Document:

exhibit10-2.htm

Exhibit 10.2

 

AMENDED AND RESTATED

RELATIONSHIP AGREEMENT

 

This AGREEMENT, dated as of June 11, 2004, is by and among ARJO WIGGINS APPLETON LTD. (f/k/a Arjo Wiggins Appleton p.l.c.) ("AWA"), ARJO WIGGINS (BERMUDA) HOLDINGS LIMITED ("AWA Sub" and, together with AWA, the "AWA Parties"), PAPERWEIGHT DEVELOPMENT CORP. ("PDC"), PDC CAPITAL CORPORATION ("PDC Sub" and, together with PDC, the "PDC Parties") and ARJO WIGGINS APPLETON (BERMUDA) LIMITED ("Bermuda").

 

PRELIMINARY STATEMENTS:

 

(1)                                  AWA is the sole holder of all of the issued and outstanding Class A Common Shares of AWA Sub.

 

(2)                                  PDC is the sole stockholder of PDC Sub.

 

(3)                                  AWA Sub is the legal and beneficial owner of 800 Class A Common Shares and 1000 Class B Preference Shares of Bermuda (the "AWA Sub Bermuda Securities").

 

(4)                                  PDC Sub is the legal and beneficial owner of 200 Class A Common Shares and 1 Class C Preference Share of Bermuda (the "PDC Sub Bermuda Securities").

 

(5)                                  AWA, PDC, New Appleton LLC and Appleton Papers Inc. ("API") are parties to that certain AWA Fox River Environmental Indemnity Agreement, dated November 9, 2001 (as amended, supplemented or otherwise modified from time to time, the "AWA Indemnity Agreement").

 

(6)                                  AWA and Bermuda are parties to that certain Assignment and Assumption Deed, dated November 9, 2001 (the "Assumption Deed").

 

(7)                                  The parties have entered into this Agreement to set out certain mutual agreements concerning the activities of Bermuda and the satisfaction of claims under the Assumption Deed and the AWA Indemnity Agreement.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

SECTION 1.                                Definitions.

 

(a)                                  "Administrative Agent" means Bear Stearns Corporate Lending Inc. or its successor as administrative agent pursuant to the Credit Agreement.

 

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(b)                                 "Credit Agreement" means that certain Credit Agreement, dated as of June 11, 2004 by and among PDC, API, Rose Holdings Limited, the several banks and other financial institutions or entities from time to time parties thereto, Bear Stearns & Co. Inc. and UBS Securities LLC as joint lead arrangers and joint bookrunners, UBS Securities LLC, as syndication agent, US Bank National Association, Associated Bank National Association and LaSalle Bank National Association, each as documentation agent, and the Administrative Agent, together with any amendments or modifications thereto.

 

(c)                                  "Trustee" means (i) while such notes are outstanding, the trustee under an indenture providing for the issuance of API's 9 3/4 % senior subordinated notes due 2014 on the date hereof (the "Senior Subordinated Notes") or any successor trustee thereof; and (ii) while such notes are outstanding, the trustee under an indenture providing for the issuance of API's 8 1/8 % senior notes due 2011 on the date hereof (the "Senior Notes") or any successor trustee thereof.  At a time when both the Senior Subordinated Notes and the Senior Notes are no longer outstanding, all references to the Trustee in this Agreement shall be deleted.

 

(d)                                 Other capitalized terms used in this Agreement not otherwise defined herein shall have the meanings set forth in the AWA Indemnity Agreement.

 

SECTION 2.                                Prohibition of Certain Activities.

 

(a)                                  Except with the prior written consent of AWA, and, at a time that AWA is required to maintain the Acceptable Protection Coverage, of the Administrative Agent and the Trustee, PDC shall not:

 

(i)                                     transfer, whether voluntarily or involuntarily, any of the equity securities of PDC Sub (collectively, the "PDC Sub Equity Securities");

 

(ii)                                  grant, whether voluntarily or involuntarily, any option or right, or enter into any agreement, that (A) calls for the issuance, sale or other disposition of any PDC Sub Equity Securities or (B) relates to the voting or control of any PDC Sub Equity Securities;

 

(iii)                               create or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over any PDC Sub Equity Securities; or

 

(iv)                              vote as a stockholder of PDC Sub in favor of, or otherwise permit, (A) any assignment by PDC Sub for the benefit of creditors, the appointment of a receiver for the assets of PDC Sub or the filing of any petition or application concerning PDC Sub under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or regulation, (B) the issuance of additional equity securities by PDC Sub, (C) the amendment of the Certificate of Incorporation or Bylaws of PDC Sub (collectively, the "PDC Sub Constitutional Documents"), or (D) the taking of any act outside the corporate powers of PDC Sub, as reflected in the PDC Sub Constitutional Documents.

 

(b)                                 Except with the prior written consent of PDC, and, at a time that AWA is required to maintain the Acceptable Protection Coverage, of the Administrative Agent and the Trustee, AWA shall not:

 

(i)                                     transfer, whether voluntarily or involuntarily, any of the equity securities of AWA Sub (collectively, the "AWA Sub Equity Securities");

 

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(ii)                                  grant, whether voluntarily or involuntarily, any option or right, or enter into any agreement, that (A) calls for the issuance, sale or other disposition of any AWA Sub Equity Securities or (B) relates to the voting or control of any AWA Sub Equity Securities;

 

(iii)                               create or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over any AWA Sub Equity Securities; or

 

(iv)                              vote as a stockholder of AWA Sub in favor of, or otherwise permit, (A) any assignment by AWA Sub for the benefit of creditors, the appointment of a receiver for the assets of AWA Sub or the filing of any petition or application concerning AWA Sub under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or regulation, (B) the issuance of additional equity securities by AWA Sub, (C) the amendment of the Memorandum of Association or Bye-Laws of AWA Sub (the "AWA Sub Constitutional Documents") or (D) the taking of any act outside the corporate powers of AWA Sub, as reflected in the AWA Sub Constitutional Documents.

 

(c)                                  Except with the prior written consent of AWA, and, at a time that AWA is required to maintain the Acceptable Protection Coverage, of the Administrative Agent and the Trustee, PDC Sub shall not, and PDC shall cause PDC Sub not to:

 

(i)                                     transfer, whether voluntarily or involuntarily, the PDC Sub Bermuda Securities;

 

(ii)                                  grant, whether voluntarily or involuntarily, any option or right, or enter into any agreement, that (A) calls for the issuance, sale or other disposition of any PDC Sub Bermuda Securities or (B) relates to the voting or control of any PDC Sub Bermuda Securities; or

 

(iii)                               create or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over the PDC Sub Bermuda Securities.

 

(d)                                 Except with the prior written consent of PDC, and, at a time that AWA is required to maintain the Acceptable Protection Coverage, of the Administrative Agent and the Trustee, AWA Sub shall not, and AWA shall cause AWA Sub not to:

 

(i)                                     transfer, whether voluntarily or involuntarily, the AWA Sub Bermuda Securities;

 

(ii)                                  grant, whether voluntarily or involuntarily, any option or right or enter into any agreement that (A) calls for the issuance, sale or other disposition of any AWA Sub Bermuda Securities or (B) relates to the voting or control of any AWA Sub Bermuda Securities; or

 

(iii)                               create or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over the AWA Sub Bermuda Securities.

 

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(e)                                  Except with the prior written consent of PDC and AWA, and, at a time that AWA is required to maintain the Acceptable Protection Coverage, of the Administrative Agent and the Trustee, neither PDC Sub nor AWA Sub shall vote as a stockholder of Bermuda in favor of, or otherwise permit:

 

(i)                                     any assignment by Bermuda for the benefit of creditors, the appointment of a receiver for the assets of Bermuda or the filing of any petition or application concerning Bermuda under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or regulation;

 

(ii)                                  the voluntary or involuntary transfer by Bermuda of Indemnity Claim Insurance Policy No. 5295316 (the "Policy") issued by Commerce & Industry Insurance Company (the "Insurer");

 

(iii)                               the commutation of the Policy pursuant to Section 3(6) of the Policy without the presentation to the Insurer of certificates of the Administrative Agent and the Trustee as to the discharge of certain indebtedness of PDC and its Subsidiaries substantially in the forms attached hereto as Exhibit A-1 and A-2 respectively;

 

(iv)                              the amendment of or waiver of any right under the Policy other than (A) a change of notice address or (B) to cure any ambiguity, omission, defect or inconsistency in the Policy;

 

(v)                                 the issuance of additional equity securities by Bermuda to a party other than AWA Sub, PDC Sub or a third party holder of its Class D Preference Shares ;

 

(vi)                              the amendment of the Memorandum of Association or Bye-laws of Bermuda;

 

(vii)                           the grant, whether voluntarily or involuntarily, of any option or right, or enter into any agreement, that calls for the sale or other disposition of the Policy; or

 

(viii)                        the creation or continued existence of any pledge, lien, fixed or floating charge or other encumbrance over the Policy, except pursuant to the Collateral Assignment from Bermuda to PDC, API and New Appleton LLC dated as of November 9, 2001.

 

(f)                                    PDC Sub and AWA Sub shall cause Bermuda actively to contest any petition or application filed against it under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or regulation.

 

(g)                                 Neither AWA nor Bermuda shall permit the assignment of any rights or obligations under the Assumption Deed without the prior written approval of (i) at a time that AWA is obliged to maintain the Acceptable Protection Coverage, of the Administrative Agent and, if such consent is required pursuant to Section 2(h), of the Trustee or (ii) at all other times, PDC.

 

(h)                                 In the event that the consent of the Trustee is required under this Section 2 or Section 9, or if there is proposed any amendment, modification, waiver or alteration of terms

 

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(other than the Economic Terms (as defined below)) of this Agreement, the Policy, or the Assumption Deed, the prior written consent of the Trustee shall also be required, and in either case the Trustee shall be provided with 30 days prior written notice of the proposed amendment, modification, waiver, alteration or other action to be taken, describing the same in reasonable detail and providing any related documentation for the proposed implementation thereof, together with the following, in each case in form and substance satisfactory to the Trustee:

 

(i)                                     a legal opinion from counsel acceptable to the Trustee, to the effect that the proposed action, amendment, modification, waiver or alteration will not have any adverse effect on the legal rights of the policyholder under the Policy or the legal rights of API and PDC under the AWA Indemnity Agreement, the PDC Agreement (as amended, supplemented or otherwise modified from time to time), the Assumption Deed or this Agreement, and does not have an adverse effect on the then remoteness of AWA Sub and Bermuda from AWA and its other affiliates for bankruptcy, substantive consolidation or similar purposes;

 

(ii)                                  officer's certificates on behalf of PDC, certifying that it believes that the proposed action, amendment, modification, waiver or alteration is not adverse to the policyholder, PDC or API;

 

(iii)                               an opinion from an investment bank of recognized national standing, to the effect that the proposed action, amendment, modification, waiver or alteration is not adverse, from a financial point of view, to the policyholder or to the holders of the Notes and would not, in such investment bank's opinion, result in any adverse effect on the trading or price of the Notes; and

 

(iv)                              any additional opinions or certificates that the Trustee determines may reasonably be required given the circumstances of any proposed action, amendment, modification, waiver or alteration;

 

provided, however that the Trustee shall not be requested to approve and shall not approve any amendment, modification, waiver or alteration of the requirements of this Section 2(h) or of any of the following terms (the "Economic Terms") of this Agreement, the Policy or the Assumption Deed:  (i) Section I -- Insuring Agreement, Section II -- Limits of Insurance, Section III -- Conditions (other than Sections 3.d., 8, 9, 18 and 20 thereof) and all related definitions of the Policy; (ii) any provisions of the Assumption Deed; (iii) requirements for certificates of approval from the Trustee or other lenders in this Agreement or the Policy; (iv) the identity of the insurer under the Policy; and (v) changes in the jurisdiction of organization of the policyholder under the Policy to any jurisdiction other than a jurisdiction set forth on Exhibit B hereto; it being agreed that any amendment, modification, waiver or alteration of any of the Economic Terms shall require the prior consent of the holders of the majority in aggregate principal amount of the then outstanding New Notes.  Notwithstanding the foregoing, the consent of the Trustee shall not be required if AWA is the sole holder of the Senior Subordinated Note.

 

(i)                                     Any purported action in violation of this Section 2 shall be null and void and of no force and effect whatsoever.

 

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SECTION 3.                                Satisfaction of Obligations Under Assumption Deed.

 

(a)                                  Without limiting Bermuda's obligations under the Assumption Deed, to the extent that funding under the Policy is available in respect of obligations of AWA to PDC under the AWA Indemnity Agreement, Bermuda shall apply such proceeds by making payment directly to PDC or API or to vendors or other third persons entitled to payment thereof, in each case in a manner consistent with the terms of the AWA Indemnity Agreement, in satisfaction of its obligations under the Assumption Deed and the obligations of AWA under the AWA Indemnity Agreement.

 

(b)                                 With respect to all other amounts payable by Bermuda pursuant to the terms of the Assumption Deed, i.e. other than in satisfaction of AWA's obligations to PDC under the AWA Indemnity Agreement, Bermuda shall make such payments to AWA or such other person as AWA may designate from time to time; provided that in the event of a default by AWA in the payment of its indemnification obligations under Section 4 hereof, no payments shall be made to AWA or its designee until such obligations have been satisfied in full.

 

(c)                                  Bermuda shall use commercially reasonable efforts to collect funds under the Policy as promptly as amounts are available for payment under the terms of the Policy.

 

(d)                                 In the event AWA has not made or caused to be made a payment under the AWA Indemnity when due and payable (a "Late Payment"), PDC or PDC Sub may unilaterally cause Bermuda to make, and Bermuda agrees to make, such Indemnity Claims (as defined in the Policy) and submit such Invoice Approval Packages (as defined in the Policy) as PDC may deem appropriate to procure the Insurer's payment of such Late Payment (so long as in accordance with the terms of the Policy).

 

SECTION 4.                                Tax Treatment.

 

(a)                                  For so long as AWA continues to satisfy its obligation, if any, to indemnify the PDC Parties in accordance with subsection 4(c) below, (i) the parties agree to cause Bermuda to be classified as a partnership for United States federal income tax purposes and (ii) PDC agrees that it shall, and shall cause PDC Sub to, report all of the U.S. taxable income reportable by Bermuda in connection with its ownership of the Policy.  In the event AWA fails to satisfy its obligation to indemnify PDC Parties in accordance with clause (c) below, PDC or PDC Sub may unilaterally cause Bermuda to revoke its election to be classified as a partnership for United States federal income tax purposes and PDC shall be relieved of its obligation to report in accordance with clause (ii) above.

 

(b)                                 AWA shall cause Bermuda to provide to PDC, a reasonable time prior to the due date for the filing thereof, written notice of U.S. taxable income to be reported consistent with clause (a), including information sufficient to enable PDC to comply with its tax reporting obligations.

 

(c)                                  AWA hereby covenants to indemnify and hold harmless the PDC Parties from and against any and all increases in Taxes of a PDC Party or another Member of the Buyers' Group (as defined in the AWA Indemnity Agreement) which in any way relate to or arise from Bermuda, including Taxes arising from the receipt of any indemnification payment hereunder.

 

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(d)                                 AWA's indemnity set forth in clause (c) shall be governed, to the extent appropriate in the context, by the procedural provisions set forth in Sections 4.1 and 5.1 of the AWA Indemnity Agreement.  By way of illustration and without limitation of the foregoing:

 

(i)                                     AWA shall make payments to the PDC parties prior to the time that the PDC Parties are obligated to pay indemnified Taxes, so that the PDC Parties are never out of pocket in respect thereof.

 

(ii)                                  The PDC Parties shall provide to AWA for AWA's review, a reasonable time prior to filing, copies of the PDC Parties' tax returns reporting taxable income in respect of the Bermuda.

 

(iii)                               The Parties shall cooperate in respect of Bermuda tax matters as provided in Section 5.1.5 of the AWA Indemnity Agreement.

 

(e)                                  If there shall be any change in United States, United Kingdom or Bermuda tax law, regulation or ratings relevant to the relationships described in this Agreement, or a change in any party's tax status, at the request of either the PDC Parties or AWA, the parties shall negotiate in good faith to amend (in accordance with Sections 2 and 9 hereof) the relationships and tax treatment summarized herein.

 

SECTION 5.                                Representations and Warranties.

 

(a)                                  The AWA Parties, jointly and severally, represent and warrant that (i) AWA is the sole stockholder of AWA Sub and (ii) attached hereto as Exhibit 5(a) are true, complete and correct copies of the AWA Sub Constitutional Documents.

 

(b)                                 The PDC Parties, jointly and severally, represent and warrant that (i) PDC is the sole stockholder of PDC Sub and (ii) attached hereto as Exhibit 5(b) are true, complete and correct copies of the PDC Sub Constitutional Documents.

 

SECTION 6.                                Payment of Certain Obligations.

 

(a)                                  AWA shall provide AWA Sub, and AWA and AWA Sub shall provide Bermuda, with sufficient funds to meet its statutory and other ordinary course obligations.

 

(b)                                 PDC shall provide PDC Sub with sufficient funds to meet its statutory and other ordinary course obligations.

 

SECTION 7.                                Access to Books and Records.  To the extent permitted by antitrust and other applicable laws, the parties shall allow each other reasonable access to their books and records, and to personnel having knowledge of the whereabouts and/or contents of their books and records, for purposes of confirming compliance with the terms of this Agreement.  Any such access to and review shall be permitted and conducted only during normal business hours and upon reasonable notice.  Each party shall be entitled to recover its out-of-pocket costs (including, without limitation, copying costs and a reasonable charge for employee time) incurred in providing their books and records and/or personnel.  The requesting party shall hold in confidence all confidential information identified as such by the disclosing party or any of its

 

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officers, agents, representatives or employees; provided, however, that information that (i) was in the public domain; (ii) was in fact known to the requesting party prior to disclosure by the disclosing party or its officers, agents, representatives or employees; (iii) becomes known to the requesting party from or through a third party not under an obligation of non-disclosure to the disclosing party; or (iv) any party is required by law, rule or regulation (of any applicable stock or securities exchange or otherwise) or otherwise deems necessary and proper to disclose in connection with the filing of any tax return or other document required to be filed with, or as required by, any governmental authority, shall not be deemed to be confidential information.  In addition, the parties agree that confidential information shall not be used for any purpose other than the specific purpose for which it was supplied.

 

SECTION 8.                                Dispute Resolution.

 

(a)                                  The AWA Parties, on the one hand, and the PDC Parties, on the other hand, shall attempt in good faith to resolve any dispute or difference between or among the parties arising out of or relating to this Agreement promptly by negotiation between executives of the relevant parties who have authority to settle the controversy within fifteen (15) days after delivery of a notice of a dispute by one or more parties to the others.  All negotiations pursuant to this Section 8(a) are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

 

(b)                                 Any dispute or difference between or among the parties arising out of or relating to this Agreement which has not been resolved by negotiation pursuant to Section 8(a) within fifteen (15) days as therein provided, shall be settled by arbitration in accordance with the CPR Rules of Non-Administered Arbitration in effect on November 9, 2001, by a mutually acceptable single arbitrator designated by the respective parties.  If the parties are unable to agree on an arbitrator within fifteen (15) days following the expiration of the negotiation period described in Section 8(a), an arbitrator shall be selected by the Center for Public Resources pursuant to the procedures set forth in its Rule 6.4.b or by such other procedures as the parties may elect.  In order to expedite the process of selecting an arbitrator, the parties shall use their best efforts to agree upon a standby arbitrator and an alternate within thirty (30) days following November 9, 2001, and within thirty (30) days following the resignation or inability of any such standby arbitrator or alternate to serve.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.  The place of arbitration shall be New York, New York.  The language of the arbitration shall be English.  The arbitration shall be governed by the law of the State of New York.  The arbitrator is not empowered to award damages in excess of compensatory damages and each party expressly waives and foregoes any right to punitive, exemplary or similar damages unless a statute requires that compensatory damages be increased in a specified manner.  Following the final arbitration hearings, which shall be completed within thirty (30) days following the later of (i) the designation of the arbitrator and (ii) the expiration of the negotiation period described in Section 8(a) unless otherwise mutually agreed by the parties to the dispute, the arbitrator shall promptly deliver a written decision with respect to the dispute to each of the parties, who shall promptly act in accordance therewith.  Each party agrees that any decision of the arbitrator shall be final, conclusive and binding and that they will not contest any action by any other party thereto in accordance with a decision of the arbitrator.  It is specifically understood and agreed that any party may enforce any award rendered pursuant to

 

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the arbitration provisions of this Section 8(b) by bringing suit in any court of competent jurisdiction.

 

(c)                                  All reasonable fees, costs and expenses (including attorneys' fees and expenses) incurred by the party that prevails in any such arbitration commenced pursuant to Section 8(b) or any judicial action or proceeding seeking to enforce the agreement to arbitrate disputes as set forth in Section 8(b) or seeking to enforce any order or award of any arbitration commenced pursuant to this Section 8 may be assessed (in whole or in part) against the party or parties that do not prevail in such arbitration in such manner as the arbitrator or the court in such judicial action, as the case may be, may determine to be appropriate under the circumstances.  All costs and expenses attributable to the arbitrator shall be allocated among the parties to the arbitration in such manner as the arbitrator shall determine to be appropriate under the circumstances.

 

(d)                                 The parties hereto shall take all required steps in order to avoid any inconsistencies between the resolutions of disputes hereunder and resolutions of disputes under the AWA Indemnity Agreement including, without limitation, the consolidation of any dispute resolution procedures.

 

SECTION 9.                                Amendment; Assignment.  This Agreement may not be amended, modified or assigned except at a time that AWA is required to maintain the Acceptable Protection Coverage, with the written approval of the Administrative Agent and the Trustee pursuant to Section 2(h).  Any purported amendment, modification or assignment that is not in compliance with the preceding sentence shall be null and void and of no force and effect whatsoever.  Subject to the foregoing, this Agreement shall inure to the benefit of the parties' respective successors and assigns.

 

SECTION 10.                          Governing Law; Consent to Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.  FOR THE LIMITED PURPOSE OF ENFORCEMENT OF AN ARBITRAL JUDGMENT IN ACCORDANCE WITH SECTION 8(b), EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK FOR ANY ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN THE COURTS OF THE STATE OF NEW YORK OR THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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SECTION 11.                          Notices.

 

(a)                                  All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person or by private courier with receipt, when telefaxed and received, and,

 

If to any PDC Party:

 

Paperweight Development Corp.

c/o Appleton Papers Inc.

825 E. Wisconsin Avenue

P.O. Box 359

Appleton, WI 54912-0359

Facsimile:  (920) 991-7256

 

Attention:  Paul Karch,

Vice President, Law and

Public Affairs and

General Counsel

 

with copies to:

 

Godfrey & Kahn, S.C.

780 N. Water Street

Milwaukee, WI 53202

Facsimile:  (414) 273-5198

Attention:  Christopher B. Noyes

 

State Street Bank and Trust Company

Trustee of the ESOP Component of the

Appleton Papers Retirement Saving Plan

Two International Place

Boston, MA 02110

Facsimile:  (617)

Attention:  Kelly G. Driscoll

 

Jones Day Reavis & Pogue

77 West Wacker

Suite 3500

Chicago, IL 60601-1692

Facsimile:  (312) 782-8585

Attention:  Ronald S. Rizzo

 

If to any AWA Party:

 

Arjo Wiggins Appleton Ltd

St. Clement House

 

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Alencon Link

Basingstoke

Hampshire RG21

ENGLAND

Facsimile:  011-44-1256-796075

Attention:  Company Secretary

 

with a copy to:

 

McDermott, Will & Emery

50 Rockefeller Plaza

New York, NY 10020

Facsimile:  212-547-5444

Attention:  C. David Goldman

 

or to such other address as any such party shall designate by written notice to the other parties hereto.

 

(b)                                 Without limiting the generality of Section 11(a), AWA Sub and PDC Sub hereby agree that any notices given or received by the party identified above on behalf of them shall be deemed given and received by each of them and that, pursuant thereto, the other parties may rely upon the applicability of any such notice as being binding upon, and applicable to each of them.

 

SECTION 12.                          Third Party Beneficiary.  The Administrative Agent, on behalf of the lenders pursuant to the Credit Agreement, and the Trustee, on behalf of the holders of the Senior Subordinated Note or the New Notes, are third party beneficiaries of this Agreement with full rights and remedies under or by reason of this Agreement as if parties hereto.  Other than the parties hereto and their respective successors and permitted assigns and except as specifically set forth in the preceding sentence, nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any other person any rights or remedies under or by reason of this Agreement.

 

SECTION 13.                          Conflict with Bermuda Bye-Laws.  In the event of an inconsistency between any term of this Agreement and the Bye-Laws of Bermuda, the provisions of this Agreement shall control.

 

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

 

	
ARJO WIGGINS APPLETON LTD.

	
PAPERWEIGHT DEVELOPMENT CORP.

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Christopher Gower

	
 

	
By:

	
/s/ Dale E. Parker

	
Name:

	
Christopher Gower

	
Name:

	
Dale E. Parker

	
Title:

	
Authorized Signatory

	
Title:

	
Chief Financial Officer & Treasurer

	
 

	
 

	
 

	
 

	
 

	
ARJO WIGGINS (BERMUDA) HOLDINGS LIMITED

	
PDC CAPITAL CORPORATION

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Favier Vincent

	
 

	
By:

	
/s/ Dane E. Allen

	
Name:

	
Favier Vincent

	
Name:

	
Dane E. Allen

	
Title:

	
Authorized Signatory

	
Title:

	
Secretary

	
 

	
 

	
 

	
 

	
ARJO WIGGINS APPLETON (BERMUDA) LIMITED

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Christopher Gower

	
 

	
 

	
 

	
Name:

	
Christopher Gower

	
 

	
 

	
Title:

	
Director

	
 

	
 

 

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Exhibit A-1

 

[Date]

 

Appleton Papers Inc.

 

[address]

 

 

Ladies and Gentlemen:

 

We refer to that certain Relationship Agreement, dated as of November 9, 2001, by and among Arjo Wiggins Appleton p.l.c. ("A WA"), Arjo Wiggins (Bermuda) Holdings Limited, Paperweight Holdings Limited, Paperweight Development Corp. ("PDC"), PDC Capital Corporation and Arjo Wiggins Appleton (Bermuda) Limited.

 

The undersigned hereby confirms that the Acquisition Debt (as defined in that certain Fox River AWA Environmental Indemnity Agreement, dated as of November 9, 2001, by and among PDC, New Appleton LLC, Appleton Papers Inc. and AWA) described in item 1 of Schedule 6.1.5.2 thereof has been repaid.

 

 

	
 

	
Sincerely yours,

	
 

	
 

	
 

	
 

	
 

	
[Administrative Agent]

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
Name: 

	
 

	
 

	
Title:

	
 

 

 

Exhibit A-2

 

[Date]

 

Appleton Papers Inc.

 

[address]

 

 

Ladies and Gentlemen:

 

We refer to that certain Relationship Agreement, dated as of November 9, 2001, by and among Arjo Wiggins Appleton p.l.c. ("A WA"), Arjo Wiggins (Bermuda) Holdings Limited, Paperweight Holdings Limited, Paperweight Development Corp. ("PDC"), PDC Capital Corporation and Arjo Wiggins Appleton (Bermuda) Limited.

 

The undersigned hereby confirms that the Acquisition Debt (as defined in that certain Fox River AWA Environmental Indemnity Agreement, dated as of November 9, 2001, by and among PDC, New Appleton LLC, Appleton Papers Inc. and AWA) described in item [2 or 3, as applicable] of Schedule 6.1.5.2 thereof has been repaid.

 

	
 

	
Sincerely yours,

	
 

	
 

	
 

	
 

	
 

	
[Trustee]

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
Name:

	
 

	
 

	
Title:

 

 

Exhibit B

 

BVI

Cayman

Channel

Gibraltar Isle

of Man

Monaco

Netherlands Antilles

US Virgin

Hong Kong

 

OR

 

any country which has a local currency long-term sovereign rating of AA or better from Standard & Poors or Aa2 or better from Moody's Investor Service

 

 

Exhibit 5(a)

 

Arjo Wiggins (Bermuda) Holdings

Constitutional Documents

 

 

FORM NO. 2

 

BERMUDA

THE COMPANIES ACT 1981

 

MEMORANDUM OF ASSOCIATION OF

COMPANY LIMITED BY SHARES

 

Section 7(1) AND (2)

MEMORANDUM OF ASSOCIATION

OF

ARJO WIGGINS (BERMUDA) HOLDINGS LIMITED

 

(hereinafter referred to as "the Company")

 

I.                                         The liability of the members of the Company is limited to the amount (if any) for the time being unpaid on the shares respectively held by them.

