
described in Sections 7.1(f) or 7.1(g) has occurred, then, subject to
the provisions of Section 1.1(e)(v) below, each Revolving Lender shall,
on the date such Alternative Currency Revolving Credit Advance was to have been
made for the benefit of any European Borrower, purchase from the Alternative
Currency Swing Line Lender an undivided participation interest in the
Alternative Currency Swing Line Loan in an amount equal to its Pro Rata Share
(determined with respect to Alternative Currency Revolving Credit Borrowings)
of such Alternative Currency Swing Line Loan. 
Upon request, each Revolving Lender shall promptly transfer to the
Alternative Currency Swing Line Lender, in immediately available funds, the
amount of its participation interest.

 

(v)           Each Revolving Lender’s obligation to make Alternative
Currency Revolving Credit Advances in accordance with Section 1.1(e)(iii)
and to purchase participation interests in accordance with Section
1.1(e)(iv) shall be absolute and unconditional and shall not be affected by
any circumstance, including (A) any setoff, counterclaim, recoupment,
defense or other right that such Revolving Lender may have against the
Alternative Currency Swing Line Lender, any Borrower or any other Person for
any reason whatsoever; (B) the occurrence or continuance of any Default or
Event of Default; (C) any inability of any Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time or
(D) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. 
Alternative Currency Swing Line Lender shall be entitled to recover, on
demand, from each Revolving Lender the amounts required pursuant to Sections
1.1.(e)(iii) or 1.1(e)(iv), as the case may be.  If any Revolving Lender does not make
available such amounts to Agent or the Alternative Currency Swing Line Lender,
as applicable, the Alternative Currency Swing Line Lender shall be entitled to
recover, on demand, such amount on demand from such Revolving Lender, together
with interest thereon for each day from the date of non-payment until such
amount is paid in full at the Federal Funds Rate for the first two Business
Days and at the Alternative Currency Index Rate thereafter.

 

(f)            Funding
Authorization.  (i)  The proceeds of all Loans made to the
Domestic Borrower pursuant to this Agreement (i.e., other than Loans made to
the European 

 

10

 

Borrowers pursuant to the Alternative Currency
Revolving Credit Subfacility) subsequent to the Closing Date are to be funded
by Agent by wire transfer to the account designated by Borrower Representative
below (the “US Disbursement Account”):

 

Bank:  Deutsche Trust Company Americas

ABA No.:  021-001-033

Bank Address:  New York, New York

Account No.:  00360911

Reference:  Vertis, Inc.

 

(ii)           The proceeds of all Loans made to the European
Borrowers pursuant to the Alternative Currency Revolving Credit Subfacility
under this Agreement subsequent to the Closing Date are to be funded by Agent
by wire transfer to the applicable account designated by Borrower
Representative set forth on Schedule 1.1(e) hereof (each, a “European
Disbursement Account”, and collectively the “European Disbursement
Accounts” and collectively with the US Disbursement Account, the “Disbursement
Accounts”).

 

Borrower Representative shall provide Agent with
written notice of any change in the foregoing instructions at least three (3)
Business Days before the desired effective date of such change.

 

1.2.          Interest and Applicable Margins.

 

(a)           Borrowers
shall pay interest to Agent, for the ratable benefit of Lenders, with respect
to the various Loans (other than Letter of Credit Obligations) made by each
Lender (or in the case of the Swing Line Loan, for the benefit of the Swing
Line Lender or, in the case of the Alternative Currency Swing Line Loan, for
the benefit of the Alternative Currency Swing Line Lender), in arrears on each
applicable Interest Payment Date, at the following rates:  (i) with respect to the Revolving Credit
Advances that are Index Rate Loans, the Index Rate plus the Applicable Revolver
Index Margin per annum, (ii) with respect to Revolving Credit Advances that are
LIBOR Loans, at the election of Borrower Representative, the applicable LIBOR
Rate plus the Applicable Revolver LIBOR Margin per annum; (iii) with
respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver
Index Margin per annum, (iv) with respect to Alternative Currency Revolving
Credit Advances that are LIBOR Loans, at the election of Borrower
Representative, the applicable Alternative Currency LIBOR Rate plus the
Applicable Revolver LIBOR Margin per annum, and (v) with respect to the
Alternative Currency Swing Line Loan, the Alternative Currency Index Rate plus
the Applicable Alternative Currency Revolver Index Margin per annum.

 

As of the Closing Date, the Applicable Margins are as
follows:

 

	
  Applicable Revolver Index Margin

  	
   

  	
  1.50

  	
  %

  
	
  Applicable
  Alternative Currency Revolver Index Margin

  	
   

  	
  2.75

  	
  %

  
	
  Applicable
  Revolver LIBOR Margin

  	
   

  	
  2.75

  	
  %

  
	
  Applicable
  L/C Margin

  	
   

  	
  2.75

  	
  %

  

 

11

 

The Applicable Margins shall be adjusted (up or down)
prospectively on a quarterly basis as determined by Holdings’ and its
Subsidiaries’ consolidated financial performance, commencing with the first day
of the first calendar month that occurs more than one (1) day after delivery of
Holdings’ quarterly Financial Statements to Lenders for the Fiscal Quarter
ending June 30, 2005.  Adjustments in
Applicable Margins will be determined by reference to the following grid:

 

	
  If Leverage Ratio is:

  	
   

  	
  Level of

  Applicable Margins:

  	
   

  
	
  <0.7

  	
   

  	
  Level I

  	
   

  
	
  <1.0,
  but > 0.7

  	
   

  	
  Level II

  	
   

  
	
  <1.6,
  but > 1.0

  	
   

  	
  Level III

  	
   

  
	
  >1.6

  	
   

  	
  Level IV

  	
   

  

 

	
   

  	
   

  	
  Applicable Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  	
  Level IV

  	
   

  
	
  Applicable
  Revolver Index Margin

  	
   

  	
  1.00

  	
  %

  	
  1.25

  	
  %

  	
  1.50

  	
  %

  	
  1.75

  	
  %

  
	
  Applicable
  Alternative Currency Revolver Index Margin

  	
   

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  
	
  Applicable
  Revolver LIBOR Margin

  	
   

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  
	
  Applicable
  L/C Margin

  	
   

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  

 

All adjustments in the Applicable Margins after June
30, 2005 shall be implemented quarterly on a prospective basis, for each
calendar month commencing at least one (1) day after the date of delivery to
Lenders of the quarterly unaudited Financial Statements evidencing the need for
an adjustment.  Concurrently with the
delivery of quarterly unaudited Financial Statements, Borrower Representative
shall deliver to Agent and Lenders a certificate, signed by its chief financial
officer, setting forth in reasonable detail the basis for the continuance of,
or any change in, the Applicable Margins. 
Failure to timely deliver such Financial Statements shall, in addition
to any other remedy provided for in this Agreement, result in an increase in
the Applicable Margins to the highest level set forth in the foregoing grid,
until the first day of the first calendar month following the delivery of those
Financial Statements demonstrating that such an increase is not required.  If any Default or an Event of Default has
occurred and is continuing at the time any reduction in the Applicable Margins
is to be implemented, that reduction shall be deferred until the first day of
the first calendar month following the date on which all Defaults or Events of
Default are waived or cured.

 

(b)           If any
payment on any Loan becomes due and payable on a day other than a Business Day,
the maturity thereof will be extended to the next succeeding Business Day
(except as set forth in the definition of LIBOR Period) and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.

 

(c)           All
computations of Fees calculated on a per annum basis and interest shall be made
by Agent on the basis of a 360-day year, in each case for the actual number of 

 

12

 

days occurring in
the period for which such Fees and interest are payable.  The Index Rate and the Alternative Currency
Index Rate are each floating rates determined for each day.  Each determination by Agent of an interest
rate and Fees hereunder shall be final, binding and conclusive on Borrowers,
absent manifest error.

 

(d)           So long as
an Event of Default has occurred and is continuing under Section 7.1(a),
(f) or (g) and without notice of any kind, or so long as any other
Event of Default has occurred and is continuing and at the election of Agent
(or upon the written request of Requisite Lenders) confirmed by written notice
from Agent to Borrower Representative, the interest rates applicable to the
Loans and the Letter of Credit and Unused Line Fees shall be increased by two
percentage points (2%) per annum above the rates of interest or the rate of
such Fee otherwise applicable hereunder (“Default Rate”), and all other
outstanding Obligations which are past due shall bear interest at the then
applicable Index Rate applicable to such other Obligations plus the
Default Rate.  Interest, Unused Line Fees
and Letter of Credit Fees at the Default Rate shall accrue from the initial
date of such Event of Default until that Event of Default is cured or waived
and shall be payable upon demand, but in any event, shall be payable on the
next regularly scheduled payment date set forth herein for such Obligation.

 

(e)           Borrower
Representative shall have the option to (i) request that any Revolving
Credit Advance or Alternative Currency Revolving Credit Advance be made as a
LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans
(other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans,
(iii) convert any LIBOR Loan to an Index Rate Loan (other than an
Alternative Currency Revolving Credit Advance), subject to payment of the LIBOR
Breakage Costs in accordance with Section 1.3(e) if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or
(iv) continue all or any portion of any Loan (other than the Swing Line
Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and
the succeeding LIBOR Period of that continued Loan shall commence on the first
day after the last day of the LIBOR Period of the Loan to be continued, provided,
however, Loans that bear interest by reference to the Alternative
Currency LIBOR Rate and the Alternative Currency Index Rate may not be
converted or continued as Loans that bear interest by reference to the LIBOR
Rate or the Index Rate.  Any such
election must be made by 1:00 p.m. (New York time) on the 3rd Business Day
prior to (1) the date of any proposed Revolving Credit Advance or
Alternative Currency Revolving Credit Advance that is to bear interest at the
LIBOR Rate or Alternative Currency LIBOR Rate, as applicable, (2) the end
of each LIBOR Period with respect to any LIBOR Loans to be continued as such,
or (3) the date on which Borrower Representative wishes to convert any Index
Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower
Representative in such election.  If no
election is received with respect to a LIBOR Loan by 1:00 p.m. (New York time)
on the 3rd Business Day prior to the end of the LIBOR Period with respect thereto,
that LIBOR Loan (other than an Alternative Currency Revolving Credit Advance)
shall be converted to an Index Rate Loan at the end of its LIBOR Period.  With respect to any Loan consisting of an
Alternative Currency Revolving Credit Advance, if no election is received with
respect to a LIBOR Loan by 1:00 p.m. (New York time) on the 3rd Business Day
prior to the end of the LIBOR Period with respect thereto, that LIBOR Loan
shall be continued as a LIBOR Loan for the same LIBOR Period.  Borrower Representative must make such
election by notice to Agent in writing, by fax or overnight courier.  In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.2(e).

 

13

 

No Loan shall be made, converted into or continued as
a LIBOR Loan, if an Event of Default has occurred and is continuing and Agent
or Requisite Lenders have determined not to make or continue any Loan as a
LIBOR Loan as a result thereof.

 

(f)            Notwithstanding
anything to the contrary set forth in this Section 1.2, if a court
of competent jurisdiction determines in a final order that the rate of interest
payable hereunder exceeds the highest rate of interest permissible under law
(the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.  Thereafter,
interest hereunder shall be paid at the rate(s) of interest and in the manner
provided in Sections 1.2(a) through (e), unless and until the rate of
interest again exceeds the Maximum Lawful Rate, and at that time this paragraph
shall again apply.  In no event shall the
total interest received by any Lender pursuant to the terms hereof exceed the
amount that such Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful
Rate.  If the Maximum Lawful Rate is
calculated pursuant to this paragraph, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made. 
If, notwithstanding the provisions of this Section 1.2(f), a court
of competent jurisdiction shall determine by a final, non-appealable order that
a Lender has received interest hereunder in excess of the Maximum Lawful Rate,
Agent shall, to the extent permitted by applicable law, promptly apply such
excess as specified in Section 1.5(d) and thereafter shall refund any
excess to Borrowers or as such court of competent jurisdiction may otherwise
order.

 

1.3.          Fees.

 

(a)           Fee
Letter.  Borrowers shall pay to GE
Capital, individually, the Fees specified in that certain fee letter, dated as
of November 5, 2004 among
Borrowers and GE Capital (the “GE Capital Fee Letter”), at the times
specified for payment therein.

 

(b)           Unused
Line Fee.  As additional compensation
for the Revolving Lenders, Borrowers shall pay to Agent, for the ratable
benefit of such Lenders, in arrears, on the first Business Day of each calendar
quarter prior to the Commitment Termination Date, commencing with January, 2005
and on the Commitment Termination Date, a fee for Borrowers’ non-use of
available funds in an amount equal to one-half of one percent (0.50%) per annum multiplied by the difference between (x) the
Maximum Amount (as it may be reduced from time to time) and (y) the
average for the period of the daily closing balances of the Revolving Loan (including,
without duplication, Swing Line Loan and Alternative Currency Revolving Loans)
outstanding during the period for which such Fee is due.

 

(c)           Letter
of Credit Fee.  Borrowers agree to
pay to Agent for the benefit of Revolving Lenders, as compensation to such
Revolving Lenders for Letter of Credit Obligations incurred hereunder,
(i) without duplication of reasonable, documented, out-of-pocket costs and

 

14

 

expenses otherwise payable to Agent or Lenders
hereunder, all costs and expenses incurred by Agent or any Lender on account of
such Letter of Credit Obligations, and (ii) for each calendar quarter
during which any Letter of Credit Obligation shall remain outstanding,
commencing with the first calendar quarter following the Closing Date, a fee
(the “Letter of Credit Fee”) in an amount equal to the Applicable L/C Margin from time to time
in effect multiplied by the maximum amount available from time to time
to be drawn under the applicable Letter of Credit.  Such fee shall be paid to Agent for the
benefit of the Revolving Lenders in arrears, on the first Business Day of each
calendar quarter and on the Commitment Termination Date.  In addition, Borrowers shall pay to any L/C
Issuer, on demand, such fees (including all per annum fees), charges and
expenses of such L/C Issuer in respect of the issuance, negotiation,
acceptance, amendment, transfer and payment of such Letter of Credit or
otherwise payable pursuant to the application and related documentation under
which such Letter of Credit is issued.

 

(d)           LIBOR
Breakage Costs.  Upon (i) any
default by any Borrower in making any borrowing of, conversion into or
continuation of any LIBOR Loan following Borrower Representative’s delivery to
Agent of any LIBOR Loan request in respect thereof or (ii) any payment of
a LIBOR Loan on any day that is not the last day of the LIBOR Period applicable
thereto (regardless of the source of such prepayment and whether voluntary, by
acceleration or otherwise), Borrowers shall pay Agent, for the benefit of all
Lenders that funded or were prepared to fund any such LIBOR Loan, LIBOR
Breakage Costs, if applicable.

 

(e)           Expenses
and Attorneys’ Fees.  Borrowers agree
to pay all reasonable, documented, out-of-pocket fees, charges, costs and
expenses (including, without duplication, reasonable attorneys’ fees and
expenses) incurred by Agent in connection with any matters contemplated by or
arising out of the Loan Documents, in connection with the examination, review,
due diligence investigation, documentation, negotiation, closing and
syndication of the transactions contemplated herein and in connection with the
continued administration of the Loan Documents including any amendments,
modifications, consents and waivers, and Agent will use its best efforts to
give Borrowers reasonable notice of all such out-of-pocket fees, charges, costs
and expenses; provided, however, that so long as no Default or
Event of Default has occurred and is continuing, Borrower’s obligation to
reimburse out-of-pocket expenses in respect of (i) any Field Examination (as
defined in Section 4.3 hereof) shall not exceed $40,000 and (ii) any
Fixed Asset Appraisal (as defined in Section 6.1(g) hereof) shall not
exceed $125,000.  Borrowers agree to
promptly pay reasonable documentation charges assessed by Agent for amendments,
waivers, consents and any of the documentation prepared by Agent’s internal
legal staff.  Borrowers agree to promptly
pay, without duplication, all reasonable, documented, out-of-pocket fees, charges,
costs and expenses (including fees, charges, costs and expenses of attorneys,
auditors, appraisers, consultants and advisors) incurred by Agent in connection
with any (i) amendment, waiver or consent requested by a Credit Party with
respect to the Loan Documents, (ii) Event of Default, (iii) work-out or (iv)
action to enforce any Loan Document or to collect any payments due from
Borrowers or any other Credit Party.  In
addition, in connection with any work-out or action to enforce any Loan
Document or to collect any payments due from Borrowers or any other Credit
Party, Borrowers agree to promptly pay all reasonable fees, charges, costs and
expenses, including, without limitation, reasonable attorneys’ fees, incurred
by Lenders.  All fees, charges, costs and
expenses for which Borrowers are responsible under this Section 1.3(e)
shall be deemed part of the Obligations when incurred, payable in accordance
with the final sentence of Section 1.4 and secured by the Collateral.

 

15

 

1.4.          Receipt of Payments.  (a) 
All payments by Borrowers of the Obligations shall be without deduction,
defense, setoff or counterclaim and shall be made in same day funds and
delivered to Agent, for the benefit of Agent and Lenders, as applicable, by
wire transfer to (i) with respect to payments in U.S. Dollars, the account
identified below under the heading “US Collection Account” and (ii) with
respect to payments in Pounds Sterling, the account identified below under the
heading “UK Collection Account” or such other place as Agent may from time to
time designate in writing (collectively, the US Collection Account and the UK
Collection Account are herein referred to as the “Collection Account”).  Except as otherwise expressly stated, all
obligations hereunder of one or more Borrowers shall be the joint and several
obligations of each and every Borrower.

 

US Collection
Account

ABA No. 021-001-033

Account Number 502-328-54

Deutsche Trust Company
Americas

New York, New York

ACCOUNT NAME: GECC/CAF
DEPOSITORY

Reference:  GE Capital re Vertis, Inc. CFN5830

 

UK Collection
Account

Swift Code BARCGB22

Sort Code 200000

Barclays Bank PLC
(London)

ACCOUNT NAME: GE CAPITAL
COMMERCIAL FINANCE

Account Number: 60802697

Account ID: 5130

Reference: Vertis, Inc.
CFN5830

 

(b)           Borrowers
shall make each payment under this Agreement not later than (i) with respect to
payments in Dollars, 4:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the US Collection Account and (ii)
with respect to payments in Pounds Sterling, 11:00 a.m. (New York time) on the
day when due in immediately available funds in Pounds Sterling to the UK
Collection Account.  All payments by
Borrowers of the Obligations denominated in Dollars shall be made in Dollars;
all payments by Borrowers of the Obligations denominated in Pounds Sterling
shall be made in Pounds Sterling.  For
purposes of computing interest and Fees and determining Borrowing Availability
as of any date, all payments shall be deemed received on the day of receipt of
immediately available funds therefor in (i) the U.S. Collection Account prior
to 4:00 p.m. New York time and (ii) the UK Collection Account prior to 11:00
a.m. (New York time).  Payments received
(i) into the U.S. Collection Account after 4:00 p.m. (New York time) and (ii)
after 11:00 a.m. (New York time) in the UK Collection Account on any Business
Day shall be deemed to have been received on the following Business Day.

 

Whenever any payment to be made hereunder shall be stated
to be due on a day that is not a Business Day, the payment may be made on the
next succeeding Business Day and such extension of time shall be included in
the computation of the amount of interest and Fees due hereunder.

 

16

 

(c)           Borrowers
hereby authorize Lenders to make Revolving Credit Advances, Alternative
Currency Revolving Credit Advances or Swing Line Advances for the payment of
interest, Fees and expenses, Letter of Credit reimbursement obligations and any
amounts required to be deposited with respect to outstanding Letter of Credit
Obligations pursuant to Sections 1.5(f) or 7.3; provided, that so
long as no Event of Default has occurred and is continuing, expense
reimbursements pursuant to Section 1.3(e) shall be payable 10 days after
notice thereof to Borrower Representative (and otherwise such expense
reimbursements shall be payable upon demand).

 

1.5.          Prepayments.

 

(a)           Voluntary
Prepayments of Loans.  At any time,
Borrowers may prepay the Loans, in whole or in part, without premium or penalty
subject to the payment of LIBOR Breakage
Costs, if applicable.

 

(b)           Prepayments from
Asset Dispositions.  (i)  Except as provided in Section 1.5(b)(ii)
below and other than any asset dispositions in connection with the Permitted
Receivables Financing as otherwise permitted hereunder, immediately upon
receipt of any Net Proceeds in excess of $2,500,000 in the aggregate during any Fiscal Year, Borrowers
shall prepay the Loans in an amount equal to such Net Proceeds, except that Borrowers or their Subsidiaries may reinvest
all or a portion of the Net Proceeds of any such Asset Disposition, within
three hundred and sixty (360) days, in fixed assets.  If Borrowers do not intend to so reinvest such
Net Proceeds or if the period set forth in the immediately preceding sentence
expires without Borrowers having reinvested the Net Proceeds of any such Asset
Disposition, Borrowers shall prepay the Loans in an amount equal to such
remaining Net Proceeds in accordance with Section 1.5(d).  Notwithstanding anything to the contrary in
this Agreement, in the event that, and for so long as, Borrowers have Borrowing
Availability, both before and after giving effect to any such prepayment, in
excess of $20,000,000, the provisions of this Section 1.5(b) shall not
be applicable (i.e. no mandatory prepayment pursuant to this Section 1.5(b)
shall be required).

 

(ii)           Notwithstanding anything to the contrary in this
Agreement, payments from (a) insurance proceeds or (b) condemnation proceeds,
in each case, from casualties or losses to Collateral shall be applied to the
Loan in accordance with this Section1.5(b)(ii).  If (i) Borrowers notify Agent in writing
within thirty (30) days after the occurrence of such event that it intends to
replace or restore the affected Collateral, (ii) the cost required to replace
the Collateral with the same or substantially similar assets or restore the
Collateral to the same value as it had prior to the casualty or condemnation
does not exceed $2,500,000 and (iii) such proceeds, together with any amounts
contributed to or otherwise available to Borrowers to replace or restore the
Collateral, are sufficient to cover all or substantially all of the replacement
or restoration of the affected Collateral, Agent shall permit Borrower to
replace or restore the Collateral in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the casualty or condemnation; provided, that if Borrower has not completed such
replacement or restoration within 360 days of such event, such insurance
proceeds or condemnation proceeds shall be applied to the Obligations in
accordance with Section 1.5(b)(i). 
To the extent not used to replace or restore the affected Collateral
within 360 days of the casualty or condemnation, such proceeds

 

17

 

shall be applied in accordance with Section
1.5(b)(i).  To the extent such
prepayments exceed the then outstanding principal balance of the Loans, they
shall be returned to Borrowers.

 

(c)           Prepayments
from Issuance of Securities. 
Immediately upon the receipt by Holdings, any Borrower or any of their
Subsidiaries of the proceeds of the issuance of Stock, Borrowers shall prepay
the Loans in an amount equal to such proceeds, net of underwriting discounts
and commissions and other reasonable, documented, out-of-pocket costs
associated therewith.  The payments shall
be applied in accordance with Section 1.5(d).  Notwithstanding the foregoing, the following
proceeds of stock issuances shall be excluded from any mandatory prepayment:
(i) proceeds of issuances of Stock by any Credit Party on or prior to the
Closing Date, (ii) proceeds of issuances of Stock of Holdings to management
employees of any Credit Party, (iii) proceeds of issuances of Stock by any
Subsidiary of a Borrower to that Borrower that constitute an Investment
permitted hereunder and (iv) proceeds of issuances of Stock by Holding to (I)
THL and Evercore (Holdings’ two
principal shareholders), THL Affiliates, Evercore Affiliates and any other
existing shareholders of Holdings as of the Closing Date or (II) additional
Person(s) that become shareholder(s) of Holdings following the Closing Date and
are reasonably acceptable to Agent, provided, however, that
any such issuance(s) pursuant to this clause (II) do not result in a Change of
Control.

 

(d)           Application of
Proceeds.  (i)  With respect to any prepayments made by any
Borrower pursuant to Sections 1.5(b) and 5.17, such prepayments shall be applied as follows: first, to reduce the outstanding principal balance of the Swing
Line Loan or Alternative Currency Swing Line Loan, as applicable, outstanding
to that Borrower until the same has been repaid in full; second, to the
Revolving Credit Advances or Alternative Currency Revolving Credit Advances, as
applicable, outstanding to that Borrower until the same has been repaid in full
and, in the event that at the time of such prepayment Borrowing Availability
both before and after giving effect to any such prepayment, is less than
$20,000,000, as a permanent reduction of the Revolving Loan Commitment; third, to the principal balances of the Swing Line
Loan or the Alternative Currency Swing Line Loan, as applicable outstanding to
each other Borrower, pro rata, until the same have been repaid in full; and
fourth, to the principal balance of the Revolving Credit Advances or
Alternative Currency Revolving Credit Advances, as applicable, made to each
other Borrower, pro rata, until the same has been repaid in full and, in
the event that at the time of such prepayment Borrowing Availability, both
before and after giving effect to any such prepayment, is less than
$20,000,000, as a permanent
reduction of the Revolving Loan Commitment.

 

(ii)           With respect to any prepayments made by any Borrower
pursuant to Section 1.5(c), such
prepayments shall be applied as follows: first, to
reduce the outstanding principal balance of the Swing Line Loan outstanding to
that Borrower until the same has been repaid in full; second, to the Revolving
Credit Advances or Alternative Currency Revolving Credit Advances, as
applicable, outstanding to that Borrower until the same has been repaid in
full; third, to the principal balances
of the Swing Line Loan outstanding to each other Borrower, pro rata, until the
same have been repaid in full; and fourth, to the principal balance of the
Revolving Credit Advances or Alternative Currency Revolving Credit Advances, as
applicable, made to each other Borrower, pro rata, until the same has been repaid
in full. Considering each type of Loan being prepaid separately, any
such prepayment shall be applied first to Index Rate 

 

18

 

Loans of the type required to be
prepaid before application to LIBOR Loans of the type required to be prepaid,
in each case in a manner that minimizes any resulting LIBOR Breakage Costs.

 

(e)           Letter
of Credit Obligations.  In the event
any Letters of Credit are outstanding at the time that the Revolving Loan
Commitment is terminated, Borrowers shall deposit with Agent for the benefit of
all Revolving Lenders cash in an amount equal to 102% of the aggregate
outstanding Letter of Credit Obligations to be available to Agent to reimburse
payments of drafts drawn under such Letters of Credit and pay any Fees and
expenses related thereto.

 

1.6.          Maturity. 
All of the Obligations shall become due and payable as otherwise set
forth herein, but in any event all of the remaining Obligations (other than
contingent indemnification obligations as to which no unsatisfied claim has
been asserted) shall become due and payable upon the Commitment Termination
Date.  Until the Termination Date, Agent
shall be entitled to retain the Liens on the Collateral granted under the
Collateral Documents and the ability to exercise all rights and remedies
available to them under the Loan Documents and applicable laws.  Notwithstanding anything contained in this
Agreement to the contrary, upon any termination of the Revolving Loan
Commitment, all of the Obligations (other than contingent indemnification
obligations as to which no unsatisfied claim has been asserted) shall be due
and payable.

 

1.7.          Loan Accounts.  Agent shall maintain a loan account (the “Loan
Account”) on its books to record: 
the name and federal employer identification number of each Lender, all
Advances, all payments made by Borrowers, and all other debits and credits as
provided in this Agreement with respect to the Loans or any other
Obligations.  All entries in the Loan
Account shall be made in accordance with Agent’s customary accounting practices
as in effect from time to time.  The
balance in the Loan Account, as recorded on Agent’s most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by Borrowers; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect any Borrower’s duty to pay the Obligations.  Agent shall render to Borrower Representative
a monthly accounting of transactions with respect to the Loans setting forth
the balance of the Loan Account as to each Borrower for the immediately
preceding month.  Unless Borrower
Representative notifies Agent in writing of any objection to any such accounting
(specifically describing the basis for such objection), within forty-five (45)
days after the date thereof, each and every such accounting shall, absent
manifest error, be deemed final, binding and conclusive on Borrowers in all
respects as to all matters reflected therein. 
Only those items expressly objected to in such notice shall be deemed to
be disputed by Borrowers. 
Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and may rely on the Loan Account as evidence of the
amount of Obligations from time to time owing to it.

 

1.8.          Yield Protection.

 

(a)           Capital
Adequacy and Other Adjustments.  In
the event that any Lender shall have determined that the adoption or
implementation after the date hereof of any law, treaty, directive,
governmental (or quasi-governmental) rule, regulation, guideline or order, or 

 

19

 

any change in (or the interpretation, administration
or application of) any of the same regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful), in each case adopted or implemented after the Closing Date, from any
central bank or governmental agency or body having jurisdiction does or shall
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by such Lender or any corporation controlling such
Lender against commitments made by it under this Agreement in connection with
the making or financing of the Revolving Loan and thereby reducing the rate of
return on such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder, then Borrowers shall from time to time within fifteen
(15) days after notice and demand from such Lender (together with the
certificate referred to in the next sentence and with a copy to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. 
A certificate as to the amount of such cost and showing the basis of the
computation of such cost submitted by such Lender to Borrower Representative
and Agent shall, absent manifest error, be final, conclusive and binding for
all purposes.

 

(b)           Increased
LIBOR Funding Costs; Illegality. 
Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law, rule, regulation, treaty or directive
(or any change in the interpretation, administration or application thereof)
shall make it unlawful, or any central bank or other Governmental Authority
shall assert that it is unlawful, for any Lender to agree to make or to make or
to continue to fund or maintain any LIBOR Loan or Alternative Currency LIBOR
Loan, as applicable, then, unless that Lender is able to make or to continue to
fund or to maintain such LIBOR Loan or Alternative Currency LIBOR Loan, as
applicable at another branch or office of that Lender without, in that Lender’s
opinion, adversely affecting it or its LIBOR Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Borrower
Representative through Agent, (i) the obligation of such Lender to agree
to make or to make or to continue to fund or maintain LIBOR Loans or
Alternative Currency LIBOR Loans, as applicable, shall terminate and
(ii) each such LIBOR Loan or Alternative Currency LIBOR Loan, as
applicable, shall automatically be converted into an Index Rate Loan or
Alternative Currency Index Rate Loan, respectively.  If, after the date hereof, the introduction
of, change in or interpretation of any law, rule, regulation, treaty or
directive would impose or increase reserve requirements (other than as taken
into account in the definition of LIBOR Rate or Alternative Currency LIBOR
Rate, as applicable) and the result of any of the foregoing is to increase the
cost to Agent or any such Lender of issuing any Letter of Credit or making or
continuing any LIBOR Loan hereunder, as the case may be, or to reduce any amount
receivable hereunder, then Borrowers shall from time to time within thirty (30)
days after notice and demand from Agent to Borrower Representative (together
with the certificate referred to in the next sentence) pay to Agent itself or,
for the account of (and Agent shall promptly pay over to) all such affected
Lenders, as applicable, additional amounts sufficient to compensate the Agent
and such Lenders for such increased cost or reduced amount; provided that such
Lender shall not be entitled to any such amounts to the extent that the event
giving rise to such assessment occurred more than ninety (90) days prior to the
date such notice and demand is given to Borrower Representative; provided,
however, that if the event giving rise to such assessment has a retroactive
effect, then such 90 day period shall be extended to include the period of such
retroactive effect.  A certificate as to
the amount of such cost and showing the 

 

20

 

basis of the computation of such cost submitted by
Agent on behalf of all such affected Lenders to Borrower Representative shall,
absent manifest error, be final, conclusive and binding for all purposes.

 

1.9.          Taxes.

 

(a)           No
Deductions.  Any and all payments or
reimbursements made hereunder (including any payments made pursuant to Section
10) or under any other Loan Document shall be made free and clear of and
without deduction for any and all Charges, present or future, taxes, levies,
imposts, deductions or withholdings, and all liabilities with respect thereto
(including any interest, additions to tax or penalties applicable thereto) of
any nature whatsoever imposed by any Governmental Authority or by any political
subdivision or taxing authority thereof or therein with respect to such
payments (but excluding any tax imposed on or measured by the net income or
profits or any franchise or other tax in lieu thereof (including branch profits
or similar taxes) of Agent or Lender by (i) the jurisdiction under the
laws of which such Agent or Lender is organized or any political subdivision
thereof, or (ii) the jurisdiction of such Agent’s or Lender’s applicable
lending office or any political subdivision thereof or any UK tax required to
be withheld or deducted from interest payments made by a European Borrower but
only to the extent that it would not have been required to be so withheld or
deducted had the relevant Lender been a Qualifying Lender at the time of such
payment (For the avoidance of doubt this exclusion shall not apply to UK tax
required to be withheld or deducted from interest payments made by a European
Borrower where the relevant Lender has ceased to be a Qualifying Lender only by
reason of a change in treaty, law or regulation, or any changes in the
interpretation or administration thereof by any Governmental Authority)) and
all interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as “Taxes”).  If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
other Loan Document to any Lender or Agent, (i) the sum payable hereunder
shall be increased as may be necessary so that, after making all required
deductions (including deductions applicable to additional sums payable pursuant
to this Section 1.9), such Lender or Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions,
(iii) Borrower shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law, and
(iv) Borrower shall furnish to the Agent the original copy of a receipt
evidencing payment thereof within 30 days after such payment is made.

 

(b)           Other
Taxes.  In addition, Borrower hereby
agrees to pay any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies and irrevocable value added
taxes which arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery, enforcement or registration of,
transfer or assignment or otherwise with respect to, this Agreement or any
other Loan Document (“Other Taxes”).

 

(c)           Foreign
Lenders.  (i)  Prior to becoming a Lender under this
Agreement and within fifteen (15) days after a reasonable written request of
Borrower Representative or Agent from time to time thereafter, each such Person
or Lender that is not in each case a “United States person” (as such term is
defined in IRC Section 7701(a)(30)) for U.S. federal income tax 

 

21

 

purposes (a “Foreign Lender”) shall deliver to
each of the Borrower Representative and Agent two duly completed copies of
United States IRS Form W-8BEN, Form W-8ECI or Form W-8IMY or other applicable
or successor form, certificate or document prescribed by the IRS or substitute
therefor as applicable, certifying such Foreign Lender’s entitlement to receive
payments under this Agreement and under the Notes free of any United States
withholding tax (a ”Certificate of Exemption”).  Each Foreign Lender claiming exemption from
U.S. federal withholding tax under Section 871(h) or Section 881(c)
of the IRC with respect to payments of “portfolio interest” hereby represents
and warrants to Borrower Representative and Agent that, as of the date that it
became a Lender, such Foreign Lender (i) is not a “bank” within the
meaning of Section 881(c)(3)(A) of the IRC, (ii) is not a “10 percent
shareholder” of any Borrower within the meaning of Section 871(h)(3)(B) of the
IRC, and (iii) is not a controlled foreign corporation receiving interest
from a related person within the meaning of Section 864(d)(4) of the IRC.  Each Foreign Lender further undertakes to
deliver to each of Borrower Representative and Agent renewals or additional
copies of such Certificates of Exemption on or before the date that such
Certificate of Exemption expires or becomes obsolete as may be reasonably
requested by Borrower Representative or Agent, and after the occurrence of
any event requiring a change in the Certificate of Exemption so delivered by
it, such additional forms or amendments thereto reflecting such change.  All Certificates of Exemption, additional
forms or amendments thereto described in the preceding sentence shall certify
that such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation, or
any change in the interpretation or administration thereof by any Governmental
Authority) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form or
amendment with respect to it and such Lender advises the Borrower and the Agent
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.

 

(ii)           For any period during which Foreign Lender has failed
to provide Borrowers with an appropriate Certificate of Exemption pursuant to
clause (c)(i), above (unless such failure is due to a change in treaty, law or
regulation, or any change in the interpretation or administration thereof by
any Governmental Authority, occurring subsequent to the date on which a form
originally was required to be provided), such Foreign Lender shall not be
entitled to indemnification under this Section 1.9 with respect to
Taxes imposed by the United States; provided that, should Foreign Lender
that is otherwise exempt from or subject to a reduced rate of withholding tax
become subject to Taxes because of its failure to deliver a Certificate of
Exemption required under clause (i), above, Borrowers shall take such steps as
such Foreign Lender shall reasonably request to assist such Foreign Lender to
recover such Taxes.

 

(d)           A Treaty
Lender and the relevant European Borrower will co-operate with each other in
completing all procedural requirements necessary (in a prompt and complete
manner) to enable payments of interest to be made by the relevant European
Borrower to the relevant Treaty Lender without any deduction or withholding in
respect of UK tax.  If a Treaty Lender materially fails to co-operate
in relation to such procedural requirements (unless such failure is due to
a change in treaty, law or regulation or in the interpretation or administration
thereof by any Governmental Authority, occurring subsequent to the date on
which such Lender became a Lender hereunder) and, solely as a result
of such failure, payments of interest by the

 

 

22

 

European Borrower are required to be made subject to
deduction or withholding in respect of UK tax, the relevant European
Borrower shall not be obliged to make any additional payments in respect of
such withholdings or deductions of UK tax under this section 1.9. 
The Agent shall notify the relevant European Borrowers if a new Treaty Lender
becomes a party to this Agreement.

 

(e)           United
States Lenders.  Each Lender that is
a “United States person” (as such term is defined in IRC Section 7701(a)(30))
shall deliver to each of the Borrower Representative and Agent two duly
completed copies of United States IRS Form W-9.

