Document:

exv4w6

 

Exhibit 4.6

CREDIT ENHANCEMENT AGREEMENT

among

U.S. BANK NATIONAL ASSOCIATION

as Trustee,

DISCOVER BANK

as Master Servicer, Servicer and Seller

and

DISCOVER RECEIVABLES FINANCING CORPORATION

as Credit Enhancement Provider

 

Dated as of May 3, 2007

 

DISCOVER CARD MASTER TRUST I

SERIES 2007-3, SUBSERIES 2

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	Section 1.	 	Defined Terms
	 	 	1	 
	 	 	 	 	 
	 	 	 	 
	Section 2.	 	Loan
	 	 	2	 
	 	 	 	 	 
	 	 	 	 
	Section 3.	 	Calculation of Amount of Interest Payable on the Loan
	 	 	2	 
	 	 	 	 	 
	 	 	 	 
	Section 4.	 	Payment of Interest on the Loan
	 	 	3	 
	 	 	 	 	 
	 	 	 	 
	Section 5.	 	Repayment of Principal of the Loan
	 	 	3	 
	 	 	 	 	 
	 	 	 	 
	Section 6.	 	Payments to the Holder of the Seller Certificate and the Master Servicer
	 	 	3	 
	 	 	 	 	 
	 	 	 	 
	Section 7.	 	Deposits to and Withdrawals from the Credit Enhancement Account
	 	 	4	 
	 	 	 	 	 
	 	 	 	 
	Section 8.	 	Certain Additional Loans
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	Section 9.	 	Limited Obligation; Waiver of Setoff; Obligations Absolute
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	Section 10.	 	Investments and Information
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	Section 11.	 	Servicing Transfer
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	Section 12.	 	Representations and Warranties
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	Section 13.	 	Covenants
	 	 	7	 
	 	 	 	 	 
	 	 	 	 
	Section 14.	 	Governing Law
	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	Section 15.	 	Termination
	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	Section 16.	 	Notices
	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	Section 17.	 	Bankruptcy
	 	 	9	 
	 	 	 	 	 
	 	 	 	 
	Section 18.	 	Limitation of Remedies
	 	 	9	 
	 	 	 	 	 
	 	 	 	 
	Section 19.	 	No Petition
	 	 	9	 
	 	 	 	 	 
	 	 	 	 
	Section 20.	 	Amendments
	 	 	9	 
	 	 	 	 	 
	 	 	 	 
	Section 21.	 	Successors and Assigns; Replacement of Credit Enhancement Provider
	 	 	10	 
	 	 	 	 	 
	 	 	 	 
	Section 22.	 	Participation
	 	 	10	 

 

 

          CREDIT ENHANCEMENT AGREEMENT, dated as of May 3, 2007 among U.S. BANK NATIONAL
ASSOCIATION (formerly First Bank National Association, successor trustee to Bank of America
Illinois, formerly Continental Bank, National Association) as trustee (together with its successors
and assigns as trustee, the “Trustee”) for Discover Card Master Trust I (the “Trust”), DISCOVER
BANK (formerly Greenwood Trust Company) (“Discover Bank”) as Master Servicer, Servicer and Seller
with respect to the Trust and DISCOVER RECEIVABLES FINANCING CORPORATION as cash collateral
depositor (the “Credit Enhancement Provider”).

WITNESSETH

          WHEREAS, Discover Bank as Master Servicer, Servicer and Seller and the Trustee have entered
into an Amended and Restated Pooling and Servicing Agreement, dated as of November 3, 2004 (as the
same may from time to time be amended, modified or otherwise supplemented, the “Pooling and
Servicing Agreement”), and that certain Series Supplement, dated as of May 3, 2007 (as the same may
from time to time be amended, modified or otherwise supplemented, the “Series Supplement”);

          WHEREAS, the Trust, pursuant to the Pooling and Servicing Agreement and the Series Supplement,
is issuing $526,316,000 in aggregate principal amount of Investor Certificates of Discover Card
Master Trust I, Series 2007-3, Subseries 2 (the “Series”), which will entitle the holders thereof
to interest during the Revolving Period, the Accumulation Period, and the Amortization Period, if
any, and principal on the Class A Expected Final Payment Date, the Class B Expected Final Payment
Date and during the Amortization Period, if any;