 

2.                                       We, the undersigned, namely,

 

	
 

	
 

	
Bermudian Status

	
 

	
 

	
 

	
 

	
 

	
Name and Address

	
 

	
(Yes or No)

	
 

	
Nationality

	
 

	
Number of Shares

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Subscribed

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Alan Bossin

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Cedar House

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
41 Cedar Avenue

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Hamilton HM 12, Bermuda

	
 

	
No

	
 

	
Canadian

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Ruby L. Rawlins

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Cedar House

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
41 Cedar Avenue

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Hamilton HM 12, Bermuda

	
 

	
Yes

	
 

	
British

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Rachael M. Lathan

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Cedar House

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
41 Cedar Avenue

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Hamilton HM 12, Bermuda

	
 

	
Yes

	
 

	
British

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Angela R.B. Browne

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Cedar House

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
41 Cedar Avenue

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Hamilton HM 12, Bermuda

	
 

	
Yes

	
 

	
British

	
 

	
1

	
 

 

do hereby respectively agree to take such number of shares of the Company as may be allotted to us respectively by the provisional directors of the Company, not exceeding the number of shares for which we have respectively subscribed, and to satisfy such calls as may be made by the directors, provisional directors or promoters of the Company in respect of the shares allotted to us respectively.

 

 

3.                                       The Company is to be an exempted Company as defined by the Companies Act 1981.

 

4.                                       The Company does not have the power to hold land situate in Bermuda.

 

5.                                       The authorised share capital of the Company is US$100,000.00 divided into 1,000 A shares of par value US$60.00 each, 1,000 B shares of par value US#1.00 each, 1 C share of par value US$10.00, 1 D share of par value US#10.00, and 38,980 shares of par value US$1.00 each. The minimum subscribed share capital of the Company is $12,000.00 in United States currency.

 

6.                                       The objects and purpose for which the Company is formed and incorporated are:

 

(a) to enter into and perform its obligations and exercise its rights under the Relationship Agreement (the "Relationship Agreement") to be entered into by and among the Company, Arjo Wiggins Appleton p.l.c., Arjo Wiggins (Bermuda) Holdings Limited, Paperweight Development Corp. and PDC Capital Corporation, and any and all instruments or documents contemplated thereby, including, without limitation, any instruments or documents granting a security interest in assets of the Company;

 

(b) to enter into, perform its obligations and exercise its rights under the Assignment and Assumption Deed (the "Deed") by and between the Company and Arjo Wiggins Appleton p.l.c.;

 

(c) to enter into and perform its obligations and exercise its rights under the indemnity claim insurance policy (the "Policy") issued by Commerce & Industry Insurance Company; and

 

(d) to engage in any other activity necessary, expedient, incidental or conducive to or in furtherance of the accomplishment of the foregoing objects.

 

7.                                       Subject to the provisions of Section 42 of the Companies Act 1981 and the Bye-Laws of the Company, the Company shall have the power to issue preference shares that are, or at the option of the Company are to be liable, to be redeemed.

 

8.                                       The Company shall only have the powers set out in Schedule I of the Companies Act 1981 to the extent consistent with and in furtherance of the objects of the Company set out in Clauses 6 and 7 above and Clause 10 below.

 

9.                                       Notwithstanding any other provision of this Memorandum of Association and the Bye- Laws of the Company and any provision of law that otherwise so empowers the Company, neither the Company, the Board of Directors, the holders of the shares of the Company, nor any committee appointed or designated thereby shall without the affirmative vote or consent of the holders of a majority of each class of the shares of the Company issued and outstanding each voting as a separate class (including the affirmative vote of at least one "Independent Shareholder" (as defined below) make a general assignment for the benefit of creditors, resolve in general meeting that the Company be wound up voluntarily, file a petition or apply to any court or tribunal for the appointment of a custodian, receiver, liquidator or any trustee for it or for a substantial part of its property, file any petition in bankruptcy or voluntarily commence any proceeding under any bankruptcy, insolvency, reorganisation, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereinafter in effect, consent or acquiesce in the filing of any such petition, application, proceeding or appointment of or taking possession by the custodian, receiver, liquidator, assignee, trustee, conservator, sequestrator (or other similar official) of the Company or any substantial part of its property, or admit its inability to pay its debts generally or as they become due, or authorise any of the foregoing to be done or taken on behalf of the Company, or take any corporate action in furtherance of or to

 

 

authorise any such action. For purposes hereof, the term "Independent Shareholder" shall mean a person (which term includes an entity) who (i) is not and has not been in the past three years a shareholder (whether direct, indirect or beneficial), customer, advisor, supplier, trustee, conservator or receiver of or for, or otherwise received any payments in excess of US$60,000 from, Paperweight Development Corp. or Arjo Wiggins Appleton p.l.c. (collectively, the "Parents") and/or any Affiliate (as such term is defined below); (ii) is not and has not been in the past three years a director, officer, employee, associate or affiliate of any person (which term includes an entity) described in clause (i) above; and (iii) is not a person related to any person referred to in clauses (i) or (ii) above. For purposes hereof, the term "Affiliate" means any person or entity, other than the Company, that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, either Parent, where the term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of securities, by contract, credit arrangement or agency, or otherwise.

 

10.                               Except as otherwise provided in the Relationship Agreement, the Deed or any and all instruments or documents contemplated thereby, including, without limitation, any instruments or documents granting a security interest in assets of the Company, the Company shall:

 

(a)                                  maintain books and records separate from any other person or entity;

 

(b)                                 maintain its bank accounts separate from any other person or entity;

 

(c)                                  not commingle its assets with those of any other person or entity;

 

(d)                                 conduct its own business in its own name and hold all of its assets in its own name or in the name of a trustee or custodian on its behalf;

 

(e)                                  maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other person or entity and not have its assets listed on the financial statement of any other entity, and provide for its own operating expenses and liabilities from its own assets and funds other than certain expenses and liabilities relating to basic corporate overhead that are shared with an affiliate;

 

(f)                                    file its tax returns separate from those of any other entity and not file a consolidated federal income tax return with any other corporation;

 

(g)                                 pay its own liabilities and expenses only out of its own funds;

 

(h)                                 observe all company and other organisational formalities;

 

(i)                                     maintain an arm's length relationship with its affiliates and enter into transactions with affiliates only on a commercially reasonable basis;

 

(j)                                     pay the salaries of its own employees, if any, from its own funds;

 

(k)                                  not guarantee or become obligated for the debts of any other entity or person;

 

(l)                                     not hold out its credit as being available to satisfy the obligations of any other person or entity;

 

 

(m)                               not acquire the obligations or securities of its owners, including partners, members or shareholders, as appropriate;

 

(n)                                 not make loans to any other person or entity;

 

(o)                                 allocate fairly and reasonably any overhead expenses that are shared with an affiliate, including paying for office space and services performed by any employee of an affiliate;

 

(p)                                 use separate stationery, invoices, and checks bearing its own name;

 

(q)                                 not pledge its assets for the benefit of any other person or entity;

 

(r)                                    hold itself out as a separate identity;

 

(s)                                  correct any known misunderstanding regarding its separate identity;

 

(t)                                    not identify itself as a division of any other person or entity;

 

(u)                                 not consolidate or merge with or into any person or dissolve or liquidate in whole or in part or transfer substantial all its properties and assets to any other person, except as provided in the Bye-Laws;

 

(v)                                 not engage in any joint activity or transaction of any kind with or for the benefit of any affiliate, except for the payment of lawful distributions to, or redemptions of its shares from, its Shareholders; and

 

(w)                               maintain adequate capital in light of its contemplated business operations.

 

11.                                 Subject to the Bye-Laws of the Company, the Company reserves the right to amend, alter, change or repeal any provisions contained in this Memorandum of Association in the manner now or hereafter prescribed by law, and all the provisions of this Memorandum of Association and all rights and powers conferred in this Memorandum of Association on shareholders, directors and officers are subject to this reserved power.

 

Notwithstanding the above paragraph, the Company shall not, without the affirmative vote or consent of the holders of the majority of the voting shares of the Company issued and outstanding (including the affirmative vote of at least one Independent Shareholder), amend, alter, change or repeal Clauses 6, 7, 8, 9, 10 or this Clause 11 of this Memorandum of Association.

 

 

STAMP DUTY (To be affixed)

 

Not Applicable

 

 

Signed by each subscriber in the presence of at least one witness attesting the signature thereof:-

 

 

	
/s/ Alan Bossin

	
 

	
/s/ Dionne Hackett

	
 

	
 

	
 

	
 

	
 

	
 

	
/s/ Ruby L. Rawlins

	
 

	
/s/ Dionne Hackett

	
 

	
 

	
 

	
 

	
 

	
 

	
/s/ Rachael M. Lathan

	
 

	
/s/ Dionne Hackett

	
 

	
 

	
 

	
 

	
 

	
 

	
/s/ Angela R.B. Browne

	
 

	
/s/ Dionne Hackett

	
 

	
 

	
 

	
(Subscribers)

	
 

	
(Witnesses)

 

 

SUBSCRIBED this 5th day of November 2001

 

 

BYE-LAWS

 

of

 

ARJO WIGGINS (BERMUDA) HOLDINGS LIMITED

 

I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-Laws of Arjo Wiggins (Bermuda) Holdings Limited as subscribed by the subscribers to the Memorandum of Association and approved at the Statutory meeting of the above Company on November, 2001.

 

 

	
 

	
/s/ Alan Bossin

	
, Director

 

 

Prepared by

Messrs Appleby Spurling & Kempe

Cedar House

41 Cedar Avenue

Hamilton, Bermuda

 

 

INDEX

 

	
BYE-LAW

	
 

	
SUBJECT

	
 

	
PAGE

	
 

	
 

	
 

	
 

	
 

	
1

	
 

	
Interpretation

	
 

	
1-3

	
2

	
 

	
Registered Office

	
 

	
3

	
3,4

	
 

	
Share Rights

	
 

	
3-6

	
5,6

	
 

	
Modification of Rights

	
 

	
6, 7

	
7-9

	
 

	
Shares

	
 

	
7

	
10-12

	
 

	
Certificates

	
 

	
8

	
13

	
 

	
Register of Shareholders

	
 

	
8-9

	
14

	
 

	
Register of Directors and Officers

	
 

	
9

	
15-18

	
 

	
Transfer of Shares

	
 

	
9, 10

	
19-21

	
 

	
Transmission of Shares

	
 

	
10, 11

	
22

	
 

	
General Meetings and Written Resolutions

	
 

	
11, 12

	
23,24

	
 

	
Notice of General Meetings

	
 

	
13

	
25-31

	
 

	
Proceedings at General Meetings

	
 

	
13-15

	
32-43

	
 

	
Voting

	
 

	
15-18

	
44-49

	
 

	
Proxies and Corporate Representatives

	
 

	
18-20

	
50-52

	
 

	
Appointment and Removal of Directors

	
 

	
21

	
53

	
 

	
Resignation and Disqualification of Directors

	
 

	
22

	
54-56

	
 

	
Alternate Directors

	
 

	
22, 23

	
57

	
 

	
Directors' Fees and Additional Remuneration and Expenses

	
 

	
23, 24

	
58

	
 

	
Directors' Interests

	
 

	
24, 25

	
59-61

	
 

	
Powers and Duties of the Board

	
 

	
25, 26

	
62-64

	
 

	
Delegation of the Board's Powers

	
 

	
26, 27

 

 

	
BYE-LAW

	
 

	
SUBJECT

	
 

	
PAGE

	
 

	
 

	
 

	
 

	
 

	
65-73

	
 

	
Proceedings of the Board

	
 

	
28-30

	
74

	
 

	
Officers

	
 

	
30, 31

	
75

	
 

	
Minutes

	
 

	
31

	
76,77

	
 

	
Secretary and Resident Representative

	
 

	
31, 32

	
78

	
 

	
The Seal

	
 

	
32

	
79-84

	
 

	
Dividends and Other Payments

	
 

	
33-35

	
85

	
 

	
Reserves

	
 

	
35

	
86,87

	
 

	
Capitalization of Profits

	
 

	
35, 36

	
88

	
 

	
Record Dates

	
 

	
36

	
89-91

	
 

	
Accounting Records

	
 

	
37

	
92

	
 

	
Audit

	
 

	
37, 38

	
93-95

	
 

	
Service of Notices and Other Documents

	
 

	
38, 39

	
96

	
 

	
Winding Up

	
 

	
39

	
97-101

	
 

	
Indemnity

	
 

	
39-41

	
102

	
 

	
Amalgamation

	
 

	
41, 42

	
103

	
 

	
Continuation

	
 

	
42

	
104

	
 

	
Alteration of Bye-Laws

	
 

	
42

 

 

BYE-LAWS

of

ARJO WIGGINS (BERMUDA) HOLDINGS LIMITED

 

INTERPRETATION

 

1.      (1)                                                     In these Bye-Laws unless the context otherwise requires -

 

"Bermuda" means the Islands of Bermuda;

 

"Board" means the Board of Directors of the Company or the Directors present at a meeting of Directors at which there is a quorum;

 

"the Companies Acts" means every Bermuda statute from time to time in force concerning companies insofar as the same applies to the Company;

 

"Company" means the company incorporated in Bermuda under the name of Aijo Wiggins (Bermuda) Holdings Limited on November, 2001;

 

"Director" means such person or persons as shall be appointed to the Board from time to time pursuant to Bye-Law 50;

 

"Independent Director" has the meaning given to such term in the Company's Memorandum of Association;

 

"Insurer" has the meaning given to such term in the Relationship Agreement;

 

"Officer" means a person appointed by the Board pursuant to Bye- Law 74 of these Bye-Laws and shall not include an auditor of the Company;

 

"paid up" means paid up or credited as paid up;

 

 

"Policy" has the meaning given to such term in the Relationship Agreement;

 

"Relationship Agreement" means that certain Relationship Agreement to be entered into by and among Arjo Wiggins Appleton p.l.c., Arjo Wiggins Appleton (Bermuda) Limited, Paperweight Development Corp., PDC Capital Corporation and the Company; "Register" means the Register of Shareholders of the Company; "Registered Office" means the registered office for the time being of the Company;

 

"Resident Representative" means the individual (or, if permitted in accordance with the Companies Acts, the company) appointed to perform the duties of resident representative set out in the Companies Acts and includes any assistant or deputy Resident Representative appointed by the Board to perform any of the duties of the Resident Representative;

 

"Resolution" means a resolution of the Shareholders or, where required, of a separate class or separate classes of Shareholders, adopted either in general meeting or by written resolution, in accordance with the provisions of these Bye-Laws;

 

"Seal" means the common seal of the Company and includes any duplicate thereof;

 

"Secretary" includes a temporary or assistant or deputy Secretary and any person appointed by the Board to perform any of the duties of the Secretary;

 

"Shareholder" means a shareholder or member of the Company; "these Bye-Laws" means these Bye-Laws in their present form or as from time to time amended;

 

(2)                                                     For the purposes of these Bye-Laws a corporation shall be deemed to be present in person if its representative duly authorised pursuant to the Companies Acts is present;

 

2

 

(3)                                                     Words importing only the singular number include the plural number and vice versa;

 

(4)                                                     Words importing only the masculine gender include the feminine and neuter genders respectively;

 

(5)                                                     Words importing persons include companies or associations or bodies of persons, whether corporate or un-incorporate;

 

(6)                                                     Reference to writing shall include typewriting, printing, lithography, photography and other modes of representing or reproducing words in a legible and non-transitory form;

 

(7)                                                     Any words or expressions defined in the Companies Acts in force at the date when these Bye-Laws or any part thereof are adopted shall bear the same meaning in these Bye-Laws or such part (as the case may be).

 

(8)                                                     These Bye-laws shall be read and construed as one with the Relationship Agreement, the provisions of which are hereby incorporated into these Bye-laws. In the event of a conflict between the provisions of these Bye-laws and the Relationship Agreement, the provisions of the Relationship Agreement shall prevail save and to the extent only that they or any of them conflict with the Companies Act.

 

REGISTERED OFFICE

 

2.                                       The Registered Office shall be at such place in Bermuda as the Board shall from time to time appoint.

 

SHARE RIGHTS

 

3.                                       Subject to any special rights conferred on the holders of any share or class of shares, any share in the Company may be issued with or have attached

 

3

 

thereto such preferred, deferred, qualified or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the Company may by Resolution determine or, if there has not been any such determination or so far as the same shall not make specific provision, as the Board may determine.

 

4.           (1)                                         The share capital of the Company shall consist of the following:

 

 (a)                                   Class A Common Shares

 

(i)                                     Amount - The Company may issue no more than twelve- thousand (12,000) Class A Common shares.

 

(ii)                                  Voting Rights - The holders of the Class A Common Shares shall be entitled to receive notice of and to attend and vote at all meetings of Shareholders of the Company, except meetings at which only holders of another specified class or a series of shares are entitled to vote, and shall be entitled to one vote in respect of each Class A share held at all such meetings.

 

(iii)                               Dividends - Subject to Bye-Law 79, the holders of the Class A Common Shares have the right to receive dividends as and when the Board deems fit.

 

(iv)                              Liquidation -In the event of the liquidation, dissolution or winding up of the Company or other distribution of the property or assets of the Company among its Shareholders for the purpose of winding up its affairs, whether voluntary or involuntary, the holders of the Class A Common Shares shall be entitled, subject to any prior rights of the holders of any other class of shares ranking senior to the Class A Common Shares with respect to such distributions, to receive the remaining property of the Company.

 

(b)                                      Class B Preference Share

 

4

 

(i)                                     Amount - The Company may issue no more than one (1) Class B Preference Share, which shall be held at all times by an Independent Shareholder.

 

(ii)                                  Voting Rights - Except as provided in Bye-Law 32, the holder of the Class B Preference Share shall not be entitled to receive notice of or to attend or vote at general meetings of Shareholders of the Company.

 

(iii)                               Dividends - The holder of the Class B Preference Share shall have no right to receive dividends.

 

(iv)                              Liquidation - In the event of the liquidation, dissolution or winding up of the Company or other distribution of the property or assets of the Company among its Shareholders for the purpose of winding up its affairs, whether voluntary or involuntary, the holder of the Class B Preference Share shall be entitled, in priority to the rights of the holders of the Class A Common Shares, to receive the capital paid up on the Class B Preference Share.

 

(e)                                      Subject to the Companies Acts, any other preference shares may, with the sanction of a resolution of the Board, be issued on terms:

 

(i)                                                   that they are to be redeemed on the happening of a specified event or on a given date; and/or,

 

(ii)                                                that they are liable to be redeemed at the option of the Company; and/or,

 

(iii)                                             if authorised by the memorandum/incorporating act of the Company, that they are liable to be redeemed at the option of the holder.

 

5

 

The terms and manner of redemption shall be provided for in such resolution of the Board and shall be attached to but shall not form part of these Bye-Laws

 

(2)                                                The Board may, at its discretion and without the sanction of a Resolution authorise the purchase by the Company of its own shares upon such terms as the Board may in its discretion determine PROVIDED ALWAYS that such purchase is effected in accordance with the provisions of the Companies Acts.

 

MODIFICATION OF RIGHTS

 

5.                                       Subject to the Companies Acts, all or any of the special rights for the time being attached to any class of shares for the time being issued may from time to time (whether or not the Company is being wound up) be altered or abrogated with the consent in writing of the holders of not less than seventy five percent of the issued shares of that class or with the sanction of a resolution passed at a separate general meeting of the holders of such shares voting in person or by proxy. To any such separate general meeting, all the provisions of these Bye-Laws as to general meetings of the Company shall mutatis mutandis apply, but so that the necessary quorum shall be two or more persons holding or representing by proxy any of the shares of the relevant class, that every holder of shares of the relevant class shall be entitled on a poll to one vote for every such share held by him and that any holder of shares of the relevant class present in person or by proxy may demand a poll; provided, however, that if the Company or a class of Shareholders shall have only one Shareholder, one Shareholder present in person or by proxy shall constitute the necessary quorum.

 

6.                                       The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or

 

6

 

the terms of issue of such shares, be deemed to be altered by the creation or issue of further shares ranking pan i passu therewith.

 

SHARES

 

7.                                       Subject to the provisions of these Bye-Laws, the unissued shares of the Company (whether forming part of the original capital or any increased capital) shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration and upon such terms and conditions as the Board may determine.

 

8.                                       The Board may in connection with the issue of any shares exercise all powers of paying commission and brokerage conferred or permitted by law.

 

9.                                       Except as ordered by a court of competent jurisdiction or as required by law, no person shall be recognised by the Company as holding any share upon trust and the Company shall not be bound by or required in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as otherwise provided in these Bye-Laws, or by law) any other right in respect of any share except an absolute right to the entirety thereof in the registered holder.

 

CERTIFICATES

 

10.                                 The preparation, issue and delivery of certificates shall be governed by the Companies Acts. In the case of a share held jointly by several persons, delivery of a certificate to one of several joint holders shall be sufficient delivery to all.

 

7

 

11.                            If a share certificate is defaced, lost or destroyed it may be replaced without fee but on such terms (if any) as to evidence and indemnity and to payment of the costs and out of pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board may think fit and, in case of defacement, on delivery of the old certificate to the Company.

 

12.                            All certificates for share or loan capital or other securities of the Company (other than letters of allotment, scrip certificates and other like documents) shall, except to the extent that the terms and conditions for the time being relating thereto otherwise provide, be issued under the Seal. The Board may by resolution determine, either generally or in any particular case, that any signatures on any such certificates need not be autographic but may be affixed to such certificates by some mechanical means or may be printed thereon or that such certificates need not be signed by any persons.

 

REGISTER OF SHAREHOLDERS

 

13.                            The Secretary shall establish and maintain the Register at the Registered Office in the manner prescribed by the Companies Acts. Unless the Board otherwise determines, the Register shall be open to inspection in the manner prescribed by the Companies Acts between 10.00 a.m. and 12.00 noon on every working day. Unless the Board so determines, no Shareholder or intending Shareholder shall be entitled to have entered in the Register any indication of any trust or any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share and if any such entry exists or is permitted by the Board it shall not be deemed to abrogate any of the provisions of Bye-Law 9.

 

8

 

REGISTER OF DIRECTORS AND OFFICERS

 

14.                                 The Secretary shall establish and maintain a register of the Directors and Officers of the Company as required by the Companies Acts. The register of Directors and Officers shall be open to inspection in the manner prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.

 

TRANSFER OF SHARES

 

15.                                 Subject to the Companies Acts and to such of the restrictions contained in the Relationship Agreement and these Bye-Laws as may be applicable, any Shareholder may transfer all or any of his shares by an instrument of transfer in the usual common form or in any other form which the Board may approve.

 

16.                                 The instrument of transfer of a share shall be signed by or on behalf of the transferor and where any share is not filly-paid, the transferee and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. All instruments of transfer when registered may be retained by the Company. The Board may, in its absolute discretion and without assigning any reason therefor, decline to register any transfer of any share which is not a fully-paid share. The Board may also decline to register any transfer unless:-

 

(1)                                  the instrument of transfer is duly stamped and lodged with the Company, accompanied by the certificate for the shares to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer,

 

(2)                                  the instrument of transfer is in respect of only one class of share,

 

(3)                                  where applicable, the permission of the Bermuda Monetary Authority with respect thereto has been obtained.

 

9

 

Subject to any directions of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under this Bye-Law and Bye-Laws 15 and 17.

 

17.                                 If the Board declines to register a transfer it shall, within three months after the date on which the instrument of transfer was lodged, send to the transferee notice of such refusal.

 

18.                                 No fee shall be charged by the Company for registering any transfer, probate, letters of administration, certificate of death or marriage, power of attorney, distringas or stop notice, order of court or other instrument relating to or affecting the title to any share, or otherwise making an entry in the Register relating to any share.

 

TRANSMISSION OF SHARES

 

19.                                 Any person becoming entitled to a share by operation of applicable law may, subject as hereafter provided and upon such evidence being produced as may from time to time be required by the Board as to his entitlement, either be registered himself as the holder of the share or elect to have some person nominated by him registered as the transferee thereof. If the person so becoming entitled elects to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have his nominee registered, he shall signify his election by signing an instrument of transfer of such share in favour of his nominee. All the limitations, restrictions and provisions of these Bye-Laws relating to the right to transfer and the registration of transfer of shares shall be applicable to any such notice or instrument of transfer as aforesaid as if the event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer signed by such Shareholder.

 

10

 

20.                                 A person becoming entitled to a share in consequence by operation of applicable law shall (upon such evidence being produced as may from time to time be required by the Board as to his entitlement) be entitled to receive and may give a discharge for any dividends or other moneys payable in respect of the share, but he shall not be entitled in respect of the share to receive notices of or to attend or vote at general meetings of the Company or, save as aforesaid, to exercise in respect of the share any of the rights or privileges of a Shareholder until he shall have become registered as the holder thereof. The Board may at any time give notice requiring such person to elect either to be registered himself or to transfer the share and, if the notice is not complied with within sixty days, the Board may thereafter withhold payment of all dividends and other moneys payable in respect of the shares until the requirements of the notice have been complied with.

 

21.                                 Subject to any directions of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under Bye- Laws 19 and 20.

 

GENERAL MEETINGS AND WRITTEN RESOLUTIONS

 

22.         (1)                                   The Board shall convene and the Company shall hold general meetings as Annual General Meetings in accordance with the requirements of the Companies Acts at such times and places as the Board shall appoint. The Board may, whenever it thinks fit, and shall, when required by the Companies Acts, convene general meetings other than Annual General Meetings which shall be called Special General Meetings.

 

(2)                                  Except in the case of the removal of auditors or Directors, anything which may be done by resolution in general meeting may, without a

 

11

 

meeting and without any previous notice being required, be done by resolution in writing, signed by all of the Shareholders or any class thereof or their proxies, or in the case of a Shareholder that is a corporation (whether or not a company within the meaning of the Companies Acts) on behalf of such Shareholder, being all of the Shareholders of the Company or any class thereof who at the date of the resolution in writing would be entitled to attend a meeting and vote on the resolution. Such resolution in writing may be signed in as many counterparts as may be necessary.

 

(3)                                  For the purposes of this Bye-Law, the date of the resolution in writing is the date when the resolution is signed by, or on behalf of, the last Shareholder to sign and any reference in any enactment to the date of passing of a resolution is, in relation to a resolution in writing made in accordance with this section, a reference to such date.

 

(4)                                  A resolution in writing made in accordance with this Bye-Law is as valid as if it had been passed by the Company in general meeting or, if applicable, by a meeting of the relevant class of Shareholders of the Company, as the case may be. A resolution in writing made in accordance with this section shall constitute minutes for the purposes of the Companies Acts and these Bye-Laws.

 

NOTICE OF GENERAL MEETINGS

 

23.                                 An Annual General Meeting shall be called by not less than thirty days notice in writing and a Special General Meeting shall be called by not less than five days notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and shall specify the place, day and time of the meeting, and, the nature of the business to be considered. Notice of every general meeting shall be given in any manner permitted by Bye-Laws 93 and 94 to all

 

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Shareholders other than such as, under the provisions of these Bye-Laws or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company and to any Director or Resident Representative who or which has delivered a written notice upon the Registered Office requiring that such notice be sent to him or it. Notwithstanding that a meeting of the Company is called by shorter notice than that specified in this Bye-Law, it shall be deemed to have been duly called if it is so weed by all the Shareholders entitled to attend and vote thereat;

 

24.                                 The accidental omission to give notice of a meeting or (in cases where instruments of proxy are sent out with the notice) the accidental omission to send such instrument of proxy to, or the non-receipt of notice of a meeting or such instrument of proxy by, any person entitled to receive such notice shall not invalidate the proceedings at that meeting.

 

PROCEEDINGS AT GENERAL MEETINGS

 

25.                                 No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman which shall not be treated as part of the business of the meeting. Save as otherwise provided by these Bye-Laws, at least two Shareholders present in person or by proxy and entitled to vote shall be a quorum for all purposes; provided, however, that if the Company or a class of Shareholders shall have only one Shareholder, one Shareholder present in person or by proxy shall constitute the necessary quorum.

 

26.                                 If within five minutes (or such longer time as the chairman of the meeting may determine to wait) after the time appointed for the meeting, a quorum is not present, the meeting, if convened on the requisition of Shareholders,

 

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shall be dissolved. In any other case, it shall stand adjourned to such other day and such other time and place as the chairman of the meeting may determine and at such adjourned meeting two Shareholders present in person or by proxy shall be a quorum provided that if the Company or a class of Shareholders shall have only one Shareholder, one Shareholder present in person or by proxy shall constitute the necessary quorum. The Company shall give not less than five days notice of any meeting adjourned through want of a quorum and such notice shall state that the sole Shareholder or, if more than one, two Shareholders present in person or by proxy (whatever the number of shares held by them) shall be a quorum.

 

27.                                 A meeting of the Shareholders or any class thereof may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously and participation in such a meeting shall constitute presence in person at such meeting.

 

28.                                 Each Director upon giving the notice referred to in Bye-Law 23 above, and the Resident Representative, if any, shall be entitled to attend and speak at any general meeting of the Company.