 

(f)            Borrowers
Indemnification.  Borrowers agree to
indemnify and hold harmless each Lender and Agent, and reimburse each such
Lender or Agent (as the case may be) upon its written request, for the full
amount of Taxes (including any Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this Section 1.9) levied or imposed and
paid by such Lender or Agent (as the case may be) and any liability (including
penalties, interest and expenses, including reasonable attorney’s fees and
expenses) arising therefrom or with respect thereto whether or not such Taxes
or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.
Additionally, Borrowers agree to pay additional amounts and to indemnify each
Lender (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described under this Section 1.9 as a result of any changes after the
Closing Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of Taxes.

 

(g)           PTR Scheme

 

(i)            Each Treaty Lender:

 

irrevocably appoints the Agent to act
as syndicate manager under, and authorises the Agent to operate, and take any
action necessary or desirable under, the PTR Scheme in connection with this
Agreement or any Loan Document;

 

shall co-operate with the Agent in
completing any procedural formalities necessary under the PTR Scheme, and shall
promptly supply to the Agent such information as the Agent may request in
connection with the operation of the PTR Scheme;

 

without limiting the liability of any
European Borrower under this Agreement, shall, within 5 Business Days of
demand, indemnify the Agent for any liability or loss incurred by the Agent as
a result of the Agent acting as syndicate manager under the PTR Scheme in
connection with the Treaty Lender’s participation in any Loan or under any Loan
Document (except to the extent that the liability or loss arises directly from
the Agent’s gross negligence or willful misconduct);

 

hereby warrants and represents to the
Agent that it is a Treaty Lender.

 

(ii)           Each European Borrower acknowledges that it is fully
aware of its contingent obligations under the PTR Scheme and hereby agrees that
it shall:

 

23

 

promptly supply to the Agent such
information as the Agent may request in connection with the operation of the
PTR Scheme; and

 

act in accordance with any
provisional notice issued by the UK Inland Revenue under the PTR Scheme
(including for the avoidance of doubt paying interest free of any withholding
or deduction in accordance with such notice).

 

(iii)          The Agent agrees to provide, as soon as reasonably
practicable, a copy of any provisional authority issued to it under the PTR
Scheme in connection with any Loan to those European Borrowers specified in
such provisional authority.

 

(iv)          All Parties acknowledge that the Agent:

 

is entitled to rely completely upon
information provided to it in connection with sub-paragraphs (i) or (ii) above;

 

is not obliged to undertake any
enquiry into the accuracy of such information, nor into the status of the
treaty Lender or, as the case may be, European Borrower providing such
information; and

 

shall have no liability to any person
for the accuracy of any information it submits in connection with paragraph (i)(B)
above.

 

In this Clause “PTR
Scheme” means the Provisional Treaty Relief scheme as described in Inland
Revenue Guidelines dated January 2003 and administered by the Inland Revenue’s
Centre for Non-Residents.

 

(h)           Lender
Indemnification of Agent.  If the
U.S. IRS or any other Governmental Authority of the United States or any other
country or any political subdivision thereof asserts a claim that Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate Certificate of Exemption was not delivered or properly
completed, because such Lender failed to notify the Agent of a change in
circumstances which rendered its exemption from withholding ineffective, or for
any other reason), such Lender shall indemnify the Agent fully for all amounts
paid, directly or indirectly, by Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to Agent under this subsection, together with
all costs and expenses related thereto (including attorneys fees and time
charges of attorneys for Agent).

 

(i)            Evidence
of Payments.  As soon as practicable
after any payment of Taxes and Other Taxes by the Borrowers to a Governmental
Authority, the Borrowers shall deliver to the Administrative Agent the original
or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative
Agent.  Any Non-U.S. Lender or Treaty
Lender that is entitled to an exemption from or reduction of withholding tax
with respect to payments under this Agreement or any Note pursuant to the law
of any relevant jurisdiction or any treaty shall deliver to Borrowers (with a
copy to Agent), at the time or times prescribed by applicable law, such
properly completed and executed 

 

24

 

documentation prescribed by applicable law as will
permit such payments to be made without withholding or at a reduced rate.

 

(j)            Survival.  The agreements in this Section 1.9
shall survive the termination of this Credit Agreement and the payment of the Borrowers Obligations.

 

1.10.        Borrower Representative.  Each Borrower hereby designates Vertis as its representative and agent
on its behalf for the purposes of issuing Notice of Revolving Credit Advances,
Notice of Alternative Currency Revolving Credit Advances and Notice of
Conversion/Continuation, giving instructions with respect to the disbursement
of the proceeds of the Loans, selecting interest rate options, requesting
Letters of Credit, giving and receiving all other notices and consents
hereunder or under any of the other Loan Documents and taking all other actions
(including in respect of compliance with covenants) on behalf of any Borrower
or Borrowers under the Loan Documents. 
Borrower Representative hereby accepts such appointment.  Agent and each Lender may regard any notice
or other communication pursuant to any Loan Document from Borrower
Representative as a notice or communication from all Borrowers.  Each warranty, covenant, agreement and
undertaking made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as it if the same had been
made directly by such Borrower.

 

SECTION 2.

CONDITIONS TO LOANS

 

The obligations of Lenders and L/C Issuers to make
Loans, including to issue or cause to be issued Letters of Credit, are subject
to satisfaction or waiver of all of the applicable conditions set forth below.

 

2.1.          Conditions to Initial Loans.  The obligations of Lenders and L/C Issuers to
make the initial Loans and to issue or cause to be issued Letters of Credit on
the Closing Date are, in addition to the conditions precedent specified in Section
2.2, subject to:

 

(a)           EBITDA of Holdings and its Subsidiaries, on a consolidated basis, for the
trailing twelve month period ending October 31, 2004 (adjusted to reflect restructuring charges,
non-cash non-recurring charges and other adjustments, if any, all as set forth
in Section 6.1(a) of Schedule 1 to Annex F) shall have been at
least $182,000,000;

 

(b)           after giving effect to the Loans, the issued Letters of Credit and the
Related Transactions and the payment of all fees and expenses in connection
therewith, Borrowing Availability shall be at least $50,000,000;

 

(c)           Borrowers and the other Credit Parties shall
deliver all documents listed on, the taking of all actions set forth on
and the satisfaction of all other conditions precedent listed in the Closing
Checklist attached hereto as Annex C, all in form and substance, or in a
manner, reasonably satisfactory to Agent and Lenders.

 

25

 

2.2.          Conditions to All Loans.  Except as otherwise expressly provided
herein, no Lender or L/C Issuer shall be obligated to fund any Advance or incur
any Letter of Credit Obligation, if, as of the date thereof (the “Funding
Date”):

 

(a)           any
representation or warranty by any Credit Party contained herein or in any other
Loan Document is untrue or incorrect in any material respect (without
duplication of any materiality qualifier contained therein) as of such date,
except to the extent that such representation or warranty expressly relates to
an earlier date, and Agent or Requisite Lenders have determined not to make
such Advance or incur such Letter of Credit Obligation as a result of the fact
that such warranty or representation is untrue or incorrect; provided, however,
that, notwithstanding the foregoing, no Advance shall be made and no
Letter of Credit Obligations shall be incurred at a time when the Condition to
All Loans set forth in this clause (a) is not satisfied if either (I) after
giving effect to such Advance or incurrence of a Letter of Credit Obligation,
the aggregate amount of all Advances made and Letter of Credit Obligations
incurred during the period when the Conditions to All Loans set forth in this
clause (a) or clause (b) below is not satisfied exceeds at any point in time an
amount equal to (x) the total amount of the Loans (including, without
duplication, Letter of Credit Obligations) outstanding at the time such
condition first is not satisfied plus (y) $20,000,000 or (II) sixty (60)
days shall have passed since the time when such Conditions to All Loans set
forth in this clause (a) were first not satisfied, unless in the case of (I) or
(II), either: (i) the Condition to All Loans set forth in this clause (a)
becomes satisfied or (ii) Supermajority Lenders have determined to continue
making Advances and incurring Letter of Credit Obligations in excess of the sum
of (x) and (y) above during the period that the Condition to All Loans set
forth in this clause (a) is not satisfied;

 

(b)           any
Default or Event of Default has occurred and is continuing or would result,
after giving effect to any Advance (or the incurrence of any Letter of Credit
Obligation), and Agent or Requisite Lenders shall have determined not to make
any Advance or incur any Letter of Credit Obligation as a result of that
Default or Event of Default; provided, however, that,
notwithstanding the foregoing, no Advance shall be made and no Letter of Credit
Obligations shall be incurred following the occurrence of a Default or Event of
Default, if either (I) after giving effect to such Advance or incurrence of a
Letter of Credit Obligation, the aggregate amount of Advances made and Letter
of Credit Obligations incurred during the pendency of such Default or Event of
Default exceeds, at any point in time an amount equal to (x) the total amount
of the Loan (including, without duplication, Letter of Credit Obligations)
outstanding at the time such Default or Event of Default shall first have
occurred plus (y) $20,000,000 or (II) sixty (60) days shall have passed since
the time when such Default or Event of Default shall first have occurred,
unless, in the case of (I) or (II) either: 
(i) such Default or Event of Default, as the case may be, has been
waived pursuant to the terms of the Agreement or (ii) Supermajority Lenders
have determined to continue making Advances and incurring Letter of Credit
Obligations in excess of the sum of (x) and (y) above during the pendency of such
Default or Event of Default; or

 

(c)           after
giving effect to any Advance (or the incurrence of any Letter of Credit
Obligations), the outstanding amount of the Revolving Loan would exceed
remaining Borrowing Availability (except as provided in Section 1.1(b)(ii)).

 

26

 

The request and acceptance by any Borrower of the
proceeds of any Advance, the incurrence of any Letter of Credit Obligations or
the conversion or continuation of any Loan into, or as, a LIBOR Loan shall be
deemed to constitute, as of the date thereof, (i) a representation and
warranty by Borrowers that the conditions in this Section 2.2 have been
satisfied and (ii) a reaffirmation by Borrowers of the cross guaranty
provisions set forth in Section 10 and of the granting and continuance
of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral
Documents.

 

SECTION 3.

REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders to enter into the Loan
Documents, to make Loans and to issue or cause to be issued Letters of Credit,
Borrowers and the other Credit Parties executing this Agreement, jointly and
severally, represent, warrant and covenant to Agent and each Lender that the
following statements are and, after giving effect to the Related Transactions,
will (with respect to Sections 3.1 through 3.9) remain true,
correct and complete until the Termination Date with respect to all Credit
Parties:

 

3.1.          Organization, Powers,
Capitalization and Good Standing.

 

(a)           Organization
and Powers.  Each of the Credit
Parties and each of their Subsidiaries is duly organized, validly existing and
(in relation to Domestic Subsidiaries) in good standing under the laws of its
jurisdiction of organization and qualified to do business in all states where
such qualification is required except where failure to be so qualified would
not reasonably be expected to have a Material Adverse Effect.  As of the Closing Date, the jurisdiction of
organization and all jurisdictions in which each Credit Party is qualified to
do business are set forth on Schedule 3.1(a).  Each of the Credit Parties and each of their
material Subsidiaries has all requisite organizational power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into each Related Transactions Document to
which it is a party and to incur and/or guarantee the Obligations, grant liens
and security interests in the Collateral and carry out the Related
Transactions.

 

(b)           Capitalization.  As of the Closing Date:  (i) the authorized Stock of each of the
Credit Parties and each of their Subsidiaries (other than Holdings) is as set
forth on Schedule 3.1(b); (ii) all issued and outstanding Stock of
each of the Credit Parties and each of their Subsidiaries that has assets in
excess of $100,000 (excluding intercompany balances) is duly authorized and
validly issued, fully paid, nonassessable, free and clear of all Liens other
than Permitted Encumbrances and those in favor of Agent for the benefit of
Agent and Lenders, and such Stock was issued in compliance with all applicable
state, federal and foreign laws concerning the issuance of securities;
(iii) the identity of the holders of the Stock of each of the Credit
Parties (other than Holdings) and the percentage of their fully-diluted
ownership of the Stock of each of the Credit Parties is set forth on Schedule
3.1(b); and (iv) no Stock of any Credit Party or any of their Subsidiaries
that has assets in excess of $100,000 (excluding intercompany balances), other
than those described above, are issued and outstanding.  Except as provided in Schedule 3.1(b),
as of the Closing Date, there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings
for the purchase or 

 

27

 

acquisition from any Credit Party (other than
Holdings) or any of their Subsidiaries of any Stock of any such entity.

 

(c)           Binding
Obligation.  This Agreement is, and
the other Related Transactions Documents when executed and delivered will be,
the legally valid and binding obligations of the applicable parties thereto,
each enforceable against each of such parties, as applicable, in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting, creditors’
rights generally and the effects of general principles of equity.  The European Borrowers and each of the UK
Guarantors have taken all necessary action to authorize the entry into,
performance and delivery of the Loan Documents to which it is a party
(including, without limitation, the UK Collateral Documents) in accordance with
Sections 151-158 of the UK Companies Act 1985 (as amended).

 

3.2.          Disclosure. 
No representation or warranty of any Credit Party contained in this
Agreement, the Financial Statements referred to in Section 3.5, the
other Related Transactions Documents or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents or the Related
Transactions Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in any material
respect in light of the circumstances in which the same were made.

 

3.3.          No Material Adverse Effect.  Since December 31, 2003 there have been no
events or changes in facts or circumstances affecting any Credit Party or any
of its Subsidiaries which have had or would reasonably be expected within the
next twelve (12) months to have a Material Adverse Effect.

 

3.4.          No Conflict.  The consummation of the Related Transactions
does not and will not violate or conflict with any laws, rules, regulations or
orders of any Governmental Authority or violate, conflict with, result in a
breach of, or constitute a default (with due notice or lapse of time or both)
under any Contractual Obligation or organizational documents of any Credit
Party or any of its Subsidiaries, except if such violations, conflicts,
breaches or defaults have not had and would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

 

3.5.          Financial Statements and
Financial Projections.  All
Financial Statements concerning Holdings, Borrowers and their Subsidiaries on a
consolidated basis (accompanied by mutually acceptable supplemental
non-consolidated information customarily prepared by management) which have
been or will hereafter be furnished to Agent pursuant to this Agreement,
including those listed below, have been or will be prepared in accordance with
GAAP consistently applied (except as disclosed therein) and do or will present
fairly in all material respects the financial condition of the entities covered
thereby as at the dates thereof and the results of their operations for the
periods then ended, subject to, in the case of unaudited Financial Statements,
the absence of footnotes and normal year-end adjustments.

 

28

 

(a)           The consolidated
balance sheets at December 31, 2003 and the related statement of income of
Holdings and its Subsidiaries, for the Fiscal Year then ended, audited by
Deloitte & Touche LLP.

 

(b)           The
consolidated balance sheet at October 31, 2004 and the related statement of
income of Holdings and its Subsidiaries for the ten (10) months then ended.

 

The Financial Projections delivered on or prior to the
Closing Date and the updated Financial Projections delivered pursuant to Section
6.2(h) represent and will represent as of the date thereof the good faith
estimate of Borrowers and their senior management concerning the most probable
course of their business.

 

3.6.          Solvency. 
Each of the Credit Parties is Solvent.

 

3.7.          Use of Proceeds; Margin
Regulations.

 

(a)           No part of
the proceeds of any Loan will be used for “buying” or “carrying” “margin stock”
within the respective meanings of such terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect or for any other purpose that violates the provisions of
the regulations of the Board of Governors of the Federal Reserve System.  If requested by Agent, each Credit Party will
furnish to Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form 0-1, as applicable,
referred to in Regulation U.

 

(b)           Borrowers
shall utilize the proceeds of the Loans solely for the Refinancing, and for the
financing of Borrowers’ ordinary ongoing working capital needs, and general
corporate purposes and expenses related to the Loans and the transaction
contemplated hereunder. Schedule 3.7 contains a description of
Borrowers’ sources and uses of funds as of the Closing Date, including Loans
and Letter of Credit Obligations to be made or incurred on that date, and a
funds flow memorandum.

 

(c)           None of
the Credit Parties is required to register as (i) an “investment company”
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (ii) a “holding company” as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.

 

3.8.          Brokers. 
As of the Closing Date, no broker or finder acting on behalf of any
Credit Party or any Subsidiary thereof brought about the obtaining, making or
closing of the Loans or the Related Transactions, and no Credit Party or any
Subsidiary thereof has any obligation to any Person in respect of any finder’s
or brokerage fees in connection therewith.

 

3.9.          Compliance with Laws.  Each Credit Party represents and warrants
that it (i) is in compliance and each of its Subsidiaries is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
any Governmental Authority (including, without limitation, Executive Order No.
13224 on Terrorist Financing, effective September 24, 2001, and the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, Public Law 107-56) and the obligations,
covenants and conditions contained in all Contractual Obligations other than
those laws, rules, regulations, 

 

29

 

orders and provisions of such Contractual Obligations
the noncompliance with which would not be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect, and
(ii) maintains and each of its Subsidiaries maintains all licenses,
qualifications and permits referred to above. 
Each European Borrower and UK Guarantor is in compliance, in all
material respects, to the extent applicable, with the provisions of the UK
Money Laundering Regulations 2003, the Proceeds of Crime Act 2002 and the
Terrorism Act 2000 (as amended by the Anti-Terrorism, Crime and Corruption Act
2001).

 

3.10.        Intellectual Property.  As of the Closing Date, each of the Credit
Parties and its Subsidiaries owns, is licensed to use or otherwise has the
right to use, all material Intellectual Property used in or necessary for the
conduct of its business as currently conducted that is material to the
condition (financial or other), business or operations of such Credit Party and
its Subsidiaries, if any, and all such material Intellectual Property is
identified on Schedule 3.10.  As
of the Closing Date, except as disclosed in Schedule 3.10, the use of
such Intellectual Property by the Credit Parties and their Subsidiaries and the
conduct of their businesses does not and has not been alleged by any Person to
infringe on the rights of any Person.

 

3.11.        Investigations, Audits, Etc.  As
of the Closing Date, except as set forth on Schedule 3.11, no Credit
Party or any of their Subsidiaries is the subject of any review or audit by the
IRS or any governmental investigation concerning the violation or possible
violation of any law that would reasonably be expected to result in any
Material Adverse Effect.

 

3.12.        Employee Matters.  As of the Closing Date, except as set forth
on Schedule 3.12, (a) no Credit Party or Subsidiary of a Credit
Party nor any of their respective employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election
is pending with respect to the employees of any Credit Party or any of their
Subsidiaries and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of any Credit Party
or any of their Subsidiaries, (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the best knowledge of any Credit
Party after due inquiry, threatened between any Credit Party or any of their
Subsidiaries and its respective employees, other than employee grievances
arising in the ordinary course of business which could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect and (d) hours worked by and payment made to employees of each
Credit Party and each of their Subsidiaries comply with the Fair Labor
Standards Act, to the extent applicable, and each other federal, state,
provincial, local or foreign law applicable to such matters.  Except as set forth on Schedule 3.12,
no Borrower nor any of their Subsidiaries are party to an employment contract
with any executive officer.

 

3.13.        Litigation; Adverse Facts.  Except as set forth on Schedule 3.13,
there are no judgments outstanding against any Credit Party or any of its
Subsidiaries or affecting any property of any Credit Party or any of its
Subsidiaries as of the Closing Date, nor is there any Litigation pending, or to
the best knowledge of any Credit Party threatened, against any Credit Party or
any of its Subsidiaries that would reasonably be expected to result in any
Material Adverse Effect.

 

3.14.        Ownership of Property; Liens.  As of the Closing Date, the real estate (“Real
Estate”) listed in Schedule 3.14 constitutes all of the material
real property owned, leased or 

 

30

 

subleased by any Credit Party or any of its
Subsidiaries.  As of the Closing Date,
each of the Credit Parties and each of its Subsidiaries owns good and
marketable fee simple title to all of its owned Real Estate, and has a valid leasehold
interest in all of its leased Real Estate, all as described on Schedule 3.14,
and copies of all such leases or a summary of terms thereof reasonably
satisfactory to Agent have been provided or made available to Agent except, in
each case, for such failures as would not reasonably be expected to result in
any Material Adverse Effect.  Schedule
3.14 further describes any Real Estate with respect to which any Credit
Party or any of its Subsidiaries is a lessor, sublessor or assignor as of the
Closing Date.  As of the Closing Date,
each of the Credit Parties and each of its Subsidiaries has good title to, or
valid leasehold interests in, all of its personal property and assets except,
in each case, for such failures as would not reasonably be expected to result
in any Material Adverse Effect.  As of
the Closing Date, none of the properties and assets of any Credit Party or any
of its Subsidiaries are subject to any Liens other than Permitted
Encumbrances.  As of the Closing Date, Schedule
3.14 also describes any purchase options, rights of first refusal or other
similar material contractual rights pertaining to any Real Estate.  As of the Closing Date, no portion of any
Credit Party’s or any of its Subsidiaries’ Real Estate has suffered any damage
by fire or other casualty loss that would reasonably be expected to result in
any Material Adverse Effect or that has not heretofore been repaired and
restored in all material respects to its original condition or otherwise
remedied.  As of the Closing Date, all
material permits required to have been issued or appropriate to enable the Real
Estate to be lawfully occupied and used for all of the purposes for which it is
currently occupied and used have been lawfully issued and are in full force and
effect, except for permits which the failure to possess would not reasonably be
expected to result in any Material Adverse Effect.

 

3.15.        Environmental Matters.

 

(a)           Except as
set forth in Schedule 3.15, as of the Closing Date: (i) the Real
Estate is free of contamination from any Hazardous Material except for such
contamination that could not reasonably be expected to materially adversely
impact the value or marketability of such Real Estate and that could not
reasonably be expected to result in Environmental Liabilities of the Credit
Parties or their Subsidiaries in excess of $250,000 in the aggregate;
(ii) no Credit Party and no Subsidiary of a Credit Party has caused or
suffered to occur any Release of Hazardous Materials on, at, in, under, above,
to, from or about any of their Real Estate where such Release could reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect; (iii) the Credit Parties and their Subsidiaries are and
have been in compliance with all Environmental Laws, except for such
noncompliance that could not reasonably be expected to result in Environmental
Liabilities of the Credit Parties or their Subsidiaries in excess of $250,000
in the aggregate; (iv) the Credit Parties and their Subsidiaries have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits could not reasonably be expected
to result in Environmental Liabilities of the Credit Parties or their
Subsidiaries in excess of $250,000 in the aggregate, and all such Environmental
Permits are valid, uncontested and in good standing; (v) no Credit Party
and no Subsidiary of a Credit Party is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Credit Party or Subsidiary which could reasonably be expected to be in excess
of $250,000  in the aggregate, and no Credit Party or
Subsidiary of a Credit Party has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations; (vi) there
is no Litigation arising under or related to any Environmental Laws,
Environmental Permits or Hazardous Material that seeks damages, penalties,
fines, costs or expenses in excess of $250,000   

 

31

 

in the aggregate or injunctive relief against, or that
alleges criminal misconduct by any Credit Party or any Subsidiary of a Credit
Party; (vii) no notice has been received by any Credit Party or any
Subsidiary of a Credit Party identifying any of them as a “potentially
responsible party” or requesting information under CERCLA or analogous state or
foreign law statutes or regulations, and to the knowledge of the Credit
Parties, there are no facts, circumstances or conditions that may result in any
of the Credit Parties or their Subsidiaries being identified as a “potentially
responsible party” under CERCLA or analogous state or foreign law statutes or
regulations that could reasonably be expected to result in Environmental
Liabilities in excess of $250,000; and (viii) the Credit Parties have
provided to Agent copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or potential
Environmental Liabilities that could reasonably be expected to result in
Environmental Liabilities in excess of $250,000, in each case in possession of
the Credit Parties relating to any of the Credit Parties or their Subsidiaries.

 

(b)           Each
Credit Party hereby acknowledges and agrees that Agent (i) is not now, and has
not ever been, in control of any of the Real Estate or affairs of such Credit
Party or its Subsidiaries, and (ii) does not, through the provisions of the
Loan Documents or otherwise, influence any Credit Party’s or its Subsidiaries’
conduct with respect to the ownership, operation or management of any of their
Real Estate or compliance with Environmental Laws or Environmental Permits.

 

3.16.        ERISA.

 

(a)           Schedule
3.16 lists all Plans and separately identifies all Pension Plans, including
Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all
Retiree Welfare Plans.  As of the Closing
Date, copies of all such listed Plans other than Multiemployer Plans as defined
in ERISA Section 3(37)(A), together with a copy of the latest form IRS/DOL
5500-series for each such Plan (other than such Multiemployer Plans) have been
provided or made available to Agent. 
Except with respect to Multiemployer Plans, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would cause
the loss of such qualification or tax-exempt status.  Each Plan is in material compliance with the
applicable provisions of ERISA and the IRC, including the timely filing of all
reports required under the IRC or ERISA. 
Neither any Credit Party nor ERISA Affiliate has failed to make any
contribution or pay any amount due as required by either Section 412 of the IRC
or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit Party nor ERISA Affiliate
has engaged in a “prohibited transaction,” as defined in Section 406 of ERISA
and Section 4975 of the IRC, in connection with any Plan, that would subject
any Credit Party to a material tax on prohibited transactions imposed by
Section 502(i) of ERISA or Section 4975 of the IRC.

 

(b)           As of the
Closing Date, except as set forth in Schedule 3.16: (i) no Title IV
Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 

 

32

 

4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending,
or to the knowledge of any Borrower, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan
that would reasonably be expected to result in liabilities to the Credit
Parties and their ERISA Affiliates in excess of $500,000; (iv) no Credit
Party or ERISA Affiliate has incurred or reasonably expects to incur any
liability in excess of $500,000 as a result of a complete or partial withdrawal
from a Multiemployer Plan; (v) within the last five years no Title IV Plan
of any Credit Party or ERISA Affiliate has been terminated, whether or not in a
“standard termination” as that term is used in Section 404(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or ERISA Affiliate (determined at any
time within the past five years) with Unfunded Pension Liabilities been
transferred outside of the “controlled group” (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; (vi) except
in the case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates
makes up, in the aggregate, no more than 10% of fair market value of the assets
of any Plan measured on the basis of fair market value as of the latest
valuation date of any Plan; and (vii) no liability under any Title IV Plan
has been satisfied with the purchase of a contract from an insurance company
that is not rated AAA by the S&P or an equivalent rating by another
nationally recognized rating agency.

 

(c)           Except as
would not reasonably be expected to have a Material Adverse Effect, each
Foreign Pension Plan is in compliance and in good standing (to the extent such
concept exists in the relevant jurisdiction) in all material respects with all
laws, regulations and rules applicable thereto, including all funding
requirements, and the respective requirements of the governing documents for
such Foreign Pension Plan; (ii) with respect to each Foreign Pension Plan
maintained or contributed to by any Credit Party or any Subsidiary of a Credit
Party, (A) that is required by applicable law to be funded in a trust or other
funding vehicle, such Foreign Pension Plan is in compliance with applicable law
regarding funding requirements except to the extent permitted under applicable
law and (B) that is not required by applicable law to be funded in a trust or
other funding vehicle, reasonable reserves have been established where required
by ordinary accounting practices in the jurisdiction in which such Foreign
Pension Plan is maintained; and (iii) no actions or proceedings have been taken
or instituted to terminate or wind-up a Foreign Pension Plan with respect to
which the Credit Parties or any Subsidiary of a Credit Party could reasonably
be expected to have a Material Adverse Effect.

 

3.17.        Deposit and Disbursement
Accounts.  Schedule 3.17
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, other than accounts that have an average daily balance
for the immediately preceding 30-day period of less than $500,000 in the
aggregate for all such accounts and such Schedule correctly identifies the
name, address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number therefor.

 

3.18.        Agreements and Other Documents.  On or prior to the Closing Date, each Credit
Party has provided or made available to Agent or its counsel, on behalf of
Lenders, accurate and complete copies (or summaries) of all of the following
agreements or documents to which it is subject and each of which is listed in Schedule
3.18:  supply agreements and purchase
agreements not terminable by such Credit Party within sixty (60) days following
written notice 

 

33

 

issued by such Credit Party and involving transactions
in excess of $1,000,000 per annum; leases of Equipment having a remaining term
of one year or longer and requiring aggregate rental and other payments in
excess of $500,000 per annum; licenses and permits held by the Credit Parties,
the absence of which would reasonably be expected to have a Material Adverse
Effect; instruments and documents evidencing any material Indebtedness or
material Guaranteed Indebtedness of such Credit Party and any Lien granted by
such Credit Party with respect thereto; and instruments and agreements
evidencing the issuance of any equity securities, warrants, rights or options
to purchase equity securities of such Credit Party.

 

3.19.        Insurance.  Each Credit Party represents and warrants
that it and each of its Subsidiaries currently maintains in good repair,
working order and condition all material properties, if any, as set forth in
Section 4.2 and maintains all insurance described in such Section.  Schedule 3.19 lists all insurance
policies maintained, as of the Closing Date, for current occurrences by each
Credit Party.

 

3.20.        Taxes and Tax Returns.

 

(a)           As of the
Closing Date, (i) all Tax Returns required to be filed by the Credit Parties
have been timely and properly filed and (ii) all taxes that are due (other than
taxes being or about to be contested in good faith by appropriate proceedings
and for which adequate reserves have been provided for in accordance with GAAP)
have been paid, except where the failure to file Tax Returns or pay Taxes would
not have a Material Adverse Effect.  No
Governmental Authority has asserted any claim for taxes, or to any Credit Party’s
knowledge, has threatened to assert any claim for taxes that would, if not paid
by a Credit Party, have a Material Adverse Effect.  All taxes required by law to be withheld or
collected and remitted (including, without limitation, income tax, unemployment
insurance and workmen’s compensation premiums) with respect to the Credit
Parties have been withheld or collected and paid to the appropriate
Governmental Authorities (or are properly being held for such payment), except
for amounts the nonpayment of which would not be reasonably likely to have a
Material Adverse Effect.

 

(b)           None of
the Credit Parties has been notified that either the IRS, or any other
Governmental Authority, has raised, or intends to raise, any adjustments with
respect to Taxes of the Credit Parties, which adjustments would be reasonably
likely to have a Material Adverse Effect.

 

(c)           It is not
necessary that this Agreement or any other Loan Document be filed, registered,
recorded or enrolled in connection with any Taxes with any court, public office
or other authority in any jurisdiction or that any ad valorem stamp duty, stamp
duty, documentary, registration or similar tax or duty be paid on the execution
or delivery of this Agreement or any other Loan Document.

 

3.21.        Senior Indebtedness and Designated Senior Indebtedness.  This
Agreement, the credit facilities created hereunder and all present and future
Obligations constitute the “Senior Credit Facility,” “Senior Indebtedness,”
“Secured Indebtedness,” “Subsidiary Guarantor Senior Indebtedness” and
“Designated Senior Indebtedness,” as applicable, under and as such terms are
defined in the 2003 Senior Secured Debt Documents, the 2002 Senior Debt
Documents, the 

 

34

 

Mezzanine Debt Documents,
the February 2003 Senior Subordinated Debt Documents, the Senior Subordinated
Debt Documents and any other Subordinated Debt documents.  Without limiting the foregoing, all present
and future Obligations are hereby designated as “Senior Indebtedness” and
“Designated Senior Indebtedness” in each case as such terms are used in the
2003 Senior Secured Debt Documents, the 2002 Senior Debt Documents, the
Mezzanine Debt Documents, the February 2003 Senior Subordinated Debt Documents,
the Senior Subordinated Debt Documents and any other Subordinated Debt
documents.

 

3.22.        Senior Subordinated Debt Agreement.  The Indebtedness incurred
pursuant to that certain Credit Agreement, dated as of December 7, 1999, among
Holdings and Bankers Trust Company, The Chase Manhattan Bank and Nationsbridge,
LLC, as Agents has been paid in full and satisfied, and such Credit Agreement
and the rights and obligations thereunder are terminated and no longer of any
force and effect.

 

3.23.        Conduct of Business; Dormant Subsidiary.  Eric Studios does not engage in
any business activities and has no significant assets or liabilities and is
dormant.

 

SECTION 4.

AFFIRMATIVE COVENANTS

 

Each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that from and after the date hereof
and until the Termination Date:

 

4.1.          Compliance With Laws and
Contractual Obligations.  Each
Credit Party will (a) comply with and shall cause each of its Subsidiaries
to comply with (i) the requirements of all applicable material laws,
rules, regulations and orders of any Governmental Authority (including, without
limitation, laws, rules, regulations and orders relating to taxes, employer and
employee contributions, securities, employee retirement and welfare benefits,
environmental protection matters and employee health and safety) as now in
effect and which may be imposed in the future in all jurisdictions in which any
Credit Party or any of its Subsidiaries is now doing business or may hereafter
be doing business and (ii) the obligations, covenants and conditions contained
in all Contractual Obligations of such Credit Party or any of its Subsidiaries
other than those laws, rules, regulations, orders and provisions of such
Contractual Obligations the noncompliance with which would not be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect, and (b) maintain or obtain and shall cause each of its
Subsidiaries to maintain or obtain all licenses, qualifications and permits now
held or hereafter required to be held by such Credit Party or any of its
Subsidiaries, for which the loss, suspension, revocation or failure to obtain
or renew, would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.  This
Section 4.1 shall not preclude any Credit Party or its Subsidiaries
from contesting any taxes or other payments, if they are being diligently
contested in good faith in a manner which stays enforcement thereof and if
appropriate expense provisions have been recorded in conformity with GAAP, subject
to Section 5.2 and no Lien (other than a Permitted Encumbrance) in
respect thereof has been created.

 

4.2.          Insurance. 
Each Credit Party will maintain or cause to be maintained, with
financially sound and reputable insurers, public liability and property damage
insurance with respect to its business and properties and the business and
properties of its Subsidiaries against 

 

35

 

loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts acceptable to Agent and will deliver evidence thereof
to Agent.  Each Credit Party will
maintain business interruption insurance providing coverage consistent with
that in place on the Closing Date.  Each Credit Party shall, pursuant
to endorsements and/or assignments in form and substance reasonably
satisfactory to Agent, (i) cause Agent to be named as lender’s loss payee in
the case of casualty insurance, and assignee in the case of all business
interruption insurance, in each case for the benefit of Agent and Lenders
provided, that, in the event that no Default or Event of Default has occurred
and is continuing and that no mandatory prepayment is required under the terms
of this Agreement, Agent shall with reasonable promptness return any proceeds
so received by Agent to the Borrowers, and (ii) cause Agent and each Lender to
be named as additional insureds in the case of all liability insurance.  In the event any Credit Party fails to
provide Agent with evidence of the insurance coverage required by this
Agreement, Agent may purchase insurance at such Credit Party’s expense to
protect Agent’s interests in the Collateral. 
This insurance may, but need not, protect such Credit Party’s interests.  The coverage purchased by Agent may not pay
any claim made by such Credit Party or any claim that is made against such
Credit Party in connection with the Collateral. 
Such Credit Party may later cancel any insurance purchased by Agent, but
only after providing Agent with evidence that such Credit Party has obtained
insurance as required by this Agreement. 
If Agent purchases insurance for the Collateral, such Credit Party will
be responsible for the costs of that insurance, including interest and other
Charges imposed by Agent in connection with the placement of the insurance,
until the effective date of the cancellation or expiration of the
insurance.  The costs of the insurance
may be added to the Obligations.  The
costs of the insurance may be more than the cost of insurance such Credit Party
is able to obtain on its own.

 

4.3.          Field Examination; Fixed
Asset Appraisal; Lender Meeting. 
Upon ten (10) Business Days’ prior written notice to the Credit Parties,
each Credit Party shall permit any authorized representatives of Agent to
conduct a field examination of any of the properties of such Credit Party and
its Subsidiaries, including its and their financial and accounting records, and
to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and business with its and their officers and certified public
accountants, at such reasonable times during normal business hours and, subject
to the proviso set forth below, as often as may be reasonably requested (a “Field
Examination”); provided, however, so long as no Default or
Event of Default has occurred and is continuing, (i) Agent shall be limited to
one (1) Field Examination during each calendar year and (ii) Borrowers’
obligation to reimburse out-of-pocket expenses in respect of such Field
Examination shall not exceed $40,000. 
Representatives of each Lender will be permitted to accompany
representatives of Agent during each Field Examination at such Lender’s
expense.  In addition to the foregoing,
each Credit Party shall permit any authorized representatives of Agent to
conduct a Fixed Asset Appraisal (as defined in Section 6.2(g) hereof)
subject to and upon the terms and conditions set forth in Section 6.2(g)
hereof, provided, however, that, so long as no Default or Event
of Default has occurred and is continuing, (i) Agent shall be limited to one
(1) Fixed Asset Appraisal during each calendar year and (ii) Borrowers’
obligation to reimburse out-of-pocket expenses in respect of such Fixed Asset
Appraisal shall not exceed $125,000.  In
addition to the foregoing, each Credit Party will participate and will cause
key management personnel of each Credit Party and its Subsidiaries to
participate in a meeting with Agent and Lenders at least once during each year,
which meeting shall be held at a mutually agreeable location and time.