          WHEREAS, the principal and interest payments on the Investor Certificates are to be funded by
Principal Collections and Finance Charge Collections received by the Trust on the Receivables and
other Trust income; and

          WHEREAS, it is a condition to the issuance of the Investor Certificates that at the closing on
the date hereof, the Credit Enhancement Provider make a term loan (the “Loan”) to the Trust, for
the benefit of the Investor Certificateholders of the Series, of $39,473,700 (7.5% of the Series
Initial Investor Interest), for deposit in the Credit Enhancement Account of the Trust and
controlled by the Trustee as administrator of the Credit Enhancement to provide additional funds to
make payments on the Investor Certificates under certain circumstances.

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and
valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the
parties hereto agree as follows:

SECTION 1. DEFINED TERMS.

     (a) The capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Pooling and Servicing Agreement or the Series Supplement, as
applicable; provided, however, that such defined terms shall only have the meanings applicable to
Subseries 2 of Series 2007-3.

     (b) The following terms have the definitions set forth below:

          “Interest Period” means (i) with respect to the initial Distribution Date, the period
commencing on the Series Closing Date and ending on the day immediately preceding the initial
Distribution Date and (ii) with respect to each subsequent Distribution Date, the period commencing
on the preceding Distribution Date and ending on the day immediately preceding such Distribution
Date.

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          “Lender Rate” means, with respect to each Interest Period, the prime commercial lending rate
per annum established by the Trustee, as in effect on each day in the Interest Period.

          “LIBOR-Based Rate” means, with respect to each Interest Period, the per annum interest rate
equal to the London Interbank Offered Rate which appears on Reuters Screen LIBOR01 at approximately
11:00 a.m. (London time) two LIBOR Business Days prior to the first day of such Interest Period for
deposits of United States dollars for a period of time comparable to the Interest Period, and in an
amount comparable to the principal amount of the Loan, plus 0.40%.

          “Provider Amount” means, with respect to each Distribution Date, the lesser of (i) the unpaid
principal amount of the Loan (including any amounts loaned by the Credit Enhancement Provider
pursuant to Section 8 hereof) and (ii) the amount on deposit in the Credit Enhancement Account, in
each case before giving effect to any payments, allocations or distributions on such Distribution
Date.

          “Series Interest Payment Amount” means, for any Distribution Date, an amount equal to the
amount of interest payable on the Loan on such Distribution Date, including any accrued but unpaid
interest with respect to previous Interest Periods and interest thereon, less the amount paid to
the Credit Enhancement Provider on such Distribution Date pursuant to Section 4(a) hereof. The
Series Interest Payment Amount shall be the amount of interest payable pursuant to this Agreement
for purposes of calculating the “Credit Enhancement Fee” for the purpose of, and as such term is
defined in, the Series Supplement and such amount shall be paid in accordance with the provisions
of the Series Supplement.

SECTION 2. LOAN.

          The Credit Enhancement Provider hereby makes a term loan to the Trust, for the benefit of the
Investor Certificateholders of the Series, on the Series Closing Date in an amount equal to
$39,473,700, receipt of which is hereby acknowledged by the Trustee. The amount of such Loan shall
be increased by the amount of any additional loan made upon the agreement of the Credit Enhancement
Provider pursuant to Section 8 hereof.

SECTION 3. CALCULATION OF AMOUNT OF INTEREST PAYABLE ON THE LOAN.

     (a) The Loan shall bear interest for each day during each Interest Period with
respect thereto at a rate per annum determined for such day as follows. To the extent the unpaid
portion of the principal of the Loan during such Interest Period equals or is less than the amount
on deposit in the Credit Enhancement Account, the rate for such Interest Period on such principal
portion shall be the LIBOR-Based Rate. To the extent any portion of the unpaid principal of the
Loan exceeds such amount on deposit, the rate for such Interest Period on such principal portion
shall be the Lender Rate.

     (b) Interest shall be payable monthly in arrears on each Distribution Date.
Interest on the Loan shall be calculated on the basis of the actual number of days elapsed during
the applicable Interest Period divided by (i) 360, to the extent the LIBOR-Based Rate is
applicable, or (ii) 365 or 366, as the case may be, to the extent the Lender Rate is applicable.
The Trustee shall, as soon as practicable, notify the Seller, the Master Servicer and the Credit
Enhancement Provider of each determination of the Lender Rate and of the LIBOR-Based Rate. Each
determination thereof by the Trustee pursuant to the provisions of this Agreement shall be
conclusive and binding on the Seller, the Master Servicer and the Credit Enhancement Provider, in
the absence of manifest error.