 

29.                                 The Chairman (if any) of the Board or, in his absence, the President shall preside as chairman at every general meeting. If there is no such Chairman or President, or if at any meeting neither the Chairman nor the President is present within five minutes after the time appointed for holding the meeting, or if neither of them is willing to act as chairman, the Directors present shall choose one of their number to act or if one Director only is present he shall preside as chairman if willing to act. If no Director is present, or if each of the Directors present declines to take the chair, the persons present and entitled to vote on a poll shall elect one of their number to be chairman.

 

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30.                                 The chairman of the meeting may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for three months or more, notice of the adjourned meeting shall be given as in the case of an original meeting.

 

31.                                 Save as expressly provided by these Bye-Laws, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

 

VOTING

 

32.                                 Save where a greater majority is required by the Companies Acts or these Bye-Laws, any question proposed for consideration at any general meeting shall be decided on by a simple majority of votes cast; provided, that to the extent the Memorandum of Association of the Company requires the affirmative vote or consent of an Independent Shareholder, then such question shall also require such vote or consent.

 

33.                                 At any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:-

 

the chairman of the meeting; or

 

at least three Shareholders present in person or represented by proxy; or

 

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(3)                                  any Shareholder or Shareholders present in person or represented by proxy and holding between them not less than one tenth of the total voting rights of all the Shareholders having the right to vote at such meeting; or

 

(4)                                  a Shareholder or Shareholders present in person or represented by proxy holding shares conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all such shares conferring such right.

 

The demand for a poll may be withdrawn by the person or any of the persons making it at any time prior to the declaration of the result. Unless a poll is so demanded and the demand is not withdrawn, a declaration by the chairman that a resolution has, on a show of hands, been carried or carried unanimously or by a particular majority or not carried by a particular majority or lost shall be final and conclusive, and an entry to that effect in the minute book of the Company shall be conclusive evidence of the fact without proof of the number or proportion of votes recorded for or against such resolution.

 

34.                                 If a poll is duly demanded, the result of the poll shall be deemed to be the resolution of the meeting at which the poll is demanded.

 

35.                                 A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken in such manner and either forthwith or at such time (being not later than three months after the date of the demand) and place as the chairman shall direct. It shall not be necessary (unless the chairman otherwise directs) for notice to be given of a poll.

 

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36.           The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll has been demanded and it may be withdrawn at any time before the close of the meeting or the taking of the poll, whichever is the earlier.

 

37.           On a poll, votes may be cast either personally or by proxy.

 

38.           A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way.

 

39.           In the case of an equality of votes at a general meeting, whether on a show of hands or on a poll, the chairman of such meeting shall not be entitled to a second or casting vote and the resolution shall fail.

 

40.           In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register in respect of the joint holding.

 

41.           A Shareholder who is a patient for any purpose of any statute or applicable law relating to mental health or in respect of whom an order has been made by any Court having jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote, whether on a show of hands or on a poll, by his receiver, committee, curator bonis or other person in the nature of a receiver, committee or curator bonis appointed by such Court and such receiver, committee, curator bonis or other person may vote on a poll by proxy, and may otherwise act and be treated as such Shareholder for the purpose of general meetings.

 

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42.           No Shareholder shall, unless the Board otherwise determines, be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid.

 

43.           If;

 

(1)           any objection shall be raised to the qualification of any voter; or,

 

(2)           any votes have been counted which ought not to have been counted or which might have been rejected; or,

 

(3)           any votes are not counted which ought to have been counted, the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters shall be final and conclusive.

 

PROXIES AND CORPORATE REPRESENTATIVES

 

44.           The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised by him in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

 

45.           Any Shareholder may appoint a standing proxy or (if a corporation) representative by depositing at the Registered Office a proxy or (if a corporation) an authorisation and such proxy or authorisation shall be valid for all general meetings and adjournments thereof or, resolutions in writing,

 

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as the case may be, until notice of revocation is received at the Registered Office. Where a standing proxy or authorisation exists, its operation shall be deemed to have been suspended at any general meeting or adjournment thereof at which the Shareholder is present or in respect to which the Shareholder has specially appointed a proxy or representative. The Board may from time to time require such evidence as it shall deem necessary as to the due execution and continuing validity of any such standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until such time as the Board determines that it has received the requested evidence or other evidence satisfactory to it.

 

46.           Subject to Bye-Law 45, the instrument appointing a proxy together with such other evidence as to its due execution as the Board may from time to time require, shall be delivered at the Registered Office (or at such place as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case or the case of a written resolution, in any document sent therewith) prior to the holding of the relevant meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, before the time appointed for the taking of the poll, or, in the case of a written resolution, prior to the effective date of the written resolution and in default the instrument of proxy shall not be treated as valid.

 

47.           instruments of proxy shall be in any common form or in such other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting or any written resolution forms of instruments of proxy for use at that meeting or in connection with that written resolution. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a written

 

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resolution or amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall unless the contrary is stated therein be valid as well for any adjournment of the meeting as for the meeting to which it relates.

 

48.           A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or unsoundness of mind of the principal, or revocation of the instrument of proxy or of the authority under which it was executed, provided that no intimation in writing of such death, unsoundness of mind or revocation shall have been received by the Company at the Registered Office (or such other place as may be specified for the delivery of instruments of proxy in the notice convening the meeting or other documents sent therewith) one hour at least before the commencement of the meeting or adjourned meeting, or the taking of the poll, or the day before the effective date of any written resolution at which the instrument of proxy is used.

 

49.           Subject to the Companies Acts, the Board may at its discretion waive any of the provisions of these Bye-Laws related to proxies or authorisations and, in particular, may accept such verbal or other assurances as it thinks fit as to the right of any person to attend and vote on behalf of any Shareholder at general meetings or to sign written resolutions.

 

APPOINTMENT AND REMOVAL OF DIRECTORS

 

50.           The number of Directors shall be such number not less than two as the Company by Resolution may from time to time determine, and, subject to the Companies Acts and these Bye-Laws, the Directors shall serve until the termination of the next Annual General Meeting following their appointment. All Directors, upon election or appointment (except upon

 

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election at an Annual General Meeting), must provide written acceptance of their appointment, in such form as the Board may think fit, by notice in writing to the Registered Office within thirty days of their appointment.

 

51.           The Company shall at the Annual General Meeting and may by Resolution determine the minimum and the maximum number of Directors and may by Resolution determine that one or more vacancies in the Board shall be deemed casual. vacancies for the purposes of these Bye-Laws. Without prejudice to the power of the Company by Resolution in pursuance of any of the provisions of these Bye-Laws to appoint any person to be a Director, the Board, so long as a quorum of Directors remains in office, shall have power at any time and from time to time to appoint any individual to be a Director so as to fill a casual vacancy.

 

52.           The Company may in a Special General Meeting called for that purpose remove a Director provided notice of any such meeting shall be served upon the Director concerned not less than 14 days before the meeting and he shall be entitled to be heard at that meeting. Any vacancy created by the removal of a Director at a Special General Meeting may be filled at the Meeting by the election of another Director in his place or, in the absence of any such election, by the Board.

 

RESIGNATION AND DISQUALIFICATION OF DIRECTORS

 

53.           The office of a Director shall be vacated upon the happening of any of the following events:

 

(1)             if he resigns his office by notice in writing delivered to the Registered Office or tendered at a meeting of the Board;

 

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(2)             if he becomes of unsound mind or a patient for any purpose of any statute or applicable law relating to mental health and the Board resolves that his office is vacated;

 

(3)             if he becomes bankrupt under the laws of any country or compounds with his creditors;

 

(4)             if he is prohibited by law from being a Director;

 

(5)             if he ceases to be a Director by virtue of the Companies Acts or is removed from office pursuant to these Bye-Laws.

 

ALTERNATE DIRECTORS

 

54.           A Director may appoint and remove his own Alternate Director. Any appointment or removal of an Alternate Director by a Director shall be effected by depositing a notice of appointment or removal with the Secretary at the Registered Office, signed by such Director, and such appointment or removal shall become effective on the date of receipt by the Secretary. Any Alternate Director may be removed by resolution of the Board. Subject as aforesaid, the office of Alternate Director shall continue until the next annual election of Directors or, if earlier, the date on which the relevant Director ceases to be a Director. An Alternate Director may also be a Director in his own right and may act as alternate to more than one Director.

 

55.           An Alternate Director shall be entitled to receive notices of all meetings of Directors, to attend, be counted in the quorum and vote at any such meeting at which any Director to whom he is alternate is not personally present, and generally to perform all the functions of any Director to whom he is alternate in his absence.

 

56.           Every person acting as an Alternate Director shall (except as regards powers to appoint an alternate and remuneration) be subject in all respects to the

 

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provisions of these Bye-Laws relating to Directors and shall alone be responsible to the Company for his acts and defaults and shall not be deemed to be the agent of or for any Director for whom he is alternate. An Alternate Director may be paid expenses and shall be entitled to be indemnified by the Company to the same extent mutatis mutandis as if he were a Director. Every person acting as an Alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). The signature of an Alternate Director to any resolution in writing of the Board or a committee of the Board shall, unless the terms of his appointment provides to the contrary, be as effective as the signature of the Director or Directors to whom he is alternate.

 

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DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND

EXPENSES

 

57.           The amount, if any, of Directors' fees shall from time to time be determined by the Company by Resolution and in the absence of a determination to the contrary such fees shall be deemed to accrue from day to day. Each Director may be paid his reasonable travel, hotel and incidental expenses in attending and returning from meetings of the Board or committees constituted pursuant to these Bye-Laws or general meetings and shall be paid all expenses properly and reasonably incurred by him in the conduct of the Company's business or in the discharge of his duties as a Director. Any Director who, by request, goes or resides abroad for any purposes of the Company or who performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Bye-Law.

 

DIRECTORS' INTERESTS

 

58.           (1)           A Director may hold any other office or place of profit with the Company (except that of auditor) in conjunction with his office of Director for such period and upon such terms as the Board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Bye-Law.

 

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(2)           A Director may act by himself or his firm in a professional capacity for the Company (otherwise than as auditor) and he or his firm shall be entitled to remuneration for professional services as if he were not a Director.

 

(3)           Subject to the provisions of the Companies Acts, a Director may notwithstanding his office be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise interested; and be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the Company or in which the Company is interested. The Board may also -cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.

 

( 4 )         So long as, where it is necessary, he declares the nature of his interest at the first opportunity at a meeting of the Board or by writing to the Directors as required by the Companies Acts, a Director shall not by reason of his office be accountable to the Company for any benefit which he derives from any office or employment to which these Bye-Laws allow him to be appointed or from any transaction or arrangement in which these Bye-Laws allow him to be interested, and no such transaction or arrangement shall be liable to be avoided on the ground of any interest or benefit.

 

(5)           Subject to the Companies Acts and any further disclosure required thereby, a general notice to the Directors by a Director or Officer declaring that he is a director or officer or has an interest in a person

 

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and is to be regarded as interested in any transaction or arrangement made with that person, shall be a sufficient declaration of interest in relation to any transaction or arrangement so made.

 

POWERS AND DUTIES OF THE BOARD

 

59.           Subject to the provisions of the Companies Acts, these Bye-Laws and the Relationship Agreement and to any directions given by the Company by Resolution, the Board shall manage the business of the Company and may pay all expenses incurred in promoting and incorporating the Company and may exercise all the powers of the Company. No alteration of these Bye- Laws and no such direction shall invalidate any prior act of the Board which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this Bye-Law shall not be limited by any special power given to the Board by these Bye-Laws and a meeting of the Board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Board.

 

60.           All cheques, promissory notes, drafts, bills of exchange and other instruments, whether negotiable or transferable or not, and all receipts for money paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the Board shall from time to time by resolution determine.

 

61.           The Board may from time to time appoint one or more of its body to be a managing director, joint managing director or an assistant managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Board may determine and may revoke or terminate any such appointments. Any such revocation or

 

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termination as aforesaid shall be without prejudice to any claim for damages that such Director may have against the Company or the Company may have against such Director for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Any person so appointed shall receive such remuneration (if any) (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and either in addition to or in lieu of his remuneration as a Director. -

 

DELEGATION OF THE BOARD'S POWERS

 

62.           The Board may by power of attorney appoint any company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Bye-Laws) and for such period and subject to such conditions as it may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney and of such attorney as the Board may think fit, and may also authorise any such attorney to sub- delegate all or any of the powers, authorities and discretions vested in him.

 

63.           The Board may entrust to and confer upon any Director, Officer or, without prejudice to the provisions of Bye-Law 64, other individual any of the powers exercisable by it upon such terms and conditions with such restrictions as it thinks fit, and either collaterally with, or to the exclusion of, its own powers, and may from time to time revoke or vary all or any of such powers but no person dealing in good faith and without notice of such revocation or variation shall be affected thereby.

 

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64.           The Board may delegate any of its powers, authorities and discretions to committees, consisting of such person or persons (whether a member or members of its body or not) as it thinks fit. Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, and in conducting its proceedings conform to any regulations which may be imposed upon it by the Board. If no regulations are imposed by the Board the proceedings of a committee with two or more members shall be, as far as is practicable, governed by the Bye-Laws regulating the proceedings of the Board.

 

PROCEEDINGS OF THE BOARD

 

65.           The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by the affirmative votes of a majority of the votes cast. In the case of an equality of votes the motion shall be deemed to have been lost. A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Board.

 

66.           Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to him personally or by word of mouth or sent to him by post, cable, telex, telecopier or other mode of representing or reproducing words in a legible and non-transitory form at his last known address or any other address given by him to the Company for this purpose. A Director may retrospectively waive the requirement for notice of any meeting by consenting in writing to the business conducted at the meeting.

 

67.           (I)            The quorum necessary for the transaction of the business of the Board shall be two Directors. Any Director who ceases to be a Director at a meeting of the Board may continue to be present and to

 

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act as a Director and be counted in the quorum until the termination of the meeting if no other Director objects and if otherwise a quorum of Directors would not be present.

 

(2)           A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or proposed contract, transaction or arrangement with the Company and has complied with the provisions of the Companies Acts and these Bye-Laws with regard to disclosure of his interest shall be entitled to vote in respect of any contract, transaction or arrangement in which he is so interested and if he shall do so his vote shall be counted, and he shall be taken into account in ascertaining whether a quorum is present.

 

(3)           The Resident Representative shall, upon delivering written notice of an address for the purposes of receipt of notice, to the Registered Office, be entitled to receive notice of, attend and be heard at, and to receive minutes of all meetings of the Board.

 

68.           So long as a quorum of Directors remains in office, the continuing Directors may act notwithstanding any vacancy in the Board but, if no such quorum remains, the continuing Directors or a sole continuing Director may act only for the purpose of calling a general meeting.

 

69.           The Chairman (or President) or, in his absence, the Deputy Chairman (or Vice-President), shall preside as chairman at every meeting of the Board. If at any meeting the Chairman or Deputy Chairman (or the President or Vice-President) is not present promptly after the time appointed for holding the meeting, or is not willing to act as chairman, the Directors present may choose one of their number to be chairman of the meeting.

 

70.           The meetings and proceedings of any committee consisting of two or more Directors shall be governed by the provisions contained in these Bye-Laws

 

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for regulating the meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board.

 

71.           A resolution in writing signed by all the Directors for the time being entitled to receive notice of a meeting of the Board or by all the members of a committee for the time being shall be as valid and effectual as a resolution passed at a meeting of the Board or, as the case may be, of such committee duly called and constituted. Such resolution may be contained in one document or in several documents in the like form each signed by one or more of the Directors or members of the committee concerned.

 

72.           A meeting of the Board or a committee appointed by the Board may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously and participation in such a meeting shall constitute presence in person at such meeting.

 

73.           All acts done by the Board or by any committee or by any person acting as a Director or member of a committee or any person duly authorised by the Board or any committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the Board or such committee or person acting as aforesaid or that they or any of them were disqualified or had vacated their office, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director, member of such committee or person so authorised.

 

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OFFICERS

 

74.           The Officers of the Company shall include a President and a Vice-President or a Chairman and a Deputy Chairman who shall be Directors and shall be elected by the Board as soon as possible after the statutory meeting and each Annual General Meeting. In addition, the Board may appoint any person whether or not he is a Director to hold such office as the Board may from time to time determine. Any person elected or appointed pursuant to this Bye-Law shall hold office for such period and upon such terms as the Board may determine and the Board may revoke or terminate any such election or appointment. Any such revocation or termination shall be without prejudice to any claim for damages that such Officer may have against the Company or the Company may have against such Officer for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Save as provided in the Companies Acts or these Bye-Laws, the powers and duties of the Officers of the Company shall be such (if any) as are determined from time to time by the Board.

 

MINUTES

 

75.           The Board shall cause minutes to be made and books kept for the purpose of recording -

 

(1)           all appointments of Officers made by the Board;

 

(2)           the names of the Directors and other persons (if any) present at each meeting of the Board and of any committee;

 

(3)           of all proceedings at meetings of the Company, of the holders of any class of shares in the Company, of the Board and of committees appointed by the Board or the Shareholders;

 

(4)           of all proceedings of its managers (if any).

 

Shareholders shall only be entitled to see the Register of Directors and Officers, the Register, the financial information provided for in Bye-Law 91 and the minutes of meetings of the Shareholders of the Company.

 

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SECRETARY AND RESIDENT REPRESENTATIVE

 

76.           The Secretary (including one or more deputy or assistant secretaries) and, if required, the Resident Representative, shall be appointed by the Board at such remuneration (if any) and upon such terms as it may think fit and any Secretary and Resident Representative so appointed may be removed by the Board. The duties of the Secretary and the duties of the Resident Representative shall be those prescribed by the Companies Acts together with such other duties as shall from time to time be prescribed by the Board.

 

77.           A provision of the Companies Acts or these Bye-Laws requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as, or in the place of, the Secretary.

 

THE SEAL

 

78.           (1)           The Seal shall consist of a circular metal device with the name of the Company around the outer margin thereof and the country and year of incorporation across the centre thereof. Should the Seal not have been received at the Registered Office in such form at the date of adoption of this Bye-Law then, pending such receipt, any document requiring to be sealed with the Seal shall be sealed by affixing a red wafer seal to the document with the name of the Company, and the country and year of incorporation type written across the centre thereof.

 

(2)           The Board shall provide for the custody of every Seal. A Seal shall only be used by authority of the Board or of a committee constituted by the Board. Subject to these Bye-laws, any instrument to which a

 

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Seal is affixed shall be signed by either two Directors, or by the Secretary and one Director, or by the Secretary or by any one person whether or not a Director or Officer, who has been authorised either generally or specifically to affirm the use of a Seal; provided that the Secretary or a Director may affix a Seal over his signature alone to authenticate copies of these Bye-Laws, the minutes of any meeting or any other documents requiring authentication

 

DIVIDENDS AND OTHER PAYMENTS

 

79.           The Board may from time to time declare dividends or distributions out of contributed surplus to be paid to the Shareholders according to their rights and interests including such interim dividends as appear to the Board to be justified by the position of the Company. The Board, in its discretion, may determine that any dividend shall be paid in cash or shall be satisfied, subject to Bye-Law 86, in paying up in full shares in the Company to be issued to the Shareholders credited as fully paid or partly paid or partly in one way and partly the other. The Board may also pay any fixed cash dividend which is payable on any shares of the Company half yearly or on such other dates, whenever the position of the Company, in the opinion of the Board, justifies such payment.

 

80.           Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide:-

 

(1)           all dividends or distributions out of contributed surplus may be declared and paid according to the amounts paid up on the shares in respect of which the dividend or distribution is paid, and an amount paid up on a share in advance of calls may be treated for the purpose of this Bye-Law as paid-up on the share;

 

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(2)           dividends or distributions out of contributed surplus may be apportioned and paid pro rata according to the amounts paid-up on the shares during any portion or portions of the period in respect of which the dividend or distribution is paid.

 

81.           No dividend, distribution or other moneys payable by the Company on or in respect of any share shall bear interest against the Company.

 

82.           Any dividend, distribution or interest, or part thereof payable in cash, or any other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his address in the Register or, in the case of joint holders, addressed to the holder whose name stands first in the Register in respect of the shares at his registered address as appearing in the Register or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first in the Register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends, distributions or other moneys payable or property distributable in respect of the shares held by such joint holders.

 

83.           Any dividend or distribution out of contributed surplus unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to the Company and the payment by the Board of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof.

 

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84.           The Board may also, in addition to its other powers, direct payment or satisfaction of any dividend or distribution out of contributed surplus wholly or in part by the distribution of specific assets, and in particular of paid-up shares or debentures of any other company, and where any difficulty arises in regard to such distribution or dividend the Board may settle it as it thinks expedient, and in particular, may authorise any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution or dividend purposes of any such specific assets and may determine that cash payments shall be made to any Shareholders upon the footing of the values so fixed in order to secure equality of distribution and may vest any such specific assets in trustees as may seem expedient to the Board provided that such dividend or distribution may not be satisfied by the distribution of any partly paid shares or debentures of any company without the sanction of a Resolution.

 

RESERVES

 

85.           The Board may, before recommending or declaring any dividend or distribution out of contributed surplus, set aside such sums as it thinks proper as reserves which shall, at the discretion of the Board, be applicable for any purpose of the Company and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time think fit. The Board may also without placing the same to reserve carry forward any sums which it may think it prudent not to distribute.

 

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CAPITALIZATION OF PROFITS

 

86.           The Board may, from time to time resolve to capitalise all or any part of any amount for the time being standing to the credit of any reserve or fund which is available for distribution or to the credit of any share premium account and accordingly that such amount be set free for distribution amongst the Shareholders or any class of Shareholders who would be entitled thereto if distributed by way of dividend and in the same proportions, on the footing that the same be not paid in cash but be applied either in or towards paying up amounts for the time being unpaid on any shares in the Company held by such Shareholders respectively or in payment up in full of unissued shares, debentures or other obligations of the Company, to be allotted and distributed credited as fully paid amongst such Shareholders, or partly in one way and partly in the other, provided that for the purpose of this Bye-Law, a share premium account may be applied only in paying up of unissued shares to be issued to such Shareholders credited as fully paid and provided further that any sum standing to the credit of a share premium account may only be applied in crediting as fully paid shares of the same class as that from which the relevant share premium was derived.

 

87.           Where any difficulty arises in regard to any distribution under the last preceding Bye-Law, the Board may settle the same as it thinks expedient and, in particular, may authorise any person to sell and transfer any fractions or may resolve that the distribution should be as nearly as may be practicable in the correct proportion but not exactly so or may ignore fractions altogether, and may determine that cash payments should be made to any Shareholders in order to adjust the rights of all parties, as may seem expedient to the Board. The Board may appoint any person to sign on behalf of the persons entitled to participate in the distribution any contract necessary or desirable for giving effect thereto and such appointment shall be effective and binding upon the Shareholders.

 

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RECORD DATES

 

88.           Notwithstanding any other provisions of these Bye-Laws, the Company may by Resolution or the Board may fix any date as the record date for any dividend, distribution, allotment or issue and for the purpose of identifying the persons entitled to receive notices of general meetings. Any such record date may be on or at any time before or after any date on which such dividend, distribution, allotment or issue is declared, paid or made or such notice is despatched.

 

ACCOUNTING RECORDS

 

89.           The Board shall cause to be kept accounting records sufficient to give a true and fair view of the state of the Company's affairs and to show and explain its transactions, in accordance with the Companies Acts.

 

90.           The records of account shall be kept at the Registered Office or at such other place or places as the Board thinks fit, and shall at all times be open to inspection by the Directors: PROVIDED that if the records of account are kept at some place outside Bermuda, there shall be kept at an office of the Company in Bermuda such records as will enable the Directors to ascertain with reasonable accuracy the financial position of the Company at the end of each three month period. No Shareholder (other than an Officer or Director of the Company) shall have any right to inspect any accounting record or book or document of the Company except as conferred by law or authorised by the Board or by Resolution.

 

91.           A copy of every balance sheet and statement of income and expenditure, including every document required by law to be annexed thereto, which is to be laid before the Company in general meeting, together with a copy of the

 

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auditors' report, shall be sent to each person entitled thereto in accordance with the requirements of the Companies Acts.

 

AUDIT

 

92.           Save and to the extent that an audit is waived in the manner permitted by the Companies Acts, auditors shall be appointed and their duties regulated in accordance with the Companies Acts, any other applicable law and such requirements not inconsistent with the Companies Acts as the Board may from time to time determine.

 

SERVICE OF NOTICES AND OTHER DOCUMENTS

 

93.           Any notice or other document (including a share certificate) may be served on or delivered to any Shareholder by the Company either personally or by sending it through the post (by airmail where applicable) in a pre-paid letter addressed to such Shareholder at his address as appearing in the Register or by delivering it to or leaving it at such registered address. In the case of joint holders of a share, service or delivery of any notice or other document on or to one of the joint holders shall for all purposes be deemed as sufficient service on or delivery to all the joint holders. Any notice or other document if sent by post shall be deemed to have been served or delivered seven days after it was put in the post, and in proving such service or delivery, it shall be sufficient to prove that the notice or document was properly addressed, stamped and put in the post.

 

94.           Any notice of a general meeting of the Company shall be deemed to be duly given to a Shareholder, or other person entitled to it, if it is sent to him by cable, telex, telecopier or other mode of representing or reproducing words in a legible and non-transitory form at his address as appearing in the

 

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Register or any other address given by him to the Company for this purpose. Any such notice shall be deemed to have been served twenty-four hours after its despatch.

 

95.           Any notice or other document delivered, sent or given to a Shareholder in any manner permitted by these Bye-Laws shall, notwithstanding that such Shareholder is then dead or bankrupt or that any other event has occurred, and whether or not the Company has notice of the death or bankruptcy or other event, be deemed to have been duly served or delivered in respect of any share registered in the name of such Shareholder as sole or joint holder unless his name shall, at the time of the service or delivery of the notice or document, have been removed from the Register as the holder of the share, and such service or delivery shall for all purposes be deemed as sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share.

 

WINDING UP

 

96.           If the Company shall be wound up, the liquidator may, with the sanction of a Resolution of the Company and any other sanction required by the Companies Acts, divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purposes set such values as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders or different classes of Shareholders. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trust for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Shareholder shall be compelled to accept any shares or other assets upon which there is any liability.

 

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INDEMNITY

 

97.           Subject to the proviso below, every Director, Officer of the Company and member of a committee constituted under Bye-Law 64 and any Resident Representative shall be indemnified out of the funds of the Company against all liabilities, loss, damage or expense (including but not limited to liabilities under contract; tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him as such Director, Officer, committee member or Resident Representative and the indemnity contained in this Bye-Law shall extend to any person acting as a Director, Officer, committee member or Resident Representative in the reasonable belief that he has been so appointed or elected notwithstanding any defect in such appointment or election PROVIDED ALWAYS that the indemnity contained in this Bye- Law shall not extend to any matter which would render it void pursuant to the Companies Acts.

 

98.           Every Director, Officer, member of a committee duly constituted under Bye- Law 64 or Resident Representative of the Company shall be indemnified out of the funds of the Company against all liabilities incurred by him as such Director, Officer, committee member or Resident Representative in defending any proceedings, whether civil or criminal, in which judgement is given in his favour, or in which he is acquitted, or in connection with any application under the Companies Acts in which relief from liability is granted to him by the court.

 

99.           To the extent that any Director, Officer, member of a committee duly constituted under Bye-Law 64 or Resident Representative is entitled to claim an indemnity pursuant to these Bye-Laws in respect of amounts paid or

 

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discharged by him, the relative indemnity shall take effect as an obligation of the Company to reimburse the person making such payment or effecting such discharge.

 

100.         Each Shareholder and the Company agree to waive any claim or right of action he or it may at any time have, whether individually or by or in the right of the Company, against any Director, Officer, or member of a committee duly constituted under Bye-Law 64 on account of any action taken by such Director, Officer, or member of a committee or the failure of such Director, Officer, or member of a committee to take any action in the performance of his duties with or for the Company PROVIDED HOWEVER that such waiver shall not apply to any claims or rights of action arising out of the fraud of such Director, Officer, or member of a committee duly constituted under Bye-Law 64 or to recover any gain, personal profit or advantage to which such Director, Officer, or member of a committee duly constituted under Bye-Law 64 is not legally entitled.

 

101.         Subject to the Companies Acts, expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Bye-Laws 97 and 98 shall be paid by the Company in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified pursuant to Bye-Laws 97 and 98.

 

Each Shareholder of the Company, by virtue of its acquisition and continued holding of a share, shall be deemed to have acknowledged and agreed that the advances of funds may be made by the Company as aforesaid, and when made by the Company under this Bye-Law 101 are made to meet expenditures incurred for the purpose of enabling such Director, Officer, or

 

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member of a committee duly constituted under Bye-Law 64 to properly perform his or her duties as an officer of the Company.

 

AMALGAMATION

 

102.         Any resolution proposed for consideration at any general meeting to approve the amalgamation of the Company with any other company, wherever incorporated, shall require the approval of a simple majority of votes cast at such meeting and the quorum for such meeting shall be that required in Bye- Law 25 and a poll may be demanded in respect of such resolution in accordance with the provisions of Bye-Law 33.