 

36

 

4.4.          Organizational Existence.  Except as otherwise permitted by Section
5.6, each Credit Party will and will cause its material Subsidiaries, if
any, to at all times preserve and keep in full force and effect its
organizational existence and all rights and franchises material to its
business; provided, however, that nothing in this Section 4.4
shall prevent the dissolution of any Subsidiary that is not a Credit Party
hereunder, or withdrawal by Holdings or any of its Subsidiaries of any
Subsidiary’s qualification to do business in any jurisdiction (other than its
jurisdiction of organization) where such dissolution or withdrawal would not
reasonably be expected to have a Material Adverse Effect, or the withdrawal of
the qualification to do business in any jurisdiction of any Subsidiary that is
not a Credit Party hereunder.

 

4.5.          Environmental Matters.  Each Credit Party shall and shall cause each Person
within its control to: (a) conduct its operations and keep and maintain
its Real Estate in compliance with all Environmental Laws and Environmental
Permits other than noncompliance that would not reasonably be expected to have
a Material Adverse Effect; (b) implement any and all investigation,
remediation, removal and response actions that are appropriate or necessary to
maintain the value and marketability of the Real Estate or to otherwise comply
with Environmental Laws and Environmental Permits pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or Release of any
Hazardous Material on, at, in, under, above, to, from or about any of its Real
Estate, except where the failure to do so would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect;
(c) notify Agent promptly after such Credit Party or any Person within its
control becomes aware of any violation of Environmental Laws or Environmental
Permits or any Release on, at, in, under, above, to, from or about any Real
Estate that is reasonably likely to result in Environmental Liabilities to a
Credit Party or its Subsidiaries in excess of $1,000,000; and (d) promptly forward to Agent a copy of any order,
notice of actual or alleged violation or liability, request for information or
any communication or report received by such Credit Party or any Person within
its control in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that would
reasonably be expected to (x) have a Material Adverse Effect or (y) result in
Environmental Liabilities in excess of $1,000,000, in each case whether or not
the Environmental Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation, Release or other
matter.  If Agent at any time has a
reasonable basis to believe that there may be a violation of any Environmental
Laws or Environmental Permits by any Credit Party or any Person under its
control or any Environmental Liability arising thereunder, or a Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate, that, in each case, would reasonably be expected to have a Material
Adverse Effect, then such Credit Party and its Subsidiaries, as applicable,
shall, upon Agent’s written request (i) cause the performance of such
environmental audits including subsurface sampling of soil and groundwater to
assess such potential violations, Environmental Liabilities, or Releases, and
preparation of such environmental reports, at Borrowers’ expense, as Agent may
from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Agent and shall be in
form and substance reasonably acceptable to Agent, and (ii) if such Credit
Party or Subsidiary, as applicable, fail to perform (or cause performance of)
any environmental audit under Section 4.5(d)(i) above within a reasonable
time after receiving a written request from Agent, the Credit Parties shall
permit Agent or its representatives to have reasonable access to all Real
Estate, to the extent that the Credit Parties have control and authority to
permit access to such Real Estate, for the purpose of conducting

 

37

 

such environmental audits and testing as Agent deems
appropriate, including subsurface sampling of soil and groundwater.  Borrowers shall reimburse Agent for the costs
of such audits and tests and the same will constitute a part of the
Obligations.

 

4.6.          Landlords’ Agreements and
Mortgagee Agreements.  Each
Credit Party shall use reasonable efforts to obtain a landlord’s agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property, mortgagee of owned property or bailee with respect to any
warehouse, processor or converter facility or other location where Collateral
is stored or located (other than locations (i) outside the U.S. or (ii)
containing Collateral in an aggregate amount not to exceed $1,500,000 for each
individual location or for all such locations not to exceed $2,500,000 in the
aggregate), which agreement or letter shall contain a waiver or subordination
of all Liens or claims that the landlord, mortgagee or bailee may assert
against the Collateral at that location, and shall otherwise be reasonably
satisfactory in form and substance to Agent. 
With respect to such locations or warehouse space leased, owned or where
Collateral is stored or located as of the Closing Date and thereafter, if Agent
has not received a landlord or mortgagee agreement or bailee letter as of the
Closing Date (or, if later, as of the date such location is acquired, leased or
Collateral stored or located), the Eligible Inventory at that location shall,
in Agent’s reasonable discretion, be subject to such Reserves as may be
established by Agent in its reasonable credit judgment.  Each Credit Party shall and shall cause its
Subsidiaries to timely and fully pay and perform their obligations under all
leases and other agreements with respect to each leased location or public
warehouse where any Collateral is or may be located (other than locations (i)
outside the U.S. or (ii) containing Collateral in an aggregate amount not to
exceed $100,000 for each individual location or for all such locations not to
exceed $250,000 in the aggregate).  With
respect to Collateral in the United Kingdom, Great Britain and Northern
Ireland, the Borrowers and Credit Parties shall comply with the applicable
provisions contained in the UK Collateral Documents.

 

4.7.          Further Assurances.

 

(a)           Each
Credit Party shall, from time to time, execute such guaranties, financing
statements, documents, security agreements and reports as Agent or Requisite
Lenders at any time may reasonably request to evidence, perfect or otherwise
implement the guaranties and security for repayment of the Obligations
contemplated by the Loan Documents. 
Notwithstanding anything to the contrary contained herein or elsewhere
in this Agreement, the Receivables Subsidiary shall not be required to become a
Guarantor, although 100% of the capital Stock of the Receivables Subsidiary
shall be pledged pursuant to the Pledge Agreement.

 

(b)           In the
event any Credit Party acquires a fee ownership interest in real property after
the Closing Date, such Credit Party shall deliver to Agent a fully executed
mortgage or deed of trust over such real property in form and substance
satisfactory to Agent, together with such title insurance policies, surveys,
appraisals, evidence of insurance, legal opinions, environmental assessments
and other documents and certificates as shall be reasonably required by
Agent.  Notwithstanding the foregoing,
this Section 4.7(b) shall not apply to, and Holdings and its Subsidiaries shall
not be required to grant a mortgage in, any real property the fair market value
of which is less than $1,000,000.

 

38

 

(c)           After the
date hereof, each Credit Party shall (i) cause each Person, upon its
becoming a Subsidiary of such Credit Party (provided that this shall not be
construed to constitute consent by any of the Lenders to any transaction not
expressly permitted by the terms of this Agreement), promptly to guaranty the
Obligations and to grant to Agent, for the benefit of Agent and Lenders, a
security interest in the real, personal and mixed property of such Subsidiary
to secure the Obligations and (ii) pledge, or cause to be pledged, to
Agent, for the benefit of Agent and Lenders, all of the Stock of such
Subsidiary, other than certain Domestic Subsidiaries that are not material
Subsidiaries and the non-Domestic Subsidiaries that are not Credit Parties to
secure the Obligations.  The
documentation for such guaranty, security and pledge shall be substantially
similar to the Loan Documents executed concurrently herewith with such
modifications as are reasonably requested by Agent.

 

4.8.          Payment of Taxes.  Each Credit Party shall timely pay and
discharge (or cause to be paid and discharged) all material taxes, assessments
and governmental and other charges or levies imposed upon it or upon its income
or profits, or upon property belonging to it; provided that such Credit Party
shall not be required to pay any such tax, assessment, charge or levy that is
being contested in good faith by appropriate proceedings or other appropriate
actions diligently conducted and for which the affected Credit Party shall have
set aside on its books adequate reserves with respect thereto in conformance
with GAAP and deemed appropriate by such Credit Party and its independent
public accountants.

 

4.9.          Cash Management Systems.  Borrowers shall, and shall cause each other
Credit Party to, enter into Control Agreements with respect to each U.S.
deposit account, other than any accounts that do not have an average daily
balance for the immediately preceding 30-day period in excess of $1,000,000 in
the aggregate for all accounts, maintained by Borrowers or any Subsidiary of a
Borrower (other than (a) any payroll account so long as such payroll account
either (i) is a zero balance account or (ii) does not contain any amounts in
excess of payroll due and payable within four (4) Business Days, (b) any
segregated account that contains funds for the purpose of paying third party
vendors in connection with advertising expenses in connection with the TNN
Business of the Credit Parties, and (c) accounts funded solely to pay sales and
use tax, and any such funds are so used within two (2) Business Days) as of or
after the Closing Date.  Each such
deposit account control agreement shall be in form and substance reasonably
satisfactory to Agent.

 

4.10.        Covenants Regarding Accounts.  (a) In the ordinary course of its business,
each Credit Party processes its Accounts (other than as provided for in clause
(b) below) in a manner such that (i) each payment received by such Credit Party
in respect of an Account is allocated to a specifically identified invoice,
which invoice corresponds to a particular Account owing to such Credit Party
and (ii) in the event that, at any time, less than 100% of the Accounts of such
Credit Party are included in a Permitted Receivables Financing, payments
received in respect of those Accounts included in a Permitted Receivables Financing
would be identifiable and separable from payments received in respect of
Accounts not so included in a Permitted Receivables Financing.  (b) With respect to the Accounts of (i) the
MMS Rochester Business and (ii) the VPS Business, each applicable Credit Party
processes its Accounts in a manner such that each payment received by such
Credit Party is (i) separately identifiable, (ii) segregated from all other
Accounts and receivables and (iii) not co-mingled with any of the Accounts that
are included in a Permitted Receivables Financing.

 

39

 

4.11.        Certain Provisions With
Respect to Receivables Facility. 
The Receivables Sellers shall be permitted to transfer Receivables
Purchase Agreement Assets to the Receivables Subsidiary from time to time in
accordance with the requirements of Section 5.7(b), and in connection
therewith may make Investments as contemplated by Sections 5.3(m) and
(o) and Investments in existence on the Closing Date.  In addition, intercompany loans may be made
by the Receivables Sellers as a result of the transfer of their Receivables
Purchase Agreement Assets to the Receivables Subsidiary in accordance with the
provisions of Section 5.3(o).

 

SECTION 5.

NEGATIVE COVENANTS

 

Each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that from and after the date hereof
until the Termination Date:

 

5.1.          Indebtedness.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries directly or indirectly to create, incur,
assume, or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness (other than pursuant to a Contingent Obligation
permitted under Section 5.4) except:

 

(a)           Indebtedness
described on Schedule 5.1;

 

(b)           the
Obligations;

 

(c)           intercompany
Indebtedness arising from loans made by any Credit Party (other than Holdings)
(i) to any other Credit Party (other than Holdings) or (ii) to any other
Subsidiary in an amount not to exceed $1,500,000 in aggregate principal amount
at any time outstanding; provided, however, that upon the request
of Agent at any time, such Indebtedness shall be evidenced by unsecured
promissory notes (each, an “Intercompany Note”), the sole originally
executed counterparts of which shall be pledged and delivered to Agent, for the
benefit of Agent and Lenders, as security for the Obligations;

 

(d)           Subordinated
Debt of Holdings and Borrowers issued pursuant to the February 2003 Senior
Subordinated Notes as in existence as of the Closing Date in an amount not to
exceed $293,500,000 in aggregate
principal amount at any time outstanding;

 

(e)           the 2002
Senior Debt of Borrowers issued pursuant to the 2002 Senior Debt Documents as
in existence on the Closing Date in an amount not to exceed $350,000,000 in
aggregate principal amount at any time outstanding;

 

(f)            the 2003
Senior Secured Debt of Borrowers issued pursuant to the 2003 Senior Secured
Debt Documents as in existence as of the Closing Date in an amount not to
exceed $350,000,000 in aggregate principal amount at any time outstanding;

 

(g)           the
Mezzanine Debt of Holdings issued pursuant to the Mezzanine Debt Documents or
other mezzanine debt of Holdings issued on terms and conditions substantially
similar to those set forth in the Mezzanine Debt Documents in an amount not to
exceed $147,500,000 in aggregate
principal amount at any time outstanding (as (x) increased as a result of the
issuance of any additional Mezzanine Debt to pay-in-kind any regularly accruing
interest

 

40

 

on then outstanding Mezzanine Debt in accordance with
the terms of the Mezzanine Debt Documents (including interest, which, but for
the occurrence of a Default or Event of Default, would be payable in cash) and
(y) reduced by any repayments of principal thereof);

 

(h)           Indebtedness
not to exceed $55,000,000 in an aggregate principal amount at any time
outstanding secured by purchase money Liens or incurred with respect to Capital
Leases;

 

(i)            any other
unsecured Indebtedness of the Credit Parties not to exceed $10,000,000 in an aggregate principal
amount at any time outstanding;

 

(j)            refinancings
or the replacement of Indebtedness permitted under clauses (a), (d), (e), (f), (g) and (h) that do not accelerate the scheduled dates for payment thereof,
increase the principal amounts thereof, materially increase any interest rate
or fees applicable thereto, add additional obligors therefor, or enhance the
collateral therefor or the priority thereof;

 

(k)           Indebtedness
pursuant to the Permitted Receivables Financing and the refinancing and
replacement thereof;

 

(l)            unsecured
Indebtedness of any Credit Party issued as consideration to a seller in
connection with a Permitted Acquisition not to exceed $15,000,000 in aggregate
principal amount in any given year; provided, that any such unsecured
Indebtedness shall (i) provide that no cash payments of principal shall be
permitted to be paid until the Termination Date, (ii) be fully subordinated to
the Obligations on terms and conditions satisfactory to Agent and be subject to
a subordination agreement in form and substance reasonably satisfactory to
Agent, and (iii) otherwise be in form and substance satisfactory to Agent;

 

(m)          Accrued
expenses and current trade accounts payable incurred in the ordinary course of
business;

 

(n)           Indebtedness
under Interest Rate Protection Agreements reasonably related to outstanding
floating or fixed rate debt permitted under this Agreement entered into for
non-speculative purposes;

 

(o)           Guaranties
of Holdings or any of its Subsidiaries as a guarantor of the lessee under any
lease pursuant to which Holdings or any of its Subsidiaries is the lessee, so
long as such lease is otherwise permitted hereunder;

 

(p)           intercompany
Indebtedness that may be deemed to exist by and among the Credit Parties (and
solely by and among the Credit Parties) pursuant to the Tax Sharing Agreement;

 

(q)           Obligations
of any Credit Party incurred with respect to appeal bonds furnished by such
Credit Parties in connection with ongoing litigation matters, so long as the
aggregate amount of outstanding obligations at any time pursuant to this clause
(p) does not exceed $15,000,000;

 

41

 

(r)            Indebtedness
which may be deemed to exist pursuant to the Receivables Purchase Agreement so
long as, if such Indebtedness ever exceeds $150,000,000, mandatory repayments
or commitment reductions shall be made to reduce such Indebtedness to not
greater than $150,000,000;

 

(s)           Obligations
of any Restricted Subsidiary of Holdings incurred with respect to performance
bonds and/or fidelity bonds required to be furnished by such Restricted
Subsidiary in connection with contracts entered into by such Restricted
Subsidiary in the ordinary course of its business, so long as the aggregate
amount of outstanding obligations at any time pursuant to this clause (s) does
not exceed $5,000,000; and

 

(t)            Indebtedness
of any Borrower and/or its Subsidiaries under Currency Agreements, in each case
so long as the respective Currency Agreement is reasonably related to revenues
or payments of any Borrower and/or its Subsidiaries in the respective currency
subject to the Currency Agreement and is entered into for non-speculative
purposes.

 

5.2.          Liens and Related Matters.

 

(a)           No Liens.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly create, incur,
assume or permit to exist any Lien on or with respect to any property or asset
of such Credit Party or any such Subsidiary, whether now owned or hereafter
acquired, or any income or profits therefrom, except Permitted Encumbrances
(including, without limitation, those Liens constituting Permitted Encumbrances
existing on the date hereof and renewals and extensions thereof, as set forth
on Schedule 5.2); provided, that, the provisions of this Section
5.2(a) shall not prevent the creation, incurrence, filing, assumption or
existence of the following:

 

(i)            Liens placed upon assets used in the ordinary course
of business of Holdings or any of its Subsidiaries at the time of acquisition
thereof by Holdings or any such Subsidiary or within 90 days thereafter to
secure Indebtedness incurred to pay all or a portion of the purchase price
thereof, or Liens securing Indebtedness acquired in connection with a Permitted
Acquisition, provided that (x) the aggregate outstanding principal amount of
all Indebtedness secured by Liens permitted by this clause (i) shall not at any
time exceed the amount permitted by Section 5.1(h), (y) in all events, the Lien
encumbering the assets so acquired does not encumber any other asset of
Holdings or such Subsidiary and (z) in the case of Liens securing Indebtedness
acquired in connection with a Permitted Acquisition, such Liens are not
incurred in contemplation or anticipation of the Permitted Acquisition pursuant
to which such Indebtedness is acquired; and

 

(ii)           Liens in favor of customs and revenue authorities
arising as a matter of law or regulation to secure the payment of customs
duties in connection with the importation of goods and deposits made to secure
statutory obligations in the form of excise taxes.

 

(b)           No
Negative Pledges.  The Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly enter into or assume any agreement (other than the Loan Documents)
prohibiting the creation or assumption of any Lien upon its properties or

 

42

 

assets, whether now owned or hereafter acquired and
other than (i) provisions restricting subletting or assignment under any lease
governing a leasehold interest or lease of personal property; (ii) restrictions
with respect to a Subsidiary imposed pursuant to any agreement which has been
entered into for the sale of disposition of all or substantially all of the
equity interests or assets of such Subsidiary, so long as such sale or
disposition of all or substantially all of the equity interests or assets of
such Subsidiary is permitted under this Agreement; (iii) restrictions on
assignments or sublicensing of licensed Intellectual Property; and (iv)
restrictions in the documents related to the Permitted Receivables Financing.

 

(c)           No
Restrictions on Subsidiary Distributions to Borrowers.  Except as provided herein, the Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to: (1) pay dividends or make any other distribution on any of
such Subsidiary’s Stock owned by any Borrower or any other Subsidiary;
(2) pay any Indebtedness owed to any Borrower or any other Subsidiary;
(3) make loans or advances to any Borrower or any other Subsidiary; or
(4) transfer any of its property or assets to any Borrower or any other
Subsidiary other than the assets set forth on Schedule 5.8 and other
than encumbrances or restrictions existing under or by reason of (i) this
Agreement and the other Loan Documents; (ii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of
Holdings or any of its Restricted Subsidiaries; (iii) restrictions imposed by
any holder of a Lien permitted under Section 5.2(a) on the
transferability of any asset subject to such Lien; and (iv) restrictions on the
Receivables Subsidiary, with respect to the Receivables Purchase Agreement
Assets, set forth in the Receivables Purchase Agreement and related documents.

 

5.3.          Investments.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly make or own any
Investment in any Person except:

 

(a)           Borrowers
and their Subsidiaries may make and own Investments in Cash Equivalents subject
to Control Agreements in favor of Agent; provided that such Cash
Equivalents are not subject to setoff rights;

 

(b)           Each
Credit Party may make intercompany loans to other Credit Parties (other than
Holdings) to the extent permitted under Section 5.1;

 

(c)           Each
Credit Party may make equity contributions to other Credit Parties (other than
Holdings);

 

(d)           Borrowers
and their Subsidiaries may each make non-cash Investments in any other
Subsidiaries of the Borrowers for the purpose of the extinguishment of
intercompany Indebtedness solely through the offset of an intercompany
receivable to an intercompany payable (i.e., no transfer or payment of
cash consideration is permitted);

 

(e)           Credit
Parties and their Subsidiaries may make loans and advances to employees,
officers and directors, to the extent permissible by law, for moving,
entertainment, travel and other similar expenses in the ordinary course of
business consistent with past practices;

 

43

 

(f)            Investments
representing non-cash consideration received in accordance with Section 5.7;

 

(g)           Investments
existing on the Closing Date, as set forth on Schedule 5.3 and any
renewals, amendments and replacements thereof that do not increase the amount
thereof;

 

(h)           each
Credit Party may hold investments comprised of notes payable, or stock or other
securities issued by financially troubled Account Debtors (excluding
Affiliates) to such Credit Party pursuant to agreements with respect to
settlement of such Account Debtor’s Accounts with such Credit Party negotiated
in the ordinary course of business;

 

(i)            Investments
consisting of loans by a Borrower to employees, officers and third party
independent directors, to the extent permissible by law, of that Borrower which
are used solely by such employees, officers and third party independent
directors, to the extent permissible by law, to simultaneously purchase the
Stock of Holdings, provided that Holdings contemporaneously contributes the
proceeds of such Stock to the capital of that Borrower;

 

(j)            Borrowers
and their Subsidiaries may make advances in the form of a prepayment of
expenses, so long as such expenses were incurred in the ordinary course of
business and are being paid in accordance with customary trade terms of such
Borrower or such Subsidiary;

 

(k)           each of
the Subsidiaries of Holdings may acquire and hold accounts receivables owing to
any of them, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary terms of such Subsidiary;

 

(l)            any
Borrower may enter into Interest Rate Protection Agreements to the extent
permitted in Section 5.1(n);

 

(m)          so long as
no Default or Event of Default exists or would exist immediately after giving
effect to the respective Investment, each of the Credit Parties and their
Subsidiaries shall be permitted to make Investments (in addition to those
otherwise provided in this Section 5.3) on any date in an amount
not to exceed $2,500,000 in the aggregate;

 

(n)           each of
the Credit Parties and their Restricted Subsidiaries may make Permitted
Acquisitions in accordance with the relevant requirements of Section 5.6
and the component definitions as used therein;

 

(o)           as a
result of sales, contributions and other transfers of Receivable Purchase
Agreement Assets to the Receivables Subsidiary in accordance with Section
5.3(e), Investments may exist from time to time consisting of intercompany
loans being made (or deemed made) by any of the Credit Parties, which is, at
such time, selling or transferring Receivables Purchase Agreement Assets to the
Receivables Subsidiary as a result of the transfer of such Receivables Purchase
Agreement Assets, in each case so long as all capital stock of the Receivables
Subsidiary is pledged pursuant to the Pledge Agreement and all such
intercompany loans are evidenced by one or more promissory notes which are
pledged pursuant to the Pledge Agreement;

 

44

 

(p)           Holdings
and Borrowers may guarantee obligations of their Subsidiaries as sellers
pursuant to the Receivables Purchase Agreement and related documents, so long
as no such guaranty shall give rise to recourse liability (other than in
connection with standard securitization undertakings) for the payment of any
Receivables Purchase Agreement Assets or the principal of, or interest on, any
Purchased Interest or Investor Certificate (both as defined in the Receivables
Pooling Agreement);

 

(q)           to the
extent necessary to maintain the net worth of the Receivables Subsidiary in
accordance with the requirements of the Receivables Purchase Agreement, any of
the Credit Parties may at any time contribute one or more promissory notes to
the capital of the Receivables Subsidiary; provided that (x) at no time shall
the aggregate principal amount of such contributed outstanding promissory notes
exceed the remainder of (A) $5 million less (B) the amount of all write-downs
and write-offs of such principal amount and (y) the interest rate payable
pursuant to such promissory notes shall not be greater than the short-term
“Applicable Federal Rate” (as such term is defined in Section 1274(d) of the
Code);

 

(r)            Investments
made in accordance with the relevant requirements of Section 5.7(d);

 

(s)           any of the
Credit Parties and/or their Subsidiaries may enter into Currency Agreements in
accordance with the requirements contained in Section 5.1(t);  and

 

(t)            additional
Investments may exist from time to time consisting of capital contributions to
the Receivables Subsidiary made solely through a reduction in the principal
amount of any intercompany note then payable to Vertis by the Receivables
Subsidiary, so long as (I) all capital stock of the Receivables Subsidiary is
pledged pursuant to the Pledge Agreement and (II) any such intercompany note
(to the extent same is not reduced to $0) is pledged pursuant to the Pledge
Agreement.

 

5.4.          Contingent
Obligations.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly create or become or be liable with respect to any Contingent
Obligation except:

 

(a)           Letter of
Credit Obligations;

 

(b)           those
resulting from endorsement of negotiable instruments for collection in the
ordinary course of business;

 

(c)           those
existing on the Closing Date and described in Schedule 5.4;

 

(d)           those
arising under indemnity agreements to title insurers to cause such title
insurers to issue to Agent mortgagee title insurance policies;

 

(e)           those
arising with respect to customary indemnification obligations incurred in
connection with transactions permitted hereunder;

 

(f)            those
incurred in the ordinary course of business with respect to surety bonds,
performance and return-of-money bonds and other similar obligations not
exceeding at 

 

45

 

any time outstanding $5,000,000 in aggregate liability
and those incurred in the ordinary course of business with respect to
litigation appeal bonds not exceeding at any time outstanding $15,000,000 in
aggregate liability;

 

(g)           those
incurred with respect to Indebtedness permitted by Section 5.1 provided
that (i) any such Contingent Obligation is subordinated to the Obligations to
the same extent as the Indebtedness to which it relates is subordinated to the
Obligations and (ii) no Credit Party may incur Contingent Obligations in
respect of Indebtedness incurred by any Person that is not a Credit Party under
this paragraph (g); and

 

(h)           any other
Contingent Obligation not expressly permitted by clauses (a) through (g) above,
so long as any such other Contingent Obligations, in the aggregate at any time
outstanding, do not exceed $2,500,000 and no Credit Party may incur Contingent
Obligations in respect of Indebtedness incurred by any Person that is not a
Credit Party under this paragraph (h).

 

5.5.          Restricted
Payments.  The Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly declare, order, pay, make or set apart any sum for any Restricted
Payment, except that:

 

(a)           Each
Credit Party other than Holdings may make payments and distributions to
Holdings (whether directly or through sequential upstream Restricted Payments)
that are used by Holdings to pay federal and state income taxes then due and
owing, franchise taxes and other similar licensing expenses incurred in the ordinary
course of business, operating expenses and payables owing by Holdings in the
ordinary course of its business, and other similar corporate overhead costs and
expenses;

 

(b)           Direct or
indirect wholly-owned Subsidiaries of a Borrower or Guarantor may make
Restricted Payments to the entity that is the direct owner of the equity of
such wholly-owned Subsidiary;

 

(c)           Borrowers may make regularly scheduled cash
interest payments pursuant to the terms of the Indebtedness set forth on
Schedule 5.5, the February 2003 Senior Subordinated Debt Documents, the 2003
Senior Secured Debt Documents and the 2002 Senior Debt Documents, each as in
effect on the date hereof;

 

(d)           Borrowers
may make regularly scheduled cash interest payments pursuant to the terms of
the Mezzanine Debt Documents as in effect on the date hereof; provided, that,
(i) no Default or Event of Default has occurred and is continuing or would
result after giving effect to any Restricted Payment pursuant to this clause
(d) and (ii) Borrowers shall have demonstrated to Agent’s satisfaction that
Holdings and its Subsidiaries on a consolidated basis and after giving pro
forma effect to such Restricted Payment have a Fixed Charge Coverage Ratio of
greater than or equal to 1.20 to 1.0 for the twelve month period ending on the
last day of the month immediately prior to the date of such proposed Restricted
Payment;

 

(e)           Any Credit
Party may make Restricted Payments to repurchase stock from directors, officers
and employees in an amount not to exceed $15,000,000; provided, that
(i) no Default or Event of Default has occurred and is continuing or would
result after giving effect to 

 

46

 

any Restricted Payment pursuant to this clause (e) and
(ii) Borrowers shall have Borrowing Availability, both before and after giving
effect to any such Restricted Payment, in excess of $20,000,000;

 

(f)            so long
as no Default or Event of Default then exists or would exist immediately after
giving effect thereto, Vertis may pay cash Dividends to Holdings so long as the
cash proceeds thereof are used by Holdings, as soon as reasonably practicable,
for the purposes described in and subject to the provisions of clause (e) of
this Section 5.5;

 

(g)           Borrowers
may pay management fees and reasonable out-of-pocket expenses pursuant to the
Management Services Agreement in accordance with Section 5.8 hereof; provided  that no Event of Default exists at
the time of any such Restricted Payment or would occur as a result thereof; and

 

(h)           Borrowers
may make cash interest payments pursuant to the terms of the Mezzanine Debt
Documents as in effect on the date hereof or any other documents evidencing
mezzanine debt subject to the limitations and terms of Section 5.1(g) (in
addition to any payments made or permitted to be made pursuant to clause (d)
above) in an amount not to exceed $10,000,000; provided, that (i)
no Default or Event of Default has occurred and is continuing or would result
after giving effect to any Restricted Payment pursuant to this clause (e) and
(ii) Borrowers shall have Borrowing Availability, both before and after giving
effect to any such Restricted Payment, in excess of $20,000,000; and provided,
further, that, the sum of the amount of cash interest payments
pursuant to the terms of the Mezzanine Debt Documents pursuant to this clause
(h) plus the sum of any Restricted Payments made pursuant to clause (e)
above shall not exceed $15,000,000 (i.e. the sum of payments pursuant to clause
(e) above and this clause (h) shall in no event exceed $15,000,000
collectively, and that the sum of payments made pursuant to this clause (h)
shall reduce dollar for dollar the payments permitted pursuant to clause (e)
above).

 

5.6.          Restriction
on Fundamental Changes. 
Except as otherwise permitted by Section 4.4, the Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly:  (a) amend, modify or
waive any term or provision of its organizational documents, including its
articles of incorporation, certificates of designations pertaining to preferred
stock, by-laws, partnership agreement or operating agreement in any manner
adverse to the Agent or Lenders unless required by law; provided, that
the foregoing shall not restrict the ability of Holdings and its Subsidiaries
to amend their respective certificates of incorporation to authorize the
issuance of common Stock or Qualified Preferred Stock otherwise permitted to be
issued pursuant to the terms of this Agreement; (b) enter into any
transaction of merger or consolidation except, upon not less than five (5)
Business Days prior written notice to Agent, (i) any wholly-owned Subsidiary of
a Borrower may be merged with or into such Borrower (provided that such
Borrower is the surviving entity) or any other wholly-owned Subsidiary
of such Borrower (provided that, in the case of any such merger of any Domestic
Subsidiary with or into a Foreign Subsidiary, the Domestic Subsidiary is the
surviving entity); (ii) any Domestic Subsidiary may merge into another Domestic
Subsidiary or into the U.S. Borrower (provided that the U.S. Borrower is the
surviving entity); and (iii) any U.K. Subsidiary may merge into or consolidate
with or transfer all or part of its assets and liabilities to another U.K.
Subsidiary that is a Credit Party or either European Borrower (provided that
such European Borrower is the surviving 

 

47

 

entity); provided, however, that in no
event shall the European Borrowers merge into any other entity, including the
other European Borrower; (c) liquidate, wind-up or dissolve itself (or
suffer any liquidation or dissolution) other than (A) any inactive non-Credit
Party that holds no assets or (B)  XL Ventures, Inc., XL Ventures
(Delaware), Inc., Big Flower Digital Services (Delaware), Inc. and Big Flower
Digital, LLC, none of which shall hold any assets at the time of such
liquidation or dissolution; or (d) acquire by purchase or otherwise all or
any substantial part of the Stock, business or assets of any other Person.

 

Notwithstanding the foregoing, any Borrower may
acquire all or substantially all of the assets or Stock of any Person (the “Target”) (in
each case, a “Permitted Acquisition”) subject to the satisfaction of
each of the following conditions:

 

(i)            Agent
shall receive at least 15 Business Days’ prior written notice of such proposed
Permitted Acquisition, which notice shall include a reasonably detailed
description of such proposed Permitted Acquisition;

 

(ii)           such
Permitted Acquisition shall only involve assets comprising a business, or those
assets of a business, of the type engaged in by Borrowers as of the Closing
Date, and which would not subject Agent or any Lender to regulatory or third
party approvals in connection with the exercise of its rights and remedies
under this Agreement or any other Loan Documents other than approvals
applicable to the exercise of such rights and remedies with respect to
Borrowers prior to such Permitted Acquisition;

 

(iii)          such
Permitted Acquisition shall be consensual and shall have been approved by the
Target’s board of directors or, in the case of a stock purchase transaction,
approved by all of the shareholders of the Target;

 

(iv)          no
additional Indebtedness, Guaranteed Indebtedness, Contingent Obligations or
other liabilities other than Indebtedness pursuant to Section 5.1(l) (i.e.
seller financing) shall be incurred, assumed or otherwise be reflected on a
consolidated balance sheet of Borrowers and Target after giving effect to such
Permitted Acquisition, except (A) Loans made hereunder and (B) ordinary course
trade payables, accrued expenses and unsecured Indebtedness of the Target to
the extent no Default or Event of Default has occurred and is continuing or
would result after giving effect to such Permitted Acquisition;

 

(v)           the sum of
all amounts payable in connection with all Permitted Acquisitions (including,
without duplication, all transaction costs and all Indebtedness, liabilities,
Guaranteed Indebtedness and Contingent Obligations (other than customary
indemnities provided by purchasers and customary non-speculative obligations in
connection with the hedging of purchase price in Pounds Sterling) incurred or
assumed in connection therewith or otherwise reflected on a consolidated
balance sheet of Borrowers and Target) shall not exceed (A) (x) $100,000,000
for the Fiscal Year ended December 31, 2005 and (y) $75,000,000 during any
Fiscal Year thereafter, provided, however, that the permitted
amounts payable in connection with all Permitted Acquisitions during the Fiscal
Year ended December 31, 2006 (and only such Fiscal Year) will be increased
during such Fiscal Year (and only such Fiscal Year) by the lesser of (I)
$25,000,000 or (II) the positive amount (if any) equal to the difference
obtained by taking the permitted amounts payable in connection with all
Permitted Acquisitions specified above in 

 

48

 

clause (x) for the Fiscal
Year ended December 31, 2005 (i.e. $100,000,000) minus the actual amount
actually paid during such period in connection with all Permitted Acquisitions
during such period (i.e. such carry forward amount shall not exceed
$25,000,000) plus (B) $50,000,000 in any Fiscal Year to the extent (x) such
$50,000,000 is funded solely through the issuance of common Stock or Qualified
Preferred Stock of Holdings and (y) immediately following such Permitted
Acquisition, Borrowers shall have a Fixed Charge Coverage Ratio of at least 1.2
to 1.0, pro forma after giving effect to such Permitted Acquisition;

 

(vi)          the Target
shall have had positive EBITDA, pro forma for adjustments reasonably
satisfactory to Agent for the trailing twelve-month period preceding the date
of the Permitted Acquisition, as determined based upon the Target’s financial
statements for its most recently completed fiscal year and its most recent
interim financial period completed within sixty (60) days prior to the date of
consummation of such Permitted Acquisition;

 

(vii)         the
business and assets acquired in such Permitted Acquisition shall be free and
clear of all Liens (other than Permitted Encumbrances);

 

(viii)        within
30 days of the closing of any Permitted Acquisition, Agent will be granted a
first priority perfected Lien (subject to Permitted Encumbrances) in all assets
acquired pursuant thereto or in the assets and Stock of the Target, and
Holdings and Borrowers and the Target shall have executed such documents and
taken such actions as may be required by Agent in connection therewith;

 

(ix)           Concurrently
with delivery of the notice referred to in clause (i) above, Borrowers
shall have delivered to Agent, in form and substance reasonably satisfactory to
Agent:

 

(A)          a pro forma consolidated balance sheet, income
statement and cash flow statement of Holdings
and its Subsidiaries (the “Acquisition Pro Forma”), based on
recent financial statements, which shall be complete and shall fairly present
in all material respects the assets, liabilities, financial condition and
results of operations of Holdings and its Subsidiaries in accordance with GAAP
consistently applied, but taking into account such Permitted Acquisition and
the funding of all Loans in connection therewith, and such Acquisition Pro
Forma shall reflect that (x) Holdings and its Subsidiaries on a consolidated basis shall have EBITDA of not
less than $175,000,000 for the 12-Fiscal Month period reflected in the
Compliance and Pricing Certificate most recently delivered to Agent pursuant to
Section 6.2(n) prior to the consummation of such Permitted Acquisition,
(y)  Borrowing Availability both before and after giving effect to such
Permitted Acquisition shall be at least $20,000,000, and (z) on a pro
forma basis, no Event of Default has occurred and is continuing or would result
after giving effect to such Permitted Acquisition and Borrowers would have been
in compliance with the financial covenant set forth in Section 6 for the
four quarter period reflected in the Compliance and Pricing Certificate most
recently delivered to Agent pursuant to Section 6.2(n) prior to the
consummation of such Permitted Acquisition (after giving effect to such
Permitted Acquisition and all Loans funded in connection therewith as if made
on the first day of such period);

 

(B)           updated versions of the most recently delivered
Budgets covering the 3 year period commencing on the date of such Permitted
Acquisition and otherwise prepared in accordance with the Budgets (the “Acquisition
Budgets”) and based upon historical financial 

 

49

 

data
of a recent date reasonably satisfactory to Agent, taking into account such
Permitted Acquisition; and

 

(C)           a certificate of the chief financial officer of
Borrower Representative to the effect that: (w) Borrowers (after taking into
consideration all rights of contribution and indemnity Borrowers have against
Holdings and each other Subsidiary of Holdings) will be Solvent upon the
consummation of the Permitted Acquisition; (x) the Acquisition Pro Forma fairly
presents the financial condition of Holdings
and its Subsidiaries (on a consolidated basis) as of the date thereof
after giving effect to the Permitted Acquisition; (y) the Acquisition
Projections are reasonable estimates of the future financial performance of Holdings and its Subsidiaries
subsequent to the date thereof based upon the historical performance of Holdings and its Subsidiaries and the
Target and show that, after giving effect to such Permitted Acquisition, Holdings and its Subsidiaries shall
continue to be in compliance with the financial covenants set forth in Section
6; and (z) Holdings and its Subsidiaries
have completed their due diligence investigation with respect to the Target and
such Permitted Acquisition, which investigation has produced results
satisfactory to Holdings and its Subsidiaries, including the Borrowers;

 

(xi)           on or
prior to the date of such Permitted Acquisition, Agent shall have received
copies of the acquisition agreement and related agreements and instruments, and
any written reports, if any, with respect to any due diligence investigation
and all opinions, certificates, lien search results and other documents
reasonably requested by Agent, and in addition including those specified in the
last sentence of Section 4.7; and

 

(xii)          at
the time of such Permitted Acquisition and after giving effect thereto, no
Default or Event of Default has occurred and is continuing.