     (c) If any portion of interest due and payable on a Distribution Date is not paid on
such Distribution Date, the unpaid portion of such interest shall be due and payable on the next
succeeding

2

 

Distribution Date. Any interest that is not paid on the due date thereof shall accrue
interest from the Distribution Date on which such interest was due and payable to the date such
interest is actually paid at a rate per annum equal to the Lender Rate.

SECTION 4. PAYMENT OF INTEREST ON THE LOAN.

          On each Distribution Date, the Trustee as administrator of the Credit Enhancement shall pay or
cause to be paid to the Credit Enhancement Provider the amount of accrued but unpaid interest on
the Loan from the funds and in the order of priority set forth below; provided, however, that such
payments shall not exceed the amount of accrued but unpaid interest on the Loan and that such
payments will be made only to the extent such funds are available:

     (a) interest and earnings (net of losses and investment expenses) accrued since the
preceding Distribution Date on the Provider Amount; and

     (b) the Series Interest Payment Amount, to the extent such amount has been paid to
the Trustee as administrator of the Credit Enhancement pursuant to the Series Supplement.

SECTION 5. REPAYMENT OF PRINCIPAL OF THE LOAN.

          The principal amount of the Loan shall be due and payable on the Series Termination Date. The
Trust shall repay the unpaid principal balance of the Loan in full on or before the Series
Termination Date in accordance with the provisions of this Agreement; provided, however, that the
unpaid principal amount of the Loan shall only be paid from the funds described below, and only to
the extent such funds are available.

     (a) If, as of any Distribution Date, after giving effect to all other deposits to
and withdrawals from the Credit Enhancement Account as of such Distribution Date, the amount on
deposit in the Credit Enhancement Account exceeds the Total Maximum Credit Enhancement Amount, (i)
the amount of such excess, up to the amount, if any, by which the amount on deposit in the Credit
Enhancement Account exceeds the unpaid principal amount of the Loan, shall be withdrawn from the
Credit Enhancement Account and paid to Discover Bank on behalf of the Holder of the Seller
Certificate and (ii) the remaining amount of such excess, if any, after payment of any amounts to
be paid to Discover Bank on behalf of the Holder of the Seller Certificate pursuant to clause (i)
of this Section 5(a), shall be withdrawn from the Credit Enhancement Account and paid to the Credit
Enhancement Provider for application toward the unpaid principal amount of the Loan.

     (b) On the earlier to occur of (i) the Series Termination Date and (ii) the day on
which the Class Invested Amount with respect to each Class of the Series is paid in full, and after
payment of any amounts to be paid on such day from the Credit Enhancement Account to or for the
benefit of the Investor Certificateholders of the Series, all amounts remaining on deposit in the
Credit Enhancement Account, up to the amount of the unpaid principal amount of the Loan, shall be
withdrawn from such account and paid to the Credit Enhancement Provider for application toward the
unpaid principal amount of the Loan.

SECTION 6. PAYMENTS TO THE HOLDER OF THE SELLER CERTIFICATE AND THE MASTER
SERVICER.

     (a) On each Distribution Date, the Trustee as administrator of the Credit
Enhancement shall pay or cause to be paid to Discover Bank on behalf of the Holder of the Seller
Certificate (i) the interest and earnings (net of losses and investment expenses) accrued since the
preceding Distribution Date on an amount equal to the positive difference, if any, between (x) the
amount on deposit in the Credit

3

 

Enhancement Account and (y) the Provider Amount and (ii) the positive difference, if any,
between (x) the amount of interest and earnings (net of losses and investment expenses) accrued
since the preceding Distribution Date on the Provider Amount and (y) the amount paid to the Credit
Enhancement Provider on such Distribution Date pursuant to Section 4(a).

     (b) On each Distribution Date, an amount equal to the amount, if any, paid to the
Trustee as administrator of the Credit Enhancement pursuant to Section 9(b)(27) and 9(b)(32) of the
Series Supplement, shall be paid to Discover Bank on behalf of the Holder of the Seller
Certificate.