 

CONTINUATION

 

103.         Subject to the Companies Acts and the Relationship Agreement, the Board may approve the discontinuation of the Company in Bermuda and the continuation of the Company in a jurisdiction outside Bermuda. The Board, having resolved to approve the discontinuation of the Company, may further resolve not to proceed with any application to discontinue the Company in Bermuda or may vary such application as it sees fit.

 

ALTERATION OF BYE-LAWS

 

104.         These Bye-Laws may be amended from time to time in the manner provided for in the Companies Act and the Company's Memorandum of Association.

 

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Exhibit 5(b)

 

PDC Capital Corp.

Constitutional Documents

 

 

CERTIFICATE OF INCORPORATION

OF

PDC CAPITAL CORPORATION

 

FIRST: The name of this corporation is PDC Capital Corporation (hereinafter called the "Corporation").

 

SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, DE 19801. The name of its registered agent at such address is The Corporation Trust Company.

 

THIRD: The nature of the business to be conducted or promoted by the Corporation is to engage solely in the following activities:

 

(a)     to own shares of the capital stock of Arjo Wiggins Appleton Bermuda Limited, a Bermuda company;

 

(b)     to enter into, perform and comply with a Relationship Agreement by and among the Corporation, Arjo Wiggins Appleton p.l.c., Arjo Wiggins Bermuda Holdings Limited, Paperweight Development Corp. and Arjo Wiggins Appleton Bermuda Limited; and

 

(c)     to engage in any lawful act or activity and to exercise any powers permitted to corporations organized under the General Corporation Law of the State of Delaware that, in either case, are incidental to and necessary or convenient for the accomplishment of the above- mentioned purposes.

 

FOURTH: The total number of shares of all classes of stock that the Corporation is authorized to issue is One Thousand (1,000) shares, all of which shares shall be common stock, $1.00 par value per share ("Common Stock"). All shares of Common Stock will be identical and will entitle the holders thereof to the same rights and privileges.

 

FIFTH: In furtherance and not in limitation of the powers conferred by statute, the Corporation's Board of Directors is expressly authorized to alter, amend, repeal or adopt the By- Laws of the Corporation; provided, however, that any such alteration, amendment, repeal or adoption that relates to or affects in any way the criteria for, qualifications of, or requirement that the Corporation maintain at least one "Independent Director" (as such term is defined in the Seventh Article), must receive the prior affirmative vote or written consent of each Independent Director.

 

SIXTH: Elections of directors need not be by written ballot unless, and to the extent, so provided in the Corporation's By-Laws

 

 

SEVENTH: The Corporation shall at all times (except as noted hereafter in the event of death, incapacity, resignation or removal) have at least one director (an "Independent Director") who (a) is not and has not been in the past three years a stockholder (whether direct, indirect or beneficial) (except as the holder of not more than one percent (1%) of the equity securities), customer, advisor, supplier, trustee, conservator or receiver of or for, or otherwise received any payments in excess of $60,000 from, Paperweight Development Corp., a Wisconsin corporation (the "Parent") and/or any Affiliate (as such term is defined below); (b) is not and has not been in the past three years a director, officer, employee, associate or affiliate of any person (which term includes an entity) described in clause (a) above; and (c) is not a person related to any person referred to in clauses (a) or (b) above. In the event of the death, incapacity, resignation or removal of an Independent Director, the Board of Directors shall promptly appoint a replacement Independent Director. The Board of Directors shall not vote on any matter requiring the vote of an Independent Director under this Certificate of Incorporation unless an Independent Director is then serving on the Board. For purposes hereof, the term "Affiliate" means any person or entity, other than the Corporation, that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Parent, where the term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of securities, by contract, credit arrangement or agency, or otherwise.

 

EIGHTH: To the extent permitted under the General Corporation Law of the State of Delaware, none of the Corporation's directors shall be liable to the Corporation or its stockholder for monetary damages as a result of breaching any fiduciary duty as a director. Any repeal or modification of this Eighth Article by the Corporation's stockholder shall be prospective only, and shall not adversely affect any limitation on the personal liability of any director of the Corporation existing at the time of such repeal or modification.

 

NINTH: Subject to the limitations of an Independent Director in the Seventh Article, to the extent permitted under the General Corporation Law of the State of Delaware, any person (including, but not limited to, stockholders, directors, officers and employees of the Corporation or any Affiliate) may engage in or possess an interest in other business ventures of every nature and description, independently or with others, whether such ventures are competitive with the Corporation or otherwise, and neither the Corporation nor its stockholder shall have any right in or to such independent ventures or to the income or profits derived therefrom.

 

TENTH: Notwithstanding any other provision of this Certificate of Incorporation and any provision of law, the Corporation shall not do any of the following:

 

(a)     engage in any business or activity other than as set forth in the Third Article hereof,

 

(b)     without the affirmative vote of all of the members of the Board of Directors of the Corporation (which must include the affirmative vote of one duly appointed Independent

 

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Director, who must be present to constitute a quorum therefor), (i) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent; (ii) consent to the institution of bankruptcy or insolvency proceedings against it; (iii) file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to bankruptcy or insolvency; (iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or a substantial part of its property; (v) make a general assignment for the benefit of creditors; (vi) admit in writing its inability to pay its debts generally as they become due; or (vii) take any corporate action in furtherance of the actions set forth in clauses (i) through (vi) of this paragraph;

 

(c)     without the affirmative vote of all of the members of the Board of Directors of the Corporation (which must include the affirmative vote of one duly appointed Independent Director, who must be present to constitute a quorum therefor) merge or consolidate with any other corporation, company or entity or, except to the extent contemplated by the Third Article hereof, sell all or substantially all of its assets, or acquire all or substantially all of the assets or capital stock or other ownership interest of any other corporation, company or entity or grant any lien or encumbrance on any of its assets; or

 

(d)     incur or assume any indebtedness for borrowed money.

 

ELEVENTH: The Corporation shall insure at all times that (a) it conducts its business from an office that is separate and distinct from those of the Parent or any Affiliate, even if such office space is subleased from, or is on or near premises occupied by, the Parent or any Affiliate; (b) it maintains and uses separate stationery and telephone lines or numbers from those of the Parent or any Affiliate; (c) it maintains separate corporate records and books of account from those of the Parent or any Affiliate; (d) none of the Corporation's assets will be commingled with those of the Parent or any Affiliate; (e) the compensation of any employee, consultant or agent of the Corporation or any other operating expense incurred by the Corporation, will be paid from the assets of the Corporation; (f) it maintains an arms' length relationship with the Parent and its Affiliates; (g) it holds itself out to the public under its own name and as a separate and distinct legal entity from the Parent or any Affiliate; (h) it observes all customary formalities regarding its corporate existence, including holding regular Board of Directors meetings at least quarterly; (i) it has sufficient officers and personnel and maintains adequate capital to run its business and operations; (j) all business transactions permitted to be entered into by it with the Parent or any Affiliate must be on terms and conditions that are not more or less favorable to the Corporation than terms and conditions available at the time to the Corporation for comparable transactions with unaffiliated persons, or, if no such comparable transaction exists, on term and conditions that are otherwise fair and reasonable; (k) it does not (i) guarantee or assume any liabilities or obligations of the Parent or any Affiliate or (ii) permit the Parent or any Affiliate to assume or guarantee any liabilities of the Corporation; and (I) it does not acquire the obligations or securities of, or make loans or advances to, the Parent or any other Affiliate or hold out its credit as being able to satisfy the obligations of any other entity.

 

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TWELFTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in any manner now or hereafter provided herein or by statute; provided, however, that the Corporation shall not amend, alter, change or repeal any provision of the Third, Fifth, Seventh, Tenth or Eleventh, or this Twelfth Article of this Certificate of Incorporation (the "Restricted Articles") without the affirmative vote of one duly elected Independent Director, who must be present to constitute a quorum therefor; and provided, further, that the Corporation shall not amend or change any provision of any Article other than the Restricted Articles so as to be inconsistent with the Restricted Articles.

 

THIRTEENTH: When exercising any vote on whether the Corporation will take any action described in paragraph-(b) of the Tenth Article hereof, each director shall cast his vote recognizing that he owes his primary fiduciary duty or other obligation to the Corporation (including, without limitation, the Corporation's creditors) and not to its stockholder (except as may specifically be required by the General Corporation Law of the State of Delaware). The stockholder of the Corporation shall be deemed to have consented to the foregoing provisions of this Thirteenth Article, specifically and without limitation the waiver of its right to use a dissolution of the Corporation under Section 275(c) of the General Corporation Law of the State of Delaware, (a) by virtue of such stockholder's consent to this Certificate of Incorporation, with respect to the initial stockholder, and (b) by virtue of such stockholder's purchase of stock of the Corporation, with respect to any subsequent stockholders.

 

FOURTEENTH: In addition to the powers and authority herein above or by statute expressly conferred upon them, the Corporation's Board of Directors are hereby empowered to exercise all such powers and to do all such acts and things as may be exercised or done by the Corporation, subject nevertheless, to the provisions of the General Corporation Law of the State of Delaware, this Certificate of Incorporation (including without limitation, the Restricted Articles) and the By-Laws of the Corporation; provided, however, that no By-Law hereinafter adopted by the stockholders shall invalidate any prior act of the Corporation's Board of Directors which would have been valid had such By-Law not been adopted. The Corporation's Board of Directors will duly authorize all of the Corporation's actions.

 

FIFTEENTH: The Corporation is to have perpetual existence.

 

SIXTEENTH: The name and mailing address of the incorporator are as follows:

 

Barbara D. Gurican

Godfrey & Kahn, S.C.

780 N. Water Street

Milwaukee, Wisconsin 53202

 

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THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, makes this Certificate, hereby declaring and certifying that the facts herein stated are true, and accordingly has hereunto set her hand this 6th day of November, 2001.

 

 

	
 

	
/s/ Barbara D. Gurican

	
 

	
Barbara D. Gurican

	
 

	
Sole Incorporator

 

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BY-LAWS

 

OF

 

PDC CAPITAL CORPORATION

ARTICLE I

 

OFFICES

 

Section 1. The registered office of PDC CAPITAL CORPORATION (the "Corporation") shall be in Wilmington, Delaware.

 

Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

 

Section 3. The Corporation shall maintain a business office through which its business will be conducted separate from those of Paperweight Development Corp. and its subsidiaries and affiliates.

 

ARTICLE II

 

MEETINGS OF STOCKHOLDERS

 

Section 1. Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the Corporation.

 

Section 2. The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting, directors shall be elected and any other proper business may be transacted.

 

Section 3. A majority of the stock issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by the General Corporation Law of Delaware, by the Corporation's Certificate of Incorporation, or by these By-Laws. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat.

 

 

Section 4. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes, or the Corporation's Certificate of Incorporation, or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question.

 

Section 5. At each meeting of the stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for such stockholder by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with the Secretary of the Corporation at the beginning of each meeting in order to be counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the record date set by the Board of Directors as provided in Article V, Section 6 hereof All elections shall be had and all questions decided by a plurality vote.

 

Section 6. Special meetings of the stockholders, for any purpose, or purposes, unless otherwise prescribed by the General Corporation Law of Delaware or by the Corporation's Certificate of Incorporation, may be called by the President and shall be called by the President or the Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

 

Section 7. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given to each stockholder entitled to vote at such meeting not less than five nor more than sixty days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.

 

Section 8. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof; and may be inspected by any stockholder who is present.

 

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Section 9. Unless otherwise provided in the Corporation's Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

ARTICLE III

 

DIRECTORS

 

Section 1. The number of directors which shall constitute the whole Board shall be not less than two nor more than six, which number shall be fixed from time to time by resolution of the Board of Directors. The directors need not be stockholders or citizens of the United States or residents of the State of Delaware. The Corporation shall at all times, except as noted hereafter, have at least one Independent Director (as such term is defined in the Corporation's Certificate of Incorporation). In the event of the death, incapacity, resignation or removal of an Independent Director, or in the event that a director acting as an Independent Director shall cease to satisfy the eligibility conditions for an Independent Director, the Board of Directors shall promptly appoint a replacement Independent Director; provided, however, that the Board of Directors shall not vote on any matter requiring the vote of an Independent Director unless and until at least one Independent Director has been duly appointed to serve on the Board of Directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Corporation's Certificate of Incorporation or by the General Corporation Law of Delaware, any director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat.

 

Section 2. Vacancies on the Board of Directors by reason of death, resignation, retirement, disqualification, or increase in the authorized number of directors may, subject to Section 1 of this Article above, be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election of directors and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy, the directors then in office shall constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

 

4

 

Section 3. The property and business of the Corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Corporation's Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

 

MEETINGS OF THE BOARD OF DIRECTORS

 

Section 4. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation outside of the State of Delaware.

 

Section 5. A regular meeting of the Board of Directors shall be held at least once per quarter. The date and time of the regular meetings shall be determined by the President unless otherwise determined by the Board of Directors.

 

Section 6. Special meetings of the Board of Directors may be called by the President on forty-eight hours' notice to each director, either personally, by telegram or by telecopy; special meetings shall be called by the President or the Secretary in like manner and on like notice on the written request of two directors unless the Board of Directors consists of only one director; in which case special meetings shall be called by the President or Secretary in like manner or on like notice on the written request of the sole director.

 

Section 7. At all meetings of the Board of Directors, one-half of the entire Board of Directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Corporation's Certificate of Incorporation or by these By-Laws and except that one Independent Director must be present to form a quorum for any matter which, pursuant to the Certificate of Incorporation or these By-Laws, requires the vote of an Independent Director. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. If only one director is authorized, such sole director shall constitute a quorum.

 

Section 8. Unless otherwise restricted by the Corporation's Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

 

5

 

Section 9. Unless otherwise restricted by the Corporation's Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

 

COMMITTEES OF DIRECTORS

 

Section 10. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, and subject to the requirements of Article III, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal for the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Corporation's Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, amending these By-Laws, or taking any other action which, pursuant to the Certificate of Incorporation, requires the vote of an Independent Director; and, unless the resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.

 

Section 11. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

 

COMPENSATION OF DIRECTORS

 

Section 12. Unless otherwise restricted by the Corporation's Certificate of Incorporation or these By-Laws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director; provided, however, that services provided by any director which are determined by the Board of Directors to be ministerial and of negligible

 

 

value will not be compensated. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

 

INDEMNIFICATION

 

Section 13. The Corporation shall indemnify every person who was or is a party or is or was threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer or employee of the Corporation or, while a director, officer or employee of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise or entity, against expenses (including counsel fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, to the full extent permitted by the General Corporation Law of Delaware. The Corporation shall pay the expenses (including counsel fees) incurred by such person in advance of the final disposition of the action, suit or proceeding in accordance with section 145(e) of the General Corporation Law of Delaware.

 

ARTICLE IV

 

OFFICERS

 

Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Secretary, and a Treasurer. The Corporation may also have at the discretion of the Board of Directors such other officers as are desired, including one or more Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 2 of this Article. In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person, unless the Corporation's Certificate of Incorporation or these By-Laws otherwise provide.

 

Section 2. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

 

Section 3. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors.

 

Section 4. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. If the

 

6

 

office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.

 

PRESIDENT

 

Section 5. The President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. The President shall be an ex- officio member of all committees and shall have the general powers and duties of management usually vested in the office of President and Chief Executive Officer of corporations, and shall have such other powers and duties as may be prescribed by the Board of Directors or these By- Laws.

 

VICE PRESIDENTS

 

Section 6. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors.

 

SECRETARY AND ASSISTANT SECRETARY

 

Section 7. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these By-Laws. The Secretary shall keep in safe custody the seal of the Corporation, and when authorized by the Board of Directors, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature.

 

Section 8. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, or if there be no such determination, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

7

 

TREASURER AND ASSISTANT TREASURER

 

Section 9. The Treasurer shall have the custody of the corporate funds and securities and shall keep frill and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects, in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shalt render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond, in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of the Treasurer's office and for the restoration to the Corporation, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

 

Section 10. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, or if there be no such determination, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

ARTICLE V

 

CERTIFICATES OF STOCK

 

Section 1. Every holder of stock of the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the Corporation, certifying the number of shares represented by the certificate owned by such stockholder in the Corporation.

 

Section 2. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

 

Section 3. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent

 

8

 

such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate, which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

LOST, STOLEN OR DESTROYED CERTIFICATES

 

Section 4. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

 

TRANSFERS OF STOCK

 

Section 5. Upon surrender to the Corporation, or the transfer agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

 

FIXING RECORD DATE

 

Section 6. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders, or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

9

 

REGISTERED STOCKHOLDERS

 

Section 7. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the General Corporation Law of Delaware.

 

ARTICLE VI

 

GENERAL PROVISIONS

 

DIVIDENDS

 

Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Corporation's Certificate of Incorporation.

 

Section 2. Before payment of any dividend there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation, and the directors may abolish any such reserve. The Corporation will not pay dividends out of funds other than retained earnings unless the Board of Directors determines that the funds to be paid as dividends are no longer needed by the Corporation in the operations of its business and that the Corporation will not require any additional capital contributions after the payment of such dividend.

 

CHECKS

 

Section 3. All checks, drafts or other orders for the payment of money issued in the name of the Corporation shall be signed by such officers, employees or agents of the Corporation as shall from time to time be designated by the President, a Vice President, the Treasurer or an Assistant Treasurer. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as shall from time to time be designated by the President, a Vice President, the Treasurer or an Assistant Treasurer; and such officers may designate any type of depository arrangement (including but not limited to depository arrangements resulting in net debits against the Corporation) as from time to time offered or available.

 

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FISCAL YEAR

 

Section 4. The fiscal year of the Corporation shall be the calendar year. 

 

NOTICES

 

Section 5. Whenever, under the provisions of the General Corporation Law of Delaware or of the Corporation's Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.

 

Section 6. Whenever any notice is required to be given under the provisions of the General Corporation Law of Delaware or of the Corporation's Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed to be equivalent.

 

ANNUAL STATEMENT

 

Section 7. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation.

 

ARTICLE VII

 

AMENDMENTS

 

Section I. These By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Corporation's Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting; provided, however, that any such alteration, amendment, repeal or adoption that relates to or affects in any way the criteria for, qualifications of, or requirement that the Corporation maintain an Independent Director must receive the prior affirmative vote or written consent of each Independent Director. If the power to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the Corporation's Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal By-Laws.

 

11exhibit10-3.htm

Exhibit 10.3

 

EXECUTION COPY

 

SECOND AMENDMENT TO CREDIT AGREEMENT

 

SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"), dated as of September 30, 2009 is by and among APPLETON PAPERS INC., a Delaware corporation (the "U.S. Borrower"), PAPERWEIGHT DEVELOPMENT CORP., a Wisconsin corporation ("Holdings"), certain subsidiaries of Holdings identified on the signature pages hereto as Guarantors, the Lenders identified on the signature pages hereto and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement (as defined below). 

 

W I T N E S S E T H:

 

WHEREAS, the U.S. Borrower, Bemrosebooth Limited, a company organized under the laws of the United Kingdom, certain Subsidiaries of the U.S. Borrower party thereto, Holdings, the Lenders party thereto and the Administrative Agent entered into that certain Credit Agreement dated as of June 5, 2007 (as amended, restated, modified and/or supplemented from time to time, the "Credit Agreement"); 

 

WHEREAS, Holdings and the U.S. Borrower wish to amend and/or modify certain provisions of the Credit Agreement in order to permit the exchange of not less than $87,560,000 of the Senior Unsecured Notes and not less than $99,750,000 of the Senior Subordinated Notes for Second Lien Notes (as defined below) pursuant to the Exchange Offer (as defined below); 

 

WHEREAS, the Second Lien Notes shall be secured by a Lien on certain of the Collateral pursuant to the Second Lien Security Documents (as defined below), which Lien shall rank subordinated and junior to the Lien on the Collateral pursuant to the Security Documents; and 

 

WHEREAS, Holdings and the U.S. Borrower have requested that the Lenders amend the Credit Agreement to modify certain provisions contained therein; and

 

WHEREAS, the Required Lenders have agreed to amend the Credit Agreement on the terms and subject to the conditions set forth herein. 

 

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

I.                                         Amendments to Credit Agreement.  

 

1.                                       Section 1.01 of the Credit Agreement is hereby amended by inserting the following new definitions in the appropriate alphabetical order: 

 

 

"Exchange Offer" means the tender and exchange of Senior Unsecured Notes and Senior Subordinated Notes for Second Lien Notes pursuant to that certain Offering Circular, dated August 18, 2009, in respect of the Senior Unsecured Notes, the Senior Subordinated Notes and the Second Lien Notes.

 

"Intercreditor Agreement" means the Intercreditor Agreement executed by Holdings, the U.S. Borrower, the other Loan Parties from time to time party thereto, the Administrative Agent and the collateral agent under the Second Lien Note Indenture, as the same may be amended, restated, supplemented, waived and/or otherwise modified from time to time in accordance with the terms thereof and of this Agreement.  

 

"Second Amendment" means the Second Amendment to this Agreement, dated as of September 30, 2009.

 

"Second Amendment Effective Date" has the meaning specified in the Second Amendment.

 

"Second Lien Note Indenture" means the indenture entered into by Holdings, the U.S. Borrower, certain of its Subsidiaries and U.S. Bank National Association, as trustee, in connection with the issuance of the Second Lien Notes, as the same may be amended, restated, supplemented, waived and/or otherwise modified from time to time in accordance the terms thereof, of this Agreement and of the Intercreditor Agreement. 

 

"Second Lien Note Documents" means the Second Lien Note Indenture, the Second Lien Notes, the Second Lien Security Documents and each other document, instrument or agreement relating to the issuance of the Second Lien Notes, as the same may be amended, restated, supplemented, waived and/or otherwise modified from time to time in accordance with the terms thereof, of this Agreement and of the Intercreditor Agreement. 

 

"Second Lien Notes" means the 11.25% senior secured second lien notes of the U.S. Borrower due 2015 to be issued and exchanged pursuant to the Second Lien Note Indenture and in accordance with the Exchange Offer.

 

"Second Lien Security Documents" means the collective reference to each security agreement, pledge agreement, mortgage, deed of trust, collateral agreement, instrument or other document granting or perfecting a Lien on any asset or assets of any Person in accordance with the terms of the Intercreditor Agreement to secure the obligations and liabilities of Holdings, the U.S. Borrower and certain of its Subsidiaries under the Second Lien Note Documents.

 

"Specified Litigation" means that certain litigation commenced by the U.S. Borrower in September 2007 against a former contractor, in which the U.S. Borrower asserted claims including breach of obligations under a February 2007 agreement to perform certain engineering services, and in connection with which the U.S. Borrower received a favorable jury verdict on May 14, 2009.

 

 

2.                                       The definition of "Applicable Rate" appearing in Section 1.01 of the Credit Agreement is hereby amended by (a) deleting the grid contained in such definition and inserting the following new grid in lieu thereof:

 

	
 

	
 

	
 

	
 

	
 

	
 

	
Eurodollar

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Rate Loans

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
and

	
 

	
 

	
 

	
Pricing

	
 

	
Consolidated

	
 

	
 

	
 

	
Letter of

	
 

	
Base Rate

	
 

	
Level

	
 

	
Leverage Ratio

	
 

	
Commitment Fee

	
 

	
Credit Fee

	
 

	
Loans

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1

	
 

	
<= 3.50:1

	
 

	
0.50%

	
 

	
3.125%

	
 

	
2.125%

	
 

	
2

	
 

	
> 3.50:1 but 

<= 4.00:1

	
 

	
0.50%

	
 

	
3.625%

	
 

	
2.625%

	
 

	
3

	
 

	
> 4.00:1 but 

<= 4.50:1

	
 

	
0.50%

	
 

	
4.125%

	
 

	
3.125%

	
 

	
4

	
 

	
> 4.50:1

	
 

	
0.50%

	
 

	
4.625%

	
 

	
3.625%

	
 

 

and (b) adding the following new sentence at the end thereof: 

 

"The Applicable Rate in effect from the Second Amendment Effective Date through the first Business Day immediately following the date a Compliance Certificate is required to be delivered pursuant to Section 6.02(a) for the fiscal quarter ending on or about September 30, 2009 shall be determined based upon Pricing Level 4."

 

3.                                       The definition of "Consolidated EBITDA" appearing in Section 1.01 of the Credit Agreement is hereby amended by deleting the first paragraph of such definition and inserting the following new paragraph in lieu thereof:

 

" "Consolidated EBITDA" means, for any period, the sum of (i) Consolidated Net Income for such period plus (ii) without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense (including, but not limited to, goodwill), (d) any extraordinary charges or losses determined in accordance with GAAP, (e) non-cash charges from employee compensation deferrals and employer matching contributions pursuant to the ESOP Documentation relating to ESOP Stock Issuances, (f) cash losses from Asset Sales, (g) cash restructuring charges and/or non-recurring cash charges or losses not to exceed $2,000,000 in any twelve month period, (h) any other non-cash charges, non-cash expenses or non-cash losses of Holdings or any of its Subsidiaries (provided, however, that cash payments made in any future period in respect of such non-cash charges added back in determining Consolidated EBITDA for periods ending after the Closing Date (as with any other non-cash charge, expense or loss added to Consolidated Net Income pursuant to this clause (h)) shall be subtracted from Consolidated Net Income in calculating Consolidated EBITDA in the period when such payments are made) and (i) litigation expenses in connection with the Specified Litigation or one-time costs associated with the machinery and equipment involved in such litigation (including start-up costs), but only up to the aggregate amount of cash proceeds received by the U.S. Borrower during such period in connection with such litigation (it being understood that

 

 

approximately $5,600,000 of such costs were incurred in the fourth quarter of fiscal year 2008, approximately $3,500,000 of such costs were incurred in the first quarter of fiscal year 2009 and approximately $3,000,000 of such costs were incurred in the second quarter of fiscal year 2009), minus (iii) to the extent included in the statement of such Consolidated Net Income for such period, the sum of, without duplication, (a) interest income, (b) any extraordinary income or gains determined in accordance with GAAP (including, in any event, proceeds of the Specified Litigation (except to the extent permitted to be added back to Consolidated Net Income pursuant to clause (ii)(i) above) and any other litigation that is unusual in nature and non-recurring), (c) any cancellation-of-debt income resulting from repurchases or exchanges of Indebtedness after the Closing Date, (d) cash gains from Asset Sales and (e) any other non-cash income (excluding any items that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period that are described in the parenthetical to clause (h) above), all as determined on a consolidated basis."

 

4.                                       The definition of "Consolidated Senior Secured Leverage Ratio" appearing in Section 1.01 of the Credit Agreement is hereby amended by (i) replacing the words "Senior Secured" with "First Lien", (ii) inserting the text "the Second Lien Notes," immediately after the text "Senior Unsecured Notes" appearing in such definition, (iii) inserting the text "(in right of payment or in right of lien priority)" immediately following the text "(i) subordinated" appearing in such definition and (iv) deleting the text "subordination provisions of the Senior Subordinated Notes" appearing in such definition and inserting the text "payment subordination provisions of the Senior Subordinated Notes or lien subordination provisions of the Second Lien Notes, as applicable". In addition, each other reference to "Consolidated Senior Secured Leverage Ratio" in the Credit Agreement is hereby amended to read "Consolidated First Lien Leverage Ratio".

 

5.                                       The definition of "Excess Cash Flow" appearing in Section 1.01 of the Credit Agreement is hereby amended by (i) inserting the text "Second Lien Notes," immediately after the text "Existing Senior Subordinated Notes," appearing in such definition, (ii) replacing the text "Section 7.08(a)(C)" with the text "Section 7.08(a)(D)" and (iii) inserting the text "or resulting from the receipt of casualty or condemnation proceeds or other Extraordinary Receipts" immediately after the text "(vii) the aggregate net amount of income on the Disposition of property".

 

6.                                       The definition of "Loan Documents" appearing in Section 1.01 of the Credit Agreement is hereby amended by deleting the text "and (i) each Bilateral Facility Document" and inserting the text ", (i) each Bilateral Facility Document and (j) the Intercreditor Agreement" in lieu thereof.

 

7.                                       The definition of "Permitted Refinancing Debt" appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the following text immediately preceding the text "(x) in connection" appearing in such Section: 

 

"(w) in connection with any refinancing of the Second Lien Notes, new Indebtedness of the U.S. Borrower having terms (other than pricing), taken as a whole, not materially less favorable to the U.S. Borrower than those applicable to the Second Lien Notes or otherwise on then market terms and conditions for comparable debt securities (as 

 

 

determined in good faith by the U.S. Borrower) or otherwise acceptable to the Administrative Agent; provided that in no event shall such Indebtedness (a) amortize, or otherwise be subject to scheduled redemptions, repurchases or other payments of principal or have a final maturity date that is earlier than December 15, 2015 (i.e., the original maturity date of the Second Lien Notes), (b) require prepayments or mandatory redemptions in a manner materially more extensive than the Second Lien Notes, (c) contain maintenance financial covenants that are more restrictive than those under this Agreement, (d) be secured by Liens that are not subordinated to the Liens securing the Obligations in a manner at least as favorable to the Lenders as provided for in the Intercreditor Agreement or (e) contain other terms and conditions that are more restrictive, taken as a whole, than those under this Agreement;"

 

8.                                       The definition of "Specified Change of Control" appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text "in the Second Lien Note Indenture," immediately after the text "in the Senior Unsecured Note Indenture," appearing in such Section.