 

Notwithstanding the
foregoing, the Fixed Assets, Accounts and Inventory of the Target shall not be
included in Eligible Accounts and Eligible Inventory unless and until Agent
shall have conducted a Field Examination with respect to Accounts and
Inventory, and a Fixed Asset Appraisal with respect to any Fixed Assets, with
results satisfactory to Agent.

 

5.7.          Disposal
of Assets or Subsidiary Stock. 
The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly convey, sell, lease, sublease, transfer
or otherwise dispose of, or grant any Person an option to acquire, in one
transaction or a series of related transactions, any of its property, business
or assets, whether now owned or hereafter acquired, except for (a) sales
of inventory in good faith to customers for fair value in the ordinary course
of business; and dispositions of obsolete equipment not used or useful in the
business; (b) the true sale by Vertis of Accounts pursuant to the Permitted
Receivables Financing; (c) sales, leases or other disposals of any assets in
the ordinary course of business which, in the reasonable judgment of
management, are (i) obsolete or worn out or (ii) are otherwise no longer used
or useful in the conduct of such Credit Party’s business; (d) sales,
contributions and other transfers by the Receivables Sellers of Receivables
Purchase Agreement Assets to the Receivables Subsidiary and sales and other
transfers of Receivables Purchase Agreement Assets by the Receivables
Subsidiary to the Receivables Purchasers (or to the master trust created
pursuant to the Permitted Receivables Financing), and purchases and
acquisitions of Receivables Purchase Agreement Assets by the Receivables
Subsidiary, in each case pursuant to the Receivables 

 

50

 

Purchase Agreement shall be permitted; (e) Borrowers
and their respective Subsidiaries may, in the ordinary course of business,
license, as licensor or licensee, patents, trademarks, copyrights and know-how
to or from third Persons or one another, so long as any such license by a
Borrower or any of its Subsidiaries in its capacity as licensor is permitted to
be assigned pursuant to the relevant Security Agreement and does not otherwise
prohibit the granting of a Lien by Borrower or any of their respective
Subsidiaries pursuant to such Security Agreement in the intellectual property
covered by such license; (f) Asset Dispositions by Borrowers and their
Subsidiaries (excluding sales of Accounts and Stock of any of Holdings’
Subsidiaries) if all of the following conditions are met:  (i) the aggregate fair market value of
assets sold or otherwise disposed of in any Fiscal Year does not exceed
$15,000,000 in the aggregate; (ii) the consideration received is at least
equal to the fair market value of such assets; (iii)  at least 75% of the
consideration received is cash; (iv) the non-cash portion of the consideration
received shall be evidenced by a promissory note, which promissory note shall
be in form and substance reasonably satisfactory to Agent and shall be pledged
and delivered to Agent as additional collateral security for the Obligations;
(v) the Net Proceeds of such Asset Disposition are applied as required by Section
1.5(b)(i); provided  that the Net Proceeds of any Asset
Disposition may be used to acquire assets in compliance with Section 1.5(b);
(vi) after giving effect to the Asset Disposition and the repayment of
Indebtedness with the proceeds thereof, Borrowers are in compliance on a pro
forma basis with the covenants set forth in Section 6 recomputed for the
most recently ended quarter for which information is available; and
(vii) no Default or Event of Default then exists or would result from such
Asset Disposition; (g) the sale or other disposition of any capital Stock or
other equity interests of any Person that is not a Subsidiary of Vertis or such
Subsidiary which were acquired by Vertis or such Subsidiary pursuant to an
Investment permitted by Section 5.3(f), so long as (i) 100% of the
consideration therefor shall be in the form of cash, (ii) no Default or Event
of Default has occurred and is in existence at the time of the respective sale
or disposition or would exist immediately after giving effect thereto and (iii)
the Net Proceeds therefrom are applied as required by Section 1.5(c) and
(h) the sale, transfer or other disposition of any assets of (i) any U.K.
Subsidiary to any other U.K. Subsidiary; and (ii) any Domestic Credit Party
(other than the U.S. Borrower) to any other Domestic Credit Party.

 

5.8.          Transactions
with Affiliates.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
management, consulting, investment banking, advisory or other similar services)
with any Affiliate or with any director, officer or employee of any Credit
Party, except (a) as set forth on Schedule 5.8,
(b) transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of any such Credit Party or any of its
Subsidiaries and upon fair and reasonable terms which are fully disclosed to
Agent and are no less favorable to any such Credit Party or any of its
Subsidiaries than would be obtained in a comparable arm’s length transaction
with a Person that is not an Affiliate, (c) payment of reasonable
compensation to officers and employees for services actually rendered to any
such Credit Party or any of its Subsidiaries; (d)  loans to employees
permitted in Section 5.3, (e) Restricted Payments permitted in Section
5.5 and the agreements pursuant to which such Restricted Payments are
required to be made, (f) reimbursement of employee travel and lodging costs
incurred in the ordinary course of business, (g) the guaranty of the
Obligations by Credit Parties, and (h) employment agreements, equity incentive
agreements and other employee and management arrangements in the ordinary
course of business which are fully disclosed to the Agent, (i) dividends may be
paid to the extent 

 

51

 

provided in Section 5.5, (j) Investments may be
made to the extent permitted by Section 5.3, (k) the transactions
entered into between Holdings and its Subsidiaries, or between such
Subsidiaries, shall be permitted to the extent expressly permitted by Section 5.6
and 5.7, (l) Vertis and its Subsidiaries may enter into the transactions
contemplated by the Receivables Purchase Agreement and related documents, (m)
any Borrower and any of its Subsidiaries may pay fees (including management,
acquisition and other consulting fees) to Vertis or any U.S. Subsidiary that is
a Guarantor, (n) Holdings and its Subsidiaries may pay, on a quarterly basis,
management fees to (i) THL and/or the THL Affiliates in an aggregate amount
(for all such Persons taken together) not to exceed $250,000 in any fiscal
quarter of Holdings and (ii) Evercore and/or the Evercore Affiliates in an
aggregate amount (for all such Persons taken together) not to exceed $62,500 in
any fiscal quarter of Holdings, in each case in accordance with the Sponsor
Management Agreement, provided, however, that in the event that
and for so long as a Default or Event of Default has occurred and is
continuing, the fees permitted to be paid pursuant to clause (i) and (ii) above
shall be reduced to up to $125,000 and $31,250, respectively, (o) Holdings and
its Subsidiaries may reimburse THL, THL Affiliates, Evercore and/or the
Evercore Affiliates for their reasonable out-of-pocket expenses incurred by
them in connection with performing management services to Holdings and its
Subsidiaries, (p) as long as no Default or Event of Default has occurred or is
continuing, Holdings and its Subsidiaries may pay one-time fees to THL, the THL
Affiliates, Evercore, and/or the Evercore Affiliates in
connection with each Permitted Acquisition, such fees to be payable at the time
of each such Permitted Acquisition and not to exceed (for all fees paid
pursuant to this clause (p)) 2.5% of the aggregate consideration paid by
Holdings and its Subsidiaries for any such Permitted Acquisition, (q) any
compensation paid to third-party independent outside directors, (r)
intercompany Indebtedness permitted (and only to the extent permitted) pursuant
to Sections 5.1(c), (o), (p) and (r); (s) the Mezzanine Debt
permitted (and only to the extent permitted) pursuant to Section 5.1(g); (t)
transactions between or among the Credit Parties and the Receivables Subsidiary
pursuant to the Permitted Receivables Financing that are upon fair and
reasonable terms and are no less favorable to any such party than would be
obtained in a comparable arm’s length transaction with a Person that is not an
Affiliate to the extent permitted pursuant to this Agreement; and (u)
Investments permitted (and only to the extent permitted) pursuant to Section
5.3(b), (c), (d), (g), (k), (m), (o),
(p), (q), (r) and (t);

 

provided, that any transaction (other
than as described in clauses (a), (i), (j), (k), (l), (m), (n) and (p) above)
between and among the aforementioned parties with a value in excess of (A)
$2,500,000 shall only be permitted if a majority of the disinterested directors
of Holdings approve the transaction and (B) $25,000,000 shall only be permitted
if the parties thereto provide a fairness opinion from a Person, and in form
and substance, satisfactory to Agent. 
Except as otherwise expressly provided in clauses (n), (o) and (p) of
this Section 5.8, in no event shall any management or similar fees be
paid or payable by Holdings or any of its Subsidiaries to any Affiliate (other
than Vertis or any Domestic Subsidiary that is a Credit Party hereunder).

 

5.9.          Conduct
of Business.  Holdings shall
not engage in any business activity other than its ownership of the Stock of
its Subsidiaries and its performance of the Related Transaction Documents; provided, that Holdings may engage
in those activities that (i) are incidental to (x) the maintenance of its
corporate existence in compliance with applicable law, (y) legal, tax and
accounting matters in connection with any of the foregoing activities and (z)
the entering into, and performance of its obligations under, this Agreement and
the other Loan Documents to 

 

52

 

which it is a party and (ii)
are otherwise expressly permitted by this Agreement and the other Loan
Documents.  The Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly engage in any business other than businesses of the type described
on Schedule 5.9.

 

5.10.        Changes
Relating to Indebtedness.  The
Credit Parties shall not and shall not cause or permit their Subsidiaries to
directly or indirectly change or amend the terms of any of its indebtedness
permitted by Section 5.1(d), (e), (f),
(g) or (h), including, without limitation, the Mezzanine Debt, the Senior Subordinated Debt, the February 2003 Senior
Subordinated Debt, the 2002 Senior Debt and the 2003 Senior Secured Debt
(or any indenture or other agreement, instrument or document in connection
therewith), including, without limitation, any of the Subordinated Notes, if
the effect of such amendment is to: (a)  increase the interest rate on
such Indebtedness; (b) accelerate the dates upon which payments of
principal or interest are due; (c) increase the principal amount of such
Indebtedness; (d) change any event of default or add or make more
restrictive any covenant with respect to such Indebtedness; (e) change the
redemption or prepayment provisions of such Indebtedness; (f) change the
subordination provisions thereof, if any (or the subordination terms of any
guaranty thereof); (g) change or amend any other term if such change or amendment
would materially increase the obligations of the obligor or confer additional
material rights on the holder of such Indebtedness in a manner adverse to any
Credit Party or Lenders; or (h) increase the portion of interest payable in
cash with respect to any Indebtedness for which interest is payable by the
issuance of payment-in-kind notes or is permitted to accrue without the consent
of the Required Lenders; provided, that so long as no Default or Event
of Default then exists or would result therefrom, Mezzanine Debt may be (a)
refinanced with the issuance of Permitted Subordinated Debt and in accordance
with any relevant provisions of this Agreement or (b) exchanged for Qualified
Preferred Stock in accordance with any relevant provisions of this Agreement.

 

5.11.        Fiscal
Year.  No Credit Party shall
change its Fiscal Year or permit any of its Subsidiaries to change their
respective Fiscal Years.

 

5.12.        Press
Release; Public Offering Materials. 
Each Credit Party executing this Agreement agrees that neither it nor
its Affiliates will in the future issue any press releases or other public
disclosure, including any prospectus, proxy statement or other materials filed
with any Governmental Authority relating to a public offering of the Stock of
any Credit Party, using the name of GE Capital or its affiliates or referring
to this Agreement, the other Loan Documents or the Related Transactions
Documents, other than the filing of this Agreement, the other Loan Documents or
the Related Transactions Documents as exhibits to any public disclosure
documents filed by Holdings with the Securities and Exchange Commission, as
required to do so under law, without at least two (2) Business Days’ prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will
consult with GE Capital before issuing such press release or other public
disclosure.

 

5.13.        Subsidiaries.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly establish, create
or acquire any new Subsidiary, except in connection with and to the extent
necessary to consummate one or more Permitted Acquisitions.

 

53

 

5.14.        Deposit
Accounts.  The Credit Parties
shall not and shall not cause or permit their Subsidiaries to establish any new
U.S. deposit accounts, other than any accounts that do not have an average
daily balance for the preceding 30 day period in excess of $1,000,000 in the
aggregate for all accounts, without prior written notice to Agent and unless
Agent and the bank at which the account is to be opened enter into a Control
Agreement regarding such deposit account pursuant to which such bank
acknowledges the security interest of Agent in such deposit account, agrees to
comply with instructions originated by Agent directing disposition of the funds
in the deposit account without further consent from such Credit Party or
Subsidiary, and agrees to subordinate and limit any security interest the bank
may have in the deposit account and waive all rights of set-off with respect
thereto (other than for customary fees and expenses) on terms satisfactory to
Agent.

 

5.15.        Hazardous
Materials.  The Credit Parties
shall not and shall not cause or permit their Subsidiaries to cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any
respect, or form the basis for any Environmental Liabilities by the Credit
Parties or any of their Subsidiaries under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect.

 

5.16.        ERISA.  The Credit Parties shall not and shall not
cause or permit any ERISA Affiliate to, cause or permit to occur an ERISA Event
to the extent such ERISA Event could reasonably be expected to have a Material
Adverse Effect.

 

5.17.        Sale-Leasebacks.  The Credit Parties shall not and shall not
cause or permit any of their Subsidiaries to engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets with a fair
market value in excess of $15,000,000; provided, that any Net Proceeds
received by any Credit Party pursuant to the terms of this Section 5.17 shall
be applied by the Borrowers to prepay the Loans in an amount equal to such Net
Proceeds in accordance with Section 1.5(d)(i).

 

5.18.        Prepayments
of Other Indebtedness.  The
Credit Parties shall not, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of the 2003 Senior
Secured Debt, the 2002 Senior Debt, the Mezzanine Debt, the February 2003
Senior Subordinated Debt, the Senior Subordinated Debt and any other
Subordinated Debt, other than intercompany Indebtedness reflecting
amounts owing to the Credit Parties; provided, that the foregoing
restrictions shall not apply to action taken by any Credit Party with the
consent of the Required Lenders.

 

5.19.        Special Purpose Vehicle.  The Receivables Subsidiary shall not engage
in any business activities and shall have no significant assets or liabilities
other than in connection with the Permitted Receivables Financing; provided,
that the Receivables Sellers shall be permitted to transfer Receivables
Purchase Agreement Assets to the Receivables Subsidiary from time to time in
accordance with the provisions of Section 5.7(c), and in connection
therewith may make Investments consistent with the provisions of Section 5.3.  In addition, intercompany loans may 

 

54

 

be made by the Receivables Sellers as a result of the
transfer of their Receivable Purchase Agreement Assets to the Receivables
Subsidiary.

 

SECTION 6.

FINANCIAL COVENANTS/REPORTING

 

Borrowers
covenant and agree that from and after the date hereof until the Termination
Date, Borrowers shall perform and comply with, and shall cause each of the
other Credit Parties to perform and comply with, all covenants in this Section
6 applicable to such Person.

 

6.1.          Financial
Covenant.

 

(a)           Minimum
EBITDA.  Holdings and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter, EBITDA,
adjusted to reflect restructuring charges, non-cash non-recurring charges and
other adjustments, if any, all as set forth in Section 6.1(a) of Schedule
1 to Annex F for the 12-Fiscal Month period then ended of not less than
$160,000,000.  In the event that Holdings
and its Subsidiaries are not in compliance with this Section 6.1(a), THL
and Evercore (Holding’s two principal stockholders) shall have the option to
make a common equity or, on terms and conditions acceptable to Agent, preferred
equity, contribution to Holdings and the net proceeds of such equity contribution
shall be treated on a dollar for dollar basis as EBITDA for purposes of
determining compliance with this Section 6.1(a); provided, that,
such an equity contribution shall, for purposes of its treatment as EBITDA, (i)
not be made more than once in any Fiscal Year and (ii) not exceed $15,000,000
in amount (i.e., not more than $15,000,000 of such an equity
contribution shall be treated as a replacement for EBITDA in any year and such
an equity contribution may only be made once per year).

 

6.2.          Financial
Statements and Other Reports.  Holdings and Borrowers will maintain,
and cause each of their Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of Financial Statements in conformity with GAAP (it being
understood that monthly Financial Statements are not required to have footnote
disclosures).  Borrower Representative
will deliver or make available each of the Financial Statements and other
reports described below to Agent (and each Lender in the case of the Financial
Statements and other reports described in Sections (6.2)(a), (b),
(c), (d), (e), (f), (h), (i), (j)
and (n)).

 

(a)           Monthly
Financials.  As soon as available and
in any event within thirty-five (35) days after the end of each Fiscal Month
(or forty-five (45) days for the last Fiscal Month of Borrowers’ Fiscal Year),
Borrower Representative will deliver or make available (1) the
consolidated (accompanied by mutually acceptable supplemental non-consolidated
information customarily prepared by management) balance sheet of Holdings and its Subsidiaries, as at
the end of such month, and the related consolidated (accompanied by mutually
acceptable supplemental non-consolidated information customarily prepared by
management) statements of income, stockholders’ equity and cash flow for such
Fiscal Month and for the period from the beginning of the then current Fiscal
Year of Holdings to the end of such Fiscal Month, and (2) a report setting
forth in comparative form the corresponding figures for the

 

55

 

corresponding periods of the previous Fiscal Year and
the corresponding figures from the most recent Projections for the current
Fiscal Year delivered pursuant to Section 6.2(h).

 

(b)           Quarterly
Financials.  As soon as available and
in any event within fifty (50) days after the end of each Fiscal Quarter
(including the last Fiscal Month of each Fiscal Quarter), Borrower
Representative will deliver or make available (1) the consolidated
(accompanied by mutually acceptable supplemental non-consolidated information
customarily prepared by management) balance sheet of Holdings and its Subsidiaries, as at the end of such Fiscal
Quarter, and the related consolidated (accompanied by mutually acceptable
supplemental non-consolidated information customarily prepared by management)
statements of income, stockholders’ equity and cash flow for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal Year of
Holdings to the end of such Fiscal Quarter and (2) a report setting forth
in comparative form the corresponding figures for the corresponding periods of
the previous Fiscal Year and the corresponding figures from the most recent
Projections for the current Fiscal Year delivered pursuant to Section 6.2(h).

 

(c)           Year-End
Financials.  As soon as available and
in any event within ninety-five (95) days after the end of each Fiscal Year of
Borrowers, Borrower Representative will deliver or make available (1) the
consolidated (accompanied by mutually acceptable supplemental non-consolidated
information customarily prepared by management) balance sheet of Holdings and
its Subsidiaries, as at the end of such year, and the related consolidated
(accompanied by mutually acceptable supplemental non-consolidated information
customarily prepared by management) statements of income, stockholders’ equity
and cash flow for such Fiscal Year, and (2) a report with respect to the
consolidated (together with division-by-division analysis) Financial Statements
from a firm of Certified Public Accountants selected by Borrowers and
reasonably acceptable to Agent, which report shall be prepared in accordance
with Statement of Auditing Standards No. 58 (the “Statement”)
“Reports on Audited Financial Statements” and such report shall be
“Unqualified” (as such term is defined in such Statement).

 

(d)           Accountants’
Reports.  Promptly upon receipt
thereof, Borrower Representative will deliver copies of all significant reports
submitted by Borrowers’ firm of certified public accountants in connection with
each annual, interim or special audit or review of any type of the Financial
Statements or related internal control systems of Holdings or its Subsidiaries
made by such accountants, including any comment letter submitted by such
accountants to management in connection with their services.

 

(e)           Borrowing
Base Certificate.  As soon as
available and in any event within ten (10) Business Days after the end of each
Fiscal Month, and from time to time upon the request of Agent, Borrower
Representative will deliver a Borrowing Base Certificate (in substantially the
same form as Exhibit 6.2(e), the “Borrowing Base Certificate”) as
at the last day of such period.

 

(f)            Management
Report.  Together with each delivery
of Financial Statements of Borrowers pursuant to Sections 6.2(a) and (b),
Borrower Representative will deliver a management report (1) describing
the operations and financial condition of Holdings and its Subsidiaries for the
Fiscal Month then ended and the portion of the current Fiscal Year then elapsed
(or for the Fiscal Year then ended in the case of year-end financials) and
(2) discussing 

 

56

 

the reasons for any significant variations.  The information above shall be presented in
reasonable detail and shall be certified by the chief financial officer of Borrower Representative to the effect
that such information fairly presents the results of operations and financial
condition of Holdings and its Subsidiaries as at the dates and for the periods
indicated.

 

(g)           Fixed
Asset Appraisal.  Upon the election
of Agent, which may be made at any time while and so long as an Event of
Default shall be continuing, Agent may conduct appraisals and audits and obtain
appraisal reports (collectively, a “Fixed Asset Appraisal”) in form and
substance and from appraisers reasonably satisfactory to Agent (which may be,
or be affiliated with, a Lender) with respect to the fixed assets of the
Borrower and the other Credit Parties, which report shall indicate whether or
not the information set forth in the Borrowing Base Certificate most recently
delivered is accurate and complete in all material respects based upon a review
by such appraiser; provided, that so long as no Default or Event
of Default has occurred and is continuing, (i) Agent shall be limited to one
(1) Fixed Asset Appraisal per year and (ii) Borrowers’ obligation to reimburse
out-of-pocket expenses in respect of any such Fixed Asset Appraisal shall not exceed
$125,000.

 

(h)           Financial
Projections.  As soon as available
and in any event no later than thirty (30) days following the last day of each
of Borrowers’ Fiscal Years, Borrower Representative will deliver Financial
Projections of Holdings and its Subsidiaries
for the forthcoming three (3) Fiscal Years, year by year, and for the
forthcoming Fiscal Year, Fiscal Month by Fiscal Month.

 

(i)            SEC
Filings and Press Releases.  Promptly
upon their becoming available, Borrower Representative will deliver copies of
(1) all Financial Statements, reports, notices and proxy statements sent
or made available by Holdings, Borrowers or any of their Subsidiaries to their
Stockholders, (2) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by Holdings, Borrowers or any of
their Subsidiaries with any securities exchange or with the Securities and
Exchange Commission, any Governmental Authority or any private regulatory
authority, and (3) all press releases and other statements made available
by Holdings, Borrowers or any of their respective Subsidiaries to the public
concerning developments in the business of any such Person.

 

(j)            Events
of Default, Etc.  Promptly upon any
officer of any Credit Party obtaining knowledge of any of the following events
or conditions, Borrower Representative shall deliver copies of all notices
given or received by such Borrower or Holdings or any of their Subsidiaries
with respect to any such event or condition and a certificate of Borrower
Representative’s chief financial officer specifying the nature and period of
existence of such event or condition and what action Holdings Borrowers or any of their Subsidiaries has taken, is
taking and proposes to take with respect thereto:  (1) any condition or event that
constitutes, or which could reasonably be expected to result in the occurrence
of, an Event of Default or Default; (2) any notice that any Person has
given to any Borrower or any of their Subsidiaries or any other action taken
with respect to a claimed default or event or condition of the type referred to
in Section 7.1(b); or (3) any event or condition that could
reasonably be expected to result in any Material Adverse Effect.

 

57

 

(k)           Litigation.  Promptly upon any officer of any Credit Party
obtaining knowledge of (1) the institution of any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation, tax audit or
arbitration now pending or, to the best knowledge of such Credit Party after
due inquiry, threatened against or affecting any Credit Party or any of its
Subsidiaries or any property of any Credit Party or any of its Subsidiaries (“Litigation”)
not previously disclosed by Borrower Representative to Agent or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting any Credit Party or any
property of any Credit Party which, in each case, could reasonably be expected
to have a Material Adverse Effect, Borrower Representative will promptly give
notice thereof to Agent and provide such other information as may be reasonably
available to them to enable Agent and its counsel to evaluate such matter.

 

(l)            Notice
of Corporate and other Changes. 
Borrower Representative shall provide prompt written notice of (1) any
change after the Closing Date in the authorized and issued Stock of any Credit
Party (other than the issuance of Stock by Holdings to any officers, directors
or employees of any Credit Party) or any amendment to their articles or
certificate of incorporation, by-laws, partnership agreement or other
organizational documents, (2) any Subsidiary created or acquired by any
Credit Party or any of its Subsidiaries after the Closing Date, such notice, in
each case, to identify the applicable jurisdictions, capital structures or
Subsidiaries, as applicable, and (3) any other event that occurs after the
Closing Date which would cause any of the representations and warranties in Section 3
of this Agreement or in any other Loan Document to be untrue or misleading in
any material respect.  The foregoing
notice requirement shall not be construed to constitute consent by any of the
Lenders to any transaction referred to above that is not expressly permitted by
the terms of this Agreement.

 

(m)          Other
Information.  With reasonable
promptness, Borrower Representative will deliver such other information and
data with respect to any Credit Party or any Subsidiary of any Credit Party as
from time to time may be reasonably requested by Agent.

 

(n)           Compliance
and Pricing Certificate.  Together
with each delivery of Financial Statements pursuant to Section 6.2(a)
for the last month of each Fiscal Quarter and Section 6.2(b), Borrower
Representative will deliver a fully and properly completed Compliance and
Pricing Certificate (in substantially the same form as Annex F (the “Compliance
and Pricing Certificate”) signed by Borrower Representative’s chief
executive officer or chief financial officer.

 

(o)           Taxes.  Borrower Representative shall provide prompt
written notice of (i) the execution or filing with the IRS or any other
Governmental Authority of any agreement or other document extending, or having
the effect of extending, the period for assessment or collection of any Charges
by any Credit Party or any of its Subsidiaries and (ii) any agreement by any
Credit Party or any of its Subsidiaries or request directed to any Credit Party
or any of its Subsidiaries to make any adjustment under IRC Section 481(a), by
reason of a change in accounting method or otherwise, which could reasonably be
expected to have a Material Adverse Effect.

 

(p)           Subordinated
Debt, Senior Debt and Permitted Receivables Financing Notices.  To Agent, as soon as practicable, copies of
all written notices (including, without 

 

58

 

limitation, any amendments, waivers or other
modifications) given or received by any Credit Party with respect to the
Permitted Receivables Financing, the 2002 Senior Debt, the 2003 Senior Secured
Debt, the Mezzanine Debt or any Subordinated Debt of such Person, and, within
three (3) Business Days after any Credit Party obtains knowledge of any matured
or unmatured breach, default or event of default with respect to a Permitted
Receivables Financing, the 2002 Senior Debt, the 2003 Senior Secured Debt, the
Mezzanine Debt or any Subordinated Debt, notice of such breach, default or
event of default.

 

6.3.          Accounting
Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.  For purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to such terms in conformity with GAAP.  Financial statements and other information
furnished to Agent pursuant to Section 6.2 or any other section (unless
specifically indicated otherwise) shall be prepared in accordance with GAAP as
in effect at the time of such preparation; provided that no Accounting
Change shall affect financial covenants, standards or terms in this Agreement unless
approved by Borrowers, Agent and Lenders; provided  further that
Borrowers shall prepare a reconciliation to the Financial Statements required
to be delivered hereunder that show the differences between the Financial
Statements delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes).

 

SECTION 7.

DEFAULT, RIGHTS AND REMEDIES

 

7.1.          Event
of Default.  “Event of
Default” shall mean the occurrence or existence of any one or more of the
following:

 

(a)           Payment.  (1) Failure to pay any installment or
other payment of principal of any Loan when due, or to repay Revolving Loans to
reduce their balance to the maximum amount of Revolving Loans then permitted to
be outstanding or to reimburse any L/C Issuer for any payment made by such L/C
Issuer under or in respect of any Letter of Credit when due or (2) failure
to pay, within three (3) Business Days after the due date, any interest on any
Loan or any other amount due under this Agreement or any of the other Loan
Documents; or

 

(b)           Default
in Other Agreements.  (1) Any
Credit Party or any of its Subsidiaries fails to pay when due or within any
applicable grace period any principal or interest on Indebtedness (other than
the Loans) or any Contingent Obligations or (2) breach or default of any
Credit Party or any of its Subsidiaries, or the occurrence of any condition or
event, with respect to any Indebtedness (other than the Loans) or any
Contingent Obligations, in each case if the effect of such breach, default or
occurrence is to cause or to permit the holder or holders then to cause,
Indebtedness and/or Contingent Obligations having an aggregate principal amount
in excess of $5,000,000 to become or be declared due prior to their stated
maturity; or

 

(c)           Breach
of Certain Provisions.  Failure of
any Credit Party to perform or comply with any term or condition contained in
(1) the GE
Capital Fee Letter, (2) Section 6.2 which failure continues for
more than five (5) Business Days after the date specified for performance or
compliance with such term or condition, (3) that portion of Section 4.2
relating 

 

59

 

to the Credit Parties’ obligation to maintain
insurance, or (4) Section 4.3, Section 5 or Section 6.1;
or

 

(d)           Breach
of Warranty.  Any representation,
warranty, certification or other statement made by any Credit Party in any Loan
Document or in any statement or certificate at any time given by such Person in
writing pursuant or in connection with any Loan Document is false in any
material respect (without duplication of materiality qualifiers contained
therein) on the date made; or

 

(e)           Other
Defaults Under Loan Documents. Any Credit Party defaults in the performance
of or compliance with any term contained in this Agreement or the other Loan
Documents (other than occurrences described in other provisions of this Section
7.1 for which a different grace or cure period is specified, or for which
no cure period is specified and which constitute immediate Events of Default)
and such default is not remedied or waived within thirty (30) days after the
earlier of (1) receipt by Borrower Representative of notice from Agent or
Requisite Lenders of such default or (2) actual knowledge of any Borrower
or any other Credit Party of such default; or

 

(f)            Involuntary
Bankruptcy; Appointment of Receiver, Etc. 
(1) A court enters a decree or order for relief with respect to any
Credit Party in an involuntary case under the Bankruptcy Code, which decree or
order is not stayed or other similar relief is not granted under any applicable
federal or state law; or (2) the continuance of any of the following
events for sixty (60) days unless dismissed, bonded or discharged:  (a) an involuntary case is commenced
against any Credit Party, under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect; or
(b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian, administrator or other officer
having similar powers over any Credit
Party, or over all or a substantial part of its property, is entered; or
(c) a receiver, trustee or other custodian is appointed without the
consent of a Credit Party for, or an encumbrancer takes possession of, all or a
substantial part of the property of the Credit
Party; or

 

(g)           Voluntary
Bankruptcy; Appointment of Receiver, Etc. 
(1) Any Credit Party commences a voluntary case under the
Bankruptcy Code, or consents to the entry of an order for relief in an
involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law or consents to the appointment of or taking possession
by a receiver, trustee or other custodian for all or a substantial part of its
property; or (2) any Credit Party makes any assignment for the benefit of
creditors; or (3) the Board of Directors or the shareholders of any Credit
Party adopts any resolution or otherwise authorizes action in connection with
the administration, liquidation, winding-up or dissolution of such Credit Party
or to approve any of the actions referred to in this Section 7.1(g); or

 

(h)           Judgment
and Attachments.  Any money judgment,
writ or warrant of attachment, or similar process (other than those described
elsewhere in this Section 7.1) involving an amount in the aggregate at
any time in excess of $5,000,000 (to the extent not adequately covered by
insurance provided by a reputable and solvent insurance company) is entered or
filed against one or more of the Credit Parties or any of their respective
assets and remains undischarged, unvacated, unbonded or unstayed for a period
of thirty (30) days or in any event later than five (5) Business Days prior to
the date of any proposed sale thereunder; or

 

60

 

(i)            Dissolution.  Any order, judgment or decree is entered
against any Credit Party decreeing the dissolution or split up of such Credit
Party and such order remains undischarged or unstayed for a period in excess of
fifteen (15) days; or

 

(j)            Solvency.  Any Credit Party ceases to be Solvent, fails
to pay its debts as they become due or admits in writing its present or
prospective inability to pay its debts as they become due; or

 

(k)           Invalidity
of Loan Documents.  Any of the Loan
Documents for any reason, other than a partial or full release in accordance
with the terms thereof, ceases to be in full force and effect or is declared to
be null and void, or any Credit Party denies that it has any further liability
under any Loan Documents to which it is party, or gives notice to such effect;
or

 

(l)            Damage;
Casualty.  Any event occurs, whether
or not insured or insurable, as a result of which EBITDA for the immediately
preceding 12-Fiscal Month period then ended, giving pro forma effect to any
such event would be less than $160,000,000 and any such event cannot reasonably
be expected to be corrected or reversed within 45 days; or

 

(m)          Change
of Control.  A Change of Control
occurs; or

 

(n)           Subordination/
Intercreditor Provisions. The failure of any Credit Party or any creditor
of any Credit Party or any of its Subsidiaries to comply with the terms of any
subordination or intercreditor agreement or any subordination provisions of any
note or other document running to the benefit of Agent or Lenders, including,
without limitation, in connection with the Subordinated Debt, the Mezzanine
Debt, the 2002 Senior Debt or the 2003 Senior Secured Debt, or if any such
document becomes null and void or any party denies further liability under any
such document or provides notice to that effect.

 

7.2.          Suspension
or Termination of Commitments.  Upon the occurrence of any Default or Event
of Default, Agent may, and at the request of Requisite Lenders Agent shall,
without notice or demand, immediately suspend or terminate all or any portion
of Lenders’ obligations to make additional Advances or issue or cause to be
issued Letters of Credit under the Revolving Loan Commitment; provided
that, in the case of a Default, if the subject condition or event is waived by
Requisite Lenders or cured within any applicable grace or cure period, the
Revolving Loan Commitment shall be reinstated.

 

7.3.          Acceleration
and other Remedies.  Upon the
occurrence of any Event of Default described in Sections 7.1(f) or 7.1(g),
the Commitments shall be immediately terminated and all of the Obligations,
including the Revolving Loans, shall automatically become immediately due and
payable, without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other requirements of any kind, all of which are
hereby expressly waived (including for purposes of Section 10) by
Borrowers, and the Commitments shall thereupon terminate.  Upon the occurrence and during the
continuance of any other Event of Default, Agent may, and at the request of the
Requisite Lenders, Agent shall, by written notice to Borrower Representative
(a) reduce the aggregate amount of the Commitments from time to time, (b)
declare all or any portion of the Loans and all or any portion of the other
Obligations to be, and the same shall forthwith become, immediately due and
payable together with accrued interest 

 

61

 

thereon, (c) terminate all or any portion of the
obligations of Agent, L/C Issuers and Lenders to make Revolving Credit
Advances, Alternative Currency Revolving Credit Advances and issue Letters of
Credit, (d) demand that Borrowers immediately deliver cash to Agent for
the benefit of L/C Issuers (and Borrower shall then immediately so deliver) in
an amount equal to 105% of the aggregate outstanding Letter of Credit
Obligations and (e) exercise any other remedies which may be available
under the Loan Documents or applicable law. 
Borrowers hereby grant to Agent, for the benefit of L/C Issuers and each
Lender with a participation in any Letters of Credit then outstanding, a
security interest in such cash collateral to secure all of the Letter of Credit
Obligations.  Any such cash collateral
shall be made available by Agent to L/C Issuers to reimburse L/C Issuers for
payments of drafts drawn under such Letters of Credit and any Fees, Charges and
expenses of L/C Issuers with respect to such Letters of Credit and the unused
portion thereof, after all such Letters of Credit shall have expired or been
fully drawn upon, shall be applied to pay any other Obligations.  After all such Letters of Credit shall have
expired or been fully drawn upon and the Termination Date shall have occurred,
the balance, if any, of such cash collateral shall be (subject to any rights of
third parties and except as otherwise directed by a court of competent
jurisdiction) returned to Borrowers. 
Borrowers shall from time to time execute and deliver to Agent such
further documents and instruments as Agent may request with respect to such
cash collateral.

 

7.4.          Performance
by Agent.  If any Credit Party
shall fail to perform any covenant, duty or agreement contained in any of the
Loan Documents, Agent may perform or attempt to perform such covenant, duty or
agreement on behalf of such Credit Party after the expiration of any cure or
grace periods set forth herein.  In such
event, such Credit Party shall, at the request of Agent, promptly pay any
amount reasonably expended by Agent in such performance or attempted performance
to Agent, together with interest thereon at the highest rate of interest in
effect upon the occurrence of an Event of Default as specified in Section
1.2(d) from the date of such expenditure until paid.  Notwithstanding the foregoing, it is
expressly agreed that Agent shall not have any liability or responsibility for
the performance of any obligation of any Credit Party under this Agreement or
any other Loan Document.