     (c) On the earlier to occur of (i) the Series Termination Date and (ii) the day on
which the Class Invested Amount with respect to each Class of the Series is paid in full, and after
payment of any amounts to be paid on such day from the Credit Enhancement Account to or for the
benefit of the Investor Certificateholders of the Series, any amounts remaining on deposit in the
Credit Enhancement Account that are not paid to the Credit Enhancement Provider pursuant to Section
5(b) hereof shall be withdrawn from such account and paid to Discover Bank on behalf of the Holder
of the Seller Certificate.

SECTION 7. DEPOSITS TO AND WITHDRAWALS FROM THE CREDIT ENHANCEMENT ACCOUNT.

     (a) The proceeds of the Loan made by the Credit Enhancement Provider to the Trust
pursuant to Section 2 hereof, for the benefit of the Investor Certificateholders of the Series, on
the Series Closing Date and the proceeds of any additional loan made by the Credit Enhancement
Provider pursuant to Section 8 hereof, shall be deposited into the Credit Enhancement Account. In
addition, any amounts paid to the Trustee as administrator of the Credit Enhancement on any
Distribution Date with respect to the Total Available Credit Enhancement Amount or the Available
Class B Credit Enhancement Amount pursuant to the terms of the Series Supplement also shall be
deposited into the Credit Enhancement Account upon receipt of such funds by the Trustee.

     (b) Any withdrawals from the Credit Enhancement Account for the benefit of the
Investor Certificateholders pursuant to Section 9 of the Series Supplement may be made by the
Master Servicer or by the Trustee as administrator of the Credit Enhancement and shall be deemed to
be made first from amounts on deposit in the Credit Enhancement Account as a result of payments of
Series Excess Servicing and other amounts to the Trustee as administrator of the Credit Enhancement
to fund the Total Available Credit Enhancement Amount, including any Series Excess Servicing or
other such amounts on deposit in the Credit Enhancement Account as a result of an Alternative
Credit Support Election having been made or as a result of the occurrence of a Supplemental Credit
Enhancement Event, and only after such amounts are exhausted shall any such withdrawals be deemed
to be made from amounts on deposit in the Credit Enhancement Account that are attributable to the
Loan.

     (c) On or before any Distribution Date on which Discover Bank is the Master
Servicer, all payments made pursuant to this Agreement or the Series Supplement between the Master
Servicer or the Holder of the Seller Certificate and the Credit Enhancement Account, may be
aggregated for such Distribution Date such that Discover Bank, acting as Master Servicer and as
agent of the Holder of the Seller Certificate, may make only one payment to the Credit Enhancement
Account in satisfaction of all payments of the Master Servicer and the Holder of the Seller
Certificate pursuant to this Agreement or the Series Supplement, to the extent that all payment
obligations of the Master Servicer and the Holder of the Seller Certificate to the Credit
Enhancement Account on such Distribution Date exceed all payment obligations of the Credit
Enhancement Account to the Master Servicer and the Holder of the Seller Certificate on such
Distribution Date.

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SECTION 8. CERTAIN ADDITIONAL LOANS.

     (a) Alternative Credit Support Election. In the event that an Alternative
Credit Support Election is made pursuant to the provisions of the Series Supplement, Discover Bank
on behalf of the Holder of the Seller Certificate may request that the Credit Enhancement Provider
make an additional loan in the amount of the Additional Credit Support Amount. If Discover Bank on
behalf of the Holder of the Seller Certificate makes such request, and if the Credit Enhancement
Provider elects to make such loan, the amount of such loan shall be added to the unpaid principal
amount of the Loan. In the event that the Alternative Credit Support Election does not become
effective, the Additional Credit Support Amount (or, if the entire amount of the Additional Credit
Support Amount is not then on deposit in the Credit Enhancement Account, the portion of the
Additional Credit Support Amount that is then on deposit) shall be withdrawn from the Credit
Enhancement Account and repaid to Discover Bank on behalf of the Holder of the Seller Certificate
(or, if such amount was loaned by the Credit Enhancement Provider, returned to the Credit
Enhancement Provider).