 

9.                                       Section 2.01(b) of the Credit Agreement is hereby amended by adding the following new paragraph to the end thereof: 

 

"As of August 1, 2008, (i) BemroseBooth Limited, the UK Borrower, was sold by Rose Holdings Limited, released from its obligations under the Loan Documents and no longer constituted a Designated Foreign Subsidiary Borrower pursuant to Section 2.15(e) and (ii) accordingly, the Bilateral Facilities available to the UK Borrower are no longer applicable. As of the First Amendment Effective Date, (i) no other Designated Foreign Subsidiary Borrower had been designated pursuant to Section 2.15(e), (ii) no new Designated Foreign Subsidiary Borrowers are permitted pursuant to Section 2.15(e) and (iii) accordingly, Revolving Credit Loans are no longer available in Alternative Currencies."

 

10.                                 Section 2.05(b) of the Credit Agreement is hereby amended by deleting clause (ii) of such Section and inserting the following new clause (ii) in lieu thereof:

 

"(ii) If any Loan Party or any of its Subsidiaries (x) Disposes of any property in a Disposition constituting an Asset Sale which results in the realization by such Person of Net Cash Proceeds, (y) receives Net Cash Proceeds of casualty insurance or condemnation awards (or from payments in lieu thereof) or any Extraordinary Receipts (excluding for purposes of this clause (y) (I) any Net Cash Proceeds from "Recoveries" (as defined in the AWA Environmental Indemnity Agreement and the API Environmental Indemnity Agreement), which must be paid to AWA under the terms of the applicable Fox River Indemnity Arrangements and (II) the first $20,000,000 of Extraordinary Receipts received by the Loan Parties or any of their Subsidiaries in connection with the Specified Litigation on or after the Second Amendment Effective Date) or (z) incurs or issues any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.02), the U.S. Borrower shall prepay an aggregate principal amount of Term B Loans equal to 100% of such Net Cash Proceeds within five Business Days of the receipt thereof by such Person (such prepayments to be applied as set forth in clause (iii) below); provided, however, that, (A) 

 

 

the U.S. Borrower shall only be required to prepay an aggregate principal amount of Term B Loans pursuant to preceding clause (x) above in this Section 2.05(b)(ii) equal to 50% of any Net Cash Proceeds received by the U.S. Borrower as a result of the Disposition by it of the Capital Stock of C&H Packaging Company, Inc. on or after the Second Amendment Effective Date, (B) so long as no Event of Default shall have occurred and be continuing, with respect to any prepayment of Term B Loans required to be made pursuant to preceding clause (x) above in this Section 2.05(b)(ii), if such prepayment would result in the prepayment of one or more Eurodollar Rate Loans on a day other than the last day of the then current Interest Period for each such Eurodollar Rate Loan, the U.S. Borrower may defer the relevant portion of such required payment until the last day of the relevant then current Interest Period of each such applicable Eurodollar Rate Loan (provided that such deferral period shall in no case exceed 60 days) and during such deferral period the U.S. Borrower may apply all or any part of such relevant portion of such required payment to prepay Revolving Credit Loans and may, subject to the fulfillment of the applicable conditions set forth in Article IV, reborrow such amounts (which amounts, to the extent originally constituting Net Cash Proceeds, shall be deemed to retain their original character as Net Cash Proceeds when so reborrowed) for application as required by this Section 2.05(b)(ii) (provided that, upon the occurrence of an Event of Default during any such deferral period, the U.S. Borrower shall immediately prepay Term B Loans in the amount of all Net Cash Proceeds received by the U.S. Borrower and other amounts, as applicable, that are required to be applied to prepay Loans under this Section 2.05(b)(ii) (without giving effect to this clause (B)) but which have not previously been so applied) and (C) with respect to any Net Cash Proceeds of casualty insurance or condemnation awards (or from payment in lieu thereof) otherwise required to be applied under preceding clause (y) above in this Section 2.05(b)(ii), at the election of the U.S. Borrower (as notified by the U.S. Borrower to the Administrative Agent (of its intent to reinvest) within five Business Days of the date of such Disposition), and so long as no Event of Default shall have occurred and be continuing at the time of such election, such Loan Party or such Subsidiary may reinvest all or any portion of such Net Cash Proceeds in operating assets so long as within 180 days after the receipt of such Net Cash Proceeds, such purchase shall have been consummated; and provided further, however, that any Net Cash Proceeds of casualty insurance or condemnation awards (or from payment in lieu thereof) not so reinvested shall be immediately applied (on such 180th day or, if sooner, to the extent (I) the U.S. Borrower makes an earlier determination that such funds will not be so invested or (II) an Event of Default has occurred and is continuing and the Required Lenders have requested immediate application) to the prepayment of the Term B Loans as set forth in this Section 2.05(b)(ii)."

 

11.                                 Section 2.05(b) of the Credit Agreement is hereby further amended by deleting clause (iii) of such Section and inserting the following new clause (iii) in lieu thereof:

 

"(iii) Each prepayment of Term B Loans pursuant to the foregoing provisions of this Section 2.05(b) shall be applied to the remaining principal repayment installments of the Term B Facility on a pro rata basis."

 

 

12.                                 Section 2.05(c) of the Credit Agreement is hereby amended by inserting the text ", the Second Lien Note Indenture" immediately after all instances of the text "the Senior Unsecured Note Indenture" appearing in such Section.

 

13.                                 Section 2.06(b) of the Credit Agreement is hereby amended by inserting the following text immediately preceding the existing text of such Section: 

 

"The Revolving Credit Facility shall be permanently reduced by (x) $5,000,000 on December 31, 2009, (y) another $10,000,000 on March 31, 2010 and (z) another $15,000,000 on June 30, 2010, with each such reduction to be applied as provided in Section 2.06(c) and to be accompanied by any prepayment required pursuant to Section 2.05(b)(v)."

 

14.                                 Section 2.08 of the Credit Agreement is hereby amended by deleting subsection (a) of such Section and inserting the following new subsection (a) in lieu thereof:

 

"(a) Subject to the provisions of Section 2.08(b), (i) with respect to the Revolving Credit Loans (x) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the sum of (A) the Eurodollar Rate for such Interest Period plus (B) the Applicable Rate plus (C) (in the case of a Eurodollar Rate Loan of any Lender to any Designated Foreign Subsidiary Borrower in an Alternative Currency which is lent from a Lending Office in the United Kingdom or a Participating Member State) the Mandatory Cost; (y) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (z) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to (I) the Base Rate plus the Applicable Rate or (II) such other rate as mutually agreed to by the U.S. Borrower and the Swing Line Lender; and (ii) with respect to Term B Loans, (x) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period (A) prior to the Second Amendment Effective Date at a rate per annum equal to the sum of the Eurodollar Rate for such Interest Period plus 4.50% and (B) on the Second Amendment Effective Date and thereafter at a rate per annum equal to the sum of the Eurodollar Rate for such Interest Period plus 4.625% and (y) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date (A) prior to the Second Amendment Effective Date at a rate per annum equal to the Base Rate plus 3.50% and (B) on the Second Amendment Effective Date and thereafter at a rate per annum equal to the Base Rate plus 3.625%."

 

15.                                 Section 6.02 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (f) of such Section, (ii) redesignating clause (g) of such Section as clause (i) of such Section and (iii) inserting the following new clauses (g) and (h) immediately following clause (f) of such Section: 

 

"(g) upon the request of the Administrative Agent (which request shall not be made more than once in any twenty four-month period, with the appraisals required pursuant to Section 6.16 counting as the initial request), promptly upon the completion thereof, 

 

 

appraisals at the expense of the U.S. Borrower, in form and substance, and conducted by an appraiser, reasonably satisfactory to the Administrative Agent, of the fixed assets and Mortgaged Properties of the Loan Parties; 

 

(h) upon the request of the Administrative Agent (which request shall not be made more than once in any twelve-month period, with the field examinations required pursuant to Section 6.16 counting as the initial request), promptly upon the completion thereof, field examinations at the expense of the U.S. Borrower, in form and substance, and conducted by an appraiser, reasonably satisfactory to the Administrative Agent, of the inventory and accounts receivable of the Loan Parties; and"

 

16.                                 Section 6.09(e) of the Credit Agreement is hereby amended by inserting the text ", Second Lien Notes" immediately after the text "Senior Unsecured Notes" appearing in such Section.

 

17.                                 Section 6.12 of the Credit Agreement is hereby amended by inserting the text "or the Second Lien Notes" immediately after the text "Senior Unsecured Notes" appearing in such Section.

 

18.                                 Article VI of the Credit Agreement is hereby amended by inserting the following new Section 6.16 in the appropriate sequence: 

 

"6.16 Second Amendment Post-Closing Actions. 

 

Deliver to the Administrative Agent (or otherwise fully cooperate with the Administrative Agent in obtaining, at the expense of the U.S. Borrower) within 120 days of the Second Amendment Effective Date (or such later date as agreed to by the Administrative Agent in writing): 

 

(a) appraisals, in form and substance, and conducted by an appraiser, reasonably satisfactory to the Administrative Agent, of the fixed assets and Mortgaged Properties of the Loan Parties; and 

 

(b) a field examination, in form and substance, and conducted by an appraiser, reasonably satisfactory to the Administrative Agent, of the inventory and accounts receivable of the Loan Parties."

 

19.                                 Section 7.01(c) of the Credit Agreement is hereby amended to delete the asterisk in the grid therein and the asterisked footnote at the end thereof.

 

20.                                 Section 7.02 of the Credit Agreement is hereby amended by (i) deleting the text "$150,000,000" appearing in clause (f) of such Section and inserting the text "$142,500,000 minus the aggregate principal amount of the Senior Subordinated Notes outstanding on the Second Amendment Effective Date and exchanged for Second Lien Notes in connection with the Exchange Offer" in lieu thereof, (ii) deleting the text "$185,000,000" appearing in clause (g) of such Section and inserting the text "$109,500,000 minus the aggregate principal amount of the Senior Unsecured Notes outstanding on the Second Amendment Effective Date and exchanged for Second Lien Notes in connection with the Exchange Offer" in lieu thereof, (iii) deleting the 

 

 

word "and" appearing at the end of clause (r) of such Section, (iv) deleting the period appearing at the end of clause (s) of such Section and inserting the text "; and" in lieu thereof and (v) inserting the following new clause (t) at the end of such Section: 

 

"(t) (i) Indebtedness of the U.S. Borrower in respect of the Second Lien Notes, together with any Permitted Refinancing Debt in connection therewith, in an aggregate principal amount not to exceed $199,657,500 minus the sum of (x) 1.01 times the aggregate principal amount of the Senior Unsecured Notes outstanding on the Second Amendment Effective Date and not exchanged for Second Lien Notes in connection with the Exchange Offer and (y) .625 times the aggregate principal amount of Senior Subordinated Notes outstanding on the Second Amendment Effective Date and not exchanged for Second Lien Notes in connection with the Exchange Offer and (ii) Guarantee Obligations of Holdings and any Subsidiary that is a Guarantor in respect of such Indebtedness."

 

21.                                 Section 7.03 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (r) of such Section, (ii) deleting the period appearing at the end of clause(s) of such Section and inserting the text "; and" in lieu thereof and (iii) inserting the following new clause (t) at the end of such Section: 

 

"(t) to the extent such Liens are permitted under, and subject to, the Intercreditor Agreement, Liens securing Indebtedness under the Second Lien Note Documents and any Permitted Refinancing Debt in respect thereof."

 

22.                                 Section 7.06(b) of the Credit Agreement is hereby amended by deleting clause (iii) of such Section and inserting the following new clause (iii) in lieu thereof:

 

"(iii) to the extent such Restricted Payments would be permitted under (x) at any time prior to the Second Amendment Effective Date, Section 4.07(a) of each of the Senior Subordinated Note Indenture and the Senior Unsecured Note Indenture as in effect on the date hereof or (y) on and after the Second Amendment Effective Date, Section 4.07(a) of the Second Lien Note Indenture as in effect on the Second Amendment Effective Date, (in each case taking into account any Investments made pursuant to Section 7.07(l)), to make other Restricted Payments to, or in connection with, the ESOP or the ESOP Documentation."

 

23.                                 Section 7.07(l) of the Credit Agreement is hereby amended by deleting such Section in its entirety and inserting the following Section 7.07(l) in lieu thereof:

 

"(l) additional Investments to the extent such Investment, together with all Restricted Payments made pursuant to Section 7.06(b)(iii), would be permitted under (x) at any time prior to the Second Amendment Effective Date, Section 4.07(a) of each of the Senior Subordinated Note Indenture and the Senior Unsecured Note Indenture as in effect on the date hereof or (y) on and after the Second Amendment Effective Date, Section 4.07(a) of the Second Lien Note Indenture as in effect on the Second Amendment Effective Date."

 

24.                                 Section 7.08 of the Credit Agreement is hereby amended by deleting said Section in its entirety and inserting the following new Section 7.08 in lieu thereof:

 

 

"7.08 Prepayments and Modifications of Certain Debt Instruments. 

 

(a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to the Senior Unsecured Notes, Senior Subordinated Notes, the Existing Senior Subordinated Notes, the Second Lien Notes, any Permitted Refinancing Debt or enter into any derivative or other transaction with any Derivatives Counterparty obligating Holdings, the U.S. Borrower or any Subsidiary to make payments to such Derivatives Counterparty as a result of any change in market value of the Senior Unsecured Notes, the Senior Subordinated Notes, the Existing Senior Subordinated Notes or the Second Lien Notes (other than (A) the refinancing of any Existing Senior Subordinated Notes, Senior Subordinated Notes, Senior Unsecured Notes or Second Lien Notes with applicable Permitted Refinancing Debt, (B) the repurchase, redemption or defeasance of Senior Unsecured Notes so long as the Consolidated First Lien Leverage Ratio after giving effect thereto is less than 2.50 to 1.0 on a pro forma basis as if such repurchase, redemption or defeasance had been made on the last day of the most recent four quarter period of Holdings for which financial statements have been delivered pursuant to Section 6.01, (C) the repurchase, redemption or defeasance of Second Lien Notes so long as the Consolidated First Lien Leverage Ratio after giving effect thereto is less than 1.75 to 1.0 on a pro forma basis as if such repurchase, redemption or defeasance had been made on the last day of the most recent four quarter period of Holdings for which financial statements have been delivered pursuant to Section 6.01 and (D) in addition to subsection (B) above, (i) prior to the First Amendment Effective Date, the repurchase or repayment of up to $50,000,000 in aggregate principal amount of the Existing Senior Subordinated Notes, Senior Subordinated Notes, Senior Unsecured Notes and/or any Permitted Refinancing Debt, (ii) prior to the Second Amendment Effective Date, the repurchase or repayment of the Senior Subordinated Notes so long as the aggregate cash amount expended does not exceed $1,200,000, and (iii) Senior Unsecured Notes and Senior Subordinated Notes may be exchanged for Second Lien Notes pursuant to the terms of the Exchange Offer (including, without limitation, any consent payments, payments of accrued and unpaid (but not yet due) interest and any payments for rounding); provided that, in each case under this foregoing clauses (A), (B), (C) and (D), before and after giving effect to such repurchase, repayment and/or exchange, no Default or Event of Default shall have occurred or be continuing), (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Unsecured Notes, the Senior Subordinated Notes, the Existing Senior Subordinated Notes, the Second Lien Notes or any Permitted Refinancing Debt (other than any such amendment, modification, waiver or other change that is (x) not materially adverse to the Lenders (it being understood and agreed that an increase of greater than 2.00% to the existing cash interest rate or other yield provisions is materially adverse to the Lenders so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or Agent hereunder) and that, in any event, would not result in such Indebtedness being unable to qualify as Permitted Refinancing Indebtedness if it were newly issued or (y) with respect to the Senior Unsecured Notes and the Senior Subordinated Notes, made in connection with the Exchange Offer) or (c) designate any Indebtedness (other than obligations of the Loan Parties pursuant to the Loan Documents) as "Designated Senior 

 

 

Debt" (or any other defined term having a similar purpose) for the purposes of the Senior Subordinated Note Indenture or any applicable Permitted Refinancing Debt Document."

 

25.                                 Section 7.11 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing immediately preceding the text "(h) any agreements" appearing in such Section and inserting a comma in lieu thereof and (ii) deleting the period at the end of such Section and inserting the text "and (i) the Second Lien Note Indenture." in lieu thereof.

 

26.                                 Section 7.12 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing immediately preceding the text "(viii) any restrictions" appearing in such Section and inserting a comma in lieu thereof and (ii) deleting the period at the end of such Section and inserting the text "and (ix) the Second Lien Note Indenture." in lieu thereof.

 

27.                                 Section 8.01 of the Credit Agreement is hereby amended by (i) deleting the text "100%" appearing in clause (k)(ii) of such Section and inserting the text "greater than 50%" in lieu thereof, (ii) deleting the word "or" appearing at the end of clause (l) of such Section, (iii) deleting the comma appearing at the end of clause (m) of such Section and inserting the text "; or" in lieu thereof and (iv) inserting the following new clause (n) immediately after clause (m) of such Section:

 

"(n) the Intercreditor Agreement or any provision thereof shall cease to be in full force and effect, or any Lien securing or purporting to secure Indebtedness or other obligations owing under the Second Lien Note Documents shall, for any reason, cease to be subordinated to the Lien created under the Security Documents securing the First-Lien Obligations under, and as defined in, the Intercreditor Agreement,"

 

28.                                 Article XI of the Credit Agreement is hereby amended by inserting the following new Section 11.19 in the appropriate sequence:

 

"11.19 OTHER LIENS ON COLLATERAL; TERMS OF INTERCREDITOR AGREEMENT; ETC. (a) EACH LENDER HERETO UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT LIENS SHALL BE CREATED ON THE COLLATERAL PURSUANT TO THE SECOND LIEN NOTE DOCUMENTS, WHICH LIENS SHALL BE REQUIRED TO BE SUBORDINATED AND JUNIOR TO THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS IN ACCORDANCE WITH THE TERMS OF THE INTERCREDITOR AGREEMENT. THE INTERCREDITOR AGREEMENT ALSO HAS OTHER PROVISIONS WHICH ARE BINDING UPON THE LENDERS, THE HEDGE BANKS AND THE CASH MANAGEMENT BANKS PURSUANT TO THIS AGREEMENT. PURSUANT TO THE EXPRESS TERMS OF SECTION 8.1 OF THE INTERCREDITOR AGREEMENT, IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT AND ANY OF THE LOAN DOCUMENTS, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN AND CONTROL. 

 

(b) EACH LENDER AUTHORIZES AND INSTRUCTS THE ADMINISTRATIVE AGENT TO ENTER INTO THE INTERCREDITOR AGREEMENT ON BEHALF OF THE LENDERS, AND TO TAKE ALL ACTIONS (AND EXECUTE ALL 

 

 

DOCUMENTS) REQUIRED (OR DEEMED ADVISABLE) BY IT IN ACCORDANCE WITH THE TERMS OF THE INTERCREDITOR AGREEMENT. 

 

(c) THE PROVISIONS OF THIS SECTION 11.19 ARE NOT INTENDED TO SUMMARIZE ALL RELEVANT PROVISIONS OF THE INTERCREDITOR AGREEMENT. REFERENCE MUST BE MADE TO THE INTERCREDITOR AGREEMENT ITSELF TO UNDERSTAND ALL TERMS AND CONDITIONS THEREOF. EACH LENDER IS RESPONSIBLE FOR MAKING ITS OWN ANALYSIS AND REVIEW OF THE INTERCREDITOR AGREEMENT AND THE TERMS AND PROVISIONS THEREOF, AND NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RESPECTIVE AFFILIATES MAKES ANY REPRESENTATION TO ANY LENDER AS TO THE SUFFICIENCY OR ADVISABILITY OF THE PROVISIONS CONTAINED IN THE INTERCREDITOR AGREEMENT."

 

II.                                     Miscellaneous Provisions.

 

1.                                       Conditions Precedent to Effectiveness. This Second Amendment shall become effective on the date (the "Second Amendment Effective Date") when each of the following conditions shall have been satisfied:

 

(i) Holdings, the U.S. Borrower, the Guarantors, the Administrative Agent and the Lenders constituting the Required Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of pdf, facsimile or other electronic transmission) the same to the Administrative Agent;

 

(ii) Holdings, the U.S. Borrower, the Guarantors, the Administrative Agent and the collateral agent under the Second Lien Note Indenture shall have duly authorized, executed and delivered the intercreditor agreement in the form of Annex I attached hereto, and such intercreditor agreement shall be in full force and effect;

 

(iii) the U.S. Borrower shall have paid to the Administrative Agent (or one of its Affiliates, as applicable) (a) a non-refundable cash amendment fee in dollars for distribution to each Lender which executes and delivers to the Administrative Agent (or its designee) a counterpart hereof by 5:00 P.M. (New York City time) on September 24, 2009, in an amount equal to 25 basis points (0.25%) of the sum of (x) the aggregate principal amount of all Term B Loans of such Lender and (y) Revolving Credit Commitments of such Lender, in each case outstanding on the Second Amendment Effective Date (immediately prior to the occurrence thereof) and (b) all other fees required to be paid on or before the Second Amendment Effective Date;

 

(iv) the U.S. Borrower shall have paid all reasonable fees, expenses and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Second Amendment Effective Date, plus such additional amounts of reasonable fees, expenses and disbursements of counsel to the Administrative Agent as shall constitute its reasonable estimate of reasonable fees, expenses and disbursements of counsel to the Administrative Agent incurred or to be incurred by it through the closing proceedings 

 

 

(provided that such estimate shall not thereafter preclude a final settling of accounts between the U.S. Borrower and the Administrative Agent);

 

(v) after giving effect to this Amendment, the representations and warranties of the Loan Parties contained in Section 2 of Article II of this Amendment, Article V of the Credit Agreement or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (or, if the applicable representation and warranty is already subject to a materiality standard, shall be true and correct in all respects) on and as of the Second Amendment Effective Date, except to the extent that such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct in all material respects (or, if the applicable representation and warranty is already subject to a materiality standard, shall be true and correct in all respects) as of such date; and

 

(vi) no Default shall exist and be continuing as of the Second Amendment Effective Date.

 

2.                                       Representations and Warranties. Each of the Loan Parties hereby represents and warrants that (a) it has the power and authority, and legal right, to make, deliver and perform this Amendment, (b) it has taken all necessary organizational action to authorize the execution, delivery and performance this Amendment, (c) no consent or authorization of, filing with, notice to or other act by or in respect of, or order of, any Governmental Authority or any other Person is required in connection with the execution, delivery or performance by it of this Amendment, except consents which have been obtained or made and are in full force and effect, (d) the execution, delivery and performance of this Amendment will not violate any material Requirement of Law or Contractual Obligation of Holdings, the U.S. Borrower or any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien (other than Liens permitted hereunder in connection with the Second Lien Notes) on any of their respective properties or revenues pursuant to any such Requirements of Law or any such Contractual Obligation, (e) the representations and warranties contained in Article V of the Credit Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of such date (except for those which expressly relate to an earlier date, in which case they are true and correct in all material respects as of such date) and (f) no Default or Event of Default exists under the Credit Agreement on and as of the date hereof and after giving effect to this Amendment, or will occur as a result of the transactions contemplated hereby.

 

3.                                       No Other Changes; Ratification. Except as expressly modified or waived hereby, all of the terms and provisions of the Credit Agreement (including schedules and exhibits thereto) and the other Loan Documents shall remain in full force and effect. The term "this Agreement" or "Credit Agreement" and all similar references as used in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by this Amendment. This Amendment shall constitute a "Loan Document" under, and as defined in, the Credit Agreement. Except as herein specifically agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms. This Amendment shall be effective only to the extent specifically set forth herein and shall not (i) be construed as a waiver of any 

 

 

breach or default other than as specifically waived herein nor as a waiver of any breach or default of which the Lenders have not been informed by Holdings or the U.S. Borrower, (ii) affect the right of the Lenders to demand compliance by Holdings or the U.S. Borrower with all terms and conditions of the Credit Agreement in all other instances, (iii) be deemed a waiver of any transaction or future action on the part of Holdings or the U.S. Borrower requiring the Lenders' or the Required Lenders' consent or approval under the Credit Agreement (after giving effect hereto), or (iv) be deemed or construed to be a waiver or release of, or a limitation upon, the Administrative Agent's or the Lenders' exercise of any rights or remedies under the Credit Agreement or any other document executed or delivered in connection therewith, whether arising as a consequence of any Event of Default which may now exist or otherwise, all such rights and remedies hereby being expressly reserved.

 

4.                                       Expenses. The U.S. Borrower agrees to pay all reasonable costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of Moore & Van Allen PLLC, special counsel to the Administrative Agent.

 

5.                                       Acknowledgment of Guarantors. The Guarantors acknowledge and consent to all of the terms and conditions of this Amendment and agree that this Amendment and any documents executed in connection herewith do not operate to reduce or discharge the Guarantors' obligations under the Guarantee and Collateral Agreement or the other Loan Documents.

 

6.                                       Affirmation of Liens. Each Loan Party affirms the liens and security interests created and granted by it in the Loan Documents (including, but not limited to, the Guarantee and Collateral Agreement) and agrees that this Amendment and the permitting of Liens in connection with the Second Lien Notes shall in no manner adversely affect or impair such liens and security interests.

 

7.                                       Counterparts; Facsimile/Email. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. Delivery of an executed counterpart of this Amendment by telecopy or electronic mail by any party hereto shall be effective as such party's original executed counterpart.

 

8.                                       Governing Law. This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New York, without regard to conflicts of law principles that would require the application of laws of another jurisdiction.

 

9.                                       Entirety. This Amendment and the other Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof. These Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no oral agreements between the parties.

 

 

10.                                 References to Credit Agreement. From and after the Second Amendment Effective Date, all references in the Credit Agreement and each of the other Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement, as modified hereby on the Second Amendment Effective Date.

 

* * *

 

 

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Second Amendment as of the date first above written.

 

 

	
 

	
APPLETON PAPERS INC.

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Jeffrey J. Fletcher

	
 

	
Name: 

	
Jeffrey J. Fletcher

	
 

	
Title: 

	
Controller

	
 

	
 

	
 

	
 

	
 

	
PAPERWEIGHT DEVELOPMENT CORP.

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Jeffrey J. Fletcher

	
 

	
Name: 

	
Jeffrey J. Fletcher

	
 

	
Title: 

	
Controller

	
 

	
 

	
 

	
 

	
 

	
AMERICAN PLASTICS COMPANY, INC.

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Jeffrey J. Fletcher

	
 

	
Name: 

	
Jeffrey J. Fletcher

	
 

	
Title: 

	
Treasurer

	
 

	
 

	
 

	
 

	
 

	
C & H PACKAGING COMPANY, INC.

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Jeffrey J. Fletcher

	
 

	
Name: 

	
Jeffrey J. Fletcher

	
 

	
Title: 

	
Treasurer

	
 

	
 

	
 

	
 

	
 

	
NEW ENGLAND EXTRUSION INC.

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Jeffrey J. Fletcher

	
 

	
Name: 

	
Jeffrey J. Fletcher

	
 

	
Title: 

	
Treasurer

 

 

	
 

	
PDC CAPITAL CORPORATION

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Jeffrey J. Fletcher

	
 

	
Name: 

	
Jeffrey J. Fletcher

	
 

	
Title: 

	
Treasurer

	
 

	
 

	
 

	
 

	
 

	
ROSE HOLDINGS LIMITED

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Thomas J. Ferree

	
 

	
Name: 

	
Thomas J. Ferree

	
 

	
Title: 

	
Director

 

 

	
 

	
BANK OF AMERICA, N.A.,

	
 

	
as Administrative Agent

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Rosanne Parsill

	
 

	
Name: 

	
Rosanne Parsill

 

 

ANNEX I

 

EXECUTION COPY

 

INTERCREDITOR AGREEMENT

 

This INTERCREDITOR AGREEMENT, dated as of September 30, 2009 is by and among APPLETON PAPERS INC., a Delaware corporation (the "Borrower"), PAPERWEIGHT DEVELOPMENT CORP., a Wisconsin corporation ("Holdings"), each other Grantor (as hereinafter defined) from time to time party hereto, Bank of America, N.A., in its capacity as collateral agent under the First-Lien Loan Documents (as defined below) (together with its successors and assigns in such capacity from time to time, the "First-Lien Collateral Agent") and U.S. Bank National Association in its capacity as trustee and collateral agent under the Second-Lien Note Documents (as defined below) (together with its successors and assigns in such capacity from time to time, the "Second-Lien Collateral Agent").  Capitalized terms used herein but not otherwise defined herein have the meanings set forth in Section 1 below.