 

7.5.          Application
of Proceeds.  Notwithstanding
anything to the contrary contained in this Agreement, upon the occurrence and
during the continuance of an Event of Default, Borrowers irrevocably waive the
right to direct the application of any and all payments at any time or times
thereafter received by Agent from or on behalf of Borrowers, and Agent shall
have the continuing and exclusive right to apply and to reapply any and all
payments received at any time or times after the occurrence and during the
continuance of an Event of Default. 
Notwithstanding anything to the contrary contained in this Agreement
(including, without limitation, Section 1.1 and Section 1.5
hereof), all payments (including the proceeds of any Asset Disposition or other
sale of, or other realization upon, all or any part of the Collateral) received
after acceleration of the Obligations shall be applied as follows: first,
to all costs and expenses incurred by or owing to Agent and any Lender with
respect to this Agreement, the other Loan Documents or the Collateral; second,
to accrued and unpaid interest and Fees with respect to the Obligations
(including any interest which but for the provisions of the Bankruptcy Code,
would have accrued on such amounts); third, to the principal amount of
the Obligations outstanding (other than Obligations owed to any Lender under an
Interest Rate Agreement) and to cash collateralize outstanding Letters of
Credit (pro rata among all such Obligations (based upon the principal amount
thereof or the outstanding face amount of such Letters of Credit, as
applicable); 

 

62

 

and fourth to any other obligations of
Borrowers owing to Agent or any Lender under the Loan Documents or any Interest
Rate Agreement.  Any balance remaining
shall be delivered to Borrowers or to whomever may be lawfully entitled to
receive such balance or as a court of competent jurisdiction may direct.

 

SECTION 8.

ASSIGNMENT AND PARTICIPATION

 

8.1.          Assignment
and Participations.

 

(a)           Subject to
the terms of this Section 8.1, any Lender may make an assignment to a
Qualified Assignee of, or sale of participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any
portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder.  Any assignment by a Lender shall:  (i) require the consent of Agent (which
consent shall not be unreasonably withheld, conditioned or delayed with respect
to a Qualified Assignee) and the execution of an assignment agreement (an “Assignment
Agreement” substantially in the form attached hereto as Exhibit 8.1
and otherwise in form and substance reasonably satisfactory to, and
acknowledged by, Agent); (ii) be conditioned on such assignee Lender
representing to the assigning Lender and Agent that it is purchasing the
applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (iii) except with
respect to any assignment by a Lender to an Affiliate of such Lender, after
giving effect to any such partial assignment, the assignee Lender shall have
Commitments in an amount at least equal to $5,000,000 and the assigning Lender
shall have retained Commitments in an amount at least equal to $5,000,000; (iv)
require a payment to Agent of an assignment fee of $3,500, (v) with respect to
any partial assignment, be made as an assignment of a proportionate part of all
the assigning Lender’s rights and Obligations under this Agreement with respect
to the Loan or Commitment assigned (i.e., pro rata with respect to the Domestic
Revolving Loans and the Alternative Currency Revolving Advances) and (vi) so long as no Event of Default has
occurred and is continuing, require the consent of Borrower Representative,
which shall not be unreasonably withheld or delayed.  Notwithstanding the above, Agent may in its
sole and absolute discretion permit any assignment by a Lender to a Person or
Persons that are not Qualified Assignees, subject to Borrower Representative’s
consent rights as set forth above.  In
the case of an assignment by a Lender that has become effective under this Section
8.1, (i) the assignee shall have, to the extent of such assignment,
the same rights, benefits and obligations as all other Lenders hereunder and
(ii) the assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitments or assigned portion thereof and the Loans,
Letter of Credit Obligations and other interests assigned by it from and after
the effective date of such assignment. 
Borrowers hereby acknowledge and agree that any assignment shall give
rise to a direct obligation of Borrowers to the assignee and that the assignee
shall be considered to be a “Lender.”  In
all instances, each Lender’s liability to make Loans hereunder shall be several
and not joint and shall be limited to such Lender’s Pro Rata Share of the
applicable Commitment.  In the event
Agent or any Lender assigns or otherwise transfers all or any part of the
Obligations, Agent or any such Lender shall so notify Borrowers and Borrowers
shall, upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. 
Notwithstanding the foregoing provisions of this Section 8.1(a),
(a) any Lender may at any time pledge the Obligations held by it and such
Lender’s rights under this Agreement and the other 

 

63

 

Loan Documents to a Federal Reserve Bank, (b) any
Lender that is an investment fund may assign the Obligations held by it and
such Lender’s rights under this Agreement and the other Loan Documents to
another investment fund managed by the same investment advisor or pledge such
Obligations and rights to a trustee for the benefit of its investors and (c)
any Lender may assign the Obligations to an Affiliate of such Lender or to a
Person that is a Lender prior to the date of such assignment.

 

(b)           (i)  Any participation by a Lender of all or any
part of its Commitments shall be made with the understanding that all amounts
payable by Borrowers hereunder shall be determined as if that Lender had not
sold such participation, and that the holder of any such participation shall
not be entitled to require such Lender to take or omit to take any action
hereunder except actions directly affecting (x) any reduction in the principal
amount of, or interest rate or Fees payable with respect to, any Loan in which
such holder participates, (y) any extension of the scheduled amortization of
the principal amount of any Loan in which such holder participates or the final
maturity date thereof, and (z) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this Agreement, the
Collateral Documents or the other Loan Documents).  Solely for purposes of Sections 1.8, 1.9,
8.3 and 9.1, Borrowers acknowledge and agree that a participation
shall give rise to a direct obligation of Borrowers to the participant and the
participant shall be considered to be a “Lender.”  Except as set forth in the preceding sentence
no Borrower or any other Credit Party shall have any obligation or duty to any
participant.  Neither Agent nor any
Lender (other than the Lender selling a participation) shall have any duty to
any participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.

 

(ii)  A Lender may not grant a participation to a
Person who is (x) not a “United States person” (within the meaning of IRC
Section 7701(a)(30) unless such Person is exempt from United States withholding
tax as of the date of such participation and provides a Form W-8BEN, W-8ECI or
W-8IMY, or (y) not a Qualifying Lender.

 

(iii)  Where a Lender proposes to grant a
participation to a Person who is a Qualifying Lender (x) that Person must
provide evidence of its status as a Qualifying Lender to the reasonable
satisfaction of the Lender and the Agent and (y) where the Qualifying Lender is
a Treaty Lender, agree to be bound by the provisions of Section 1.9(g).

 

(c)           Except as
expressly provided in this Section 8.1, no Lender shall, as between
Borrowers and that Lender, or Agent and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.

 

(d)           Each
Credit Party shall assist each Lender permitted to sell assignments or
participations under this Section 8.1 as required to enable the
assigning or selling Lender to effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested and the prompt preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants, all on a timetable reasonably
established by Agent in its sole discretion. 
Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit
Parties and their respective affairs

 

64

 

contained in any selling materials provided by it and
all other information provided by it and included in such materials, except
that any Projections delivered by Borrowers shall only be certified by
Borrowers as having been prepared by Borrowers in compliance with the
representations contained in Section 3.5.  Agent shall maintain, on behalf of Borrowers,
in its offices located at New York, New York a “register” for recording the name,
address, commitment and Loans owing to each Lender.  The entries in such register shall be
conclusive evidence of the amounts due and owing to each Lender in the absence
of manifest error.  Borrowers, Agent and
each Lender may treat each Person whose name is recorded in such register
pursuant to the terms hereof as a Lender for all purposes of this
Agreement.  The register described herein
shall be available for inspection by Borrower and any Lender, at any reasonable
time upon reasonable prior notice.

 

(e)           A Lender
may furnish any information concerning Credit Parties in the possession of such
Lender from time to time to assignees and participants (including prospective
assignees and participants); provided that such Lender shall obtain from
assignees or participants confidentiality covenants substantially equivalent to
those contained in Section 9.13.

 

8.2.          Agent.

 

(a)           Appointment.  Each Lender hereby designates and appoints GE
Capital as its Agent under this Agreement and the other Loan Documents, and
each Lender hereby irrevocably authorizes Agent to execute and deliver the
Collateral Documents and to take such action or to refrain from taking such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto.  Agent is authorized and empowered to amend,
modify, or waive any provisions of this Agreement or the other Loan Documents
on behalf of Lenders subject to the requirement that certain of Lenders’
consent be obtained in certain instances as provided in this Section 8.2
and Section 9.2.  The provisions
of this Section 8.2 are solely for the benefit of Agent and Lenders and
neither Borrowers nor any other Credit Party shall have any rights as a third
party beneficiary of any of the provisions hereof.  In performing its functions and duties under
this Agreement, Agent shall act solely as agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for Borrowers or any other Credit Party.  Agent may perform any of its duties
hereunder, or under the Loan Documents, by or through its agents or employees.

 

(b)           Nature
of Duties.  The duties of Agent shall
be mechanical and administrative in nature. 
Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. 
Nothing in this Agreement or any of the Loan Documents, express or
implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. 
Each Lender shall make its own independent investigation of the financial
condition and affairs of each Credit Party in connection with the extension of
credit hereunder and shall make its own appraisal of the creditworthiness of
each Credit Party, and Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto (other than as expressly required
herein).  If Agent seeks the consent or
approval of any Lenders to the taking or refraining from taking any action 

 

65

 

hereunder, then Agent shall send notice thereof to
each Lender.  Agent shall promptly notify
each Lender any time that the Requisite Lenders or Supermajority Lenders have
instructed Agent to act or refrain from acting pursuant hereto.

 

(c)           Rights, Exculpation, Etc.  Neither
Agent nor any of its officers, directors, employees or agents shall be liable
to any Lender for any action taken or omitted by them hereunder or under any of
the Loan Documents, or in connection herewith or therewith, except that Agent
shall be liable to the extent of its own gross negligence or willful misconduct
as determined by a final non-appealable order by a court of competent
jurisdiction.  Agent shall not be liable
for any apportionment or distribution of payments made by it in good faith and
if any such apportionment or distribution is subsequently determined to have
been made in error the sole recourse of any Lender to whom payment was due but
not made, shall be to recover from other Lenders any payment in excess of the
amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them).  In no event shall Agent be liable
for punitive, special, consequential, incidental, exemplary or other similar
damages. In performing its functions and duties hereunder, Agent shall exercise
the same care which it would in dealing with loans for its own account, but
neither Agent nor any of its agents or representatives shall be responsible to
any Lender for any recitals, statements, representations or warranties herein
or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the Loan Documents
or the transactions contemplated thereby, or for the financial condition of any
Credit Party.  Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any of the Loan
Documents or the financial condition of any Credit Party, or the existence or
possible existence of any Default or Event of Default.  Agent may at any time request instructions
from Requisite Lenders, Supermajority Lenders or all affected Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Loan Documents Agent is permitted or required to take or to
grant.  If such instructions are promptly
requested, Agent shall be absolutely entitled to refrain from taking any action
or to withhold any approval and shall not be under any liability whatsoever to
any Person for refraining from any action or withholding any approval under any
of the Loan Documents until it shall have received such instructions from the
Requisite Lenders, Supermajority Lenders or such other portion of the Lenders
as shall be prescribed by this Agreement. 
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders, Supermajority Lenders or all affected
Lenders, as applicable; and, notwithstanding the instructions of Requisite Lenders,
Supermajority Lenders or all affected Lenders, as applicable, Agent shall have
no obligation to take any action if it believes, in good faith, that such
action is deemed to be illegal by Agent or exposes Agent to any liability for
which it has not received satisfactory indemnification in accordance with Section
8.2(e).

 

(d)           Reliance.  Agent shall be entitled to rely, and shall be
fully protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, fax or telegram) believed by it in
good faith to be genuine and correct and to have been signed, sent or made by
the proper Person, and with respect to all matters pertaining to this Agreement
or any of the Loan Documents and its duties hereunder or thereunder.  Agent shall be entitled to rely upon the 

 

66

 

advice of legal counsel, independent accountants, and
other experts selected by Agent in its sole discretion.

 

(e)           Indemnification.  Lenders will reimburse and indemnify Agent
for and against, without duplication, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, attorneys’ fees and expenses), advances or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against Agent in its capacity as such in any way
relating to or arising out of this Agreement or any of the Loan Documents or
any action taken or omitted by Agent in its capacity as such in under this
Agreement or any of the Loan Documents, in proportion to each Lender’s Pro Rata
Share, but only to the extent that any of the foregoing is not reimbursed by
Borrowers; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements to the
extent resulting from Agent’s gross negligence or willful misconduct as
determined by a final non-appealable order by a court of competent
jurisdiction.  If any indemnity furnished
to Agent for any purpose shall, in the opinion of Agent, be insufficient or
become impaired, Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against even if so directed by the
Requisite Lenders, Supermajority Lenders or such other portion of the Lenders
as shall be prescribed by this Agreement until such additional indemnity is
furnished.  The obligations of Lenders
under this Section 8.2(e) shall survive the payment in full of the
Obligations and the termination of this Agreement.

 

(f)            GE
Capital (or any successor Agent) Individually.  With respect to its Commitments hereunder, GE
Capital (or any successor Agent) shall have and may exercise the same rights
and powers hereunder and is subject to the same obligations and liabilities as
and to the extent set forth herein for any other Lender.  The terms “Lenders,” “Requisite Lenders”,
“Supermajority Lenders” or any similar terms shall, unless the context clearly
otherwise indicates, include GE Capital (or any successor Agent) in its
individual capacity as a Lender or one of the Requisite Lenders or
Supermajority Lenders.  GE Capital (or
any successor Agent), either directly or through strategic affiliations, may
lend money to, acquire equity or other ownership interests in, provide advisory
services to and generally engage in any kind of banking, trust or other
business with any Credit Party as if it were not acting as Agent pursuant
hereto and without any duty to account therefor to Lenders.  GE Capital (or any successor Agent), either
directly or through strategic affiliations, may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

 

(g)           Successor
Agent.

 

(i)            Resignation.  Agent may
resign from the performance of all its agency functions and duties hereunder at
any time by giving at least thirty (30) Business Days’ prior written notice to
Borrower Representative and Lenders. 
Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to clause (ii) below or as otherwise provided in
clause (ii) below.

 

(ii)           Appointment of Successor. 
Upon any such notice of resignation pursuant to clause (i) above,
Requisite Lenders shall appoint a successor Agent which, unless an 

 

67

 

Event of Default has occurred and is
continuing, shall be reasonably acceptable to Borrowers.  If a successor Agent shall not have been so
appointed within the thirty (30) Business Day period referred to in clause (i)
above, the retiring Agent, upon notice to Borrower Representative, shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
Requisite Lenders appoint a successor Agent as provided above.

 

(iii)          Successor Agent.  Upon the
acceptance of any appointment as Agent under the Loan Documents by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under the
Loan Documents.  After any retiring
Agent’s resignation as Agent, the provisions of this Section 8.2 shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it in its capacity as Agent.

 

(h)           Collateral
Matters.

 

(i)            Release of Collateral. 
Lenders hereby irrevocably authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral
(x) on the Termination Date, (y) constituting property being sold or
disposed of if Borrowers (or any of them) certify to Agent that the sale or
disposition is made in compliance with the provisions of this Agreement (and
Agent may rely in good faith conclusively on any such certificate, without
further inquiry) or (z) in accordance with the provisions of the next
sentence.  In addition, with the consent
of Supermajority Lenders, during any Fiscal Year Agent may release any Lien
granted to or held by Agent upon any Collateral having a book value not greater
than ten percent (10%) of the total book value of all Collateral as of the
first day of such Fiscal Year.

 

(ii)           Confirmation of Authority; Execution of Releases. 
Without in any manner limiting Agent’s authority to act without any
specific or further authorization or consent by Lenders (as set forth in Section
8.2(h)(i)), each Lender agrees to confirm in writing, upon request by Agent
or Borrower Representative, the authority to release any Collateral conferred
upon Agent under clauses (x) and (y) of Section 8.2(h)(i).  Upon receipt by Agent of any required
confirmation from the Requisite Lenders of its authority to release any
particular item or types of Collateral, and upon at least ten (10) Business
Days’ prior written request by Borrower Representative, Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to Agent upon such
Collateral; provided, however, that (x) Agent shall not be
required to execute any such document on terms which, in Agent’s opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Liens without recourse or warranty, and
(y) such release shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of any Credit Party, in respect of), all
interests retained by any Credit Party, including the proceeds of any sale, all
of which shall continue to constitute part of the Collateral.

 

(iii)          Absence of Duty.  Agent shall
have no obligation whatsoever to any Lender or any other Person to assure that
the property covered by the Collateral Documents exists or is owned by
Borrowers or any other Credit Party or is cared for, protected or insured or
has been encumbered or that the Liens granted to Agent have been properly or
sufficiently or 

 

68

 

lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Section 8.2(h)
or in any of the Loan Documents, it being understood and agreed that in respect
of the property covered by the Collateral Documents or any act, omission or
event related thereto, Agent may act in any manner it may deem appropriate, in
its discretion, given Agent’s own interest in property covered by the
Collateral Documents as one of the Lenders and that Agent shall have no duty or
liability whatsoever to any of the other Lenders, provided that Agent
shall exercise the same care which it would in dealing with loans for its own
account.

 

(i)            Agency
for Perfection.  Agent and each
Lender hereby appoint each other Lender as agent for the purpose of perfecting
Agent’s security interest in assets which, in accordance with the Code in any
applicable jurisdiction, can be perfected by possession or control.  Should any Lender (other than Agent) obtain
possession or control of any such assets, such Lender shall notify Agent
thereof, and, promptly upon Agent’s request therefor, shall deliver such assets
to Agent or in accordance with Agent’s instructions or transfer control to
Agent in accordance with Agent’s instructions. 
Each Lender agrees that it will not have any right individually to
enforce or seek to enforce any Collateral Document or to realize upon any
collateral security for the Loans unless instructed to do so by Agent in
writing, it being understood and agreed that such rights and remedies may be
exercised only by Agent.

 

(j)            Notice
of Default.  Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default except with respect to defaults in the payment of principal, interest
and Fees required to be paid to Agent for the account of Lenders, unless Agent
shall have received written notice from a Lender or Borrower Representative
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”.  Agent will use reasonable efforts to notify
each Lender of its receipt of any such notice, unless such notice is with
respect to defaults in the payment of principal, interest and fees, in which
case Agent will notify each Lender of its receipt of such notice.  Agent shall take such action with respect to
such Default or Event of Default as may be requested by Requisite Lenders in
accordance with Section 7.  Unless
and until Agent has received any such request, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in
the best interests of Lenders.

 

(k)           Lender
Actions Against Collateral.  Each
Lender agrees that it will not take any enforcement action, nor institute any
actions or proceedings, with respect to the Loans, against any Borrower or any
Credit Party hereunder or under the other Loan Documents or against any Collateral
(including the exercise of any right of set-off) without the consent of the
Agent or Requisite Lenders.  All such
enforcement actions and proceedings shall be (i) taken in concert and (ii) at
the direction of or with the consent of Agent or Requisite Lenders.  Agent is authorized to issue all notices to
be issued by or on behalf of Lenders with respect to any Subordinated Debt, the
2002 Senior Debt, the 2003 Senior Secured Debt or the Mezzanine Debt.  With respect to any action by Agent to
enforce the rights and remedies of Agent and the Lenders under this Agreement
and the other Loan Documents, each Lender hereby consents to the jurisdiction
of the court in which such action is maintained, and agrees to deliver its
Notes to

 

69

 

Agent to the extent necessary to enforce the rights
and remedies of Agent for the benefit of the Lenders under the Mortgages in
accordance with the provisions hereof.

 

(l)            Agent
Reports.  Each Lender may from time
to time receive one or more reports or other information (each, a “Report”)
prepared by or on behalf of Agent (or one or more of Agent’s Affiliates).  With respect to each Report, each Lender
hereby agrees that:

 

(i)            Agent (and Agent’s Affiliates) shall have no duties or
obligations in connection with or as a result of a Lender receiving a copy of a
Report, which will be provided solely as a courtesy, without
consideration.  Each Lender will perform
its own diligence and will make its own independent investigation of the
operations, financial conditions and affairs of the Credit Parties and will not
rely on any Report or make any claim that it has done so.  In addition, each Lender releases, and agrees
that it will not assert, any claim against Agent (or one or more of Agent’s
Affiliates) that in any way relates to any Report or arises out of a Lender
having access to any Report or any discussion of its contents, and each Lender
agrees to indemnify and hold harmless Agent (and Agent’s Affiliates) and their
respective officers, directors, employees, agents and attorneys from all
claims, liabilities and expenses relating to a breach by a Lender or any of its
personnel of this Section or otherwise arising out of a Lender’s access to any
Report or any discussion of its contents;

 

(ii)           Each Report may not be complete and certain
information and findings obtained by Agent (or one or more of Agent’s
Affiliates) regarding the operations and condition of the Credit Parties may
not be reflected in each Report.  Agent
(and Agent’s Affiliates) makes no representations or warranties of any kind
with respect to (i) any existing or proposed financing; (ii) the accuracy or
completeness of the information contained in any Report or in any other related
documentation; (iii) the scope or adequacy of Agent’s (and Agent’s Affiliates’)
due diligence, or the presence or absence of any errors or omissions contained
in any Report or in any other related documentation; and (iv) any work
performed by Agent (or one or more of Agent’s Affiliates) in connection with or
using any Report or any related documentation; and

 

(iii)          Each Lender agrees to safeguard each Report and any
related documentation with the same care which it uses with respect to
information of its own which it does not desire to disseminate or publish, and
agrees not to reproduce or distribute or provide copies of or disclose any
Report or any other related documentation or any related discussions to anyone.

 

8.3.          Set
Off and Sharing of Payments.  Subject
to Section 8.2(k), in addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, during
the continuance of any Event of Default, each Lender is hereby authorized by
Borrowers at any time or from time to time, with reasonably prompt subsequent
notice to Borrower Representative (any prior or contemporaneous notice being
hereby expressly waived) to set off and to appropriate and to apply any and all
(A) balances held by such Lender at any of its offices for the account of
any Borrower or any of its Subsidiaries (regardless of whether such balances
are then due to any Borrower or its Subsidiaries), and (B) other property
at any time held or owing by such Lender to or for the credit or for the
account of any Borrower or any of its Subsidiaries, against and on account of
any of the Obligations; except that no Lender shall

 

70

 

exercise any such right without the prior written
consent of Agent.  Notwithstanding
anything herein to the contrary, the failure to give notice of any set off and
application made by such Lender to Borrower Representative shall not affect the
validity of such set off and application. 
Any Lender exercising a right to set off shall purchase for cash (and
the other Lenders shall sell) interests in each of such other Lender’s Pro Rata
Share of the Obligations as would be necessary to cause all Lenders to share
the amount so set off with each other Lender entitled to share in the amount so
set off in accordance with their respective Pro Rata Shares.  Borrowers agree, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the Obligations and upon
doing so shall deliver such amount so set off to the Agent for the benefit of
all Lenders entitled to share in the amount so set off in accordance with their
Pro Rata Shares.

 

8.4.          Disbursement
of Funds.  Agent may, on behalf of
Lenders, disburse funds to Borrowers for Loans requested.  Each Lender shall reimburse Agent on demand
for all funds disbursed on its behalf by Agent, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Loan before Agent
disburses same to Borrowers.  If Agent
elects to require that each Lender make funds available to Agent prior to a
disbursement by Agent to Borrowers, Agent shall advise each Lender by telephone
or fax of the amount of such Lender’s Pro Rata Share of the Loan requested by
Borrower Representative no later than 1:00 p.m. (New York time) on the Funding Date applicable thereto,
and each such Lender shall pay Agent such Lender’s Pro Rata Share of such
requested Loan, in same day funds, by wire transfer to Agent’s account on such
Funding Date.  If any Lender fails to pay
the amount of its Pro Rata Share within one (1) Business Day after Agent’s
demand, Agent shall promptly notify Borrower Representative, and Borrowers
shall immediately repay such amount to Agent. 
Any repayment required pursuant to this Section 8.4 shall be
without premium or penalty.  Nothing in
this Section 8.4 or elsewhere in this Agreement or the other Loan
Documents, including the provisions of Section 8.5, shall be deemed to
require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its commitments hereunder or to prejudice any
rights that Agent or Borrowers may have against any Lender as a result of any
default by such Lender hereunder.

 

8.5.          Disbursements
of Advances; Payment.

 

(a)           Advances;
Payments.

 

(i)            Revolving Lenders shall refund or participate in (A)
the Swing Line Loan in accordance with clauses (iii) and (iv) of Section
1.1(b) and (B) the Alternative Currency Swing Line Loan in accordance with
clauses (iii) and (iv) of Section 1.1(e).  If the Swing Line Lender declines to make a
Swing Line Advance or if Swing Line Availability is zero, Agent shall notify
Revolving Lenders, promptly after receipt of a Notice of Revolving Credit
Advance and in any event prior to 2:00 p.m. (New York time) on the date such
Notice of a Revolving Credit Advance is received, by fax, telephone or other
similar form of transmission.  Each
Revolving Lender shall make the amount of such Lender’s Pro Rata Share of such
Revolving Credit Advance available to Agent in same day funds by wire transfer
to Agent’s account as set forth in Section 1.1(f) not later than 4:00
p.m. (New York time) on the requested Funding Date in the case of an Index Rate
Loans and not later than 12:00 noon (New York time) on the requested Funding
Date in the case of a LIBOR Loan.  After
receipt of such wire transfers

 

71

 

(or, in the Agent’s sole discretion,
before receipt of such wire transfers), subject to the terms hereof, Agent
shall make the requested Revolving Credit Advance to a Borrower as designated
by Borrower Representative in the Notice of Revolving Credit Advance.  All payments by each Revolving Lender shall
be made without setoff, counterclaim or deduction of any kind.  If the Alternative Currency Swing Line Lender
declines to make a Alternative Currency Swing Line Advance or if Alternative
Currency Swing Line Availability is zero, Agent shall notify Revolving Lenders,
promptly after receipt of a Notice of Alternative Currency Advance and in any
event prior to 2:00 p.m. (New York time) on the date such Notice of Alternative
Currency Advance is received, by fax, telephone or other similar form of
transmission.  Each Revolving Lender
shall make the amount of such Lender’s Pro Rata Share of such Alternative
Currency Revolving Credit Advance available to Agent in same day funds by wire
transfer to Agent’s account as set forth in Section 1.1(f) not later
than 4:00 p.m. (New York time) on the requested Funding Date in the case of an
Index Rate Loans and not later than 12:00 noon (New York time) on the requested
Funding Date in the case of a LIBOR Loan. 
After receipt of such wire transfers (or, in the Agent’s sole
discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Alternative Currency Revolving Credit
Advance to a European Borrower as designated by Borrower Representative in the
Notice of Alternative Currency Advance. 
All payments by each Revolving Lender shall be made without setoff,
counterclaim or deduction of any kind.

 

(ii)           At least once each calendar week or more frequently at
Agent’s election (each, a “Settlement Date”), Agent shall advise each
Lender by telephone or fax of the amount of such Lender’s Pro Rata Share of
principal, interest and Fees paid for the benefit of Lenders with respect to
each applicable Loan.  Provided that each
Lender has funded all payments and Advances required to be made by it and
funded all purchases of participations required to be funded by it under this
Agreement and the other Loan Documents as of such Settlement Date, Agent shall
pay to each Lender such Lender’s Pro Rata Share of principal, interest and Fees
paid by Borrowers since the previous Settlement Date for the benefit of such
Lender on the Loans held by it. Such payments shall be made by wire transfer to
such Lender’s account (as specified by such Lender in Annex E or the
applicable Assignment Agreement) not later than 2:00 p.m. (New York time) on the next Business Day following each Settlement Date. To
the extent that any Lender (a “Non-Funding Lender”) has failed to fund
all such payments and Advances or failed to fund the purchase of all such
participations required to be funded by such Lender pursuant to this Agreement,
Agent shall be entitled to set off the funding shortfall against that
Non-Funding Lender’s Pro Rata Share of all payments received from
Borrowers.

 

(b)           Availability
of Lender’s Pro Rata Share.  Agent
may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance or Alternative Currency Revolving Credit Advance
available to Agent on each Funding Date. 
If such Pro Rata Share is not, in fact, paid to Agent by such Revolving
Lender when due, Agent will be entitled to recover such amount on demand from
such Revolving Lender without setoff, counterclaim or deduction of any
kind.  If any Revolving Lender fails to
pay the amount of its Pro Rata Share forthwith upon Agent’s demand, Agent shall
promptly notify Borrower Representative and Borrowers shall immediately repay
such amount to Agent.  Nothing in this Section
8.5(b) or elsewhere in this Agreement or the other Loan Documents shall be
deemed to require Agent to advance funds on behalf of any Revolving Lender or
to relieve any Revolving Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Borrowers may

 

72

 

have against any Revolving Lender as a result of any
default by such Revolving Lender hereunder. 
To the extent that Agent advances funds to Borrowers on behalf of any
Revolving Lender and is not reimbursed therefor on the same Business Day as
such Advance is made, Agent shall be entitled to retain for its account all
interest accrued on such Advance until reimbursed by the applicable Revolving
Lender.

 

(c)           Return
of Payments.

 

(i)            If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrowers and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind.

 

(ii)           If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to any Credit Party or
paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.

 

(d)           Non-Funding
Lenders.  The failure of any
Non-Funding Lender to make any Revolving Credit Advance, any Alternative
Currency Revolving Credit Advance or any payment required by it hereunder, or
to fund any purchase of any participation in any Swing Line Loan to be made or
funded by it on the date specified therefor shall not relieve any other Lender
(each such other Revolving Lender, an “Other Lender”) of its obligations
to make such Advance or fund the purchase of any such participation on such
date, but neither any Other Lender nor Agent shall be responsible for the
failure of any Non-Funding Lender to make an Advance, fund the purchase of a
participation or make any other payment required hereunder.  Notwithstanding anything set forth herein to
the contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a “Lender” or a
“Revolving Lender” or a “Supermajority Lender” (or be included in the
calculation of “Requisite Lenders” or “Supermajority Lenders” hereunder) for
any voting or consent rights under or with respect to any Loan Document.

 

SECTION 9.

MISCELLANEOUS

 

9.1.          Indemnities.  Borrowers agree, jointly and severally, to
indemnify, pay, and hold Agent, each Lender, each L/C Issuer and their
respective Affiliates, officers, directors, employees, agents, and attorneys
(the “Indemnitees”) harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs and expenses (including all reasonable fees and expenses of counsel to
such Indemnitees) of any kind or nature whatsoever that may be imposed on,
incurred by, or asserted against the Indemnitee as a result of such Indemnitees
being a party to this Agreement or the transactions consummated

 

73

 

pursuant to this Agreement or otherwise relating to
any of the Related Transactions; provided, that Borrowers shall have no
obligation to an Indemnitee hereunder with respect to liabilities to the extent
resulting from the gross negligence or willful misconduct of that Indemnitee as
determined by a court of competent jurisdiction.  If and to the extent that the foregoing
undertaking may be unenforceable for any reason, Borrowers agree to make the
maximum contribution to the payment and satisfaction thereof which is
permissible under applicable law.

 

9.2.          Amendments
and Waivers.

 

(a)           Except for
actions expressly permitted to be taken by Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, or any consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Borrowers, and by Requisite Lenders, Supermajority Lenders or all affected
Lenders, as applicable.  Except as set
forth in clause (b) below, all such amendments, modifications, terminations or
waivers requiring the consent of any Lenders shall require the written consent
of Requisite Lenders.

 

(b)           No
amendment, modification, termination or waiver shall, unless in writing and
signed by Agent and each Lender directly affected thereby:  (i) increase the principal amount, or
postpone or extend the scheduled date of expiration, of any Lender’s Commitment
(which action shall be deemed only to affect those Lenders whose Commitments
are increased or the scheduled date of expiration of whose Commitments are
postponed or extended and may be approved by Requisite Lenders, including those
Lenders whose Commitments are increased or the scheduled date of expiration of
whose Commitments are postponed or extended provided, that, in no
event shall the Commitment of any Lender be extended without the consent of such
Lender); (ii) reduce the principal of, rate of interest on (other than any
determination or waiver to charge or not charge interest at the Default Rate)
or Fees payable with respect to any Loan or Letter of Credit Obligations of any
affected Lender; (iii) extend any scheduled payment date or final maturity
date of the principal amount of any Loan of any affected Lender or postpone or
extend the scheduled date of expiration of any Letter of Credit beyond the date
set forth in clause (b) of the initial sentence of Section 1.1(c)(iv);
(iv) waive, forgive, defer, extend or postpone any payment of interest or
Fees as to any affected Lender (which action shall be deemed only to affect
those Lenders to whom such payments are made); (v) release any Guaranty
or, except as otherwise permitted in Section 5.7 or Section 8.2(h),
release Collateral (which action shall be deemed to directly affect all
Lenders); (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder (which action shall be
deemed to directly affect all Lenders); and (vii) amend or waive this Section
9.2 or the definition of the terms “Requisite Lenders” or “Supermajority
Lenders” insofar as each such definition affects the substance of this Section
9.2 or the term “Pro Rata Share” (which action shall be deemed to directly
affect all Lenders).  Furthermore, no
amendment, modification or waiver shall, unless in writing and signed by Agent
and Supermajority Lenders, amend, modify or waive Section 6.1 or Section
5.7(ix)(A)(x) hereof.  Furthermore,
no amendment, modification, termination or waiver affecting the rights or
duties of Agent or L/C Issuers under this Agreement or any other Loan Document
shall be effective unless in writing and signed by Agent or L/C Issuers, as the
case may be, in addition to Lenders required hereinabove to take such
action.  Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was

 

74

 

given.  No
amendment, modification, termination or waiver shall be required for Agent to
take additional Collateral pursuant to any Loan Document.  No amendment, modification, termination or
waiver of any provision of any Note shall be effective without the written
concurrence of the holder of that Note. 
No notice to or demand on any Credit Party in any case shall entitle
such Credit Party or any other Credit Party to any other or further notice or
demand in similar or other circumstances. 
Any amendment, modification, termination, waiver or consent effected in
accordance with this Section 9.2 shall be binding upon each holder of
the Notes at the time outstanding and each future holder of the Notes.

 

9.3.          Notices.  Any notice or other communication required
shall be in writing addressed to the respective party as set forth below and
may be personally served, telecopied, sent by overnight courier service or U.S.
mail and shall be deemed to have been given: 
(a) if delivered in person, when delivered; (b) if delivered
by fax, on the date of transmission if transmitted on a Business Day before
4:00 p.m New York Time; (c) if delivered by overnight courier, one (1) Business Day
after delivery to the courier properly addressed; or (d) if delivered by
U.S. mail, four (4) Business Days after deposit with postage prepaid and
properly addressed.

 

	
  Notices shall be addressed as follows:

  
	
   

  
	
   

  	
  If to Borrower Representative:

  	
  Vertis, Inc.

  
	
   

  	
   

  	
  250 West Pratt Street

  
	
   

  	
   

  	
  Baltimore, MD 21201

  
	
   

  	
   

  	
  ATTN: Treasurer

  
	
   

  	
   

  	
  Fax: (410) 454-0887

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Sullivan & Cromwell
  LLP

  
	
   

  	
   

  	
  125 Broadway

  
	
   

  	
   

  	
  New York, NY 10004

  
	
   

  	
   

  	
  ATTN: Robert E.
  Buckholz, Jr., Esq.

  
	
   

  	
   

  	
  Fax: (212) 558-3588

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  T.H. LEE

  
	
   

  	
   

  	
  100 Federal Street,

  
	
   

  	
   

  	
  35th Floor

  
	
   

  	
   

  	
  Boston, MA 02110

  
	
   

  	
   

  	
  ATTN:

  
	
   

  	
   

  	
  Fax:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Agent or GE
  Capital:

  	
  GENERAL ELECTRIC
  CAPITAL CORPORATION

  
	
   

  	
   

  	
  335 Madison Avenue,
  12th Floor

  
	
   

  	
   

  	
  New York, NY 10017

  
	
   

  	
   

  	
  ATTN: Vertis, Inc.,
  Account Officer

  
	
   

  	
   

  	
  Fax: (212) 983-8767

  

 

75

 

 

	
  With a copy to:

  	
  GENERAL ELECTRIC
  CAPITAL CORPORATION

  
	
   

  	
   

  	
  201 Merritt 7

  
	
   

  	
   

  	
  P.O. Box
  5201

  
	
   

  	
   

  	
  Norwalk,
  Connecticut 06851

  
	
   

  	
   

  	
  ATTN: General
  Counsel

  
	
   

  	
   

  	
  Global
  Sponsor Finance

  
	
   

  	
   

  	
  Fax: (203) 956-4216

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL ELECTRIC
  CAPITAL CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN: Corporate Counsel

  
	
   

  	
   

  	
  Global
  Sponsor Finance

  
	
   

  	
   

  	
  Fax: (312) 441-6876

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Winston & Strawn
  LLP

  
	
   

  	
   

  	
  200 Park Avenue

  
	
   

  	
   

  	
  New York, NY 10166

  
	
   

  	
   

  	
  Attn: William D.
  Brewer, Esq.

  
	
   

  	
   

  	
  Fax: (212) 294-4700

  
	
   

  	
   

  	
   

  
	
   

  	
  If to a Lender:

  	
  To the address set
  forth on the signature page hereto or in the applicable Assignment Agreement

  

 

9.4.          Failure
or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of Agent or
any Lender to exercise, nor any partial exercise of, any power, right or
privilege hereunder or under any other Loan Documents shall impair such power,
right, or privilege or be construed to be a waiver of any Default or Event of
Default.  All rights and remedies
existing hereunder or under any other Loan Document are cumulative to and not
exclusive of any rights or remedies otherwise available.

 

9.5.          Marshaling;
Payments Set Aside.  Neither Agent
nor any Lender shall be under any obligation to marshal any assets in payment
of any or all of the Obligations.  To the
extent that Borrowers make payment(s) or Agent enforces its Liens or Agent or
any Lender exercises its right of set-off, and such payment(s) or the proceeds
of such enforcement or set-off is subsequently invalidated, declared to be
fraudulent or preferential, set aside, or required to be repaid by anyone
(whether as a result of any demand, litigation, settlement or otherwise), then
to the extent of such recovery, the Obligations or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or set-off had not occurred.