     (b) Increased Credit Enhancement Amount. In the event the Series Investor
Interest is increased pursuant to Section 31 of the Series Supplement, requiring an Increased
Credit Enhancement Amount, Discover Bank on behalf of the Holder of the Seller Certificate may
request that the Credit Enhancement Provider make an additional loan in the amount of the Increased
Credit Enhancement Amount. If Discover Bank on behalf of the Holder of the Seller Certificate
makes such request, and if the Credit Enhancement Provider elects to make such loan, the amount of
such loan shall be added to the unpaid principal amount of the Loan.

     (c) Supplemental Credit Enhancement Event. In the event that a Supplemental
Credit Enhancement Event occurs, Discover Bank as Servicer may request that the Credit Enhancement
Provider make an additional loan in the amount of the Supplemental Credit Enhancement Amount. If
Discover Bank as Servicer makes such a request, and if the Credit Enhancement Provider elects to
make such loan, the amount of such loan shall be equal to the Supplemental Credit Enhancement
Amount and shall be added to the unpaid principal amount of the Loan.

     (d) Notice. The Credit Enhancement Provider shall give prior written notice
to Moody’s and Standard & Poor’s of the making of any loan by the Credit Enhancement Provider other
than the additional loans described in this Section 8.

     (e) Interest Rate. At the time of any additional loan described in this
Section 8, Discover Bank as Servicer and the Credit Enhancement Provider may agree in writing that
the Supplemental Credit Enhancement Amount, the Increased Credit Enhancement Amount or the
Additional Credit Support Amount, as applicable, shall bear interest at a different LIBOR-Based
Rate, which rate shall reflect prevailing market conditions and the expected duration of such
additional loan.

SECTION 9. LIMITED OBLIGATION; WAIVER OF SETOFF; OBLIGATIONS ABSOLUTE.

     (a) Notwithstanding any provision in any other section of this Agreement to the
contrary, the obligation to repay the Loan, together with interest thereon, shall be without
recourse to any Seller, the Master Servicer, any Servicer, the Trustee, the Trust, any
Certificateholder, or any affiliate, officer, director, employee or person acting on behalf of any
of them, and the obligation to pay such amounts shall be limited solely to the application of funds
pursuant to this Agreement, in the manner and to the extent such funds are available, except for
the direct recourse indemnification obligation of each successor Master Servicer pursuant to
Section 11 hereof. The Credit Enhancement Provider agrees that its interest in funds on deposit in
the Credit Enhancement Account is subordinated to the interests of the

5

 

Investor Certificateholders of the Series, as provided in this Agreement and in the Series
Supplement. The Credit Enhancement Provider further agrees that it shall have no right of setoff
or lender’s lien against any Seller, the Master Servicer, any Servicer, the Trustee, the Trust, or
any Certificateholder.

     (b) The obligations of the Seller, the Trustee, the Credit Enhancement Provider and
the Master Servicer under this Agreement shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement.

SECTION 10. INVESTMENTS AND INFORMATION.

     (a) The Trustee shall from time to time during the term of this Agreement invest all
amounts on deposit in the Credit Enhancement Account as the Master Servicer shall direct, which
investments shall at all times be made in compliance with the terms of the Pooling and Servicing
Agreement and the Series Supplement.

     (b) The Master Servicer shall provide the Credit Enhancement Provider with such
background information and data with respect to the Credit Enhancement Account as the Credit
Enhancement Provider may reasonably request.

SECTION 11. SERVICING TRANSFER.

          In the event that a successor Master Servicer is appointed pursuant to the Pooling and
Servicing Agreement, from and after the effective date of such transfer of servicing, the successor
Master Servicer appointed pursuant to the Pooling and Servicing Agreement, and not the former
Master Servicer, shall (a) be responsible for the performance of all servicing functions to be
performed from and after such date, (b) agree to be bound by the terms, covenants and conditions
contained herein applicable to the Master Servicer and be subject to the duties and obligations of
the Master Servicer hereunder, and (c) agree to indemnify and hold harmless the Credit Enhancement
Provider from and against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever which the Credit Enhancement Provider may incur (or which may be claimed against the
Credit Enhancement Provider) by reason of the gross negligence or willful misconduct of the
successor Master Servicer in exercising its powers and carrying out its obligations under the
Pooling and Servicing Agreement and the Series Supplement. Such transfer of servicing shall not
affect any rights or obligations of the former Master Servicer under this Agreement that arose
prior to the effective date of the transfer of servicing, except that such former Master Servicer
shall have no obligation to indemnify the Credit Enhancement Provider as a result of any act or
failure to act of any successor Master Servicer in the performance of the servicing functions.