 

RECITALS

 

WHEREAS, the Borrower, Bemrosebooth Limited, a company organized under the laws of the United Kingdom, certain subsidiaries of the Borrower party thereto, Holdings, the lenders party thereto (the "Lenders") and Bank of America, N.A., in its capacity as administrative agent (together with its successors and assigns in such capacity from time to time, the "First-Lien Administrative Agent"), entered into that certain Credit Agreement dated as of June 5, 2007 (as amended, restated, supplemented, modified and/or Refinanced from time to time, the "First-Lien Credit Agreement") providing for the making of term and revolving loans to the Borrower, and the issuance of, and participation in, letters of credit for the account of the Borrower as provided therein;

 

WHEREAS, pursuant to that certain Indenture, dated as of the date hereof (as amended, restated, supplemented, modified and/or Refinanced from time to time, the "Second-Lien Note Indenture"), between the Borrower, the other Grantors from time to time party thereto and the Second-Lien Collateral Agent, the Borrower intends to issue senior secured second lien notes;

 

WHEREAS, the obligations of Holdings, the Borrower, and the other Grantors under the First-Lien Loan Documents, all Secured Hedge Agreements and all Secured Cash Management Agreements are secured by substantially all the assets of Holdings, the Borrower and the other Grantors, respectively, pursuant to the terms of the First-Lien Security Documents;

 

WHEREAS, the obligations of Holdings, the Borrower, and the other Grantors under the Second-Lien Note Documents will be secured by substantially all the assets of Holdings, the Borrower and the other Grantors, respectively, pursuant to the terms of the Second-Lien Security Documents;

 

WHEREAS, the First-Lien Loan Documents and the Second-Lien Note Documents provide, among other things, that the parties thereto shall set forth in this Agreement their respective rights and remedies with respect to the Collateral;

 

WHEREAS, in order to induce the First-Lien Collateral Agent and the First-Lien Creditors to consent to the Grantors incurring the Second-Lien Obligations and to induce the First-Lien Creditors to continue to extend credit and other financial accommodations and lend monies to or for the benefit of the Borrower or any other Grantor, the Second-Lien Collateral Agent on behalf of the Second-Lien Creditors (and each Second-Lien Creditor by its acceptance of the benefits of the Second-Lien Security Documents) has agreed to the subordination, intercreditor and other provisions set forth in this Agreement; and

 

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WHEREAS, the First-Lien Loan Documents may be amended to permit Holdings, the Borrower and the other Grantors to, from time to time, incur additional secured debt which Holdings, the Borrower and the First-Lien Collateral Agent may agree may share a first-priority security interest in the Collateral in accordance with the First-Lien Loan Documents and the terms of this Agreement in existence at the time of such incurrence;

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and obligations herein set forth and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

SECTION 1.  Definitions.

 

1.1           Defined Terms.  As used in the Agreement, the following terms shall have the following meanings:

 

"Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

 

"Agreement" means this Intercreditor Agreement, as amended, restated, renewed, extended, supplemented and/or otherwise modified from time to time in accordance with the terms hereof.

 

"Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute.

 

"Bankruptcy Law" means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors.

 

"Borrower" has the meaning provided in the first paragraph of this Agreement.

 

"Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.

 

"Cap Amount" means $463,125,000.

 

"Capital Stock" means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

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"Cash Management Agreement" has the meaning set forth in the First-Lien Credit Agreement.

 

"Cash Management Bank" has the meaning set forth in the First-Lien Credit Agreement.

 

"Collateral" means all of the assets and property of any Grantor, whether real, personal or mixed, constituting both First-Lien Collateral and Second-Lien Collateral.

 

"Collateral Agent" means, as the context requires, collectively, the First-Lien Collateral Agent and the Second-Lien Collateral Agent.

 

"Comparable Second-Lien Security Document" means, in relation to any Collateral subject to any Lien created under any First-Lien Security Document, that Second-Lien Security Document which creates a Lien on the same Collateral, granted by the same Grantor.

 

"Creditors" means, collectively, the First-Lien Creditors and the Second-Lien Creditors.

 

"Discharge of First-Lien Credit Agreement Obligations" means, except to the extent otherwise provided in Section 5.6 hereof (and subject to Section 6.5 hereof), (a) payment in full in cash of the principal of and interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding at the rate provided for in the respective First-Lien Loan Documents, whether or not such interest is, or would be, allowed in such Insolvency or Liquidation Proceeding) and premium, if any, on all Indebtedness outstanding under the First-Lien Loan Documents (other than contingent obligations not yet accrued and payable), (b) payment in full in cash of all other First-Lien Obligations (other than Secured Hedge Agreement Obligations and Secured Cash Management Obligations) that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid (including legal fees and other expenses, costs or charges accruing on or after the commencement of any Insolvency or Liquidation Proceeding whether or not such legal fees and other expenses, costs or charges are, or would be, allowed in such Insolvency or Liquidation Proceeding), (c) termination (without any prior demand for payment thereunder having been made or, if made, with such demand having been fully reimbursed in cash) or cash collateralization (in an amount and manner, and on terms, satisfactory to the First-Lien Collateral Agent) of all letters of credit issued by any First-Lien Creditor and (d) termination of all other commitments of the First-Lien Creditors under the First-Lien Loan Documents.

 

"Discharge of First-Lien Obligations" means, except to the extent otherwise provided in Section 5.6 hereof, (a) payment in full in cash of the principal of and interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding at the rate provided for in the respective First-Lien Loan Documents, whether or not such interest would be allowed in any such Insolvency or Liquidation Proceeding) and premium, if any, on all Indebtedness outstanding under the First-Lien Documents (other than contingent obligations not yet accrued and payable), (b) payment in full in cash of all other First-Lien Obligations that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid (including legal fees and other expenses, costs or charges accruing on or after the commencement of any Insolvency or Liquidation Proceeding whether or not such legal fees and other expenses, costs or charges are, or would be, allowed in such Insolvency or Liquidation Proceeding), (c) termination (without any prior demand for payment thereunder having been made or, if made, with such demand having been fully reimbursed in cash) or cash collateralization (in an amount and manner, and on terms, satisfactory to the First-Lien Collateral Agent) of all letters of credit, Secured Hedge Agreements and Secured Cash Management Agreements issued or entered into, as the case may be, by any First-Lien Creditor and (d) termination of all other commitments of the First-Lien Creditors under the First-Lien Documents.

 

3

 

"Enforcement Action" means the exercise of any rights or remedies against any Collateral, including, without limitation, any right to take possession or control of any Collateral under any lockbox agreement, account control agreement, landlord waiver or bailee's letter or similar agreement or arrangement, any right of set-off or recoupment and any enforcement, collection, execution, levy or foreclosure action or proceeding taken against the Collateral.

 

"First-Lien Collateral" means all of the assets and property of any Grantor, whether real, personal or mixed, with respect to which a Lien is granted (or purported to be granted) as security for any First-Lien Obligations.

 

"First-Lien Collateral Agent" has the meaning provided in the first paragraph of this Agreement.

 

"First-Lien Credit Agreement" has the meaning set forth in the recitals hereto.

 

"First-Lien Creditors" means, at any relevant time, the holders of First-Lien Obligations at such time, including, without limitation, the First-Lien Lenders, the Hedge Banks, the Cash Management Banks, the First-Lien Collateral Agent, the First-Lien Administrative Agent and the other agents and arrangers under the First-Lien Credit Agreement.

 

"First-Lien Documents" means and includes the First-Lien Loan Documents, each Secured Cash Management Agreement and each Secured Hedge Agreement.

 

"First-Lien Lenders" means the "Lenders" under, and as defined in, the First-Lien Credit Agreement; provided that the term "First-Lien Lender" shall in any event include each letter of credit issuer and each swingline lender under the First-Lien Credit Agreement.

 

"First-Lien Loan Documents" means the First-Lien Credit Agreement and the other Loan Documents (as defined in the First-Lien Credit Agreement) and each of the other agreements, documents and instruments providing for or evidencing any other First-Lien Obligation and any other document or instrument executed or delivered at any time in connection with any First-Lien Obligation (including any intercreditor or joinder agreement among holders of First-Lien Obligations but excluding Secured Hedge Agreements and Secured Cash Management Agreements), to the extent such are effective at the relevant time, as each may be amended, modified, restated, supplemented, replaced and/or Refinanced from time to time; provided that no such modification of the First-Lien Credit Agreement shall increase the maximum aggregate principal amount of Loans and stated amount of Letters of Credit thereunder to an amount in excess of the Cap Amount.

 

"First-Lien Obligations" means (i) all Obligations outstanding under the First-Lien Credit Agreement and the other First-Lien Loan Documents, (ii) all Secured Cash Management Obligations and (iii) all Secured Hedge Agreement Obligations.  "First-Lien Obligations" shall in any event include:  (a) all interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation Proceeding (and the effect of provisions such as Section 502(b)(2) of the Bankruptcy Code), accrue) after commencement of an Insolvency or Liquidation Proceeding in accordance with the rate specified in the relevant First-Lien Document, whether or not the claim for such interest is, or would be, allowed as a claim in such Insolvency or Liquidation Proceeding, (b) any and all fees, expenses and other charges (including attorneys' and/or financial consultants' fees and expenses) incurred by the First-Lien Collateral Agent, the First-Lien Administrative Agent and the First-Lien Creditors after the commencement of an Insolvency or Liquidation Proceeding, whether or not the claim for such fees, expenses and other charges is allowed under Section 506(b) of the Bankruptcy Code or any other provision of the Bankruptcy Code or Bankruptcy Law as a claim in such Insolvency or Liquidation Proceeding and (c) all obligations and 

 

4

 

liabilities of each Grantor under each First-Lien Document to which it is a party which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due. The First-Lien Obligations shall not include (x) principal of Loans or stated amounts of Letters of Credit in excess of the Cap Amount as in effect at the time incurred or (y) any amount in clauses (a) through (c) of the preceding sentence incurred in connection with the enforcement of the excess amounts referred to in preceding clause (x) (excluding, in either case, (i) any such excess amounts representing the capitalization of interest or fees or resulting from fluctuations in currency values, which excess amounts shall be First-Lien Obligations and (ii) all Secured Hedge Agreement Obligations and Secured Cash Management Obligations, which obligations shall be First-Lien Obligations).

 

"First-Lien Required Lenders" means the "Required Lenders" under, and as defined in, the First-Lien Credit Agreement.

 

"First-Lien Security Agreement" means the Guarantee and Collateral Agreement, dated as of June 5, 2007, among Holdings, the Borrower, the other Grantors from time to time party thereto and the First-Lien Collateral Agent, as the same may be amended, supplemented, restated, modified and/or Refinanced from time to time.

 

"First-Lien Security Documents" means the Security Documents (as defined in the First-Lien Credit Agreement) and any other agreement, document or instrument pursuant to which a Lien is granted (or purported to be granted) securing any First-Lien Obligations or under which rights or remedies with respect to such Liens are governed, as the same may be amended, supplemented, restated, modified and/or Refinanced from time to time.

 

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

 

"Grantors" means Holdings, the Borrower and each of the Subsidiary Guarantors (other than PDC Capital Corporation) that have executed and delivered, or may from time to time hereafter execute and deliver, a First-Lien Security Document or a Second-Lien Security Document.

 

"Hedge Agreements" has the meaning set forth in the First-Lien Credit Agreement.

 

"Hedge Bank" has the meaning set forth in the First-Lien Credit Agreement.

 

"Holdings" has the meaning provided in the first paragraph of this Agreement.

 

"Indebtedness" means and includes all Obligations that constitute "Indebtedness" within the meaning of the First-Lien Credit Agreement or the Second-Lien Note Indenture.

 

"Insolvency or Liquidation Proceeding" means (a) any voluntary or involuntary case or proceeding under the Bankruptcy Code with respect to any Grantor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any Grantor or with respect to a material portion of its respective assets, (c) any liquidation, dissolution, reorganization or winding up of any Grantor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any Grantor.

 

5

 

"Letter of Credit" means "Letter of Credit" under, and as defined in, the First-Lien Credit Agreement.

 

"Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

"Loans" means "Loans" under, and as defined in, the First-Lien Credit Agreement.

 

"Obligations" means any and all obligations (including guaranty obligations) with respect to the payment and performance of (a) any principal of or interest or premium on any indebtedness, including any reimbursement obligation in respect of any letter of credit, or any other liability, including interest that accrues after the commencement of any Insolvency or Liquidation Proceeding of any Grantor at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such Insolvency or Liquidation Proceeding, (b) any fees, indemnification obligations, expense reimbursement obligations or other liabilities payable under the documentation governing any indebtedness (including, without limitation, the retaking, holding, selling or otherwise disposing of or realizing on the Collateral), (c) any obligation to post cash collateral in respect of letters of credit or any other obligations, and (d) all performance obligations under the documentation governing any indebtedness.

 

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

 

"Pledged Collateral" means Collateral in the possession of the First-Lien Collateral Agent (or its agents or bailees), to the extent that possession thereof is taken to perfect a Lien thereon under the Uniform Commercial Code.

 

"Recovery" has the meaning set forth in Section 6.5 hereof.

 

"Refinance" means, in respect of any indebtedness, to refinance, extend, renew, defease, amend, modify, supplement, restructure, replace, refund or repay, or to issue other indebtedness, in exchange or replacement for, such indebtedness.  "Refinanced" and "Refinancing" shall have correlative meanings.

 

"Required First-Lien Creditors" means (i) at all times prior to the occurrence of the Discharge of First-Lien Credit Agreement Obligations, the First-Lien Required Lenders (or, to the extent required by the First-Lien Credit Agreement, each of the First-Lien Lenders), and (ii) at all times after the occurrence of the Discharge of First-Lien Credit Agreement Obligations, the holders of at least the majority of the then outstanding Secured Hedge Agreement Obligations and/or Secured Cash Management Obligations (with the calculation of the amount of outstanding Secured Hedge Agreement Obligations and/or Secured Cash Management Obligations determined by the First-Lien Collateral Agent as directed by a majority of the holders of the Secured Hedge Agreement Obligations and Secured Cash Management Obligations or, in the absence of such a direction, in such reasonable manner as is acceptable to the First-Lien Collateral Agent).

 

6

 

"Second-Lien Collateral" means all of the assets of any Grantor, whether real, personal or mixed, with respect to which a Lien is granted (or purported to be granted) as security for any Second-Lien Obligations.

 

"Second-Lien Collateral Agent" has the meaning set forth in the preamble hereof.

 

"Second-Lien Creditors" means, at any relevant time, the holders of Second-Lien Obligations at such time, including without limitation the Second-Lien Holders and the Second-Lien Collateral Agent.

 

"Second-Lien Enforcement Date" means, at any time while an "Event of Default" exists under (and as defined in) the Second-Lien Note Documents, the date which is 360 days after the occurrence of (i) such "Event of Default" and (ii) the First-Lien Collateral Agent's receipt of written notice from the Second-Lien Collateral Agent certifying that such "event of default" has occurred and is continuing (and requesting that enforcement action be taken with respect to the Collateral), so long as the respective "event of default" shall not have been cured or waived (or the respective acceleration rescinded).

 

"Second-Lien Holders" means the "Holders" under, and as defined in, the Second-Lien Note Indenture.

 

"Second-Lien Note Documents" means the Second-Lien Note Indenture, the Second-Lien Security Documents and each of the other agreements, documents and instruments providing for or evidencing any other Second-Lien Obligation, and any other document or instrument executed or delivered at any time in connection with any Second-Lien Obligation, as the same may be amended, modified or otherwise supplemented from time to time in accordance with the terms hereof, thereof and the First-Lien Credit Agreement; provided that any such modification does not increase the aggregate principal amount thereof beyond the limit set forth in the First-Lien Credit Agreement and is otherwise in accordance with the provisions of the First-Lien Credit Agreement and this Agreement.

 

"Second-Lien Note Indenture" has the meaning set forth in the recitals hereto.

 

"Second-Lien Obligations" means all Obligations outstanding under the Second-Lien Note Indenture and the other Second-Lien Note Documents.  "Second-Lien Obligations" shall in any event include:  (a) all interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation Proceeding (and the effect of provisions such as Section 502(b)(2) of the Bankruptcy Code), accrue) after commencement of an Insolvency or Liquidation Proceeding in accordance with the rate specified in the relevant Second-Lien Note Document whether or not the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding, (b) any and all fees and expenses (including attorneys' and/or financial consultants' fees and expenses) incurred by the Second-Lien Collateral Agent and the Second-Lien Creditors after the commencement of an Insolvency or Liquidation Proceeding, whether or not the claim for fees and expenses is allowed under Section 506(b) of the Bankruptcy Code or any other provision of the Bankruptcy Code or Bankruptcy Law as a claim in such Insolvency or Liquidation Proceeding and (c) all obligations and liabilities of each Grantor under each Second-Lien Note Document to which it is a party which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due.

 

"Second-Lien Security Agreement" means the Second-Lien Collateral Agreement, dated as of the date hereof, among Holdings, the Borrower, the other Grantors from time to time party thereto and the Second-Lien Collateral Agent, as the same may be amended, supplemented, restated, modified and/or Refinanced from time to time in accordance with the terms hereof and thereof.

 

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"Second-Lien Security Documents" means the Security Documents (or any similarly defined term) (as defined in the Second-Lien Note Indenture) and any other agreement, document, mortgage or instrument pursuant to which a Lien is granted (or purported to be granted) securing any Second-Lien Obligations or under which rights or remedies with respect to such Liens are governed, as the same may be amended, supplemented, restated, modified and/or Refinanced from time to time in accordance with the terms hereof and thereof.

 

"Secured Cash Management Agreement" means any Cash Management Agreement that is entered into by and between the Borrower or any other Grantor and any Cash Management Bank.

 

"Secured Cash Management Obligations" means the collective reference to all obligations and liabilities of a Grantor (including, without limitation, interest accruing at the then applicable rate provided in any Secured Cash Management Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to a Grantor, whether or not a claim for post-filing or post-petition interest is, or would be, allowed in such proceeding) to any Cash Management Bank, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Secured Cash Management Agreement or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the relevant Lender and other expenses, costs and charges or affiliate thereof that are required to be paid by any Grantor pursuant to the terms of any Secured Cash Management Agreement whether or not a claim is, or would be, allowed for such amounts in any Insolvency or Liquidation Proceeding of such Grantor).

 

"Secured Hedge Agreement" means any interest rate, energy, raw materials or commodity Hedge Agreement permitted under Article VII of the First-Lien Credit Agreement that is entered into by and between the Borrower or any other Grantor and any Hedge Bank.

 

"Secured Hedge Agreement Obligations" means the collective reference to all obligations and liabilities of a Grantor (including, without limitation, interest accruing at the then applicable rate provided in any Secured Hedge Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Grantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any Hedge Bank, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Secured Hedge Agreement or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the relevant Lender or affiliate thereof and all other expenses, costs and charges that are required to be paid by any Grantor pursuant to the terms of any Secured Hedge Agreement whether or not a claim is, or would be, allowed for such amounts in any Insolvency or Liquidation Proceeding of such Grantor).

 

"Security Documents" means, collectively, the First-Lien Security Documents and the Second-Lien Security Documents.

 

"Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially

 

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owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

 

"Subsidiary Guarantors" means each Subsidiary of Holdings which enters into a guaranty of any First-Lien Obligations or Second-Lien Obligations.

 

"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as from time to time in effect in the State of New York.

 

1.2                                 Terms Generally.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation."  The word "will" shall be construed to have the same meaning and effect as the word "shall".  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified, (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Exhibits or Sections shall be construed to refer to Exhibits or Sections of this Agreement, (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (f) terms defined in the UCC but not otherwise defined herein shall have the same meanings herein as are assigned thereto in the UCC, (g) reference to any law means such law as amended, modified, codified, replaced or re-enacted, in whole or in part, and in effect on the date hereof, including rules, regulations, enforcement procedures and any interpretations promulgated thereunder, and (h) references to Sections or clauses shall refer to those portions of this Agreement, and any references to a clause shall, unless otherwise identified, refer to the appropriate clause within the same Section in which such reference occurs.

 

SECTION 2.  Priority of Liens.

 

2.1                                 Subordination; Etc.  Notwithstanding the date, manner or order of grant, attachment or perfection of any Liens securing the Second-Lien Obligations granted on the Collateral or of any Liens securing the First-Lien Obligations granted on the Collateral and notwithstanding any provision of the UCC, or any applicable law or the Second-Lien Note Documents or any other circumstance whatsoever (including any non-perfection of any Lien purporting to secure the First-Lien Obligations and/or Second-Lien Obligations), the Second-Lien Collateral Agent, on behalf of itself and the other Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents) hereby agrees that:  (a) any Lien on the Collateral securing any First-Lien Obligations now or hereafter held by or on behalf of the First-Lien Collateral Agent or any First-Lien Creditors or any agent or trustee therefor, regardless of how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be senior in all respects and prior to any Lien on the Collateral securing any of the Second-Lien Obligations; and (b) any Lien on the Collateral now or hereafter held by or on behalf of the Second-Lien Collateral Agent, any Second-Lien Creditors or any agent or trustee therefor regardless of how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the Collateral securing any First-Lien Obligations.  All Liens on the Collateral securing any First-Lien Obligations shall be and remain senior in all respects and prior to all Liens on the Collateral securing any Second-Lien Obligations for all purposes, notwithstanding any failure of the First-Lien Collateral Agent or the First Lien Creditors to adequately perfect its security interests in the Collateral and 

 

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whether or not such Liens securing any First-Lien Obligations are subordinated to any Lien securing any other obligation of Holdings, the Borrower, any other Grantor or any other Person.  The parties hereto acknowledge and agree that it is their intent that the First-Lien Obligations (and the security therefor) constitute a separate and distinct class (and separate and distinct claims) from the Second-Lien Obligations (and the security therefor).

 

2.2                                 Nature of First Lien Obligations. The Second-Lien Collateral Agent, for itself and on behalf of the other Second-Lien Creditors, acknowledges that (a) a portion of the First Lien Obligations are revolving in nature, (b) subject to succeeding clause (d), the amount of such revolving First-Lien Obligations that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, (c) the terms of the First-Lien Obligations may be modified, extended or amended from time to time, and (d), subject to the limitations on the aggregate principal amount of First-Lien Obligations set forth in the definition of "First-Lien Obligations", the aggregate amount of the Obligations owing to the First-Lien Creditors may be increased or Refinanced, in either event, without notice to or consent by the Second-Lien Creditors and without affecting the provisions hereof.  Subject to the limitations on the aggregate principal amount of certain First-Lien Obligations set forth in the definition of "First-Lien Obligations", the lien priorities provided in Sections 2.1 and 2.2 shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or Refinancing of either the First-Lien Obligations or the Second-Lien Obligations, or any portion thereof.

 

2.3                                 Prohibition on Contesting Liens.  Each of the Second-Lien Collateral Agent, for itself and on behalf of each Second-Lien Creditor, and the First-Lien Collateral Agent, for itself and on behalf of each First-Lien Creditor, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), (i) the validity or enforceability of any Security Document or any Obligation thereunder, (ii) the validity, perfection, priority or enforceability of the Liens, mortgages, assignments and security interests granted pursuant to the Security Documents with respect to the First-Lien Obligations or (iii) the relative rights and duties of the holders of the First-Lien Obligations and the Second-Lien Obligations granted and/or established in this Agreement or any other Security Document with respect to such Liens, mortgages, assignments, and security interests; provided that nothing in this Agreement shall be construed to prevent or impair the rights of the First-Lien Collateral Agent or any First-Lien Creditor to enforce this Agreement, including the priority of the Liens securing the First-Lien Obligations as provided in Section 3.1 hereof.

 

2.4                                 No New Liens.  So long as the Discharge of First-Lien Obligations has not occurred, the parties hereto agree that neither Holdings nor the Borrower shall, and shall not permit any other Grantor to, grant or permit any additional Liens, or take any action to perfect any additional Liens, on any asset or property to secure any Second-Lien Obligation unless it has also granted a Lien on such asset or property to secure the First-Lien Obligations and has taken all actions to perfect such Liens.  To the extent that the foregoing provisions are not complied with for any reason, without limiting any other rights and remedies available to the First-Lien Collateral Agent and/or the other First-Lien Creditors, the Second-Lien Collateral Agent, on behalf of itself and the other Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), agrees that any amounts received by or distributed to any of them pursuant to or as a result of Liens granted in contravention of this Section 2.4 shall be subject to Section 4.2 hereof.

 

2.5                                 Similar Liens and Agreements.  The parties hereto agree that it is their intention that the Second-Lien Collateral not be more expansive than the First-Lien Collateral.  In furtherance of the foregoing and of Section 8.9 hereof, the Second-Lien Collateral Agent and the other Second-Lien Creditors agree, subject to the other provisions of this Agreement:

 

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(i)                                     upon request by the First-Lien Collateral Agent, to cooperate in good faith (and to direct their counsel to cooperate in good faith) from time to time in order to determine the specific items included in the Second-Lien Collateral and the steps taken to perfect the Liens thereon and the identity of the respective parties obligated under the Second-Lien Note Documents;

 

(ii)                                  that the First-Lien Security Documents and the Second-Lien Security Documents shall be substantially in the same form; and

 

(iii)                               that the guarantees for the First-Lien Obligations and the Second-Lien Obligations shall be substantially similar in substance.

 

SECTION 3.  Enforcement.

 

3.1                                 Exercise of Remedies.  (a)  Subject to Section 3.1(f), so long as the Discharge of First-Lien Obligations has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against Holdings, the Borrower or any other Grantor:  (i) the Second-Lien Collateral Agent and the other Second-Lien Creditors will not exercise or seek to exercise any rights or remedies (including setoff or recoupment) with respect to any Collateral (including, without limitation, the exercise of any right under any lockbox agreement, control account agreement, landlord waiver or bailee's letter or similar agreement or arrangement to which the Second-Lien Collateral Agent or any Second-Lien Creditor is a party) or institute or commence, or join with any Person in commencing, any action or proceeding with respect to such rights or remedies (including any action of foreclosure, enforcement, collection or execution and any Insolvency or Liquidation Proceeding), and will not contest, protest or object to any foreclosure proceeding or action brought by the First-Lien Collateral Agent or any other First-Lien Creditor or any other exercise by the First-Lien Collateral Agent or any other First-Lien Creditor, of any rights and remedies relating to the Collateral under the First-Lien Documents or otherwise, or object to the forbearance by the First-Lien Collateral Agent or the other First-Lien Creditors from bringing or pursuing any foreclosure proceeding or action or any other exercise of any rights or remedies relating to the Collateral; and (ii) the First-Lien Collateral Agent shall have the exclusive right, and the Required First-Lien Creditors shall have the exclusive right to instruct the First-Lien Collateral Agent, to enforce rights, exercise remedies (including set-off and the right to credit bid their debt) and make determinations regarding the release, disposition, or restrictions with respect to the Collateral without any consultation with or the consent of the Second-Lien Collateral Agent or any other Second-Lien Creditor, all as though the Second-Lien Obligations did not exist; provided, that:

 

(A) in any Insolvency or Liquidation Proceeding commenced by or against the Borrower or any other Grantor, the Second-Lien Collateral Agent may file a claim or statement of interest with respect to the Second-Lien Obligations;

 

(B) the Second-Lien Collateral Agent may take any action (not adverse to the prior Liens on the Collateral securing the First-Lien Obligations, or the rights of the First-Lien Collateral Agent or the other First-Lien Creditors to exercise remedies in respect thereof) in order to preserve or protect its Lien on the Collateral in accordance with the terms of this Agreement; and

 

(C) the Second-Lien Creditors shall be entitled to file any necessary responsive or defensive pleading in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Second-Lien Creditors, including any claim secured by the Collateral, if any, in each case in accordance with the terms of this Agreement.

 

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In exercising rights and remedies with respect to the Collateral, the First-Lien Collateral Agent and the other First-Lien Creditors may enforce the provisions of the First-Lien Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion.  Such exercise and enforcement shall include the rights of an agent appointed by them to sell or otherwise dispose of Collateral upon foreclosure, to incur expenses in connection with such sale or disposition, and to exercise all the rights and remedies of a secured creditor under the Uniform Commercial Code of any applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any applicable jurisdiction.

 

(b)                                 The Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, agrees that it will not take or receive any Collateral or any proceeds of Collateral in connection with the exercise of any right or remedy (including setoff or recoupment) with respect to any Collateral, unless and until the Discharge of First-Lien Obligations has occurred and, to the extent any Collateral or the proceeds thereof are taken or received in connection with the exercise of a right or remedy with respect to the Collateral by the Second-Lien Collateral Agent or any Second-Lien Creditor, then such Collateral or proceeds shall be paid over to the First-Lien Collateral Agent in accordance with Section 4.2. Without limiting the generality of the foregoing, unless and until the Discharge of First-Lien Obligations has occurred, the sole right of the Second-Lien Collateral Agent and the other Second-Lien Creditors with respect to the Collateral is to hold a Lien on the Collateral pursuant to the Second-Lien Security Documents for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after the Discharge of the First-Lien Obligations has occurred in accordance with the terms of the Second-Lien Note Documents and applicable law.