 

76

 

9.6.          Severability.  The invalidity, illegality, or
unenforceability in any jurisdiction of any provision under the Loan Documents
shall not affect or impair the remaining provisions in the Loan Documents.

 

9.7.          Lenders’
Obligations Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several and not joint and no Lender shall be responsible for the obligation or
commitment of any other Lender hereunder. 
In the event that any Lender at any time should fail to make a Loan as
herein provided, the Lenders, or any of them, at their sole option, may make
the Loan that was to have been made by the Lender so failing to make such
Loan.  Nothing contained in any Loan
Document and no action taken by Agent or any Lender pursuant hereto or thereto
shall be deemed to constitute Lenders to be a partnership, an association, a
joint venture or any other kind of entity. 
The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt.

 

9.8.          Headings.  Section and subsection headings are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purposes or be given substantive effect.

 

9.9.          Applicable
Law.  THIS AGREEMENT AND EACH OF THE
OTHER LOAN DOCUMENTS WHICH DOES NOT EXPRESSLY SET FORTH APPLICABLE LAW SHALL BE
GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

9.10.        Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns except that Borrowers may not
assign their rights or obligations hereunder without the written consent of all
Lenders and any such purported assignment without such written consent shall be
void.

 

9.11.        No
Fiduciary Relationship; Limited Liability. 
No provision in the Loan Documents and no course of dealing between the
parties shall be deemed to create any fiduciary duty owing to any Credit Party
by Agent or any Lender.  Borrowers and
each other Credit Party agree that neither Agent nor any Lender shall have
liability to Borrowers or any other Credit Party (whether sounding in tort,
contract or otherwise) for losses suffered by Borrowers or any other Credit
Party in connection with, arising out of, or in any way related to the
transactions contemplated and the relationship established by the Loan Documents,
or any act, omission or event occurring in connection therewith, unless and to
the extent that it is determined that such losses resulted from the gross
negligence or willful misconduct of the party from which recovery is sought as
determined by a final non-appealable order by a court of competent
jurisdiction.  Neither Agent nor any
Lender shall have any liability with respect to, and Borrowers and each other
Credit Party hereby waive, release and agree not to sue for, any special,
indirect or consequential damages suffered by Borrowers and any other Credit
Party in connection with, arising out of, or in any way related to the Loan
Documents or the transactions contemplated thereby.

 

9.12.        Construction.  Agent, each Lender, Borrowers and each other
Credit Party acknowledge that each of them has had the benefit of legal counsel
of its own choice and has

 

77

 

been afforded an opportunity to review the Loan
Documents with its legal counsel and that the Loan Documents shall be construed
as if jointly drafted by Agent, each Lender, Borrowers and each other Credit
Party.

 

9.13.        Confidentiality.  Until the Termination Date, Agent and each
Lender agree to exercise their best efforts to keep confidential any non-public
information delivered pursuant to the Loan Documents and identified as such by
Borrowers and not to disclose such information to Persons other than to
potential assignees or participants or to any Affiliate of, or Persons employed
by or engaged, by Agent, a Lender or any of their respective Affiliates or a
Lender’s assignees or participants including attorneys, auditors, professional
consultants, rating agencies, insurance industry associations and portfolio
management services.  The confidentiality
provisions contained in this Section 9.13 shall not apply to disclosures
(i) required to be made by Agent or any Lender to any regulatory or
governmental agency or pursuant to law, rule, regulations or legal process or
(ii) consisting of general portfolio information that does not
specifically identify Borrowers.  Each
Credit Party consents to the publication by Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions contemplated
by this Agreement.  Agent or such Lender
shall provide a draft of any such tombstone or similar advertising material to
each Credit Party for review and comment prior to the publication thereof.  Agent may provide to industry trade
organizations information with respect to the Credit Facility that is necessary
and customary for inclusion in league table measurements.  The obligations of Agent and Lenders under
this Section 9.13 shall supersede and replace the obligations of Agent
and Lenders under any confidentiality agreement in respect of this financing
executed and delivered by Agent or any Lender prior to the date hereof.

 

9.14.        CONSENT
TO JURISDICTION.  BORROWERS AND
CREDIT PARTIES HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN NEW YORK COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREE THAT,
SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS.  BORROWERS AND CREDIT
PARTIES EXPRESSLY SUBMIT AND CONSENT TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWERS AND CREDIT PARTIES HEREBY WAIVE
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREE THAT ALL SUCH SERVICE OF PROCESS
MAY BE MADE UPON BORROWERS AND CREDIT PARTIES BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER REPRESENTATIVE, AT THE ADDRESS
SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS
AFTER THE SAME HAS BEEN POSTED.

 

9.15.        WAIVER
OF JURY TRIAL.  BORROWERS, CREDIT
PARTIES, AGENT AND EACH LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS. 
BORROWERS, CREDIT PARTIES, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND

 

78

 

THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  BORROWERS, CREDIT PARTIES, AGENT AND EACH
LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING
THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS.

 

9.16.        Survival
of Warranties and Certain Agreements. 
All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement, the making of the Loans, issuances
of Letters of Credit and the execution and delivery of the Notes.  Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of Borrowers set forth in Sections 1.3(f),
1.8, 1.9 and 9.1
shall survive the repayment of the Obligations and the termination of this
Agreement.

 

9.17.        Entire
Agreement.  This Agreement, the Notes
and the other Loan Documents embody the entire agreement among the parties
hereto and supersede all prior commitments, agreements, representations, and
understandings, whether oral or written, relating to the subject matter hereof
(other than the GE Capital Fee Letter), and may not be contradicted or varied
by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.  All
Exhibits, Schedules and Annexes referred to herein are incorporated in this
Agreement by reference and constitute a part of this Agreement.

 

9.18.        Counterparts;
Effectiveness.  This Agreement and
any amendments, waivers, consents or supplements may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one in the same
instrument.  This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.

 

9.19.        Replacement
of Lenders.

 

(a)           Within
fifteen (15) days after receipt by Borrower Representative of written notice
and demand from any Lender for payment pursuant to Section 1.8 or 1.9
or, as provided in Section 9.19(c), in the case of certain refusals by
any Lender to consent to certain proposed amendments, modifications,
terminations or waivers with respect to this Agreement that have been approved
by Requisite Lenders, Supermajority Lenders or all affected Lenders, as
applicable (any such Lender demanding such payment or refusing to so consent
being referred to herein as an “Affected Lender”), Borrowers may, at
their option, notify Agent and such Affected Lender of its intention to do one
of the following:

 

(i)            Borrowers may obtain, at Borrowers’ expense, a
replacement Lender (“Replacement Lender”) for such Affected Lender,
which Replacement Lender shall be reasonably satisfactory to Agent.  In the event Borrowers obtain a Replacement
Lender that will purchase all outstanding Obligations owed to such Affected
Lender and assume its Commitments hereunder within ninety (90) days following notice
of Borrowers’ intention to do so, the Affected Lender shall sell and assign all
of its rights and delegate all of its obligations under this Agreement to such
Replacement Lender in accordance with the provisions of Section 8.1,

 

79

 

provided that Borrowers have reimbursed such
Affected Lender for any administrative fee payable pursuant to Section 8.1
and, in any case where such replacement occurs as the result of a demand for
payment pursuant to Section 1.8 or 1.9, paid all amounts required
to be paid to such Affected Lender pursuant to Section 1.8 or 1.9
through the date of such sale and assignment; or

 

(ii)           Borrowers may, with Agent’s consent, prepay in full
all outstanding Obligations owed to such Affected Lender and terminate such
Affected Lender’s Pro Rata Share of the Revolving Loan Commitment, in which
case the Revolving Loan Commitment will be reduced by the amount of such Pro
Rata Share.  Borrowers shall, within
ninety (90) days following notice of their intention to do so, prepay in full
all outstanding Obligations owed to such Affected Lender (including, in any
case where such prepayment occurs as the result of a demand for payment for
increased costs, such Affected Lender’s increased costs for which it is
entitled to reimbursement under this Agreement through the date of such
prepayment), and terminate such Affected Lender’s obligations under the
Revolving Loan Commitment.

 

(b)           In the
case of a Non-Funding Lender pursuant to Section 8.5(a), at Borrower
Representative’s request, Agent or a Person acceptable to Agent shall have the
right with Agent’s consent and in Agent’s sole discretion (but shall have no
obligation) to purchase from any Non-Funding Lender, and each Non-Funding
Lender agrees that it shall, at Agent’s request, sell and assign to Agent or
such Person, all of the Loans and Commitments of that Non-Funding Lender for an
amount equal to the principal balance of all Loans held by such Non-Funding
Lender and all accrued interest and Fees with respect thereto through the date of
sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement.

 

(c)           If, in
connection with any proposed amendment, modification, waiver or termination
pursuant to Section 9.2 (a “Proposed Change”) requiring (i) the
consent of all affected Lenders, the consent of Requisite Lenders is obtained,
but the consent of other Lenders whose consent is required is not obtained (any
such Lender whose consent is not obtained being referred to as a “Non-Consenting
Lender”), or (ii) requiring the consent of Supermajority Lenders, the
consent of Requisite Lenders is obtained but the consent of Supermajority
Lenders is not obtained, then, so long as Agent is not a Non-Consenting Lender,
at Borrower Representative’s request Agent, or a Person reasonably acceptable
to Agent, shall have the right with Agent’s consent and in Agent’s sole
discretion (but shall have no obligation) to purchase from such Non-Consenting
Lenders, and such Non-Consenting Lenders agree that they shall, upon Agent’s
request, sell and assign to Agent or such Person, all of the Loans and
Commitments of such Non-Consenting Lenders for an amount equal to the principal
balance of all Loans held by the Non-Consenting Lenders and all accrued
interest and Fees and other Obligations owing with respect thereto through the
date of sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement.

 

9.20.        Delivery
of Termination Statements and Mortgage Releases.  On the Termination Date, and so long as no
suits, actions proceedings, or claims are pending or threatened against any
Indemnitee asserting any damages, losses or liabilities that are indemnified
liabilities hereunder, subject to the terms of the Loan Documents, Agent shall
deliver to Borrower Representative termination statements, mortgage releases
and other documents necessary or appropriate to evidence the termination of the
Liens securing payment of the Obligations.

 

80

 

9.21.        Subordination of
Intercompany Debt.

 

(a)           Each Credit Party hereby
agrees that any intercompany Indebtedness or other intercompany payables or
receivables, or intercompany advances directly or indirectly made by or owed to
such Credit Party by any other Credit Party (collectively, “Intercompany
Debt”), of whatever nature at any time outstanding shall be subordinate and
subject in right of payment to the prior payment in full in cash of the
Obligations.  Each Credit Party hereby
agrees that it will not, while any Event of Default is continuing, accept any
payment, including by offset, on any Intercompany Debt until the Termination
Date, in each case, except with the prior written consent of Agent.

 

(b)           In the event that any
payment on any Intercompany Debt shall be received by a Credit Party other than
as permitted by this Section 9.21 before the Termination
Date, such Credit Party shall receive such payments and hold the same in trust
for, segregate the same from its own assets and shall immediately pay over to,
the Agent for the benefit of the Agent and Lenders all such sums to the extent
necessary so that Agent and the Lenders shall have been paid in full, in cash,
all Obligations owed or which may become owing.

 

(c)           Upon any payment or
distribution of any assets of any Credit Party of any kind or character,
whether in cash, property or securities by set-off, recoupment or otherwise, to
creditors in any liquidation or other winding-up of such Credit Party or in the
event of any Proceeding, Agent and Lenders shall first be entitled to receive
payment in full in cash, in accordance with the terms of the Obligations and of
this Agreement, of all amounts payable under or in respect of such Obligations,
before any payment or distribution is made on, or in respect of, any
Intercompany Debt, in any such Proceeding, any distribution or payment, to
which Agent or any Lender would be entitled except for the provisions hereof
shall be paid by such Credit Party, or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution
directly to Agent (for the benefit of Agent and the Lenders) to the extent
necessary to pay all such Obligations in full in cash, after giving effect to
any concurrent payment or distribution to Agent and Lenders (or to Agent for
the benefit of Agent and Lenders).

 

9.22.        Judgment
Currency.

 

(i)            The Credit Parties’ obligations hereunder and under
the other Loan Documents to make payments in the respective Applicable Currency
(the “Obligation Currency”) shall not be discharged or satisfied by any tender
or recovery pursuant to any judgment expressed in or converted into any
currency other than the Obligation Currency, except to the extent that such
tender or recovery results in the effective receipt by the Agent, or the
respective Lender of the full amount of the Obligation Currency expressed to be
payable to the Agent or such Lender under this Agreement or the other Loan
Documents.  If for the purpose of
obtaining or enforcing judgment against any Credit Party in any court or in any
jurisdiction, it becomes necessary to convert into or from any currency other
than the Obligation Currency (such other currency being hereinafter referred to
as the “Judgment Currency”) an amount due in the Obligation Currency, the
conversion shall be made, at the Sterling Equivalent, or the Dollar Equivalent
thereof, as the case may be, and, in the case of other currencies, the Exchange
Rate

 

81

 

determined, in each case, as of the
day on which the judgment is given (such Business Day being hereinafter
referred to as the “Judgment Currency Conversion Date”).

 

(ii)           If there is a change in the Exchange Rate prevailing
between the Judgment Currency Conversion Date and the date of actual payment of
the amount due, the Borrowers covenant and agree to pay, or cause to be paid,
such additional amounts, if any (but in any event not a lesser amount), as may
be necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of the Obligation Currency which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial award at the
Exchange Rate prevailing on the Judgment Currency Conversion Date.

 

(iii)          For purposes of determining the Sterling Equivalent or
the Dollar Equivalent or any other Exchange Rate for this Section, such amounts
shall include any premium and costs payable in connection with the purchase of
the Obligation Currency.

 

9.23.        Provisions Regarding the
Existing Security Agreement; Collateral Agent.  Pursuant to the terms of the Existing
Security Agreement, this Credit Agreement is and shall be deemed to be the
“Credit Agreement” as defined in the Existing Security Agreement.  The Lenders hereunder,
which Lenders constitute the “Required Senior Lenders” as defined in and
pursuant to the Existing Security Agreement, hereby appoint Agent as
“Collateral Agent” as defined in and pursuant to the Existing Security
Agreement, and Agent hereby accepts such appointment as successor Collateral
Agent.  Agent and Lenders hereby agree
that any action taken by Agent that requires the consent of Required Secured
Creditors or Required Senior Lenders as each is defined in and pursuant to the
Existing Security Agreement shall require the consent of Requisite Lenders as
defined herein.

 

9.24.        Curative
Provisions.

 

(a)           Existing Security Agreement.

 

(i)            Pursuant to the terms of the Existing Security
Agreement, the existing Credit Agreement has been replaced and refinanced and
this Credit Agreement is and shall be deemed to be the “Credit Agreement” as
defined in the Existing Security Agreement.

 

(ii)           All references to Section 9.04 of the Credit Agreement
in the Existing Security Agreement shall be deemed to be a reference to Section
5.1 of the Credit Agreement.

 

(iii)          All references to Section 12 of the Credit Agreement
in the Existing Security Agreement shall be deemed to be a reference to Section
8.2 of the Credit Agreement.

 

(iv)          All references to Section 13.12 of the Credit
Agreement in the Existing Security Agreement shall be deemed to be a reference
to Section 9.2 the Credit Agreement.

 

82

 

(v)           All references to the Eighth Amendment Effective Date
of the Credit Agreement in the Existing Security Agreement shall be deemed to
be a reference to “the Closing Date (and as amended, modified or supplemented
from time to time)” of the Credit Agreement.

 

(vi)          All references to “Credit Document” in the Existing
Security Agreement shall be deemed to be a reference to any Loan Document as
defined in the Credit Agreement.

 

(vii)         All references to “Permitted Business” in the Existing
Security Agreement shall be deemed to be a reference to any business permitted
to be conducted by the Credit Parties pursuant to Section 5.9 of the Credit
Agreement.

 

(viii)        All references to “Security Document” in the Existing
Security Agreement shall be deemed to be a reference to any Collateral Document
as defined in the Credit Agreement.

 

(ix)           All references to “U.S. Pledge Agreement” in the
Existing Security Agreement shall be deemed to be a reference to any Pledge
Agreement as defined in the Credit Agreement delivered by a Domestic Credit
Party.  All references to “Pledgee” in
the Existing Security Agreement shall be deemed to be a reference to Agent as
agent pursuant to the Pledge Agreements.

 

(x)            All references to the US Subsidiaries Guaranty in the
Existing Security Agreement shall be deemed to be a reference to the Subsidiary
Guaranty as defined in the Credit Agreement.

 

(xi)           All references to the Vertis
Guaranty in the Existing Security Agreement shall be deemed to be a reference
to the guaranty of Vertis contained in Section 10 of the Credit Agreement.

 

(b)           Existing Mortgages.

 

(i)            Pursuant to the terms of the
Mortgages, the existing Credit Agreement has been replaced and refinanced and
this Credit Agreement is and shall be deemed to be the “Credit Agreement” as
defined in the Mortgages.

 

(ii)           All references to Section 4.02(f) and 3.14 of the
Credit Agreement in the Mortgages shall be deemed to be a reference to Section
7.5 of the Credit Agreement.

 

(iii)          All references to Section 8.03 of the Credit Agreement
in the Mortgages shall be deemed to be a reference to Sections 4.2 and 3.14 of
the Credit Agreement.

 

83

 

(iv)          All references to Section 8.05 of the Credit Agreement
in the Mortgages shall be deemed to be a reference to Section 4.1 of the Credit
Agreement.

 

(v)           All references to Section 9.04 of the Credit Agreement
in the Mortgages shall be deemed to be a reference to Section 5.1 of the Credit
Agreement.

 

(vi)          All references to Section 12 of the Credit Agreement
in the Mortgages shall be deemed to be a reference to Section 8.2 of the Credit
Agreement.

 

(vii)         All references to the Eighth Amendment Effective Date
of the Credit Agreement in the Mortgages shall be deemed to be a reference to
“the Closing Date (and as amended, modified or supplemented from time to time)”
of the Credit Agreement.

 

(viii)        All references to Administrative Agent in the
Mortgages shall be deemed to be a reference to the Agent as defined in the
Credit Agreement.

 

(ix)           All references to Credit Document in the Mortgages
shall be deemed to be a reference to any Loan Document as defined in the Credit
Agreement.

 

(x)            All references to the U.S.
Subsidiaries Guaranty in the Mortgages shall be deemed to be a reference to the
Subsidiary Guaranty as defined in the Credit Agreement.

 

SECTION 10.

CROSS-GUARANTY

 

10.1.        Cross-Guaranty.  Each Borrower hereby agrees that such
Borrower is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to Agent and Lenders and their respective successors
and assigns, the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Obligations owed or
hereafter owing to Agent and Lenders by each other Borrower.  Each Borrower agrees that its guaranty
obligation hereunder is a continuing guaranty of payment and performance and
not of collection, that its obligations under this Section 10 shall
not be discharged until payment and performance, in full, of the Obligations
has occurred, and that its obligations under this Section 10 shall be
absolute and unconditional, irrespective of, and unaffected by,

 

(a)           the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which any Borrower is or may become a party;

 

84

 

(b)           the
absence of any action to enforce this Agreement (including this Section 10)
or any other Loan Document or the waiver or consent by Agent and Lenders with
respect to any of the provisions thereof;

 

(c)           the
existence, value or condition of, or failure to perfect or delay in perfecting
its Lien against, any security for the Obligations or any action, or the
absence of any action, by Agent and Lenders in respect thereof (including the
release of any such security);

 

(d)           the
insolvency of any Credit Party; or

 

(e)           any other
action or circumstances that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.

 

Each
Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations guaranteed hereunder.

 

10.2.        Waivers
by Borrowers.  Each Borrower
expressly waives all rights it may have now or in the future under any statute,
or at common law, or at law or in equity, or otherwise, to compel Agent or
Lenders to marshal assets or to proceed in respect of the Obligations
guaranteed hereunder against any other Credit Party, any other party or against
any security for the payment and performance of the Obligations before
proceeding against, or as a condition to proceeding against, such
Borrower.  It is agreed among each
Borrower, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this Section 10 and such waivers, Agent
and Lenders would decline to enter into this Agreement.

 

10.3.        Benefit
of Guaranty.  Each Borrower agrees
that the provisions of this Section 10 are for the benefit of Agent and
Lenders and their respective successors, transferees, endorsees and assigns,
and nothing herein contained shall impair, as between any other Borrower and
Agent or Lenders, the obligations of such other Borrower under the Loan
Documents.

 

10.4.        Waiver
of Subrogation, Etc.. 
Notwithstanding anything to the contrary in this Agreement or in any
other Loan Document, and except as set forth in Section 10.7, each
Borrower hereby expressly and irrevocably waives any and all rights at law or
in equity to subrogation, reimbursement, 
exoneration, contribution, indemnification or set off and any and all
defenses available to a surety, guarantor or accommodation co-obligor.  Each Borrower acknowledges and agrees that
this waiver is intended to benefit Agent and Lenders and shall not limit or
otherwise affect such Borrower’s liability hereunder or the enforceability of
this Section 10, and that Agent, Lenders and their respective
successors and assigns are intended third party beneficiaries of the waivers
and agreements set forth in this Section 10.4.

 

10.5.        Election
of Remedies.  If Agent or any Lender
may, under applicable law, proceed to realize its benefits under any of the
Loan Documents giving Agent or such Lender a Lien upon any Collateral, whether
owned by any Borrower or by any other Person, either by judicial foreclosure or
by non-judicial sale or enforcement, Agent or any Lender may, at its sole
option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 10.  If, in the exercise of any of its rights and
remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency

 

85

 

judgment against any Borrower or any other Person,
whether because of any applicable laws pertaining to “election of remedies” or
the like, each Borrower hereby consents to such action by Agent or such Lender
and waives any claim based upon such action, even if such action by Agent or
such Lender shall result in a full or partial loss of any rights of subrogation
that each Borrower might otherwise have had but for such action by Agent or
such Lender.  Any election of remedies that
results in the denial or impairment of the right of Agent or any Lender to seek
a deficiency judgment against any Borrower shall not impair any other
Borrower’s obligation to pay the full amount of the Obligations.  In the event Agent or any Lender shall bid at
any foreclosure or trustee’s sale or at any private sale permitted by law or
the Loan Documents, Agent or such Lender may bid all or less than the amount of
the Obligations and the amount of such bid need not be paid by Agent or such
Lender but shall be credited against the Obligations.  The amount of the successful bid at any such
sale, whether Agent, Lender or any other party is the successful bidder, shall
be conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Section 10, notwithstanding that any present or future law or
court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which Agent or any Lender might otherwise be entitled but
for such bidding at any such sale.

 

10.6.        Limitation.  Notwithstanding any provision herein
contained to the contrary, each Borrower’s liability under this Section 10
(which liability is in any event in addition to amounts for which such Borrower
is primarily liable under Section 1) shall be limited to an amount not
to exceed as of any date of determination the greater of:

 

(a)           the net
amount of all Loans advanced to any other Borrower under this Agreement and
then re-loaned or otherwise transferred to, or for the benefit of, such
Borrower; and

 

(b)           the amount
that could be claimed by Agent and Lenders from such Borrower under this Section
10 without rendering such claim voidable or avoidable under Section 548 of
Chapter 11 of the Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute
or common law after taking into account, among other things, such Borrower’s right
of contribution and indemnification from each other Borrower under Section
10.7.

 

10.7.        Contribution
with Respect to Guaranty Obligations.

 

(a)           To the
extent that any Borrower shall make a payment under this Section 10
of all or any of the Obligations (other than Loans made to that Borrower for
which it is primarily liable) (a “Guarantor Payment”) that, taking into
account all other Guarantor Payments then previously or concurrently made by
any other Borrower, exceeds the amount that such Borrower would otherwise have
paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower’s “Allocable
Amount” (as defined below) (as determined immediately prior to such Guarantor
Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as
determined immediately prior to the making of such Guarantor Payment, then,
following the Termination Date, such Borrower shall be entitled to receive
contribution and indemnification payments from, and be reimbursed

 

86

 

by, each other Borrower for the amount of such excess,
pro rata based upon their respective Allocable Amounts in effect immediately
prior to such Guarantor Payment.

 

(b)           As of any
date of determination, the “Allocable Amount” of any Borrower shall be
equal to the maximum amount of the claim that could then be recovered from such
Borrower under this Section 10 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.

 

(c)           This Section
10.7 is intended only to define the relative rights of Borrowers and nothing
set forth in this Section 10.7 is intended to or shall impair the
obligations of Borrowers,  jointly and
severally, to pay any amounts as and when the same shall become due and payable
in accordance with the terms of this Agreement, including Section 10.1.  Nothing contained in Section 10 shall
limit the liability of any Borrower to pay the Loans made directly or
indirectly to that Borrower and accrued interest, Fees and expenses with
respect thereto for which such Borrower shall be primarily liable.

 

(d)           The
parties hereto acknowledge that the rights of contribution and indemnification
hereunder shall constitute assets of the Borrower to which such contribution
and indemnification is owing.

 

(e)           The rights
of the indemnifying Borrowers against other Credit Parties under this Section
10.7 shall be exercisable from and after the Termination Date.

 

10.8.        Liability
Cumulative.  The liability of
Borrowers under this Section 10 is in addition to and shall be
cumulative with all liabilities of each Borrower to Agent and Lenders under
this Agreement and the other Loan Documents to which such Borrower is a party
or in respect of any Obligations or obligation of the other Borrower, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

 

87

 

Witness
the due execution hereof by the respective duly authorized officers of the
undersigned as of the date first written above.

 

 

	
   

  	
  VERTIS, INC., AS A BORROWER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS LIMITED, AS A EUROPEAN

  BORROWER AND A BORROWER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS DIGITAL SERVICES
  LIMITED,

  AS A EUROPEAN BORROWER AND A

  BORROWER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

88

 

	
   

  	
  CREDIT
  PARTIES:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  XL
  VENTURES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  XL
  VENTURES (DELAWARE), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENTERON
  GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEBCRAFT,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

89

 

	
   

  	
  PRINTCO,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BIG
  FLOWER DIGITAL SERVICES

  (DELAWARE), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BIG
  FLOWER DIGITAL LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEBCRAFT
  CHEMICALS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS
  PRS LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

90

 

	
   

  	
  THE
  ADMAGIC GROUP, LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS
  DIRECT MARKETING

  SERVICES (CROYDON) LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS
  DIRECT MARKETING

  SERVICES (LEICESTER) LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS
  FULFILMENT SERVICES

  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADMAGIC
  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

91

 

	
   

  	
  VERTIS
  DIRECT RESPONSE LTD

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FUSION
  PREMEDIA GROUP LTD

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS
  HARVEY HUNTER LTD

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Stephen Tremblay

  	
   

  
	
   

  	
  Name:

  	
  Stephen Tremblay

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION,

  
	
   

  	
  as Agent, an L/C Issuer and a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Sandra Claghorn

  	
   

  
	
   

  	
   

  	
  Its Duly Authorized
  Signatory

  
						

 

92

 

	
   

  	
  BANK
  OF AMERICA, N.A., as a Lender and

  as Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Ernest Pelli

  	
   

  
	
   

  	
  Name:

  	
  Ernest Pelli

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
  Address: 335 Madison
  Avenue, 6th Floor

  
	
   

  	
  New York, NY
  10017

  
	
   

  	
  Attn: Jang Kim

  
	
   

  	
  Fax: (212)
  503-7330

  
	
   

  	
   

  
	
   

  	
  ABA No.: 011 900571

  
	
   

  	
  Account No.: 936
  9337536

  
	
   

  	
  Bank: Fleet Capital
  Corporation

  
	
   

  	
  Bank Address: 777 Main
  Street

  
	
   

  	
  Hartford, CT
  06115

  
						

 

93

 

ANNEX A

to

CREDIT
AGREEMENT

 

DEFINITIONS

 

Capitalized terms used in the Loan Documents shall
have (unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings and all references to Sections, Exhibits, Schedules or
Annexes in the following definitions shall refer to Sections, Exhibits,
Schedules or Annexes of or to the Agreement:

 

Account Debtor means any Person who
may become obligated to any Credit Party under, with respect to, or on account
of, an Account, Chattel Paper or General Intangibles (including a payment
intangible).

 

Accounting Changes means:  (a) changes in accounting principles
required by GAAP and implemented by Holdings or any of its Subsidiaries and
(b) changes in accounting principles recommended by Holdings’ certified
public accountants and implemented by Holdings or any of its Subsidiaries.

 

Accounts means all “accounts,” as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, including (a) all accounts receivable, other receivables, book
debts and other forms of obligations (other than forms of obligations evidenced
by Chattel Paper or Instruments), (including any such obligations that may be
characterized as an account or contract right under the Code), (b) all of
each Credit Party’s rights in, to and under all purchase orders or receipts for
goods or services, (c) all of each Credit Party’s rights to any goods
represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all rights to payment due
to any Credit Party for property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Credit Party or in connection with any other transaction
(whether or not yet earned by performance on the part of such Credit Party),
(e) all healthcare insurance receivables, and (f) all collateral
security of any kind, now or hereafter in existence, given by any Account
Debtor or other Person with respect to any of the foregoing.

 

Advance means any Revolving Credit
Advance, Alternative Currency Revolving Credit Advance, Alternative Currency
Swing Line Advance or Swing Line Advance, as the context may require.

 

Affected Lender has the meaning
ascribed to it in Section 9.19(a).

 

Affiliate means, with respect to any
Person, (a) each Person that, directly or indirectly, owns or controls,
whether beneficially, or as a trustee, guardian or other fiduciary, 10% or more
of the Stock having ordinary voting power in the election of directors of such

 

A-1

 

Person, (b) each
Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person’s officers, directors, joint venturers and
partners and (d) in the case of Borrowers, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of any
Borrower.  For the purposes of this
definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term “Affiliate”
shall specifically exclude Agent and each Lender.

 

Agent means GE Capital in its
capacity as Agent for Lenders or a successor agent.

 

Agreement means this Credit Agreement
(including all schedules, subschedules, annexes and exhibits hereto), as the
same may be amended, supplemented, restated or otherwise modified from time to
time.

 

Allocable Amount has the meaning
ascribed to it in Section 10.7.

 

Alternative Currency means with
respect to Alternative Currency Revolving Credit Sub-Commitments, Alternative
Currency Revolving Credit Advances, Alternative Swing Line Commitments and
Alternative Swing Line Advances, Pounds Sterling.

 

Alternative Currency Index Rate
means, for any day, , the average on that day (as determined by Agent) of the
Pounds Sterling base rates quoted by Barclays Bank PLC, Lloyds TSB Bank plc and
HSBC Bank plc and their respective successors or such other clearing banks
located in the United Kingdom as the Agent may reasonably select.  Each change in any interest rate provided for
in the Agreement based upon the Index Rate shall take effect at the time of
such change in the Index Rate.

 

Alternative Currency LIBOR Rate
means for each LIBOR Period with respect to an Alternative Currency Swing Line
Loan or an Alternative Currency Revolving Credit Advance, a rate of interest
determined by Agent equal to:

 

(a)           the
offered rate for deposits in Pounds Sterling for the applicable LIBOR Period
per the British Bankers LIBOR Rates that appears on Telerate Page 3750 as of
11:00 a.m. (London time), on the second full LIBOR Business Day next
preceding the first day of such LIBOR Period (unless such date is not a
Business Day, in which event the next succeeding Business Day will be used);
divided by

 

(b)           a
number equal to 1.0 minus 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) LIBOR Business Days prior to the beginning of such
LIBOR 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.

 

A-2

 

If such interest rates shall cease to be available
from Telerate News Service, the Alternative Currency LIBOR Rate shall be
determined from such financial reporting service or other information as shall
be available to Agent.

 

Alternative Currency Revolving Credit Advance
has the meaning specified in Section 1.1(d).

 

Alternative Currency Revolving Credit Borrowing
means a borrowing consisting of Alternative Currency Revolving Credit Advances.

 

Alternative Currency Revolving Credit Sub-Commitment
means, with respect to any Lender, the amount set forth opposite such Lender’s
name on Annex B hereto under the caption “Amount of Alternative Currency
Revolving Credit Sub-Commitment” or, if such Lender has entered into one or
more Assignments and Acceptances, set forth for such Lender in the Register
maintained by the Agent as such Lender’s “Alternative Currency Revolving Credit
Sub-Commitment,” as such amount may be reduced at or prior to such time
pursuant to the terms of this Agreement. 
The Alternative Currency Revolving Credit Sub-Commitments of all the
Revolving Lenders equal $150,000,000 in the aggregate as of the Closing Date.

 

Alternative Currency Revolving Credit Subfacility
has the meaning specified in Section 1.1(d).

 

Alternative Currency Swing Line Advance
has the meaning ascribed to it in Section 1.1(e).

 

Alternative Currency Swing Line Availability
has the meaning ascribed to it in Section 1.1(e).

 

Alternative Currency Swing Line Commitment
means the commitment of the Alternative Currency Swing Line Lender to make
Alternative Currency Swing Line Advances as set forth on Annex B to the
Agreement, which commitment constitutes a subfacility of the Revolving Loan
Commitment of the Alternative Currency Swing Line Lender.  The commitment on the Closing Date for both
the Alternative Currency Swing Line Loan and the Swing Line Loan, collectively,
is (i) $40,000,000 (or the Dollar Equivalent thereof, from the Closing Date
through and including February 28, 2005 and (ii)$30,000,000 (or the Dollar
Equivalent thereof) thereafter (i.e. the sum of the Alternative Currency Swing
Line Commitment and the Swing Line Commitment, collectively, shall not exceed
(i) $40,000,000 (or the Dollar Equivalent thereof, from the Closing Date
through and including February 28, 2005 and (ii) $30,000,000 thereafter).

 

Alternative Currency Swing Line Lender
means GE Capital.

 

Alternative Currency Swing Line Loan
means at any time, the aggregate amount of Alternative Currency Swing Line
Advances outstanding to European Borrowers.

 

Alternative Currency Swing Line Note
has the meaning ascribed to it in Section 1.1(e).

 

A-3

 

Anti-Terrorism Laws has the meaning
ascribed to it in Section 3.9.

 

Applicable Alternative Currency Revolver Index Margin
means the per annum interest rate margin from time to time in effect and
payable in addition to the Alternative Currency Index Rate, as applicable,
applicable to any Loan, as determined by reference to Section 1.2(a).

 

Applicable Currency means as to any
particular payment or Advance, U.S. Dollars or the Alternative Currency in
which it is denominated or is payable.

 

Applicable L/C Margin means the fee margin, from time to time in
effect, payable with respect to outstanding Letter of Credit Obligations as
determined by reference to Section 1.2(a).

 

Applicable Margins has the meaning
ascribed to it in Section 1.2(a).

 

Applicable Percentage has the meaning ascribed to it in Section 1.3(f).

 

Applicable Revolver Index Margin
means the per annum interest rate margin from time to time in effect and
payable in addition to the Index Rate, applicable to any Loan, as determined by
reference to Section 1.2(a).

 

Applicable Revolver LIBOR Margin
means the per annum interest rate from time to time in effect and payable in
addition to the LIBOR Rate or Alternative Currency Index Rate, as applicable,
applicable to any Loan, as determined by reference to Section 1.2(a).

 

Asset Disposition means the
disposition whether by sale, lease, transfer, loss, damage, destruction,
casualty, condemnation or otherwise of any of the following:  (a) any of the Stock or other equity or
ownership interest of any of the Credit Parties or any of their respective
Subsidiaries or (b) any or all of the assets of any of the Credit Parties
or any of their respective Subsidiaries other than sales and dispositions
described in Section 5.7(a) and (d).

 

Assigned Dollar Value means (a) in
respect of any Advance denominated in U.S. Dollars, the amount thereof, and (b)
in respect of any Advance denominated in an Alternative Currency, the Dollar
Equivalent thereof based upon the applicable Exchange Rate as of the Exchange
Rate Determination Date for such Advance; provided, however, if,
as of the end of any Interest Period in respect of such Advance, the Dollar
Equivalent thereof determined based upon the applicable Exchange Rate as of the
date that is five (5) Business Days before the end of such Interest Period
would not equal the “Assigned Dollar Value” thereof, then on and after the end
of such Interest Period the “Assigned Dollar Value” of such Advance shall be
adjusted to be the Dollar Equivalent thereof determined based upon the Exchange
Rate that gave rise to such adjustment (subject to further adjustment in
accordance with this proviso thereafter). The Assigned Dollar Value of an
Alternative Currency Revolving Credit Advance included in any Advance shall
equal the pro rata portion of the Assigned Dollar Value of such Advance
represented by such Advance.

 

A-4

 

Assignment Agreement has the meaning
ascribed to it in Section 8.1(a).

 

Bankruptcy Code means the provisions
of Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. or other
applicable bankruptcy, insolvency or similar laws.

 

Borrower and Borrowers have
the respective meanings ascribed to them in the preamble to the Agreement.

 

Borrower Representative means Vertis
in its capacity as Borrower Representative pursuant to the provisions of Section 1.10.

 

Borrowers Pledge Agreement means the
Pledge Agreement of even date herewith executed by the Borrowers in favor of
Agent, on behalf of itself and Lenders, pledging all Stock of their
Subsidiaries, if any, other than the Receivables Subsidiary, certain Domestic
Subsidiaries that are not material Subsidiaries and the non-Domestic
Subsidiaries that are not Credit Parties and all Intercompany Notes owing to or
held by it.

 

Borrowing Availability means as of
any date of determination, the lesser of (i) the Maximum Amount and
(ii) the Borrowing Base, in each case, less the sum of (a) the
Revolving Loan then outstanding (including without duplication or any double
counting, the outstanding balance of Letter of Credit Obligations and the
Alternative Currency Revolving Credit Advances then outstanding, the Swing Line
Loan then outstanding), and (b) Reserves required by Agent in its reasonable
credit judgment.

 

Borrowing Base has the meaning
ascribed to it in Exhibit 6.2(e).

 

Borrowing Base Certificate has the
meaning ascribed to it in Section 6.2(e).

 

Business Day means any day that is
not a Saturday, a Sunday or a day on which banks are required or permitted to
be closed in the State of Maryland, New York or New Jersey and in reference to
LIBOR Loans shall mean any such day that is also a LIBOR Business Day.

 

Capital Expenditures has the meaning
ascribed to it in Section 6.1(a) of Schedule 1 to Annex F.

 

Capital Lease means, with respect to
any Person, any lease of any property (whether real, personal or mixed) by such
Person as lessee that, in accordance with GAAP, would be required to be
classified and accounted for as a capital lease on a balance sheet of such
Person.

 

Capital Lease Obligation means, with
respect to any Capital Lease of any Person, the amount of the obligation of the
lessee thereunder that, in accordance with GAAP, would appear on a balance
sheet of such lessee in respect of such Capital Lease.

 

Cash Equivalents means:  (i) marketable securities
(A) issued or directly and unconditionally guaranteed as to interest and
principal by the United States government or

 

A-5

 

(B) issued by any
agency or instrumentality of the United States government the obligations of
which are backed by the full faith and credit of the United States, in each
case maturing not more than (1) year after acquisition thereof;
(ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing not more than one year after
acquisition thereof and having, at the time of acquisition, a rating of at
least A-1 from S&P or at least P-1 from Moody’s; (iii) commercial
paper maturing no more than one year from the date of acquisition and, at the
time of acquisition, having a rating of at least A-1 or the equivalent thereof
from S&P or at least P-1 or the equivalent thereof from Moody’s;
(iv) time deposits and certificates of deposit or bankers’ acceptances
issued or accepted by any Lender or by any commercial bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia that is at least (A) ”adequately capitalized” (as defined in the
regulations of its primary Federal banking regulator) and (B) has Tier 1
capital (as defined in such regulations) of not less than $250,000,000, in each
case maturing within one year after issuance or acceptance thereof; and
(v) shares of any money market mutual or similar funds that (A) has
substantially all of its assets invested continuously in the types of
investments referred to in clauses (i) through (iv) above, (B) has net
assets of not less than $500,000,000 and (C) has the highest rating
obtainable from either S&P or Moody’s.

 

Certificate of Exemption has the
meaning ascribed to it in Section 1.9(c).

 

Change of Control means (I) at any time prior to the
consummation of a Qualified IPO, (i) a “Change of Control” under, and as
defined in, the 2002 Senior Debt Indenture, the 2003 Senior Secured Notes
Indenture, any Indebtedness listed on Schedule 5.1, any Senior
Subordinated Debt Documents and any Mezzanine Debt Documents or any Qualified
Preferred Stock, in each case to the extent then outstanding, shall have
occurred; or (ii) the ratio of (x) either (A) the percentage of the voting
interest in Holdings’ outstanding Stock on a fully diluted basis or (B) the
percentage of the economic interest in Holdings’ outstanding Stock, in each
case owned by the THL Group at any time, to (y) (A) the percentage of the
voting interest in Holdings’ outstanding Stock on a fully diluted basis or (B)
the percentage of the economic interest in Holdings’ outstanding Stock, as the
case may be, in each case held by the THL Group on the Closing Date, shall at
any time be less than .51:1.0; or (iii) THL Group and the Evercore Group
shall cease collectively to own on a fully diluted basis in the aggregate at
least 51% of the economic and voting interest in Holdings’ outstanding Stock;
or (iv) the Board of Directors of Holdings shall cease to consist of a majority
of Continuing Directors; or (v) Holdings shall cease to own 100% on a fully
diluted basis of the shares of outstanding Stock of Vertis; (vi) Holdings shall
at any time cease to own, directly or indirectly, 100% of the outstanding Stock
of each Borrower and each other Credit Party or (vii) any Borrower ceases to
own and control all of the economic and voting rights associated with all of
the outstanding Stock of any of its Subsidiaries and (II) at any time after the
consummation of a Qualified IPO, (i) a “Change of Control” under, and as
defined in, the 2002 Senior Debt Indenture, the 2003 Senior Secured Notes
Indenture, any Indebtedness listed on Schedule 3.1, any Senior
Subordinated Debt Documents and any Mezzanine Debt Documents or any Qualified
Preferred Stock, in each case to the extent then outstanding, shall have
occurred; or (ii) any “Person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined

 

A-6

 

in Rules 13(d)-3 and
13(d)-5 under the Exchange Act), directly or indirectly, of 20% or more of the
economic and voting interest in Holdings’ outstanding Stock unless the THL
Group and The Evercore Group shall collectively own a greater percentage of the
economic and voting interest in Holdings’ outstanding Stock than such “Person”
or “Group” that holds 20% or more of such Stock; or (iii) the ratio of (x)
either (A) the percentage of the voting interest in Holdings’ outstanding Stock
on a fully diluted basis or (B) the percentage of the economic interest in
Holdings’ outstanding Stock, in each case owned by the THL Group at any time,
to (y) (A) the percentage of the voting interest in Holdings’ outstanding Stock
on a fully diluted basis or (B) the percentage of the economic interest in
Holdings’ outstanding Stock, as the case may be, in each case held by the THL
Group on the Closing Date, shall at any time be less than .30:1.0; or (iv) THL
Group and the Evercore Group shall cease collectively to own on a fully diluted
basis in the aggregate at least 30% of the economic and voting interest in
Holdings’ outstanding Stock; or (v) the Board of Directors of Holdings shall
cease to consist of a majority of Continuing Directors; or (vi) Holdings shall cease
to own 100% on a fully diluted basis of the shares of outstanding Stock of
Vertis; (vii) Holdings shall at any time cease to own, directly or indirectly,
100% of the outstanding Stock of each Borrower and each other Credit Party or
(viii) any Borrower ceases to own and control all of the economic and voting
rights associated with all of the outstanding Stock of any of its Subsidiaries.

 

Charges means all federal, state,
county, city, municipal, local, foreign or other governmental premiums and
other amounts (including premiums and other amounts owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party,
(d) any Credit Party’s ownership or use of any properties or other assets,
or (e) any other aspect of any Credit Party’s business.

 

Chattel Paper means any “chattel
paper,” as such term is defined in the Code, including electronic chattel
paper, now owned or hereafter acquired by any Credit Party, wherever located.

 

Closing Checklist means the
schedule, including all appendices, exhibits or schedules thereto, listing
certain documents and information to be delivered in connection with the
Agreement, the other Loan Documents and the transactions contemplated
thereunder, substantially in the form attached hereto as Annex C.

 

Closing Date means December [    ], 2004.

 

Code means the Uniform Commercial
Code as the same may, from time to time, be enacted and in effect in the State
of New York; provided, that to the extent that the Code is used to
define any term herein or in any Loan Document and such term is defined
differently in different Articles or Divisions of the Code, the definition of
such term contained in Article or Division 9 shall govern; provided  further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of, or remedies with respect to, Agent’s
or any Lender’s Lien on any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of New
York, the term “Code”

 

A-7

 

shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes of the provisions thereof relating to such attachment, perfection,
priority or remedies and for purposes of definitions related to such
provisions.

 

Collateral means the property covered
by the Existing Security Agreement, the Mortgages, the UK Collateral Documents
and the other Collateral Documents and any other property, real or personal,
tangible or intangible, now existing or hereafter acquired, that may at any
time be or become subject to a security interest or Lien in favor of Agent, on
behalf of itself and Lenders, to secure the Obligations or any portion thereof.

 

Collateral Documents means the
Security Agreement, the Existing Security Agreement, the Pledge Agreements, the
Guaranties, the Mortgages, the Patent Security Agreements, the Trademark
Security Agreements, the Copyright Security Agreements, the U.K. Collateral
Documents and all similar agreements entered into guaranteeing payment of, or
granting a Lien upon property as security for payment of, the Obligations or
any portion thereof.

 

Commitment Termination Date means
the earliest of (a) December [   ],
2008, (b) the date of termination of Lenders’ obligations to make Advances
and to incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 7.3, and (c) the date of (i)
prepayment in full in cash by Borrowers of the Loans (other than Letters of
Credit which are covered by clause (ii) below), (ii) the cancellation and
return (or stand-by guarantee) of all Letters of Credit or the cash
collateralization or, with the consent of Agent in each instance, the backing
with standby letters of credit acceptable to Agent, of all Letter of Credit
Obligations pursuant to and in the amount required by Section 1.5(f),
and (iii) the permanent reduction of the Commitments to zero dollars ($0).

 

Commitments means (a) as to any
Lender, the aggregate of such Lender’s Revolving Loan Commitment as set forth
on Annex B to the Agreement or in the most recent Assignment Agreement
executed by such Lender and (b) as to all Lenders, the aggregate of all
Lenders’ Revolving Loan Commitments, which aggregate commitment shall be Two
Hundred Million Dollars ($200,000,000) on the Closing Date, as such Commitments
may be reduced, amortized or adjusted from time to time in accordance with this
Agreement.

 

Communication means any notice,
information or other communication required or permitted to be given or made
under this Agreement, but excluding any Loan Document requested by Agent to be
delivered solely in a signed writing, including without limitation, any
Mortgage, Note, power of attorney, or Patent, Trademark or Copyright Security
Agreement.

 

Compliance and Pricing Certificate
has the meaning ascribed to it in Section 6.2(n).

 

Consolidated Net Income has the
meaning ascribed to it in Section 6.1(a) of Schedule 1 to Annex
F.

 

Contingent Obligation means, as
applied to any Person, any direct or indirect liability of that Person:  (i) with respect to Guaranteed Indebtedness
and with respect to any

 

A-8

 

Indebtedness, lease,
dividend or other obligation of another Person if the purpose or intent of the
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto; (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (iii) under any foreign
exchange contract, currency swap agreement, interest rate swap agreement or
other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates, (iv) any
agreement, contract or transaction involving commodity options or future
contracts, (v) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement, or
(vi) pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to maintain
the solvency, financial condition or any balance sheet item or level of income
of another.  The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum
amount so guaranteed.

 

Continuing Directors shall mean the
directors of Holdings on the Closing Date and each other director, if such
director’s nomination for election to the Board of Directors of Holdings who
later joins the Board of Directors approved by the affirmative vote of a
majority of the then Continuing Directors at the time of such nomination.

 

Contractual Obligations means, as
applied to any Person, any indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person is a party or
by which it or any of its properties is bound or to which it or any of its
properties is subject including the Related Transactions Documents.

 

Control Agreement means tri-party
deposit account, securities account or commodities account control agreements
by and among the applicable Credit Party, Agent and the depository, securities
intermediary or commodities intermediary, and each in form and substance
satisfactory in all respects to Agent and in any event providing to Agent
“control” of such deposit account, securities or commodities account within the
meaning of Articles 8 and 9 of the Code.

 

Copyright License means any and all
rights now owned or hereafter acquired by any Credit Party under any written
agreement granting any right to use any Copyright or Copyright registration.

 

Copyright Security Agreements means
the Assignments of Security Interest in Copyrights made in favor of Agent by
each applicable Credit Party.

 

Copyrights means all of the
following now owned or hereafter adopted or acquired by any Credit Party:
(a) all copyrights and General Intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in

 

A-9

 

connection therewith,
including all registrations, recordings and applications in the United States
Copyright Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; and (b) all reissues, extensions or renewals thereof.

 

Credit Parties means Holdings, Borrowers, and each other
Person satisfying each of the following conditions: (i) which executes
this Agreement as a “Credit Party”, (ii) which executes a Guaranty,
(iii) which grants a Lien on all or substantially all of its assets to
secure payment of the Obligations and (iv) all of the Stock of which is
pledged to Agent for the benefit of itself and Lenders.

 

Current Assets means, with respect
to any Person, all current assets of such Person as of any date of
determination calculated in accordance with GAAP, but excluding cash, cash
equivalents and debts due from Affiliates.

 

Currency Agreement shall mean any
obligations of any Person pursuant to any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
such Person or any of its Subsidiaries against fluctuations in currency values.

 

Current Liabilities means, with
respect to any Person, all liabilities that should, in accordance with GAAP, be
classified as current liabilities, and in any event shall include all
Indebtedness payable on demand or within one year from any date of
determination without any option on the part of the obligor to extend or renew
beyond such year, all accruals for federal or other taxes based on or measured
by income and payable within such year, but excluding the current portion of
long-term debt required to be paid within one year and the aggregate
outstanding principal balances of the Revolving Loan and the Swing Line Loan.

 

Debentures means the debentures
executed and issued to Agent, on behalf of Agent and Lenders, by one or more
Credit Parties.

 

Default means any event that, with
the passage of time or notice or both, would, unless cured or waived, become an
Event of Default.

 

Default Rate has the meaning
ascribed to it in Section 1.2(d).

 

Disbursement Account has the meaning
ascribed to it in Section 1.1(e).

 

Disclosure Schedules means the
Schedules prepared by Borrowers and denominated as Schedules 1.1(a)
through 5.19 in the index to the Agreement.

 

Documents means any “document,” as
such term is defined in the Code, including electronic documents, now owned or
hereafter acquired by any Credit Party, wherever located.

 

Dollar Equivalent means, on any date
of determination, in relation to an amount denominated in any Alternative
Currency, the amount of U.S. Dollars required to purchase the

 

A-10

 

relevant stated amount of
such Alternative Currency at the Exchange Rate with respect to such Alternative
Currency on such date.

 

Dollars or $ means lawful
currency of the United States of America.

 

Domestic Subsidiaries means any
Subsidiary organized under the laws of a jurisdiction in the United States of
America.

 

EBITDA has the meaning ascribed to
it in Section 6.1(b) of Schedule 1 to Annex F.

 

Eligible Accounts has the meaning
ascribed to it in Schedule 1 to Exhibit 6.2(e).

 

Eligible Inventory has the meaning
ascribed to it in Schedule 1 to Exhibit 6.2(e).

 

Environmental Laws means all
applicable federal, state, local and foreign laws, statutes, ordinances, codes,
rules, standards and regulations, now or hereafter in effect, and any
applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment,
imposing liability or standards of conduct for or relating to the regulation
and protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).  Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§
9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid
Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42 U.S.C. §§
7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§
1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et
seq.); and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.),
and any and all regulations promulgated thereunder, and all analogous state,
local and foreign counterparts or equivalents and any transfer of ownership
notification or approval statutes.

 

Environmental Liabilities means,
with respect to any Person, all liabilities, obligations, responsibilities,
response, remedial and removal costs, investigation and feasibility study
costs, capital costs, operation and maintenance costs, losses, damages,
punitive damages, property damages, natural resource damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants), fines,
penalties, sanctions and interest incurred as a result of or related to any
claim, suit, action, investigation, proceeding or demand by any Person, whether
based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law, including any arising under or related
to any Environmental Laws, Environmental Permits, or in connection with any
Release or threatened Release or presence of a Hazardous Material whether on,
at, in, under, from or about or in the vicinity of any real or personal
property.

 

A-11

 

Environmental Permits means all
permits, licenses, authorizations, certificates, approvals or registrations
required by any Governmental Authority under any Environmental Laws.

 

Equipment means all “equipment,” as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located and, in any event, including all such Credit Party’s
machinery and equipment, including processing equipment, conveyors, machine
tools, data processing and computer equipment, including embedded software and
peripheral equipment and all engineering, processing and manufacturing equipment,
office machinery, furniture, materials handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, forklifts, molds, dies,
stamps, motor vehicles, rolling stock and other equipment of every kind and
nature, trade fixtures and fixtures not forming a part of real property,
together with all additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel therefor, and
all manuals, drawings, instructions, warranties and rights with respect
thereto, and all products and proceeds thereof and condemnation awards and
insurance proceeds with respect thereto.

 

ERISA means the Employee Retirement
Income Security Act of 1974, as amended from time to time, and any regulations
promulgated thereunder.

 

ERISA Affiliate means, with respect
to any Credit Party, any trade or business (whether or not incorporated) that,
together with such Credit Party, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC.

 

ERISA Event means, with respect to
any Credit Party or any ERISA Affiliate, (a) any event described in
Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the
withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or
partial withdrawal of any Credit Party or any ERISA Affiliate from any
Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any
Credit Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30
days; (g) any other event or condition that might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Title IV Plan or Multiemployer
Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA;
(h) the termination of a Multiemployer Plan under Section 4041A of ERISA
or the reorganization or insolvency of a Multiemployer Plan under Section 4241
or 4245 of ERISA; or (i) the loss of a Qualified Plan’s qualification or
tax exempt status; or (j) the termination of a Plan described in Section
4064 of ERISA, in each case of clauses (a) through (j), that individually or in
the aggregate could reasonably be expected to result in liabilities to the
Credit Parties and their ERISA Affiliates in excess of $500,000.

 

A-12

 

ESOP means a Plan that is intended
to satisfy the requirements of Section 4975(e)(7) of the IRC.

 

Event of Default has the meaning
ascribed to it in Section 7.1.

 

Evercore means Evercore Capital
Partners L.P.

 

Evercore Affiliates means Evercore
and any Person that directly or indirectly through one or more intermediaries,
controls or is in common control with Evercore.

 

Evercore Group means Evercore and
any Evercore Affiliates who act as a partnership, syndicate, limited
partnership or other group for the purpose of acquiring, holding or disposing
of securities of Holdings.

 

Exchange Rate shall mean, on any
day, (a) with respect to any Alternative Currency, the spot rate at which U.S.
Dollars are offered on such day to the Agent in London for such Alternative
Currency at approximately 11:00 A.M. (London time), and (b) with respect to
U.S. Dollars in relation to any specified Alternative Currency, the spot rate
at which such specified Alternative Currency is offered on such day to the Agent
in London for U.S. Dollars at approximately 11:00 A.M. (London time).  For purposes of determining the Exchange Rate
in connection with an Alternative Currency Revolving Credit Borrowing, such
Exchange Rate shall be determined as of the Exchange Rate Determination Date
for such Alternative Currency Revolving Credit Borrowing.  The Agent shall provide Borrower
Representative with the then current Exchange Rate from time to time upon
Borrower Representative’s request therefor.

 

Exchange Rate Determination Date
means, for purposes of the determination of the Exchange Rate of any stated
amount on any Business Day in relation to any Alternative Currency Revolving
Credit Borrowing, the date which is three Business Days prior to the date such
Alternative Currency Revolving Credit Borrowing is made.

 

Existing Mortgages means each of the
existing mortgages entered into by and among Agent as successor Collateral
Agent (as defined therein), each Credit Party that is a signatory thereto, and
each other party signatory thereto.

 

Existing Security Agreement or Security
Agreement means the Security Agreement, dated as of December 7, 1999 and
Amended and Restated as of June 6, 2003, entered into by and among Agent, as
successor Collateral Agent (as defined therein), each Credit Party that is a
signatory thereto, and each other party signatory thereto.

 

Fair Labor Standards Act means the
Fair Labor Standards Act, 29 U.S.C. §201 et seq.

 

February 2003 Senior Subordinated Notes
shall mean those certain 13 1⁄2% Senior Subordinated Notes due 2009 issued by
Vertis under the February 2003 Senior Subordinated Debt Documents.

 

A-13

 

February 2003 Senior Subordinated Debt
means the Indebtedness of Vertis evidence by the February 2003 Senior
Subordinated Debt Documents.

 

February 2003 Senior Subordinated Debt Documents
shall mean the February 2003 Senior Subordinated Notes, the February 2003
Senior Subordinated Notes Indenture and the other documents and instruments
executed and delivered with respect to the February 2003 Senior Subordinated
Notes or the February 2003 Senior Subordinated Notes Indenture, in each case as
in effect on the Closing Date and as the same may be amended, modified and/or
supplemented from time to time in accordance with the terms thereof and of the
Agreement.

 

February 2003 Senior Subordinated Notes Indenture
shall mean the Indenture, dated as of February 28, 2003 among Vertis and the
February 2003 Senior Subordinated Notes Indenture Trustee, as in effect on the
Closing Date and as the same may be amended, modified and/or supplemented from
time to time in accordance with the terms thereof and of the Agreement.

 

February 2003 Senior Subordinated Notes Indenture
Trustee shall mean the trustee under the 2003 Senior Subordinated
Notes Indenture.

 

Federal Funds Rate means, for any
day, a floating rate equal to the weighted average of the rates on overnight
federal funds transactions among members of the Federal Reserve System, as
determined by Agent in its sole discretion, which determination shall be final,
binding and conclusive (absent manifest error).

 

Federal Reserve Board means the
Board of Governors of the Federal Reserve System.

 

Fees means any and all fees payable
to Agent or any Lender pursuant to the Agreement or any of the other Loan
Documents.

 

Field Examination has the meaning
ascribed to it in Section 4.3.

 

Financial Projections means
Holdings, Borrowers’ and their Subsidiaries’ forecasted consolidated
(accompanied by mutually acceptable supplemental non-consolidated information
customarily prepared by management): (a) balance sheets; (b) profit
and loss statements; and (c) cash flow statements, all prepared on a basis
substantially consistent with the historical Financial Statements of Holdings and
Borrowers, together with appropriate supporting details and a statement of
underlying assumptions and in the form and in detail substantially consistent
with the financial budgets and projections (as appropriate), including a
twelve-month budget, delivered to Agent prior to the Closing Date.

 

Financial Statements means the
consolidated (accompanied by mutually acceptable supplemental non-consolidated
information customarily prepared by management) income statements, statements
of cash flows and balance sheets of Holdings, Borrowers and their Subsidiaries
delivered in accordance with Section 6.2.

 

A-14

 

Fiscal Month means any of the
monthly accounting periods of Holdings of each Fiscal Year.

 

Fiscal Quarter means any of the quarterly
accounting periods of Holdings, ending on March 31, June 30, September 30 and
December 31 of each year.

 

Fiscal Year means any of the annual
accounting periods of Borrowers ending on December 31 of each year.

 

Fixed Charges has the meaning
ascribed to it in Section 6.1(c) of Schedule 1 to Annex F.

 

Fixed Charge Coverage Ratio has the
meaning ascribed to it in Section 5.5 of Schedule 1 to Annex F.

 

Fixtures means all “fixtures” as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party.

 

Foreign Lender has the meaning
ascribed to it in Section 1.9(c).

 

Foreign Pension Plan means any plan,
fund (including, without limitation, any super-annuation fund) or other similar
program established or maintained outside of the United States of America by
any Credit Party or any Subsidiary of any Credit Party primarily for the
benefit of employees of such Credit Party or Subsidiary residing outside the
United States of America, which plan, fund, or similar program provides or
results in retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which is
not subject to ERISA or the Code.

 

Foreign Subsidiary or non-Domestic Subsidiary
means any direct or indirect Subsidiary of Holdings organized under the laws of
a jurisdiction outside of the United States.

 

Funded Debt means, with respect to
any Person, without duplication, all Indebtedness for borrowed money evidenced
by notes, bonds, debentures, or similar evidences of Indebtedness and that by
its terms matures more than one year from, or is directly or indirectly
renewable or extendible at such Person’s option under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a period
of more than one year from the date of creation thereof, and specifically
including Capital Lease Obligations, current maturities of long-term debt,
revolving credit and short-term debt extendible beyond one year at the option
of the debtor, and also including, in the case of Borrowers, the Obligations
(including Letter of Credit Obligations) and, without duplication, Guaranteed
Indebtedness consisting of guaranties of Funded Debt of other Persons.

 

Funding Date has the meaning
ascribed to it in Section 2.2.

 

GAAP means generally accepted
accounting principles in the United States of America, consistently applied.

 

A-15

 

GE Capital has the meaning ascribed
to it in the Preamble.

 

GE Capital Fee Letter has the
meaning ascribed to it in Section 1.3(a).

 

General Intangibles means “general
intangibles,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, including all right, title and interest that such
Credit Party may now or hereafter have in or under any Contractual Obligation,
all payment intangibles, customer lists, Licenses, Copyrights, Trademarks,
Patents, and all applications therefor and reissues, extensions or renewals
thereof, rights in Intellectual Property, interests in partnerships, joint
ventures and other business associations, licenses, permits, copyrights, trade
secrets, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records, goodwill (including the goodwill
associated with any Trademark or Trademark License), all rights and claims in
or under insurance policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax
refunds and other payments, rights to receive dividends, distributions, cash,
Instruments and other property in respect of or in exchange for pledged Stock
and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of such Credit Party or any computer bureau or service company from
time to time acting for such Credit Party.

 

Goods means any “goods,” as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located, including embedded software to the extent included in
“goods” as defined in the Code, manufactured homes, standing timber that is cut
and removed for sale and unborn young of animals.

 

Governmental Authority means any
nation or government, any state or other political subdivision thereof, and any
agency, department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.

 

Guaranteed Indebtedness means, as to
any Person, any obligation of such Person guaranteeing, providing comfort or
otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary
obligation”) of any other Person (the “primary obligor”) in any
manner, including any obligation or arrangement of such Person to (a) purchase
or repurchase any such primary obligation, (b) advance or supply funds
(i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such arrangement from loss
(other than product warranties given in the ordinary course of business) or
(e) indemnify the

 

A-16

 

owner of such primary
obligation against loss in respect thereof. 
The amount of any Guaranteed Indebtedness at any time shall be deemed to
be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such Guaranteed
Indebtedness is incurred and (y) the maximum amount for which such Person
may be liable pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness, or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.

 

Guarantees means, collectively, the Holdings Guaranty,
each Subsidiary Guaranty and any other guaranty executed by any Guarantor in
favor of Agent and Lenders in respect of the Obligations.

 

Guarantor Payment has the meaning
ascribed to it on Section 10.7.

 

Guarantors means Holdings, the UK
Guarantors, each Subsidiary of each Borrower (other than the Receivables
Subsidiary, certain Domestic Subsidiaries that are not material Subsidiaries
and the non-Domestic Subsidiaries that are not Borrowers), and each other
Person, if any, that executes a guaranty or other similar agreement in favor of
Agent, for itself and the ratable benefit of Lenders, in connection with the
transactions contemplated by the Agreement and the other Loan Documents.

 

Hazardous Material means any
substance, material or waste that is regulated by, or forms the basis of
liability now or hereafter under, any Environmental Laws, including any
material or substance that is (a) defined as a “solid waste,” “hazardous
waste,” “hazardous material,” “hazardous substance,” “dangerous goods,”
“extremely hazardous waste,”  “restricted
hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special
waste,” “toxic substance” or other similar term or phrase under any
Environmental Laws, or (b) petroleum or any fraction or by-product
thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive
substance.

 

Holdings has the meaning ascribed thereto in the
recitals to the Agreement.

 

Holdings Guaranty means the guaranty of even date herewith
executed by Holdings in favor of Agent, on behalf of itself and Lenders.

 

Holdings Pledge Agreement means the Pledge Agreement of even date
herewith executed by Holdings in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its Subsidiaries (other than the
Receivables Subsidiary, certain Domestic Subsidiaries that are not material
Subsidiaries and the non-Domestic
Subsidiaries that are not Credit Parties).

 

Indebtedness means, with respect to
any Person, without duplication (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property payment for which
is deferred six (6) months or more, but excluding obligations to trade
creditors incurred in the ordinary course of business that are unsecured and
not overdue by more than six (6) months unless being contested in good faith,
(b) all reimbursement and other obligations with respect to letters of
credit, bankers’ acceptances and surety bonds, whether or

 

A-17

 

not matured (excluding
ordinary trade credit), (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations
and the present value (discounted at the Index Rate as in effect on the Closing
Date) of future rental payments under all synthetic leases, (f) all net
settlement obligations of such Person under commodity purchase or option agreements
or other commodity price hedging arrangements, in each case whether contingent
or matured, (g) all net payment obligations of such Person under any
foreign exchange contract, currency swap agreement, interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to alter
the risks of that Person arising from fluctuations in currency values or
interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.

 

Indemnitees has the meaning ascribed
to it in Section 9.1.

 

Index Rate means, for any day, a
floating rate equal to the higher of (i) the rate publicly quoted from
time to time by The Wall Street Journal as the “base rate
on corporate loans posted by at least 75% of the nation’s 30 largest banks”
(or, if The Wall Street Journal ceases quoting a base rate of
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519)
entitled “Selected Interest Rates” as the Bank prime loan rate or its
equivalent), and (ii) the Federal Funds Rate plus 50 basis points per
annum.  Each change in any interest rate
provided for in the Agreement based upon the Index Rate shall take effect at
the time of such change in the Index Rate.

 

Index Rate Loan means an Advance or
portion thereof bearing interest by reference to the Index Rate or the
Alternative Currency Index Rate.

 

Instruments means all “instruments,”
as such term is defined in the Code, now owned or hereafter acquired by any
Credit Party, wherever located, and, in any event, including all certificated
securities, all certificates of deposit, and all promissory notes and other evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.

 

Intellectual Property means any and
all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with
such Trademarks.

 

Intercompany Debt has the meaning
ascribed to it in Section 9.21.

 

Intercompany Notes means a
promissory note contemplated by Section 5.1(c).

 

A-18

 

Interest Expense has the meaning
ascribed to it in Section 6.1(c) of Schedule 1 to Annex F.

 

Interest Payment Date means
(a) as to any Index Rate Loan, the first Business Day of each quarter to occur while such Loan is outstanding,
and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period;
provided, that in the case of any LIBOR Period greater than three months
in duration, interest shall be payable at three month intervals and on the last
day of such LIBOR Period; and provided  further that, in addition
to the foregoing, each of (x) the date upon which all of the Commitments
have been terminated and the Loans have been paid in full and (y) the
Commitment Termination Date shall be deemed to be an “Interest Payment Date”
with respect to any interest that has then accrued under the Agreement.

 

Interest Rate Protection Agreement
shall mean any interest rate swap agreement, interest rate cap agreement,
interest collar agreement, interest rate hedging agreement, interest rate floor
agreement or other similar agreement or arrangement.

 

Inventory means any “inventory,” as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located, including inventory, merchandise, goods and other
personal property that are held by or on behalf of any Credit Party for sale or
lease or are furnished or are to be furnished under a contract of service, or
that constitute raw materials, work in process, finished goods, returned goods,
supplies or materials of any kind, nature or description used or consumed or to
be used or consumed in such Credit Party’s business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software.

 

Investment means (i) any direct
or indirect purchase or other acquisition by Borrowers or any of their
Subsidiaries of any Stock, or other ownership interest in, any other Person,
and (ii) any direct or indirect loan, advance or capital contribution by
Borrowers or any of their Subsidiaries to any other Person.

 

Investment Property means all
“investment property,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, including:
(i) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Credit Party, including the rights of such
Credit Party to any securities account and the financial assets held by a
securities intermediary in such securities account and any free credit balance
or other money owing by any securities intermediary with respect to that
account; (iii) all securities accounts of any Credit Party; (iv) all
commodity contracts of any Credit Party; and (v) all commodity accounts
held by any Credit Party.

 

IRC means the Internal Revenue Code
of 1986, as amended, and all regulations promulgated thereunder.

 

IRS means the United States Internal
Revenue Service.

 

A-19

 

L/C Issuer means GE Capital or a
Subsidiary thereof or a bank or other legally authorized Person and used by
Agent in connection with credit facilities of similar nature and selected by
and reasonably acceptable to Agent and reasonably acceptable to the Borrower,
in such Person’s capacity as an issuer of Letters of Credit hereunder.

 

L/C Sublimit has the meaning
ascribed to it in Section 1.1(c).

 

Lenders means GE Capital, the other
Lenders named on the signature pages of the Agreement, and, if any such Lender
shall decide to assign all or any portion of the Obligations, such term shall
include any assignee of such Lender.

 

Letters of Credit means documentary
or standby letters of credit issued for the account of a Borrower by L/C Issuers,
and bankers’ acceptances issued by Borrowers, for which Agent and Lenders have
incurred Letter of Credit Obligations.

 

Letter of Credit Fee has the meaning
ascribed to it in Section 1.3(c).

 

Letter of Credit Obligations means,
without duplication, all outstanding obligations incurred by Agent and Lenders
at the request of Borrower Representative, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of
Letters of Credit by L/C Issuers or the purchase of a participation as set
forth in Section 1.1(d) with respect to any Letter of Credit.  The amount of such Letter of Credit
Obligations shall equal the maximum amount that may be payable by Agent and
Lenders thereupon or pursuant thereto.

 

Leverage Ratio has the meaning
ascribed to it in Section 6.1(e) of Schedule 1 to Annex F.

 

LIBOR Breakage Costs means an amount
equal to the amount of any losses, expenses, liabilities (including, without
limitation, any loss (including interest paid) and lost opportunity cost
(consisting of the present value of the difference between the LIBOR Rate or
Alternative Currency LIBOR Rate, as applicable in effect for the Interest
Period and any lower LIBOR Rate or Alternative Currency LIBOR Rate, as
applicable in effect at the time of prepayment for the remainder of that
Interest Period) in connection with the re-employment of such funds) that any
Lender may sustain as a result of (i) any default by any Borrower in making any
borrowing of, conversion into or continuation of any LIBOR Loan following
Borrower Representative’s delivery to Agent of any LIBOR Loan request in
respect thereof or (ii) any payment of a LIBOR Loan on any day that is not
the last day of the LIBOR Period applicable thereto (regardless of the source
of such prepayment and whether voluntary, by acceleration or otherwise). For
purposes of calculating amounts payable to a Lender under Section 1.3(e),
each Lender shall be deemed to have actually funded its relevant LIBOR Loan
through the purchase of a deposit bearing interest at LIBOR or Alternative
Currency LIBOR Rate, as applicable in an amount equal to the amount of that
LIBOR Loan and having a maturity and repricing characteristics comparable to
the relevant LIBOR Period; provided, however, that each Lender
may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under Section
1.3(d).

 

A-20

 

LIBOR Business Day means a Business
Day on which banks in the City of London are generally open for interbank or
foreign exchange transactions.

 

LIBOR Loans means an Advance or any
portion thereof bearing interest by reference to the LIBOR Rate or Alternative
Currency LIBOR Rate, as applicable.

 

LIBOR Period means, with respect to
any LIBOR Loan, each period commencing on a LIBOR Business Day selected by
Borrower Representative pursuant to the Agreement and ending one week or one,
two, three or six months thereafter, as selected by Borrower Representative’s
irrevocable notice to Agent as set forth in Section 1.2(e); provided,
that the foregoing provision relating to LIBOR Periods is subject to the
following:

 

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

 

(b)           any
LIBOR Period that would otherwise extend beyond the date set forth in clause
(a) of the definition of “Commitment Termination Date” shall end two (2) LIBOR
Business Days prior to such date;

 

(c)           any
LIBOR 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 LIBOR Period) shall end on the last LIBOR Business Day
of a calendar month;

 

(d)           Borrower
Representative shall select LIBOR Periods so as not to require a payment or
prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and

 

(e)           Borrower
Representative shall select LIBOR Periods so that there shall be no more than 7
separate LIBOR Loans in existence at any one time.

 

LIBOR Rate means for each LIBOR
Period, a rate of interest determined by Agent equal to:

 

(a)           the
offered rate for deposits in United States Dollars for the applicable LIBOR
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time),
on the second full LIBOR Business Day next preceding the first day of such
LIBOR Period (unless such date is not a Business Day, in which event the next
succeeding Business Day will be used); divided by

 

(b)           a
number equal to 1.0 minus 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) LIBOR Business Days prior to the beginning of such
LIBOR 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

 

A-21

 

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.

 

If such interest rates shall cease to be available
from Telerate News Service, the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be available to
Agent.

 

License means any Copyright License,
Patent License, Trademark License or other license of rights or interests now
held or hereafter acquired by any Credit Party.

 

Lien means any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge,
claim, security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).

 

Litigation has the meaning ascribed
to it in Section 6.2(k).

 

Loan Account has the meaning
ascribed to it in Section 1.7.

 

Loan Documents means the Agreement,
the Notes, the Collateral Documents, the GE Capital Fee Letter, the
subordination provisions applicable to any Subordinated Debt, and intercreditor
provisions applicable to any Indebtedness that is pari passu in right of payment to the Obligations and all
other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, Agent or any
Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby.  Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to the Agreement or such Loan Document
as the same may be in effect at any and all times such reference becomes
operative.

 

Loans means the Revolving Loan,
including, without limitation, any loans pursuant to Alternative Currency
Revolving Credit Advance, and the Swing Line Loan.

 

Management Services Agreement shall
mean collectively (i) the Management Services Agreement, dated as of December
7, 1999, between THL Equity Advisors IV, LLC and Holdings, (ii) the Management
Services Agreement, dated as of December 7, 1999, between Thomas H. Lee
Capital, LLC and Holdings and (iii) the Management Services Agreement, dated as
of December 7, 1999, between Evercore Advisors, Inc. and Holdings, all as in
effect on the Closing Date.