 

(c)                                  The Second-Lien Collateral Agent and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), (i) agrees that the Second-Lien Collateral Agent and the other Second-Lien Creditors will not take any action that would hinder, delay, limit or prohibit any exercise of remedies under the First-Lien Documents, including any collection, sale, lease, exchange, transfer or other disposition of the Collateral, whether by foreclosure or otherwise, or that would limit, invalidate, avoid or set aside any Lien or Security Document or subordinate the priority of the First-Lien Obligations to the Second-Lien Obligations or grant the Liens securing the Second-Lien Obligations equal ranking to the Liens securing the First-Lien Obligations and (ii) hereby waives any and all rights it or the Second-Lien Creditors may have as a junior lien creditor or otherwise (whether arising under the UCC or under any other law) to object to the manner in which the First-Lien Collateral Agent or the other First-Lien Creditors seek to enforce or collect the First-Lien Obligations or the Liens granted in any of the First-Lien Collateral, regardless of whether any action or failure to act by or on behalf of the First-Lien Collateral Agent or First-Lien Creditors is adverse to the interest of the Second-Lien Creditors.

 

(d)                                 Each Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents) agrees hereby acknowledges and agrees that no covenant, agreement or restriction contained in the Second-Lien Security Documents or any other Second-Lien Note Document shall be deemed to restrict in any way the rights and remedies of the First-Lien Collateral Agent or the other First-Lien Creditors with respect to the Collateral as set forth in this Agreement and the First-Lien Documents.

 

(e)                                  The Second-Lien Collateral Agent and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents) agrees that the Second-Lien Collateral Agent and the other Second-Lien Creditors will not, without the prior written consent of the First-Lien Required Lenders (or the First-Lien Collateral Agent at their direction or with their consent), issue any payment blockage or similar notice with respect to any First-Lien Obligations.

 

(f)                                    Notwithstanding anything to the contrary in preceding clauses (a) through (e) of this Section 3.1, at any time after the Second-Lien Enforcement Date, the Second-Lien Collateral Agent, 

 

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for itself and on behalf of the Second-Lien Creditors, and the other Second-Lien Creditors may, but only if the First-Lien Collateral Agent or the First-Lien Creditors are not pursuing or exercising remedies with respect to the Collateral (with any determination of which Collateral to proceed against, and in what order, to be made by the First-Lien Collateral Agent or such First-Lien Creditors in their sole discretion), enforce the Liens on Collateral granted pursuant to the Second-Lien Security Documents, provided that (x) any Collateral or any proceeds of Collateral received by the Second-Lien Collateral Agent or such other Second-Lien Creditor, as the case may be, in connection with the enforcement of such Lien shall be applied in accordance with Section 4 hereof and (y) the First-Lien Collateral Agent or any other First-Lien Creditors may at any time take over such enforcement actions or proceedings, provided that the First-Lien Collateral Agent or such First-Lien Creditors, as the case may be, pursues enforcement proceedings with respect to the Collateral, with any determination of which Collateral to proceed against, and in what order, to be made by the First-Lien Collateral Agent or such First-Lien Creditors in their sole discretion, and provided further that the Second-Lien Collateral Agent or Second-Lien Creditors, as the case may be, shall only be able to recoup (from amounts realized by the First-Lien Collateral Agent or any First-Lien Creditors) in any enforcement proceeding with respect to the Collateral (whether initiated by the First-Lien Collateral Agent or First-Lien Creditors or taken over by them as contemplated above) any expenses incurred by them in accordance with the priorities set forth in Section 4 hereof.

 

3.2                                 Actions Upon Breach.  (a)     If any Second-Lien Creditor, contrary to this Agreement, commences or participates in any Enforcement Action against Borrower, any other Grantor or the Collateral, the First-Lien Collateral Agent may intervene and may interpose in the name of the First-Lien Creditors or in the name of any Grantor the making of this Agreement as a defense or dilatory plea.

 

(b)                                 Should any Second-Lien Creditor, contrary to this Agreement, in any way take, or attempt or threaten to take, any Enforcement Action with respect to the Collateral (including, without limitation, any attempt to realize upon or enforce any remedy contrary to this Agreement), or fail to take any action required by this Agreement, the First-Lien Collateral Agent (in its own name or in the name of a Grantor) may obtain relief against such Second-Lien Creditor by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by the Second-Lien Collateral Agent on behalf of each Second-Lien Creditor that (i) the First-Lien Creditors' damages from such actions may be difficult to ascertain and may be irreparable, and (ii) the Second-Lien Collateral Agent on behalf of each Second-Lien Creditor waives any defense that the First-Lien Creditors cannot demonstrate damage or can be made whole by the awarding of damages.

 

SECTION 4.  Payments.

 

4.1                                 Application of Proceeds.  So long as the Discharge of First-Lien Obligations has not occurred, any proceeds of any Collateral pursuant to the enforcement of any Security Document or the exercise of any remedial provision thereunder, together with all other proceeds received by any Creditor (including all funds received in respect of post-petition interest or fees and expenses) as a result of any such enforcement or the exercise of any such remedial provision or as a result of any distribution of or in respect of any Collateral (whether or not expressly characterized as such) upon or in any Insolvency or Liquidation Proceeding with respect to any Grantor, or the application of any Collateral (or proceeds thereof) to the payment thereof or any distribution of Collateral (or proceeds thereof) upon the liquidation or dissolution of any Grantor, shall be applied by the First-Lien Collateral Agent to the First-Lien Obligations in such order as specified in the relevant First-Lien Document.  Upon the Discharge of the First-Lien Obligations, the First-Lien Collateral Agent shall deliver (i) to the Second-Lien Collateral Agent any proceeds of Collateral held by it in the same form as received, with any necessary endorsements to be applied by the Second-Lien Collateral Agent to the Second-Lien Obligations in such 

 

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order as specified in the Second-Lien Security Documents or (ii) as a court of competent jurisdiction may otherwise direct.

 

4.2                                 Payments Over.  Until such time as the Discharge of First-Lien Obligations has occurred, any Collateral or proceeds thereof (together with assets or proceeds subject to Liens referred to in the final sentence of Section 2.4 hereof) (or any distribution in respect of the Collateral, whether or not expressly characterized as such) received by the Second-Lien Collateral Agent or any other Second-Lien Creditors in connection with the exercise of any right or remedy (including set-off) relating to the Collateral or otherwise that is inconsistent with this Agreement shall be segregated and held in trust and forthwith paid over to the First-Lien Collateral Agent for the benefit of the First-Lien Creditors in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct.  The First-Lien Collateral Agent is hereby authorized to make any such endorsements as agent for the Second-Lien Collateral Agent or any such other Second-Lien Creditors.  This authorization is coupled with an interest and is irrevocable until such time as this Agreement is terminated in accordance with its terms.

 

SECTION 5.  Other Agreements.

 

5.1                                 Releases.

 

(a)                                  If, in connection with:

 

(i)                                     the exercise of the First-Lien Collateral Agent's remedies in respect of the Collateral including those described in Section 3.1 hereof, including any sale, lease, exchange, transfer or other disposition of any such Collateral (any of the foregoing, a "Remedial Action");

 

(ii)                                  any sale, lease, exchange, transfer or other disposition (any of the foregoing, a "Disposition") of any Collateral permitted under the terms of the First-Lien Loan Documents or consented to by the Required First-Lien Creditors (whether or not an "event of default" thereunder or under any Second-Lien Note Document has occurred and is continuing); or

 

(iii)                               any agreement between the First-Lien Collateral Agent and the Borrower or any other Grantor (x) to release the First-Lien Collateral Agent's Lien on any portion of the Collateral of a Grantor or (y) to release any Grantor from its obligations under its guaranty of the First-Lien Obligations, when, in each case, the Lien of the First Lien Collateral Agent on all of the Capital Stock of such Grantor is being released in accordance with Section 5.1(a)(i) or (ii);

 

there occurs the release by the First-Lien Collateral Agent, acting on its own or at the direction of the Required First-Lien Creditors, of any of its Liens on any part of the Collateral, or of any Grantor from its obligations under its guaranty of the First-Lien Obligations, then the Liens, if any, of the Second-Lien Collateral Agent, for itself and for the benefit of the Second-Lien Creditors, on such Collateral, and the obligations of such Grantor under its guaranty of the Second-Lien Obligations, shall be automatically, unconditionally and simultaneously released, and the Second-Lien Collateral Agent, for itself or on behalf of any such Second-Lien Creditors, promptly shall execute and deliver to the First-Lien Collateral Agent or such Grantor such termination statements, releases and other documents as the First-Lien Collateral Agent or such Grantor may request to effectively confirm such release; provided however that if an "event of default" then exists under the Second-Lien Note Indenture and the Discharge of First-Lien Obligations occurs concurrently with any such release, the Second-Lien Collateral Agent (on behalf of the Second-Lien Creditors) shall be entitled to receive the residual cash or cash equivalents (if any) remaining after giving effect to such release and the Discharge of the First-Lien Obligations.

 

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(b)                                 Until the Discharge of First-Lien Obligations occurs, the Second-Lien Collateral Agent, for itself and on behalf of the Second-Lien Creditors, hereby irrevocably constitutes and appoints the First-Lien Collateral Agent and any officer or agent of the First-Lien Collateral Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Second-Lien Collateral Agent or such other Second-Lien Creditor or in the First-Lien Collateral Agent�s own name, from time to time in the First-Lien Collateral Agent�s discretion, for the purpose of carrying out the terms of Section 5.1(a), to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of Section 5.1(a), including any endorsements or other instruments of transfer or release.  This authorization is coupled with an interest and is irrevocable until such time as this Agreement is terminated in accordance with its terms.

 

(c)                                  If, prior to the Discharge of First Lien Obligations, a subordination of the First-Lien Collateral Agent�s Lien on any Collateral is permitted (or in good faith believed by the First-Lien Collateral Agent to be permitted) under the First-Lien Credit Agreement to another Lien permitted under the First-Lien Credit Agreement (a "Priority Lien"), then the First-Lien Collateral Agent is authorized to execute and deliver a subordination agreement with respect thereto in form and substance satisfactory to it, and the Second-Lien Collateral Agent, for itself and on behalf of the Second-Lien Creditors, shall promptly execute and deliver to the First-Lien Collateral Agent or the relevant Grantor an identical subordination agreement subordinating the Liens of the Second-Lien Collateral Agent for the benefit of the Second-Lien Creditors to such Priority Lien.

 

5.2                                 Insurance.  Unless and until the Discharge of First-Lien Obligations has occurred, the First-Lien Collateral Agent (acting at the direction of the Required First-Lien Creditors) shall have the sole and exclusive right, subject to the rights of the Grantors under the First-Lien Documents, to adjust settlement for any insurance policy covering the Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding (or any deed in lieu of condemnation) affecting the Collateral.  Unless and until the Discharge of First-Lien Obligations has occurred, and subject to the rights of the Grantors under the First-Lien Security Documents, all proceeds of any such policy and any such award (or any payments with respect to a deed in lieu of condemnation) in respect to the Collateral shall be paid to the First-Lien Collateral Agent for the benefit of the First-Lien Creditors pursuant to the terms of the First-Lien Loan Documents (including, without limitation, for purposes of cash collateralization of commitments, letters of credit, Secured Hedge Agreements and Secured Cash Management Agreements) and, after the Discharge of First-Lien Obligations has occurred, to the Second-Lien Collateral Agent for the benefit of the Second-Lien Creditors to the extent required under the Second-Lien Security Documents and then, to the extent no Second-Lien Obligations are outstanding, to the owner of the subject property, such other Person as may be entitled thereto or as a court of competent jurisdiction may otherwise direct.  If the Second-Lien Collateral Agent or any other Second-Lien Creditors shall, at any time, receive any proceeds of any such insurance policy or any such award or payment in contravention of this Agreement, it shall pay such proceeds over to the First-Lien Collateral Agent in accordance with the terms of Section 4.2 of this Agreement.

 

5.3                                 Amendments to Second-Lien Note Documents and Second-Lien Security Documents.

 

(a)                                  Until the Discharge of First-Lien Obligations occurs, the Second-Lien Note Documents may be amended, supplemented or otherwise modified in accordance with their terms and the Second-Lien Obligations may be Refinanced in each case, without the consent of the First-Lien Collateral Agent or the First-Lien Creditors; provided, however, that (i) the holders of any such Refinancing debt 

 

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bind themselves in writing to the terms of this Agreement and (ii) any such amendment, supplement, modification or Refinancing shall be permitted under the First-Lien Credit Agreement.

 

(b)                                 Without the prior written consent of the First-Lien Collateral Agent (acting at the direction of the Required First-Lien Creditors), no Second-Lien Security Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Second-Lien Security Document, would contravene the provisions of this Agreement or any First-Lien Loan Document.  Each of Holdings, the Borrower and each other Guarantor agrees that each Second-Lien Security Document shall include the following language (or language to similar effect approved by the First-Lien Collateral Agent):

 

"Notwithstanding anything herein to the contrary, the lien and security interest granted to the Second-Lien Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Second-Lien Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement, dated as of September 30, 2009 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the "Intercreditor Agreement"), among Appleton Papers Inc., Paperweight Development Corp., each other Grantor party thereto from time to time, Bank of America, N.A., as First-Lien Collateral Agent, U.S. Bank National Association, as Second-Lien Collateral Agent, and certain other persons party or that may become party thereto from time to time.  In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern and control."

 

In addition, each of Holdings, the Borrower and each other Grantor agrees that each Second-Lien Security Document covering any Collateral shall contain such other language as the First-Lien Collateral Agent may reasonably request to reflect the subordination of such Second-Lien Security Document to the First-Lien Security Document covering such Collateral.

 

(c)                                  In the event the First-Lien Collateral Agent or the other First-Lien Creditors and the relevant Grantor(s) enter into any amendment, waiver or consent in respect of any of the First-Lien Security Documents for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any First-Lien Security Document or changing in any manner the rights of the First-Lien Collateral Agent, the other First-Lien Creditors, the Borrower or any other Grantor thereunder, then such amendment, waiver or consent shall apply automatically to any comparable provision of the Second-Lien Note Indenture and the Comparable Second-Lien Security Document without the consent of the Second-Lien Collateral Agent or the other Second-Lien Creditors and without any action by the Second-Lien Collateral Agent, the Borrower or any other Grantor, provided, that (A) no such amendment, waiver or consent shall have the effect of (i) removing assets subject to the Lien of the Second-Lien Security Documents, except to the extent that a release of such Lien is permitted by Section 5.1 of this Agreement, (ii) imposing additional duties on the Second-Lien Collateral Agent without its consent, or (iii) permitting other liens on the Collateral not permitted under the terms of the Second-Lien Note Documents or Section 6 hereof and (B) notice of such amendment, waiver or consent shall have been given to the Second-Lien Collateral Agent (although the failure to give any such notice shall in no way affect the effectiveness of any such amendment, waiver or consent).

 

5.4                                 Rights As Unsecured Creditors.  Except as otherwise set forth in this Agreement, the Second-Lien Collateral Agent and the other Second-Lien Creditors may exercise rights and remedies as unsecured creditors against Holdings, the Borrower or any other Grantor that has guaranteed the Second-Lien Obligations in accordance with the terms of the Second-Lien Note Documents and applicable law.  Except as otherwise set forth in this Agreement, nothing in this Agreement shall prohibit

 

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the receipt by the Second-Lien Collateral Agent or any other Second-Lien Creditors of the required payments of interest and principal on the Second-Lien Obligations so long as such receipt is not the direct or indirect result of the exercise by the Second-Lien Collateral Agent or any other Second-Lien Creditor of rights or remedies as a secured creditor (including set-off) or enforcement in contravention of this Agreement of any Lien held by any of them.  In the event the Second-Lien Collateral Agent or any other Second-Lien Creditor becomes a judgment lien creditor in respect of Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subordinated to the Liens securing First-Lien Obligations on the same basis as the other Liens securing the Second-Lien Obligations are so subordinated to such First-Lien Obligations under this Agreement.  Nothing in this Agreement impairs or otherwise adversely affects any rights or remedies the First-Lien Collateral Agent or the other First-Lien Creditors may have with respect to the First-Lien Collateral.

 

5.5                                 Bailee for Perfection.

 

(a)                                  The First-Lien Collateral Agent agrees to acquire and acknowledges it holds the Pledged Collateral or other Collateral (including any deposit accounts or securities accounts of the Grantors) in its possession or control (or in the possession or control of its agents or bailees) on behalf of itself and the Second-Lien Collateral Agent and any assignee solely for the purpose of perfecting the security interest granted under the First-Lien Documents and the Second-Lien Note Documents, subject to the terms and conditions of this Section 5.5.

 

(b)                                 Until the Discharge of First-Lien Obligations has occurred, the First-Lien Collateral Agent shall be entitled to deal with the Pledged Collateral in accordance with the terms of the First-Lien Documents as if the Liens of the Second-Lien Collateral Agent under the Second-Lien Security Documents did not exist.  The rights of the Second-Lien Collateral Agent shall at all times be subject to the terms of this Agreement and to the First-Lien Collateral Agent's rights under the First-Lien Documents.

 

(c)                                  The First-Lien Collateral Agent shall have no obligation whatsoever to the First-Lien Creditors and the Second-Lien Collateral Agent or any Second-Lien Creditor to assure that the Pledged Collateral is genuine or owned by any of the Grantors or to preserve rights or benefits of any Person except as expressly set forth in this Section 5.5.  The duties or responsibilities of the First-Lien Collateral Agent under this Section 5.5 shall be limited solely to holding the Pledged Collateral as bailee in accordance with this Section 5.5.

 

(d)                                 The First-Lien Collateral Agent acting pursuant to this Section 5.5 shall not have by reason of the First-Lien Security Documents, the Second-Lien Security Documents, this Agreement or any other document a fiduciary relationship in respect of the First-Lien Creditors, the Second-Lien Collateral Agent or any other Second-Lien Creditor.  The duties or responsibilities of the First-Lien Collateral Agent under this Section 5.5 shall be limited solely to (i) physically holding (or causing its agent or bailee, as applicable, to hold) any Collateral that may from time to time be in its possession or control (or in the possession or control of its agents or bailees) as agent or bailee for purposes of perfecting the Lien held by the other administrative agent and (ii) delivering the Collateral or the proceeds thereof to such Person as required by this Section 5.5.

 

(e)                                  Except as otherwise directed by a court of competent jurisdiction, upon the Discharge of the First-Lien Obligations, the First-Lien Collateral Agent shall deliver the remaining Pledged Collateral (if any) (or proceeds thereof) together with any necessary endorsements or transfer control of any Collateral, first, to the Second-Lien Collateral Agent, if any Second-Lien Obligations remain outstanding, and second, to the Borrower or the relevant Grantor if no First-Lien Obligations or 

 

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Second-Lien Obligations remain outstanding (in each case, so as to allow such Person to obtain control of such Pledged Collateral).

 

5.6                                 When Discharge of First-Lien Obligations Deemed to Not Have Occurred.  If at any time after the Discharge of First-Lien Obligations has occurred, the Borrower thereafter enters into any Refinancing of any First-Lien Loan Document evidencing a First-Lien Obligation which Refinancing is permitted hereby, then such Discharge of First-Lien Obligations shall automatically be deemed not to have occurred for all purposes of this Agreement, and the obligations under such Refinancing First-Lien Loan Document shall automatically be treated as First-Lien Obligations for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth herein, and the first-lien collateral agent under such First-Lien Loan Documents shall be the First-Lien Collateral Agent for all purposes of this Agreement.  Upon receipt of a notice stating that the Borrower has entered into a new First-Lien Loan Document (which notice shall include the identity of the new agent, such agent, the "New Agent"), the Second-Lien Collateral Agent shall promptly enter into such documents and agreements (including amendments or supplements to this Agreement) as the Borrower or such New Agent may reasonably request in order to provide to the New Agent the rights contemplated hereby, in each case consistent in all material respects with the terms of this Agreement.

 

SECTION 6.  Insolvency or Liquidation Proceedings.

 

6.1                                 Finance and Sale Issues.  (a)  If the Borrower or any other Grantor shall be subject to any Insolvency or Liquidation Proceeding and the First-Lien Collateral Agent (acting at the direction of the Required First-Lien Creditors) shall desire to permit the use of Cash Collateral (as defined in Section 363(a) of the Bankruptcy Code) on which the First-Lien Collateral Agent or any other creditor of the Borrower or any other Grantor has a Lien or to permit the Borrower or any other Grantor to obtain financing (including on a priming basis), whether from the First-Lien Creditors or any other third party under Section 362, 363 or 364 of the Bankruptcy Code or any other Bankruptcy Law (each, a "Post-Petition Financing"), then the Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), agrees that it will not oppose or raise any objection to or contest (or join with or support any third party opposing, objecting to or contesting), such use of Cash Collateral or Post-Petition Financing and will not request adequate protection or any other relief in connection therewith (except as expressly agreed in writing by the First-Lien Collateral Agent or to the extent permitted by Section 6.3 hereof) and, to the extent the Liens securing the First-Lien Obligations are subordinated to or pari passu with such Post-Petition Financing, the Liens of the Second-Lien Collateral Agent on the Collateral shall be deemed to be subordinated, without any further action on the part of any person or entity, to (x) the Liens securing the Post-Petition Financing (and all Obligations relating thereto), (y) any adequate protection Liens provided to the First-Lien Collateral Agent or the First-Lien Creditors and (z) any "carve-out" for professional and United States Trustee fees agreed to by the First-Lien Collateral Agent and the Liens securing the Second Lien Obligations shall have the same priority with respect to the Collateral relative to the Liens securing the First Lien Obligations as if such Post-Petition Financing had not occurred.  The Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors agrees that notice received three (3) calendar days prior to the entry of an order approving such usage of cash collateral or approving such Post-Petition Financing shall be adequate notice.

 

(b)  The Second-Lien Collateral Agent, on behalf of itself and the other Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), agrees that it will raise no objection to, oppose or contest (or join with or support any third party opposing, objecting to or contesting), a sale or other disposition of any Collateral free and clear of its Liens or other claims under Section 363 of the Bankruptcy Code if the Required First-Lien Creditors 

 

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have consented to such sale or disposition of such assets and the Liens securing the First-Lien Obligations and the Second-Lien Obligations continue on the proceeds of such sale or disposition of such assets.

 

6.2                                 Relief from the Automatic Stay.  Until the Discharge of First-Lien Obligations has occurred, the Second-Lien Collateral Agent, on behalf of itself and the other Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), agrees that none of them shall (i) seek relief, pursuant to Section 362(d) of the Bankruptcy Code or otherwise, from the automatic stay of Section 362(a) of the Bankruptcy Code or from any other stay in any Insolvency or Liquidation Proceeding in respect of the Collateral, without the prior written consent of the First-Lien Collateral Agent or (ii) oppose any request by the First-Lien Collateral Agent or any First-Lien Creditor to seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of the Collateral.

 

6.3                                 Adequate Protection.  (a) The Second-Lien Collateral Agent and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), agrees that none of them shall (i) oppose, object to or contest (or join with or support any third party opposing, objecting to or contesting) (a) any request by the First-Lien Collateral Agent or the other First-Lien Creditors for adequate protection in any Insolvency or Liquidation Proceeding (or any granting of such request) or (b) any objection by the First-Lien Collateral Agent or the other First-Lien Creditors to any motion, relief, action or proceeding based on the First-Lien Collateral Agent or the other First-Lien Creditors claiming a lack of adequate protection or (ii) seek or accept any form of adequate protection under any of Sections 362, 363 and/or 364 of the Bankruptcy Code with respect to the Collateral, except to the extent that, in the sole discretion of the First Lien Creditors, the receipt by the Second-Lien Creditors of any such adequate protection would not reduce (or would not have the effect of reducing) or adversely affect the adequate protection that the First-Lien Creditors otherwise would be entitled to receive (it being understood that, in any event, (A) no adequate protection shall be requested or accepted by the Second-Lien Creditors or by the Second Lien Collateral Agent on their behalf unless the First-Lien Creditors are satisfied in their sole discretion with the adequate protection afforded to the First-Lien Creditors, and (B) any such adequate protection is in the form of a replacement Lien on the Grantors' assets, which Lien will be subordinated to the Liens securing the First-Lien Obligations (including any replacement Liens granted in respect of the First Lien Obligations) and any Post-Petition Financing (and all Obligations relating thereto) on the same basis as the other Liens securing the Second-Lien Obligations are so subordinated to the First-Lien Obligations under this Agreement).

 

(b)                                 If the First-Lien Collateral Agent or the First-Lien Creditors (or any subset thereof) are granted adequate protection in the form of a superpriority claim, then the Second-Lien Collateral Agent, on behalf of itself or any of the Second-Lien Creditors, may seek or request a superpriority claim, which superpriority claim will be junior in all respects to the superpriority claim granted to the First-Lien Collateral Agent and the First-Lien Creditors, and, in the event that the Second-Lien Collateral Agent, on behalf of itself or any of the Second-Lien Creditors, seeks or requests adequate protection in respect of Second-Lien Obligations and such adequate protection is granted in the form of a superpriority claim, then the Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, agrees that the First-Lien Collateral Agent and the providers of any Post-Petition Financing also shall be granted a superpriority claim, which superpriority claim will be senior in all respects to the superpriority claim granted to the Second-Lien Collateral Agent and the Second-Lien Creditors.  The Second-Lien Collateral Agent and each of the Second Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) agrees, pursuant to Section 1129(a)(9) of the Bankruptcy Code, that such junior superpriority claims (including any claim arising under 11 U.S.C. §507(b)) may be paid under any plan of reorganization in any combination of cash, debt, equity or other property having a value on the effective date of such plan equal to the allowed amount of such claims.  The Second-Lien Collateral Agent and each of the Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note 

 

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Documents) agrees that they shall waive a right to distributions of proceeds of Avoidance Actions (defined below) in respect of any claim granted to the Second-Lien Collateral Agent or the Second Lien Creditors in connection with the Post-Petition Financing or cash collateral usage or arising as a result of the Second-Lien Creditors rights under 11 U.S.C. §507(b) upon the waiver by the First-Lien Collateral Agent, on behalf of itself and the First-Lien Creditors, of a right to distributions of proceeds of such Avoidance Actions.  For purposes hereof, "Avoidance Actions" means all claims and causes of actions under Chapter 5 of the Bankruptcy Code, including, inter alia, those under sections 502(d), 544, 545, 547, 548, 549, 550, 552(b) and 553.

 

6.4                                 No Waiver; Voting Rights.  Nothing contained herein shall prohibit or in any way limit the First-Lien Collateral Agent or any First-Lien Creditor from objecting on any basis in any Insolvency or Liquidation Proceeding or otherwise to any action taken by the Second-Lien Collateral Agent or any other Second-Lien Creditor, including the seeking by the Second-Lien Collateral Agent or any other Second-Lien Creditor of adequate protection or the assertion by the Second-Lien Collateral Agent or any other Second-Lien Creditors of any of its rights and remedies under the Second-Lien Note Documents or otherwise.  In any Insolvency or Liquidation Proceeding, neither the Second-Lien Collateral Agent nor any other Second-Lien Creditor shall (i) oppose, object to, or vote against any plan of reorganization or disclosure statement, or join with or support any third party in doing so, to the extent the terms of such plan or disclosure statement comply with the following clause (ii) and are otherwise consistent with the rights of the First-Lien Creditors under this Agreement or (ii) support or vote for any plan of reorganization or disclosure statement of any Grantor unless (x) such plan provides for the payment in full in cash of all First-Lien Obligations (including all post-petition interest, fees and expenses as provided in Section 6.6 hereof) on the effective date of such plan of reorganization (or such plan is otherwise supported by the First-Lien Creditors), or (y) such plan provides on account of the First Lien Obligations for the retention by the First Lien Collateral Agent, for the benefit of the First Lien Creditors, of the Liens on the Collateral securing the First Lien Obligations, and on all proceeds thereof, and such plan also provides that any Liens retained by, or granted to, the Second Lien Collateral Agent are only on assets or property securing the First Lien Obligations and shall have the same relative priority with respect to the Collateral or other assets or property, respectively, as provided in this Agreement with respect to the Collateral, and to the extent such plan provides for deferred cash payments, or for the distribution of any other property of any kind or nature, on account of the First Lien Obligations or the Second Lien Obligations, such plan provides that any such deferred cash payments or other distributions in respect of the Second Lien Obligations shall be delivered to the First-Lien Collateral Agent and distributed in accordance with the priorities provided in Section 4.1 hereof, it being understood that, in the event that any plan is proposed by any debtor, creditor, or other party in interest in any such Insolvency or Liquidation Proceeding that is inconsistent with or purports to alter the provisions of this Agreement (including the provisions of Section 4.1 hereof and the priority of application of the proceeds of Collateral set forth therein), the First-Lien Collateral Agent shall be deemed to have been granted, as of the date hereof, an irrevocable power of attorney to vote the claims of the Second-Lien Creditors against any such plan, with such appointment being coupled with an interest, and the First-Lien Collateral Agent shall be deemed the "holder" of such claims within the meaning of Section 1126(a) of the Bankruptcy Code.  Except as provided in this Section 6, the Second-Lien Creditors shall remain entitled to vote their claims in any such Insolvency or Liquidation Proceeding.

 

6.5                                 Preference Issues.  If any First-Lien Creditor is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower or any other Grantor any amount (a "Recovery"), then the First-Lien Obligations shall be reinstated to the extent of such Recovery and the First-Lien Creditors shall be entitled to a reinstatement of First-Lien Obligations with respect to all such recovered amounts.  If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties 

 

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hereto from such date of reinstatement.  Any amounts received by the Second Lien Collateral Agent or any Second Lien Creditor on account of the Second Lien Obligations after the termination of this Agreement shall, in the event of a reinstatement of this Agreement pursuant to this Section 6.5, be held in trust for and paid over to the First Lien Collateral Agent for the benefit of the First Lien Creditors, for application to the reinstated First Lien Obligations.  This Section 6.5 shall survive termination of this Agreement.

 

6.6                                 Post-Petition Interest.

 

(a)                                  Neither the Second-Lien Collateral Agent nor any other Second-Lien Creditor shall oppose or seek to challenge any claim by the other First-Lien Collateral Agent or any First-Lien Creditor for allowance in any Insolvency or Liquidation Proceeding of First-Lien Obligations consisting of post-petition interest, fees or expenses.  Regardless of whether any such claim for post-petition interest, fees or expenses is allowed or allowable, and without limiting the generality of the other provisions of this Agreement, this Agreement expressly is intended to comply with and does comply with the "rule of explicitness" in that this Agreement expressly entitles the First-Lien Creditors, and is intended to provide the First Lien Creditors with the right, to receive payment of all post-petition interest, fees or expenses through distributions made pursuant to the provisions of this Agreement even though such interest, fees and expenses are not allowed or allowable against the bankruptcy estate of the Borrower or any other Grantor under Section 502(b)(2) or Section 506(b) of the Bankruptcy Code or under any other provision of the Bankruptcy Code or any other Bankruptcy Law.

 

(b)                                 Without limiting the foregoing, it is the intention of the parties hereto that (and to the maximum extent permitted by law the parties hereto agree that) the First-Lien Obligations (and the security therefor) constitute a separate and distinct class (and separate and distinct claims) from the Second-Lien Obligations (and the security therefor).

 

6.7                                 Waiver.  The Second-Lien Collateral Agent and each of the other Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) waives any claim it may hereafter have against any First-Lien Creditor arising out of the election by any First-Lien Creditor of the application to the claims of any First Lien Creditor of Section 1111(b)(2) of the Bankruptcy Code, and/or out of any Cash Collateral or Post-Petition Financing arrangement or out of any grant of a security interest in connection with the Collateral in any Insolvency or Liquidation Proceeding.

 

6.8                                 Limitations.  So long as the Discharge of First-Lien Obligations has not occurred, without the express written consent of the First-Lien Collateral Agent, in any Insolvency or Liquidation Proceeding involving any Grantor, none of the Second-Lien Creditors shall (or shall join with or support any third party making, opposing, objecting or contesting, as the case may be) (i) make an election for application to its claims of Section 1111(b)(2) of the Bankruptcy Code, (ii) oppose, object to or contest the determination of the extent of any Liens held by any of the First-Lien Creditors or the value of any claims of First-Lien Creditors under Section 506(a) of the Bankruptcy Code, (iii) oppose, object to or contest the payment to the First Lien Creditors of interest, fees or expenses under Section 506(b) of the Bankruptcy Code, or (iv) assert or enforce, at any time prior to the Discharge of First-Lien Obligations, any claim under Section 506(c) of the Bankruptcy Code senior to or on parity with the First Lien Obligations for costs or expenses of preserving or disposing of any Collateral.

 

SECTION 7.  Reliance; Waivers; Etc.

 

7.1                                 Reliance.  The consent by the First-Lien Creditors to the execution and delivery of the Second-Lien Documents and the grant to the Second-Lien Collateral Agent on behalf of the Second-Lien Creditors of a Lien on the Collateral and all loans and other extensions of credit made or 

 

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deemed made on and after the date hereof by the First-Lien Creditors to the Grantors shall be deemed to have been given and made in reliance upon this Agreement.  The First-Lien Collateral Agent, on behalf of itself and the First-Lien Creditors under the First-Lien Documents, acknowledges that it and the other First-Lien Creditors have, independently and without reliance on the Second-Lien Collateral Agent or any other Second-Lien Creditors, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into such First-Lien Documents and be bound by the terms of this Agreement and they will continue to make their own credit decision in taking or not taking any action under any First-Lien Document or this Agreement.  Each of the Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) other than the Second-Lien Collateral Agent, acknowledges that it has, independently and without reliance on the First-Lien Collateral Agent or any First-Lien Creditor, and based on documents and information deemed by it appropriate, made its own credit analysis and decision to enter into each of the Second-Lien Note Documents and be bound by the terms of this Agreement and it will continue to make its own credit decision in taking or not taking any action under the Second-Lien Note Documents or this Agreement.

 

7.2                                 No Warranties or Liability.  The First-Lien Collateral Agent, on behalf of itself and the First-Lien Creditors under the First-Lien Documents, acknowledges and agrees that each of the Second-Lien Collateral Agent and the other Second-Lien Creditors have made no express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the Second-Lien Note Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon.  The Second-Lien Creditors will be entitled to manage and supervise their respective loans and extensions of credit under the Second-Lien Note Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate.  Each of the Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) acknowledges and agrees that each of the First-Lien Collateral Agent and the First-Lien Creditors have made no express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the First-Lien Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon.  The First-Lien Creditors will be entitled to manage and supervise their respective loans and extensions of credit under their respective First-Lien Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate.  The Second-Lien Collateral Agent and the other Second-Lien Creditors shall have no duty to the First-Lien Collateral Agent or any of the other First-Lien Creditors, and the First-Lien Collateral Agent and the other First-Lien Creditors shall have no duty to the Second-Lien Collateral Agent or any of the other Second-Lien Creditors, to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of an event of default or default under any agreements with Holdings, the Borrower or any other Grantor (including under the First-Lien Documents and the Second-Lien Note Documents), regardless of any knowledge thereof which they may have or be charged with.

 

7.3                                 No Waiver of Lien Priorities.

 

(a)                                  No right of the First-Lien Creditors, the First-Lien Collateral Agent or any of them to enforce any provision of this Agreement or any First-Lien Document shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of Holdings, the Borrower or any other Grantor or by any act or failure to act by any First-Lien Creditor or the First-Lien Collateral Agent, or by any noncompliance by any Person with the terms, provisions and covenants of this Agreement, any of the First-Lien Documents or any of the Second-Lien Note Documents, regardless of any knowledge thereof which the First-Lien Collateral Agent or the First-Lien Creditors, or any of them, may have or be otherwise charged with.

 

(b)                                 Without in any way limiting the generality of the foregoing paragraph (but subject to the rights of the Borrower and the other Grantors under the First-Lien Documents), the First-

 

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Lien Creditors, the First-Lien Collateral Agent and any of them may, at any time and from time to time in accordance with the First-Lien Documents and/or applicable law, without the consent of, or notice to, the Second-Lien Collateral Agent or any other Second-Lien Creditor, without incurring any liabilities to the Second-Lien Collateral Agent or any other Second-Lien Creditor and without impairing or releasing the Lien priorities and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of the Second-Lien Collateral Agent or any Second-Lien Creditors is affected, impaired or extinguished thereby) do any one or more of the following:

 

(i)                                     make loans and advances to any Grantor or issue, guaranty or obtain letters of credit for account of any Grantor or otherwise extend credit to any Grantor, in any amount and on any terms, whether pursuant to a commitment or as a discretionary advance and whether or not any default or event of default or failure of condition is then continuing;

 

(ii)                                  change the manner, place or terms of payment or change or extend the time of payment of, or amend, renew, exchange, increase or alter, the terms of any of the First-Lien Obligations or any Lien on any First-Lien Collateral or guaranty thereof or any liability of the Borrower or any other Grantor, or any liability incurred directly or indirectly in respect thereof (including any increase in or extension of the First-Lien Obligations, without any restriction as to the amount, tenor or terms of any such increase or extension) or otherwise amend, renew, exchange, extend, modify or supplement in any manner any Liens held by the First-Lien Collateral Agent or any of the First-Lien Creditors, the First-Lien Obligations or any of the First-Lien Documents;

 

(iii)                               sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of the First-Lien Collateral or any liability of the Borrower or any other Grantor to the First-Lien Creditors or the First-Lien Collateral Agent, or any liability incurred directly or indirectly in respect thereof;

 

(iv)                              settle or compromise any First-Lien Obligation or any other liability of the Borrower or any other Grantor or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including the First-Lien Obligations) in any manner or order;

 

(v)                                 exercise or delay in or refrain from exercising any right or remedy against the Borrower or any other Grantor or any other Person or with respect to any security, elect any remedy and otherwise deal freely with the Borrower, any other Grantor or any First-Lien Collateral and any security and any guarantor or any liability of the Borrower or any other Grantor to the First-Lien Creditors or any liability incurred directly or indirectly in respect thereof;

 

(vi)                              release or discharge any First-Lien Obligation or any guaranty thereof or any agreement or obligation of any Grantor or any other person or entity with respect thereto;

 

(vii)                           take or fail to take any Lien securing the First-Lien Obligations or any other collateral security for any First-Lien Obligations or take or fail to take any action which may be necessary or appropriate to ensure that any Lien securing First-Lien Obligations or any other Lien upon any property is duly enforceable or perfected or 

 

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entitled to priority as against any other Lien or to ensure that any proceeds of any property subject to any Lien are applied to the payment of any First-Lien Obligation or any Obligation secured thereby; or

 

(viii)                        otherwise release, discharge or permit the lapse of any or all Liens securing the First-Lien Obligations or any other Liens upon any property at any time securing any First Lien Obligations.

 

Notwithstanding the above, any amendment, waiver or consent in respect of any of the First-Lien Security Documents shall be consistent with the provisions Section 5.3(c) hereof.

 

(c)                                  The Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien Note Documents), agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the Collateral or any other similar rights a junior secured creditor may have under applicable law.

 

7.4                                 Waiver of Liability; Indemnity.

 

(a)                                  Each of the Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) also agrees that the First-Lien Creditors and the First-Lien Collateral Agent shall have no liability to any of the Second-Lien Creditors, and each of the Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) hereby waives any claim against any First-Lien Creditor or the First-Lien Collateral Agent, arising out of any and all actions which the First-Lien Creditors or the First-Lien Collateral Agent may take or permit or omit to take with respect to:  (i) the First-Lien Documents (including, without limitation, any failure to perfect or obtain perfected security interests in the First-Lien Collateral), (ii) the collection of the First-Lien Obligations or (iii) the foreclosure upon, or sale, liquidation or other disposition of, any First-Lien Collateral.  The Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, agrees that the First-Lien Creditors and the First-Lien Collateral Agent have no duty, express or implied, fiduciary or otherwise, to them in respect of the maintenance or preservation of the First-Lien Collateral, the First-Lien Obligations or otherwise.  Neither the First-Lien Collateral Agent nor any other First-Lien Creditor nor any of their respective directors, officers, employees or agents will be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so, or will be under any obligation to sell or otherwise dispose of any Collateral upon the request of the or any other Grantor or upon the request of the Second-Lien Collateral Agent, any other holder of Second-Lien Obligations or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  Without limiting the foregoing, each Second-Lien Creditor by accepting the benefits of the Second-Lien Security Documents agrees that neither the First-Lien Collateral Agent nor any other First-Lien Creditor (in directing the Collateral Agent to take any action with respect to the Collateral) shall have any duty or obligation to realize first upon any type of Collateral or to sell, dispose of or otherwise liquidate all or any portion of the Collateral in any manner, including as a result of the application of the principles of marshaling or otherwise, that would maximize the return to any class of Creditors holding Obligations of any type (whether First-Lien Obligations or Second-Lien Obligations), notwithstanding that the order and timing of any such realization, sale, disposition or liquidation may affect the amount of proceeds actually received by such class of Creditors from such realization, sale, disposition or liquidation.

 

(b) With respect to its share of the Obligations, Bank of America, N.A. and/or U.S. Bank National Association (each a "Bank") shall have and may exercise the same rights and powers hereunder as, and shall be subject to the same obligations and liabilities as and to the extent set forth herein for, any 

 

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other Creditor, all as if Bank were not the First-Lien Collateral Agent or the Second-Lien Collateral Agent.  The term "Creditors" or any similar term shall, unless the context clearly otherwise indicates, include Bank in its individual capacity as a Creditor.  Bank and its affiliates may lend money to, and generally engage in any kind of business with, the Grantors or any of their Affiliates as if Bank were not acting as the First-Lien Collateral Agent or Second- Lien Collateral Agent and without any duty to account therefor to any other Creditor.

 

7.5                                 Obligations Unconditional.  All rights, interests, agreements and obligations of the First-Lien Collateral Agent and the other First-Lien Creditors and the Second-Lien Collateral Agent and the other Second-Lien Creditors, respectively, hereunder (including the Lien priorities established hereby) shall remain in full force and effect irrespective of:

 

(a)                                  any lack of validity or enforceability of any First-Lien Loan Document or any Second-Lien Document;

 

(b)                                 any change in the time, manner or place of payment of, or in any other terms of, all or any of the First-Lien Obligations or Second-Lien Obligations, or any amendment or waiver or other modification, including any increase in the amount thereof, whether by course of conduct or otherwise, of the terms of any First-Lien Document or any Second-Lien Document;

 

(c)                                  any exchange of any security interest in any Collateral or any other collateral, or any amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the First-Lien Obligations or Second-Lien Obligations or any guarantee thereof;

 

(d)                                 the commencement of any Insolvency or Liquidation Proceeding in respect of the Borrower or any other Grantor; or

 

(e)                                  any other circumstances which otherwise might constitute a defense available to, or a discharge of, the Borrower or any other Grantor in respect of the First-Lien Obligations, or of the Second-Lien Collateral Agent or any Second-Lien Creditor in respect of this Agreement.

 

SECTION 8.  Miscellaneous.

 

8.1                                 Conflicts.  In the event of any conflict between the provisions of this Agreement and the provisions of the First-Lien Documents or the Second-Lien Note Documents, the provisions of this Agreement shall govern and control.

 

8.2                                 Effectiveness; Continuing Nature of this Agreement; Severability.  This Agreement shall become effective when executed and delivered by the parties hereto.  This is a continuing agreement of lien subordination and the First-Lien Creditors may continue, at any time and without notice to the Second-Lien Collateral Agent or any other Second-Lien Creditor, to extend credit and other financial accommodations and lend monies to or for the benefit of the Borrower or any other Grantor constituting First-Lien Obligations in reliance hereon.  The Second-Lien Collateral Agent and each of the Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien Note Documents) hereby waives any right it may have under applicable law to revoke this Agreement or any of the provisions of this Agreement.  The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation Proceeding.  Without limiting the generality of the foregoing, this Agreement is intended to constitute and shall be deemed to constitute a �subordination agreement� 

 

25

 

within the meaning of Section 510(a) of the Bankruptcy Code and is intended to be and shall be interpreted to be enforceable to the maximum extent permitted pursuant to applicable nonbankruptcy law.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  All references to the Borrower or any other Grantor shall include the Borrower or such Grantor as debtor and debtor-in-possession and any receiver or trustee for the Borrower or any other Grantor (as the case may be) in any Insolvency or Liquidation Proceeding.  This Agreement shall terminate and be of no further force and effect, (i) with respect to the Second-Lien Collateral Agent, the other Second-Lien Creditors and the Second-Lien Obligations, upon the later of (1) the date upon which the obligations under the Second-Lien Note Indenture terminate if there are no other Second-Lien Obligations outstanding on such date and (2) if there are other Second-Lien Obligations outstanding on such date, the date upon which such Second-Lien Obligations terminate and (ii) with respect to the First-Lien Collateral Agent, the other First-Lien Creditors and the First-Lien Obligations, the date of the Discharge of First-Lien Obligations, subject to the rights of the First-Lien Creditors under Section 6.5.

 

8.3                                 Amendments; Waivers.  No amendment, modification or waiver of any of the provisions of this Agreement by the Second-Lien Collateral Agent or the First-Lien Collateral Agent shall be made unless the same shall be in writing signed on behalf of each party hereto; provided that (x) the First-Lien Collateral Agent (at the direction of the Required First-Lien Creditors) may, without the written consent of any other Creditor, agree to modifications of this Agreement for the purpose of securing additional extensions of credit (including pursuant to the First-Lien Credit Agreement or any Refinancing or extension thereof) and adding new creditors as "First-Lien Creditors" and "Creditors" hereunder, so long as such extensions (and resulting additions) do not otherwise give rise to a violation of the express terms of the First-Lien Credit Agreement or the Second-Lien Note Indenture and (y) additional Grantors may be added as parties hereto in accordance with the provisions of Section 8.18 of this Agreement. Each waiver of the terms of this Agreement, if any, shall be a waiver only with respect to the specific instance involved and shall not impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time.  Notwithstanding the foregoing, no Grantor shall have any right to consent to or approve any amendment, modification or waiver of any provision of this Agreement except to the extent its rights, interests, liabilities or privileges are directly and adversely affected.

 

8.4                                 Information Concerning Financial Condition of Holdings and its Subsidiaries.  (a)     The First-Lien Collateral Agent and the First-Lien Creditors, on the one hand, and the Second-Lien Collateral Agent and the other Second-Lien Creditors, on the other hand, shall each be responsible for keeping themselves informed of (a) the financial condition of Holdings and its Subsidiaries and all endorsers and/or guarantors of the First-Lien Obligations or the Second-Lien Obligations and (b) all other circumstances bearing upon the risk of nonpayment of the First-Lien Obligations or the Second-Lien Obligations.  The First-Lien Collateral Agent and the other First-Lien Creditors shall have no duty to advise the Second-Lien Collateral Agent or any other Second-Lien Creditor of information known to it or them regarding such condition or any such circumstances or otherwise.  In the event the First-Lien Collateral Agent or any of the other First-Lien Creditors, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to the Second-Lien Collateral Agent or any other Second-Lien Creditor, it or they shall be under no obligation (w) to make, and the First-Lien Collateral Agent and the other First-Lien Creditors shall not make, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of any such information so provided, (x) to provide any additional information or to provide any such information on any subsequent occasion, (y) to undertake any investigation or (z) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential or is otherwise required to maintain confidential.

 

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(b)                                 The Grantors agree that any information provided to the First-Lien Collateral Agent, the Second-Lien Collateral Agent, any First-Lien Creditor or any Second-Lien Creditor may be shared by such Person with any First-Lien Creditor, any Second-Lien Creditor, the First-Lien Collateral Agent or the Second-Lien Collateral Agent notwithstanding a request or demand by such Grantor that such information be kept confidential; provided that such information shall otherwise be subject to the respective confidentiality provisions in the First-Lien Documents and the Second Lien Documents, as applicable.

 

8.5                                 Subrogation.  Subject to the Discharge of First-Lien Obligations, with respect to the value of any payments or distributions in cash, property or other assets that the Second-Lien Creditors or Second-Lien Collateral Agent pay over to the First-Lien Collateral Agent or any of the other First-Lien Creditors under the terms of this Agreement, the Second-Lien Creditors and the Second-Lien Collateral Agent shall be subrogated to the rights of the First-Lien Collateral Agent and such other First-Lien Creditors; provided that, the Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, hereby agrees not to assert or enforce all such rights of subrogation it may acquire as a result of any payment hereunder until the Discharge of First-Lien Obligations has occurred.  Each of Holdings, the Borrower and each other Grantor acknowledges and agrees that, the value of any payments or distributions in cash, property or other assets received by the Second-Lien Collateral Agent or the other Second-Lien Creditors and paid over to the First-Lien Collateral Agent or the other First-Lien Creditors pursuant to, and applied in accordance with, this Agreement, shall not relieve or reduce any of the Obligations owed by the Borrower or any other Grantor under the Second-Lien Note Documents.

 

8.6                                 Application of Payments.  All payments received by the First-Lien Collateral Agent or the other First-Lien Creditors may be applied, reversed and reapplied, in whole or in part, to such part of the First-Lien Obligations as the First-Lien Creditors, in their sole discretion, deem appropriate.  The Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, assents to any extension or postponement of the time of payment of the First-Lien Obligations or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security which may at any time secure any part of the First-Lien Obligations and to the addition or release of any other Person primarily or secondarily liable therefor.

 

8.7                                 SUBMISSION TO JURISDICTION; WAIVERS.  (a)  ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING HERETO MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK TO THE EXTENT PERMITTED BY APPLICABLE LAW.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW (i) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (ii) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 8.8; AND (iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.

 

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(b)                                 EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER HEREOF, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS.  EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.7(b) AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

8.8                                 Notices.  All notices to the Second-Lien Creditors and the First-Lien Creditors permitted or required under this Agreement may be sent to the Second-Lien Collateral Agent and the First-Lien Collateral Agent, respectively.  Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, electronically mailed or sent by courier service or U.S. mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of electronic mail or four Business Days after deposit in the U.S. mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, (i) the addresses of each Collateral Agent shall be as set forth opposite such Collateral Agent's name on the signature pages hereto and (ii) the addresses of each Grantor shall be as set forth in the respective Security Documents, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.

 

8.9                                 Further Assurances.  Each of the First-Lien Collateral Agent, on behalf of itself and the First-Lien Creditors under the First-Lien Documents, the Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, Holdings, the Borrower and each Grantor, agrees that each of them shall take such further action and shall execute and deliver such additional documents and instruments (in recordable form, if requested) as the First-Lien Collateral Agent or the Second-Lien Collateral Agent may reasonably request to effectuate the terms of and the lien priorities contemplated by this Agreement.  Each Second-Lien Creditor, by its acceptance of the benefits of the Second-Lien Note Documents, agrees to be bound by the agreements herein made by it and the Second-Lien Collateral Agent, on its behalf.

 

8.10                           APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES.

 

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8.11                           Binding on Successors and Assigns.  This Agreement shall be binding upon First-Lien Collateral Agent, the other First-Lien Creditors, the Second-Lien Collateral Agent, the other Second-Lien Creditors and their respective successors and assigns.

 

8.12                           Specific Performance. Each of the First-Lien Collateral Agent and the Second-Lien Collateral Agent may demand specific performance of this Agreement.  Each of the First-Lien Collateral Agent, on behalf of itself and the First-Lien Creditors under the First-Lien Documents, and the Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense which might be asserted to bar the remedy of specific performance in any action which may be brought by the First-Lien Collateral Agent or the Second-Lien Collateral Agent, as the case may be.

 

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

 

8.14                           Counterparts.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Agreement or any document or instrument delivered in connection herewith by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement or such other document or instrument, as applicable.

 

8.15                           Authorization.  By its signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that it is duly authorized to execute this Agreement. Each Second-Lien Creditor, by its acceptance of the benefits of the Second-Lien Note Documents, agrees to be bound by the agreements made herein.

 

8.16                           No Third Party Beneficiaries; Effect of Agreement.  This Agreement and the rights and benefits hereof shall inure to the benefit of each of the parties hereto and its respective successors and assigns and shall inure to the benefit of each of the First-Lien Creditors and the Second-Lien Creditors.  No other Person shall have or be entitled to assert rights or benefits hereunder.  Nothing in this Agreement shall impair, as between each of the Grantors and the First-Lien Collateral Agent and the First-Lien Creditors, on the one hand, and each of the Grantors and the Second-Lien Collateral and the Second-Lien Creditors, on the other hand, the obligations of each Grantors to pay principal, interest, fees and other amounts as provided in the First-Lien Documents and the Second-Lien Note Documents, respectively.

 

8.17                           Provisions Solely to Define Relative Rights.  The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the First-Lien Creditors on the one hand and the Second-Lien Creditors on the other hand.  None of the Borrower, any other Grantor or any other creditor thereof shall have any rights hereunder.  Nothing in this Agreement is intended to or shall impair the obligations of the Borrower or any other Grantor, which are absolute and unconditional, to pay the First-Lien Obligations and the Second-Lien Obligations as and when the same shall become due and payable in accordance with their terms.

 

8.18                           Grantors; Additional Grantors.  It is understood and agreed that Holdings, the Borrower and each other Grantor on the date of this Agreement shall constitute the original Grantors party hereto.  The original Grantors hereby covenant and agree to cause each Subsidiary of Holdings which becomes a Subsidiary Guarantor after the date hereof to contemporaneously become a party hereto (as a Grantor) by executing delivering a counterpart hereof to the First-Lien Collateral Agent or by executing 

 

29

 

and delivering an assumption agreement in form and substance reasonably satisfactory to the First-Lien Collateral Agent.  The parties hereto further agree that, notwithstanding any failure to take the actions required by the immediately preceding sentence, each Person which becomes a Subsidiary Guarantor at any time (and any security granted by any such Person) shall be subject to the provisions hereof as fully as if same constituted a Grantor party hereto and had complied with the requirements of the immediately preceding sentence.

 

8.19                           Second-Lien Collateral Agent.   For the avoidance of doubt it is understood and agreed that Second-Lien Collateral Agent is not a party to any First-Lien Documents, is not bound by any of their terms nor has any obligations (express or implied) under any such documents, is not deemed to have any knowledge related thereto and will not be required to refer to any such agreements for any reason whatsoever.

 

The Second-Lien Collateral Agent shall not have nor shall it be deemed to owe any fiduciary duty to any holders of First-Lien Obligations or the First-Lien Collateral Agent.  With respect to the holders of First-Lien Obligations and the First-Lien Collateral Agent, the Second-Lien Collateral Agent undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Agreement and no implied covenants or obligations with respect to the holders of First-Lien Obligations or the First-Lien Collateral Agent shall be read into this Agreement against the Second-Lien Collateral Agent.

 

30

 

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

 

	
 

	
First-Lien Collateral Agent 

	
 

	
 

	
Notice Address: 

	
BANK OF AMERICA, N.A., 

in its capacity as First-Lien Collateral Agent 

	
Bank of America, N.A. 

	
 

	
Agency Management 

	
By: 

	
/s/ Rosanne Parsill

	
231 S. LaSalle Street 

	
 

	
Name: Rosanne Parsill 

	
Chicago, IL 60697 

	
 

	
Title: Assistant Vice President

	
Telephone: 

	
(312) 923-1639 

	
 

	
Telecopier: 

	
(877) 206-8429 

	
 

	
Attention: 

	
Rosanne Parsill

	
 

	
 

	
 

	
 

	
 

	
 

	
Second-Lien Collateral Agent 

	
 

	
 

	
Notice Address: 

	
U.S. BANK NATIONAL ASSOCIATION, 

in its capacity as Second-Lien Collateral Agent 

	
U.S. Bank National Association 

	
 

	
60 Livingston Avenue 

	
By: 

	
/s/ Richard Prokosch

	
EP-MN-WS3C 

	
 

	
Name: Richard Prokosch 

	
St. Paul, MN 55107-2292 

	
 

	
Title: Vice President

	
Telephone: 

	
(651) 495-3918

	
 

	
Telecopier: 

	
(651) 495-8097

	
 

	
Attention: 

	
Rick Prokosch

	
 

	 	 	 	 	 

 

APPLETON PAPERS INC.

INTERCREDITOR AGREEMENT

 

 

	
 

	
APPLETON PAPERS INC.

	
 

	
 

	
 

	
By:

	
/s/ Thomas J. Ferree

	
 

	
 

	
Name: 

	
Thomas J. Ferree

	
 

	
 

	
Title:

	
Chief Financial Officer

	
 

	
 

	
 

	
 

	
 

	
PAPERWEIGHT DEVELOPMENT CORP.

	
 

	
 

	
 

	
 

	
By:

	
/s/ Thomas J. Ferree

	
 

	
 

	
Name: 

	
Thomas J. Ferree

	
 

	
 

	
Title:

	
Chief Financial Officer

	
 

	
 

	
 

	
 

	
 

	
AMERICAN PLASTICS COMPANY, INC.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Thomas J. Ferree

	
 

	
 

	
Name: 

	
Thomas J. Ferree

	
 

	
 

	
Title:

	
Chief Financial Officer

	
 

	
 

	
 

	
 

	
 

	
C & H PACKAGING COMPANY, INC.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Thomas J. Ferree

	
 

	
 

	
Name:

	
Thomas J. Ferree

	
 

	
 

	
Title:

	
Chief Financial Officer

	
 

	
 

	
 

	
 

	
 

	
NEW ENGLAND EXTRUSION INC.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Thomas J. Ferree

	
 

	
 

	
Name:

	
Thomas J. Ferree

	
 

	
 

	
Title:

	
Chief Financial Officer

 

APPLETON PAPERS INC.

INTERCREDITOR AGREEMENT

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