 

A-22

 

Master Documentary Agreement means
the Master Agreement for Documentary Letters of Credit, dated as of the Closing
Date, between Borrowers, as Applicants, and GE Capital, as Issuer.

 

Master Standby Agreement means the
Master Agreement for Standby Letters of Credit dated as of the Closing Date
between Borrowers, as Applicants, and GE Capital, as Issuer.

 

Master Trust shall mean the trust
created pursuant to the Receivables Purchase Agreement, and any successor or
similar trust created pursuant to any subsequent Receivables Purchase
Agreement.

 

Material Adverse Effect means a material adverse effect on
(a) the business, assets, operations or financial or other condition of
(i) any Borrower or (ii) the Credit Parties considered as a whole,
(b) Borrowers’ ability to pay any of the Loans or any of the other
Obligations in accordance with the terms of the Agreement, (c) the
Collateral or Agent’s Liens, on behalf of itself and Lenders, on the Collateral
or the priority of such Liens, or (d) Agent’s or any Lender’s rights and
remedies under the Agreement and the other Loan Documents.

 

Maximum Amount means, as of any date
of determination, an amount equal to the Revolving Loan Commitment of all
Lenders as of that date.

 

Maximum Lawful Rate has the meaning
ascribed to it in Section 1.2(f).

 

Mezzanine Debt means the
Indebtedness of Holdings evidenced by the Mezzanine Debt Documents.

 

Mezzanine Debt Documents shall mean
the Mezzanine Note and Warrant Purchase Agreement, the Mezzanine Notes and the
other documents and instruments executed and delivered with respect to the
Mezzanine Notes or the Mezzanine Note and Warrant Purchase Agreement, in each
case as in effect on the Closing Date and as the same may be amended, modified
and/or supplemented from time to time in accordance thereof and of the
Agreement.

 

Mezzanine Note and Warrant Purchase Agreement
means the Mezzanine Note and Warrant Purchase Agreement dated as of December 7,
1999 by and among Holdings and the purchasers named therein, as in effect on
the Closing Date and as the same may be amended, modified and/or supplemented
from time to time in accordance thereof and of the Agreement.

 

Mezzanine Notes means those certain
12% Mezzanine Subordinated Notes due 2010 issued by Holdings under the
Mezzanine Debt Documents.

 

MMS Rochester Business means the
fulfillment business located in Rochester which handles accounts related to
certain media and marketing and fulfillment services activities.

 

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

 

A-23

 

Mortgages means each of the
mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust,
collateral assignments of leases or other real estate security documents
delivered by any Credit Party to Agent on behalf of itself and Lenders with
respect to the Real Estate.

 

Multiemployer Plan means a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA, and to which any Credit Party
or ERISA Affiliate is making, is obligated to make or has made or been
obligated to make, contributions on behalf of participants who are or were
employed by any of them.

 

Net Proceeds means cash proceeds
received by Borrowers or any of their Subsidiaries from any Asset Disposition
(including insurance proceeds, awards of condemnation, and payments under notes
or other debt securities received in connection with any Asset Disposition),
net of (a) the costs of such Asset Disposition (including taxes
attributable to such sale, lease or transfer) and any commissions and other
customary transaction fees, costs and expenses), other than any costs payable
to any Affiliate of a Credit Party (b) amounts applied to repayment of
Indebtedness (other than the Obligations) secured by a Lien permitted under the
Agreement on the asset or property disposed, and (c) any amounts required to be
held in escrow until such time as such amounts are released from escrow
whereupon such amounts shall be considered Net Proceeds.

 

Non-Consenting Lender has the
meaning ascribed to it in Section 9.19(c).

 

Non-Funding Lender has the meaning
ascribed to it in Section 8.5(a).

 

Notes means, collectively, the
Revolving Notes and the Swing Line Note.

 

Notice of Alternative Currency Borrowing
has the meaning specified in Section 1.1(d).

 

Notice of Revolving Credit Advance
has the meaning ascribed to it in Section 1.1(a).

 

Notice of Conversion/Continuation
has the meaning ascribed to it in Section 1.2(e).

 

Obligations means all loans,
advances, debts, liabilities and obligations, for the performance of covenants,
tasks or duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or such amounts are liquidated or
determinable), including obligations pursuant to Letter of Credit Obligations,
owing by any Credit Party to Agent or any Lender, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. 
This term includes all principal, interest (including all interest that
accrues after the commencement of any case or proceeding by or against any
Credit Party in bankruptcy, whether or not allowed in such

 

A-24

 

case or proceeding),
Fees, Charges, expenses, attorneys’ fees and any other sum chargeable to any
Credit Party under the Agreement or any of the other Loan Documents.

 

Operating Cash Flow has the meaning
ascribed to it in Section 6.1(e) of Schedule 1 to Annex F.

 

Other Lender has the meaning
ascribed to it in Section 8.5(d).

 

Other Taxes has the meaning ascribed
to it in Section 1.9(b).

 

Overadvance has the meaning ascribed
to it in Section 1.1(b).

 

Patent License means rights under
any written agreement now owned or hereafter acquired by any Credit Party
granting any right with respect to any invention on which a Patent is in
existence.

 

Patent Security Agreements means the
Assignments of Security Interests in Patents made in favor of Agent by each
applicable Credit Party.

 

Patents means all of the following
in which any Credit Party now holds or hereafter acquires any interest:
(a) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent
of the United States or of any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State or any other
country, and (b) all reissues, continuations, continuations-in-part or
extensions thereof.

 

PBGC means the Pension Benefit
Guaranty Corporation.

 

Pension Plan means a Plan described
in Section 3(2) of ERISA.

 

Permitted Acquisition has the
meaning ascribed to it in Section 5.6.

 

Permitted Encumbrances means the
following encumbrances: (a) Liens for taxes, assessments or governmental
charges or levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP, excluding federal income tax Liens and Liens in favor of the PBGC
under ERISA; (b) Liens in respect of property or assets of any of the
Borrowers or any of their respective Subsidiaries imposed by law which were
incurred in the ordinary course of business consistent with past practices and
which have not arisen to secure Indebtedness for borrowed money, such as
carriers’, materialmen’s, warehousemen’s and mechanics’ Liens, statutory and
common law landlord’s Liens, and other similar Liens arising in the ordinary
course of business consistent with past practices; (c) Liens created by or
pursuant to this Agreement, the Collateral Documents or the other Loan
Documents, including, without limitation, the Securities Agreement; (d) Liens
in existence on the Closing Date which are listed, and the property subject
thereto described, on Schedule 5.2, without giving effect to any
extensions or renewals thereof; (e) Liens arising from

 

A-25

 

judgments, decrees,
awards or attachments in circumstances not constituting an Event of Default, provided
that the amount of cash and property (determined on a fair market value basis)
deposited or delivered to secure the respective judgment or decree or subject
to attachment shall not exceed $5,000,000 or the Dollar Equivalent thereof in
the aggregate at any time; (f) Liens (other than any Lien imposed by ERISA) (1)
incurred or deposits made in the ordinary course of business in connection with
general insurance maintained by the Borrower and its Subsidiaries, (2) incurred
or deposits made in the ordinary course of business of the Borrower and its
Subsidiaries in connection with workers’ compensation, unemployment insurance
and other types of social security, (3) to secure the performance by the
Borrower and its Subsidiaries of tenders, statutory obligations (other than
excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases,
government contracts, trade contracts, performance and return of money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money) to the extent incurred in the ordinary course of business, or
(4) to secure the performance by the Borrower and its Subsidiaries of leases of
Real Property, to the extent incurred or made in the ordinary course of
business consistent with past practices; (g) licenses, sublicenses, leases or
subleases granted to third Persons in the ordinary course of business not
interfering in any material respect with the business of the Borrower or any of
its Subsidiaries; (h) easements, rights-of-way, restrictions, minor defects or
irregularities in title, encroachments and other similar charges or
encumbrances, in each case not securing Indebtedness and not interfering in any
material respect with the ordinary conduct of the business of the Borrower or
any of its Subsidiaries; (i) Liens arising from precautionary UCC financing
statements regarding operating leases; (j) Liens created pursuant to or in
connection with leases or Capital Leases permitted pursuant to this Agreement, provided
that (1) such Liens only serve to secure the payment of rent or Indebtedness
arising under such leases or Capital Leases and (2) the Liens encumbering the
assets leased or purported to be leased under such leases or Capital Leases do
not encumber any other assets of the Borrower or any of its Subsidiaries (other
than letters of credit, payment undertaking agreements, guaranteed investment
contracts, deposits of cash or Cash Equivalents and other credit support
arrangements, in each case having an aggregate value not exceeding the fair
market value of the assets leased or purported to be leased under such leases
or Capital Leases (each of such values determined at the time when the lease
agreement relating to the relevant lease or Capital Lease is signed and
delivered)); (k) (1) those liens, encumbrances, hypothecs and other matters
affecting title to any Real Property and found reasonably acceptable by the
Agent or insured against by title insurance, (2) as to any particular Real
Property at any time, such easements, encroachments, covenants, rights of way,
minor defects, irregularities or encumbrances on title which could not
reasonably be expected to materially impair such Real Property for the purpose
for which it is held by the mortgagor or grantor thereof, or the lien or
hypothec held by the Agent, (3) zoning and other municipal ordinances which are
not violated in any material respect by the existing improvements or the
present use made by the mortgagor or grantor thereof of the premises, (4)
general real estate taxes and assessments not yet delinquent, (5) any Lien that
would be disclosed on a true, correct and complete survey of the Real Property
that does not materially affect the use or enjoyment of the Real Property as it
is currently being used, and (6) such other similar items as the Agent may
consent to (such consent not to be unreasonably withheld); (l) Liens arising
pursuant to purchase money mortgages or security interests securing
Indebtedness representing the purchase price (or financing of the purchase
price within 90 days after the respective purchase) of assets acquired after
the Closing Date,

 

A-26

 

provided
that (1) any such Liens attach only to the assets so purchased, upgrades
thereon and, if the asset so purchased is an upgrade, the original asset itself
(and such other assets financed by the same financing source), (2) the
Indebtedness (other than Indebtedness incurred from the same financing source
to purchase other assets and excluding Indebtedness representing obligations to
pay installation and delivery charges for the property so purchased) secured by
any such Lien does not exceed 100% of the lesser of the fair market value or
the purchase price of the property being purchased at the time of the
incurrence of such Indebtedness and (3) the Indebtedness secured thereby is
permitted to be incurred pursuant to this Agreement; (m) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Borrower or any of its Subsidiaries in the ordinary course of business; (n)
Liens, if any, in connection with and arising at or after the time of the
transfer of Receivable Purchase Agreement Assets by Borrowers pursuant to the
Permitted Receivables Financing; (o) Liens created pursuant to or in connection
with the 2003 Senior Secured Debt Documents; and (p) Liens securing Indebtedness
or leases that refinance, refund, extend, renew and/or replace Indebtedness or
leases secured by Liens described in clauses (a) through (m) above.

 

Permitted Receivables Financing
means the transaction entered into pursuant to and in accordance with the
Receivables Purchase Agreement and the other agreements, instruments and
documents executed in connection therewith.

 

Permitted Subordinated Debt shall
mean unsecured subordinated Indebtedness for borrowed money in an aggregate
principal amount not to exceed $100,000,000 at any time outstanding, all of the
terms and conditions of which (including, without limitation, the maturity
thereof, the interest rate applicable thereto, amortization, defaults,
remedies, voting rights, subordination provisions, etc.), and the documentation
therefor, shall be reasonably satisfactory to Agent and the Required Lenders;
provided, that in any event, unless such Required Lenders otherwise expressly
consent in writing prior to the incurrence thereof, (i) no such Indebtedness
shall be secured by any asset of Holdings or any of its Subsidiaries; (ii) such
Indebtedness shall be subject to subordination provisions contained in a
subordination agreement or other contractual provisions in form and substance
satisfactory to Agent and Required Lenders and (iii) such Indebtedness shall
not provide for the cash payment of principal or interest prior to the
Termination Date.  The incurrence of
Permitted Subordinated Indebtedness shall be deemed to be a representation and
warranty by Vertis and the Credit Parties that all conditions thereto have been
satisfied in all applicable respects and that same is permitted in accordance
with the terms of this Agreement, which representation and warranty shall be
deemed to be a representation and warranty for all purposes hereunder,
including, without limitation, Section 7.1.

 

Person means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public
benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).

 

A-27

 

Plan means, at any time, an “employee
benefit plan,” as defined in Section 3(3) of ERISA, that any Credit Party or
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any Credit Party.

 

Pledge Agreements means the Holdings
Pledge Agreement, the Borrowers Pledge Agreement, and any other pledge
agreement or charge over shares entered into after the Closing Date by any
Credit Party.

 

Pounds Sterling shall mean freely
transferable lawful money of the United Kingdom (expressed in Pounds Sterling).

 

Prior Lenders means The Chase
Manhattan Bank and the other banks party to the credit facility for which The
Chase Manhattan Bank acts as Agent.

 

Prior Lenders Obligations means any
and all obligations of Holdings, the Borrowers and the other Credit Parties to
Prior Lenders.

 

Pro Rata Share means with respect to
all matters relating to any Lender (a) with respect to the Revolving Loan,
the percentage obtained by dividing (i) the Revolving Loan Commitment of
that Lender by (ii) the aggregate Revolving Loan Commitments of all
Lenders, (b) with respect to all Loans, the percentage obtained by
dividing (i) the aggregate Commitments of that Lender by (ii) the
aggregate Commitments of all Lenders, and (c) with respect to all Loans on
and after the Commitment Termination Date, the percentage obtained by dividing
(i) the aggregate outstanding principal balance of the Loans held by that
Lender, by (ii) the outstanding principal balance of the Loans held by all
Lenders, as any such percentages may be adjusted by assignments pursuant to Section
8.1.

 

Proceeding means a proceeding under
the United States Bankruptcy Code, Insolvency Laws or any similar law in any
jurisdiction, in which any Credit Party or any Subsidiary thereof is a debtor.

 

Proposed Change has the meaning
ascribed to it in Section 9.19(c).

 

Qualified Assignee means (a) any
Lender, any Affiliate of any Lender and, with respect to any Lender that is an
investment fund that invests in commercial loans, any other investment fund
that invests in commercial loans and that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment
advisor, and (b) any commercial bank, savings and loan association or savings
bank or any other entity which is an “accredited investor” (as defined in
Regulation D under the Securities Act of 1933) which extends credit or buys
loans as one of its businesses, including insurance companies, mutual funds,
lease financing companies and commercial finance companies, which has a rating
of BBB or higher from S&P and a rating of Baa2 or higher from Moody’s at
the date that it becomes a Lender and which, through its applicable lending
office, is capable of lending to Borrowers without the imposition of any
withholding or similar taxes; provided that no Person that (directly or
through an Affiliate) holds a cash Investment in the Subordinated Debt or
equity of any Credit Party in excess of 20% of its cash Investment in the Loans
shall be a Qualified Assignee.

 

A-28

 

Qualified IPO means an underwritten public offering
of Holdings common Stock which generates net cash proceeds to Holdings of at
least $200,000,000.

 

Qualified Plan means a Pension Plan
that is intended to be tax-qualified under Section 401(a) of the IRC.

 

Qualified Preferred Stock shall mean
any preferred stock of Holdings, the express terms of which shall provide that
dividends thereon shall not be required to be paid at any time (and to the
extent) that such payment would be prohibited by the terms of this Agreement or
any other agreement of Holdings or any of its Subsidiaries relating to
outstanding indebtedness and which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event (including any change of control event), cannot mature
(excluding any maturity as the result of an optional redemption by the issuer
thereof) and is not mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, and is not redeemable, or required to be repurchased,
at the option of the holder thereof (including, without limitation, upon the
occurrence of a change of control event), in whole or in part, on or prior to
the tenth anniversary of the date of issuance of such preferred stock and that
otherwise has rights and preferences and is on terms and conditions reasonably
acceptable to the Agent.

 

Qualifying Lender means any Lender
which, in respect of any payment of interest by a European Borrower; (a) is
able under UK domestic law to receive payments of interest from that European
Borrower, which have a source within the UK, free of any withholding tax
imposed by the UK; or (b) is a Treaty Lender.

 

Real Estate has the meaning ascribed
to it in Section 3.14.

 

Receivables Indenture shall mean the
Amended and Restated Indenture and Servicing Agreement, dated as of December 9,
2002, among Vertis Receivables LLC, Vertis and Manufacturers and Traders Trust
Company, as Trustee, as amended, supplemented or modified from time to time and
any replacement therefore from time to time; provided, that such
amendment, supplement or modification or replacement therefore is not
prohibited under the terms of this Agreement.

 

Receivables Purchase Agreement means
that certain Amended and Restated Receivables Purchase Agreement dated as of
December 9 2002 among Vertis as Initial Servicer, Vertis and certain of its
Subsidiaries, as Sellers, and Vertis Receivables, LLC as Buyer as the same may
be amended, modified or supplemented from time to time and any replacement
therefore from time to time.

 

Receivables Purchase
Agreement Assets shall
mean all accounts receivable (whether now existing or arising in the future) of
Vertis and any of the Domestic Subsidiaries of Vertis (other than the
Receivables Subsidiary) which are transferred to the Receivables Subsidiary
pursuant to the Receivables Purchase Agreement, and any assets directly related
thereto, including, without limitation, (i) all receivables and other
Collateral (as defined in Section 2.1 of the Receivables Indenture), (ii) all
collateral given by the respective account

 

A-29

 

debtor or on its behalf
(but not by Holdings or any of its Subsidiaries) securing such accounts
receivable, (iii) all contracts and all guarantees (but not by Holdings or any
of its Subsidiaries) or other obligations directly related to such accounts
receivable, (iv) other related assets which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable (which may
include amounts, which do not constitute proceeds of any account receivable
included in the Receivables Purchase Agreement, paid by an account receivable
obligor which are credited to a bank account established under the Receivables
Purchase Agreement, so long as such amounts, upon identification by the
servicer under the Receivables Purchase Agreement as not constituting proceeds
of an account receivable included in the Receivables Purchase Agreement, may be
released from any Lien granted under the Receivables Purchase Agreement), and
(v) proceeds of all of the foregoing.

 

Receivables Seller at any time shall
mean Vertis and any Domestic Subsidiary that is a Guarantor which is, at such
time, a Person which is selling or transferring Receivables Purchase Agreement
Assets to the Receivables Subsidiary.

 

Receivables Subsidiary means Vertis
Receivables, LLC or any other wholly-owned Subsidiary designated as the
Receivables Subsidiary pursuant to the Receivables Indenture; provided, that
all of the Stock of any such other wholly-owned Subsidiary is pledged to the
Agent on behalf of Agent and Lender to secure the Obligations.

 

Refinancing means the repayment in
full by Borrowers of the Prior Lenders Obligations on the Closing Date.

 

Refunded Alternative Currency Swing Line Loan
has the meaning ascribed to it in Section 1.1(e)(iii).

 

Refunded Swing Line Loan has the
meaning ascribed to it in Section 1.1(c)(iii).

 

Related Transactions means the
initial borrowing under the Revolving Loan on the Closing Date, the
Refinancing, the payment of all Fees, costs and expenses associated with all of
the foregoing and the execution and delivery of all of the Related Transactions
Documents.

 

Related Transactions Documents means
the Loan Documents, and all other agreements or instruments executed in
connection with the Related Transactions.

 

Release means any release,
threatened release, spill, emission, leaking, pumping, pouring, emitting,
emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Material in the indoor or outdoor environment,
including the movement of Hazardous Material through or in the air, soil,
surface water, ground water or property.

 

Replacement Lender has the meaning
ascribed to it in Section 9.19(a).

 

A-30

 

Requisite Lenders means Lenders
having (a) more than 50% of the Commitments of all Lenders, or (b) if
the Commitments have been terminated, more than 50% of the aggregate
outstanding amount of the Loans; provided  that if there is more
than one Lender, Requisite Lenders shall in any event be at least two (2)
Lenders.

 

Reserves means, with respect to the
Borrowing Base (a) reserves established by Agent from time to time against
Eligible Accounts and Eligible Inventory pursuant to Exhibit 6.2(e) and
(b) such other reserves against Eligible Accounts, Eligible Inventory or
Borrowing Availability that Agent may, in its reasonable credit judgment,
establish from time to time.  Without
limiting the generality of the foregoing, Reserves established to ensure the
payment of accrued Interest Expenses or Indebtedness shall be deemed to be a
reasonable exercise of Agent’s credit judgment.

 

Restricted Payment means, with
respect to any Credit Party (a) the declaration or payment of any dividend
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets in respect of Stock; (b) any payment on
account of the purchase, redemption, defeasance, sinking fund or other
retirement of such Credit Party’s Stock or any other payment or distribution
made in respect thereof, either directly or indirectly; (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any Subordinated Debt; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase
or sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement, indemnification
or contribution arising out of or related to any such claim for damages or
rescission; (f) any payment, loan, contribution, or other transfer of
funds or other property to any Stockholder of such Credit Party other than
payment of compensation in the ordinary course of business to Stockholders who
are employees of such Credit Party; and (g) any payment of management fees
(or other fees of a similar nature), out-of-pocket expenses in connection
therewith and indemnities payable in connection with any management services,
consulting or like agreement by such Credit Party to any Stockholder of such
Credit Party or its Affiliates.

 

Restricted Subsidiary of any Person
means any Subsidiary of such Person which at the time of determination is not
an Unrestricted Subsidiary.

 

Retiree Welfare Plan means, at any
time, a Welfare Plan that provides for continuing coverage or benefits for any
participant or any beneficiary of a participant after such participant’s
termination of employment, other than continuation coverage provided pursuant
to Section 4980B of the IRC and at the sole expense of the participant or the
beneficiary of the participant.

 

Revolving Credit Advance has the
meaning ascribed to it in Section 1.1(a).

 

A-31

 

Revolving Lenders means those
Lenders having a Revolving Loan Commitment.

 

Revolving Loan means, at any time,
the sum of (i) the aggregate amount of Revolving Credit Advances outstanding to
Borrowers plus (ii) Swing Line Advances and Alternative Currency Swing Line
Advances plus (iii) the aggregate amount of Alternative Currency
Revolving Credit Advances outstanding to Borrowers plus (iv) the
aggregate Letter of Credit Obligations incurred on behalf of Borrowers.  Unless the context otherwise requires,
references to the outstanding principal balance of the Revolving Loan shall
include the outstanding balance of Letter of Credit Obligations.

 

Revolving Loan Commitment means
(a) as to any Lender, the commitment of such Lender to make its Pro Rata
Share of Revolving Credit Advances and Alternative Currency Revolving Credit
Advances or incur its Pro Rata Share of Letter of Credit Obligations
(including, in the case of the Swing Line Lender, its commitment to make Swing
Line Advances as a portion of its Revolving Loan Commitment and in the case of
the Alternative Currency Swing Line Lender, its commitment to make Alternative
Currency Swing Line Advances as a portion of its Revolving Loan Commitment) as
set forth on Annex B or in the most recent Assignment Agreement, if any,
executed by such Lender and (b) as to all Lenders, the aggregate
commitment of all Lenders to make the Revolving Credit Advances (including, in
the case of the Swing Line Lender, Swing Line Advances—and, in the case of the
Alternative Currency Swing Line Lender, Alternative Currency Swing Line
Advances) and Alternative Currency Revolving Credit Advances or incur Letter of
Credit Obligations, which aggregate commitment shall be Two Hundred Million
Dollars ($200,000,000) on the Closing Date, as such amount may be adjusted, if
at all, from time to time in accordance with the Agreement.

 

Revolving Notes has the meaning
ascribed to it in Section 1.1(b).

 

S&P means Standard & Poor’s
Ratings Services, a division of the McGraw-Hill Companies, Inc.

 

Senior Subordinated Debt means the Indebtedness of Holdings evidenced by the
Senior Subordinated Debt Documents, and any other Indebtedness of any Credit
Party subordinated to the Obligations as to right and time of payment and as to
any other rights and remedies thereunder and having such other terms as are
satisfactory to Agent and Requisite Lenders.

 

Senior Subordinated Debt
Documents shall mean
the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt
Documents and all other documents executed and delivered with respect to
thereto, as in effect on the Closing Date as the same may be amended, modified
or supplemented from time to time in accordance with the terms hereof and
thereof.

 

Settlement Date has the meaning
ascribed to it in Section 8.5(a)(ii).

 

Share Charges means the U.K. Share
Charges executed by one or more Credit Parties in favor of Agent, on behalf of
Agent and Lenders.

 

A-32

 

Software means all “software” as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, other than software embedded in any category of Goods, including all
computer programs and all supporting information provided in connection with a
transaction related to any program.

 

Solvent means, with respect to any
Person on a particular date, that on such date (a) the fair value of the
property of such Person is greater than the total amount of liabilities,
including subordinated and contingent liabilities, of such Person; (b) the
present fair saleable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts and liabilities, including subordinated and contingent liabilities as
they become absolute and matured; (c) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such Person’s
ability to pay as such debts and liabilities mature; and (d) such Person
is not engaged in a business or transaction, and is not about to engage in a
business or transaction, for which such Person’s property would constitute an
unreasonably small capital.  The amount
of contingent liabilities (such as Litigation, guaranties and pension plan
liabilities) at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at the time, represents the amount that
can be reasonably be expected to become an actual or matured liability.

 

Statement has the meaning ascribed
to it in Section 6.2(b).

 

Sterling Equivalent shall mean, at
any time for the determination thereof, the amount of Pounds Sterling which
could be purchased with the amount of Dollars involved in such computation at
the Exchange Rate on the date of determination.

 

Stock means all shares, options,
warrants, general or limited partnership interests, membership interests or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

 

Stockholder means, with respect to
any Person, each holder of Stock of such Person.

 

Subordinated Debt means collectively, the Senior Subordinated
Debt and the February 2003 Senior Subordinated Debt, and any other Indebtedness
of any Credit Party subordinated to the Obligations as to right and time of
payment and as to any other rights and remedies thereunder and having such
other terms as are satisfactory to Agent and Requisite Lenders.

 

Subordinated Notes means those certain February 2003
Senior Subordinated Notes and any other notes evidencing Senior Subordinated
Debt.

 

Subsidiary means, with respect to
any Person, (a) any corporation of which an aggregate of more than 50% of
the outstanding Stock having ordinary voting power to elect a

 

A-33

 

majority of the board of
directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of 50% or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership
or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner.  Unless the context
otherwise requires, each reference to a Subsidiary shall be a reference to a
Subsidiary of a Borrower.

 

Subsidiary Guaranty means the
Subsidiary Guaranty of even date herewith executed by one or more Subsidiaries
of Borrowers in favor of Agent, on behalf of itself and Lenders.

 

Supermajority Lenders means Lenders
having (a) more than 75% of the Commitments of all Lenders or (b) if the
Revolving Loan Commitments have been terminated, more than 75% of the aggregate
outstanding amounts of all Loans, provided, that, if there is more than one
Lender, Supermajority Lenders shall in any event be at least two (2) Lenders.

 

Swing Line Advance has the meaning
ascribed to it in Section 1.1(b).

 

Swing Line Availability has the
meaning ascribed to it in Section 1.1(b).

 

Swing Line Commitment means the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex B to the Agreement, which commitment constitutes a subfacility of
the Revolving Loan Commitment of the Swing Line Lender and which commitment on
the Closing Date for both the Alternative Currency Swing Line Loan and the
Swing Line Loan is, collectively, (i) $40,000,000 (or the Dollar Equivalent
thereof) from the Closing Date through and including February 28, 2005 and (ii)
$30,000,000 (or the Dollar Equivalent thereof) thereafter (i.e. the sum of the
Alternative Currency Swing Line Commitment and the Swing Line Commitment,
collectively, shall not exceed (i) $40,000,000 (or the Dollar Equivalent
thereof) from the Closing Date through and including February 28, 2005 and (ii)
$30,000,000 thereafter).

 

Swing Line Lender means GE Capital.

 

Swing Line Loan means at any time,
the aggregate amount of Swing Line Advances outstanding to Borrowers.

 

Swing Line Note has the meaning
ascribed to it in Section 1.1(b).

 

Target has the meaning ascribed to
it in Section 5.6.

 

A-34

 

Tax Returns means all reports,
returns, information returns, claims for refund, elections, estimated Tax
filings or payments, requests for extension, documents, statements,
declarations and certifications and other information required to be filed with
respect to Taxes, including attachments thereto and amendments thereof.

 

Taxes has the meaning ascribed to it
in Section 1.9(a).

 

Tax Sharing Agreement means that
certain Amended and Restated Tax Sharing Agreement, dated as of February 4,
2000, by and among the Credit Parties, certain other Subsidiaries of Holdings
and the other parties named therein provided, that, the
provisions of Section 5.1(p) of the Agreement shall be satisfied.

 

Termination Date means the date on
which (a) the Loans have been repaid in full in cash, (b) all other
Obligations under the Agreement and the other Loan Documents have been
completely discharged or, in the case of covenants, the obligations to perform
such covenants have been terminated (other than contingent indemnification
obligations as to which no unsatisfied claim has been asserted), (c) all
Letter of Credit Obligations have been cash collateralized in the amount set
forth in Section 1.5(f), cancelled or, with the consent of Agent in each
instance, backed by standby letters of credit acceptable to Agent, (d) all
Commitments have been terminated and (e) Agent and Lenders have been
released by Credit Parties of all claims against Agent and Lenders.

 

THL shall mean Thomas H. Lee
Partners L.P., a Delaware limited partnership.

 

THL Affiliates means THL and any
person that directly or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, THL.

 

THL Group means THL and any THL
Affiliate who act as a partnership, syndicate, limited partnership or group for
the purpose of acquiring, holding or disposing of securities of Holdings.

 

Title IV Plan means a Pension Plan
(other than a Multiemployer Plan), that is covered by Title IV of ERISA, and
that any Credit Party or ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.

 

TNN Business means the media
planning and placement activities business acquired by Vertis in 2003.

 

Trademark Security Agreements means
the Assignments of Security Interests in Trademarks made in favor of Agent by
each applicable Credit Party.

 

Trademark License means rights under
any written agreement now owned or hereafter acquired by any Credit Party
granting any right to use any Trademark.

 

A-35

 

Trademarks means all of the
following now owned or hereafter adopted or acquired by any Credit Party:
(a) all trademarks, trade names, corporate names, business names, trade
styles, service marks, logos, internet domain names, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications
in connection therewith, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by
any of the foregoing.

 

Treaty Lenders means a Lender or
Agent which receives a payment of interest from a European Borrower and is
beneficially entitled to that interest and is (i) resident (as defined in the
appropriate double taxation agreement) in a country with which the UK has a
double taxation agreement which makes provision for residents of that Lender’s
jurisdiction to obtain full exemption from tax imposed on interest by the UK
(ii) is eligible for benefits provided in the appropriate double taxation
treaty determined, inter alia, in
the case of the Income Tax Treaty between the United States and the United
Kingdom, the Limitations on Benefits provisions of such treaty and (iii) does
not carry on a business in the UK through a permanent establishment with which
the payment is effectively connected.

 

2002 Senior Debt means the
Indebtedness of Vertis evidenced by the 2002 Senior Notes.

 

2002 Senior Debt Documents shall
mean the 2002 Senior Notes, the 2002 Senior Notes Indenture and the other
documents and instruments executed and delivered with respect to the 2002
Senior Notes or the 2002 Senior Notes Indenture, in each case as in effect on
the Closing Date and as the same may be amended, modified and/or supplemented
from time to time in accordance with the terms thereof and of this Agreement.

 

2002 Senior Notes shall mean those
certain 10 7/8% Senior Notes due 2009 issued by Vertis under the 2002 Senior
Debt Documents.

 

2002 Senior Notes Indenture shall
mean the Indenture, dated as of June 24, 2002 among Vertis and the 2002 Senior
Notes Indenture Trustee, as in effect on the Closing Date and as the same may
be amended, modified and/or supplemented from time to time in accordance with
the terms thereof and of this Agreement.

 

2002 Senior Notes Indenture Trustee
shall mean the trustee under the 2002 Senior Notes Indenture.

 

2003 Senior Secured Debt means the
Indebtedness of Vertis evidenced by the 2003 Senior Secured Notes.

 

2003 Senior Secured Notes shall mean
Vertis’ 9-3/4% 2003 Senior Secured Notes due April 1, 2009 issued pursuant to
the 2003 Senior Secured Notes Indenture.

 

A-36

 

2003 Senior Secured Debt Documents
shall mean the 2003 Senior Secured Notes, the 2003 Senior Secured Notes
Indenture and the other documents and instruments executed and delivered with
respect to the 2003 Senior Secured Notes or the 2003 Senior Secured Notes
Indenture, in each case as in effect on the Closing Date and as the same may be
amended, modified and/or supplemented from time to time in accordance with the
terms thereof and of this Agreement.

 

2003 Senior Secured Notes Indenture
shall mean the Indenture, dated as of June 6, 2003, among Vertis and the
2003 Senior Secured Notes Indenture Trustee, as in effect on the Closing Date
and as the same may be amended, modified and/or supplemented from time to time
in accordance with the terms thereof and of this Agreement.

 

2003 Senior Secured Notes Indenture Trustee
shall mean the trustee under the 2003 Senior Secured Notes Indenture.

 

U.K. Collateral Documents means the
Debentures, the Share Charges, the Guarantee and all similar agreements entered
into guaranteeing payment of, or granting a Lien or charge upon property as
security for payment of, the Obligations or any portion thereof.

 

U.K. Guarantors means:

 

•      Vertis Direct Marketing Services (Croydon)
Limited

 

•      Admagic Limited

 

•      Vertis Fulfillment Services Limited

 

•      Vertis PRS Limited

 

•      Vertis Direct Marketing Services
(Leicester) Limited

 

•      The Admagic Group Limited

 

•      Vertis Direct Response Limited

 

•      Fusion PreMedia Group Limited

 

•      Vertis Harvey Hunter Limited

 

and such other entities which may from time to time be
added as a UK Guarantor in accordance with the terms of this Credit Agreement.

 

U.K. Subsidiary means any Subsidiary
organized under the laws of the United Kingdom.

 

A-37

 

Unfunded Pension Liability means, at
any time, the aggregate amount, if any, of the sum of (a) the amount by
which the present value of all accrued benefits under each Title IV Plan
exceeds the fair market value of all assets of such Title IV Plan allocable to
such benefits in accordance with Title IV of ERISA, all determined as of the
most recent valuation date for each such Title IV Plan using the actuarial
assumptions for funding purposes in effect under such Title IV Plan, and
(b) for a period of 5 years following a transaction which might reasonably
be expected to be covered by Section 4069 of ERISA, the liabilities (whether or
not accrued) that could be avoided by any Credit Party or any ERISA Affiliate
as a result of such transaction.

 

Unrestricted Subsidiary of any
Person means:

 

(1)           any
Subsidiary of such Person that at the time of determination shall be or
continue to be designated an Unrestricted Subsidiary by the Board of Directors
of such Person in the manner provided below;

 

(2)           any
Subsidiary of an Unrestricted Subsidiary; and

 

(3)           any
Subsidiary listed on Schedule A-1.

 

The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Stock of, or owns or holds any Lien
on any property of, Holdings or any Subsidiary thereof that is not a Subsidiary
of the Subsidiary to be so designated; provided that each Subsidiary to
be so designated and each of its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which Agent or any Lender has recourse to any of the
assets of Vertis or any of its Restricted Subsidiaries.

 

Unused Alternative Currency Revolving Credit Sub-Commitment
means, as to any Revolving Lender at any time, an amount in U.S. Dollars equal
to (i) such Lender’s Alternative Currency Revolving Credit Sub-Commitment minus
(ii) the sum of (x) the aggregate Assigned Dollar Value of all Alternative
Currency Revolving Credit Advances made by such Lender and outstanding at such
time, plus (y) such Lender’s Pro Rata Share of the aggregate Assigned
Dollar Value of all Alternative Currency Revolving Credit Advances made by the
Revolving Lenders (other than such Lender) and outstanding at such time.

 

Vertis means Vertis, Inc., a
Delaware corporation.

 

VPS Business means Vertis Print
Solutions in Chicago, Illinois, which handles accounts related to certain
short-run direct mail print activities.

 

Welfare Plan means a Plan described
in Section 3(l) of ERISA.

 

Rules of construction with respect to accounting terms
used in the Agreement or the other Loan Documents shall be as set forth or
referred to in this Annex A.  All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates

 

A-38

 

otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein; in the event that any term is defined differently in different
Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or clause as
contained in the Agreement.  The words “herein,”
“hereof” and “hereunder” and other words of similar import refer to the
Agreement 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 the Agreement
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; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations.  Whenever any provision
in any Loan Document refers to the knowledge (or an analogous phrase) of any
Credit Party, such words are intended to signify that such Credit Party has
actual knowledge or awareness of a particular fact or circumstance or that such
Credit Party, if it had exercised reasonable diligence, would have known or
been aware of such fact or circumstance. 
Definitions of agreements and instruments in Annex A shall mean and
refer to such agreements and instruments as amended, modified, supplemented,
restated, substituted or replaced from time to time in accordance with their
respective terms and the terms of this Agreement and the other Loan Documents.

 

A-39

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