SECTION 12. REPRESENTATIONS AND WARRANTIES.

     (a) The Credit Enhancement Provider hereby represents and warrants to the Master
Servicer and the Trustee that:

          (i) The Credit Enhancement Provider has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of Delaware, and has the
corporate power and authority to execute, deliver and perform its obligations under this Agreement.

          (ii) This Agreement has been duly authorized, executed and delivered on the part of
the Credit Enhancement Provider.

          (iii) When executed and delivered, this Agreement will constitute a valid and
binding agreement of the Credit Enhancement Provider enforceable against the Credit Enhancement
Provider in

6

 

accordance with its terms, except (A) as the same may be limited by insolvency, bankruptcy or
reorganization or other laws relating to or affecting the enforcement of creditors’ rights and (B)
as the same may be limited by general equity principles (whether considered in a proceeding at law
or in equity) and by the discretion of the court before which any proceeding therefor may be
brought.

     (b) The Master Servicer hereby represents and warrants to the Credit Enhancement
Provider and the Trustee that:

          (i) The Master Servicer has been duly incorporated and is validly existing as a
banking corporation in good standing under the laws of the State of Delaware, and has the corporate
power and authority to execute, deliver and perform its obligations under the Pooling and Servicing
Agreement, the Series Supplement and this Agreement.

          (ii) This Agreement, the Pooling and Servicing Agreement and the Series Supplement
have been duly authorized, executed and delivered on the part of the Master Servicer.

          (iii) When executed and delivered, each of this Agreement, the Pooling and Servicing
Agreement and the Series Supplement will constitute a valid and binding agreement of the Master
Servicer enforceable against the Master Servicer in accordance with its terms, except (A) as the
same may be limited by insolvency, bankruptcy, receivership or reorganization or other laws
relating to or affecting the enforcement of creditors’ rights and (B) as the same may be limited by
general equity principles (whether considered in a proceeding at law or in equity) and by the
discretion of the court before which any proceeding therefor may be brought.

     (c) The Trustee hereby represents and warrants to the Credit Enhancement Provider
and the Master Servicer that:

          (i) The Trustee is organized, existing and in good standing under the laws of the
United States of America.

          (ii) The Trustee has full power, authority and right to execute, deliver and perform
this Agreement, the Pooling and Servicing Agreement and the Series Supplement, and has taken all
necessary action to authorize the execution, delivery and performance by it of this Agreement, the
Pooling and Servicing Agreement and the Series Supplement.

          (iii) Each of this Agreement, the Pooling and Servicing Agreement and the Series
Supplement have been duly executed and delivered by the Trustee.

SECTION 13. COVENANTS.

          Discover Bank, as Master Servicer and on behalf of the Holder of the Seller Certificate,
covenants and agrees that, so long as this Agreement shall remain in effect or any monetary
obligation arising hereunder or under the Series Supplement shall remain unpaid, it will change the
terms and provisions of a Credit Agreement with respect to a Discover Bank Discover Card Account or
any other Account with respect to which it is the Servicer (including, without limitation, the
calculation of the amount, or the timing, of charge-offs) only if it does not believe, after a good
faith assessment of the expected effects of such change, that such change will result in a
reduction of the Portfolio Yield, for any Due Period beginning prior to the termination of the
Series, to less than the Base Rate unless such change (i) is required by any Requirements of Law or
(ii) is deemed necessary by Discover Bank in its sole reasonable judgment to maintain its credit
card business on a competitive basis. For purposes of this Section 13, “Base Rate” shall mean (i)
the weighted average of the Certificate Rates for each Class of

7

 

each Series then outstanding plus (ii) 1% per annum. For purposes of the immediately
preceding sentence, the Certificate Rate for each Class that does not have a fixed Certificate Rate
shall be the actual Certificate Rate for such Class for the Interest Accrual Period commencing in
the immediately preceding Due Period. In the event that any Additional Seller shall transfer
Receivables in Additional Accounts to the Trust, Discover Bank on behalf of the Holder of the
Seller Certificate shall cause the Servicer with respect to such Additional Accounts to make the
covenant set forth above with respect to such Additional Accounts.

SECTION 14. GOVERNING LAW.

          THIS AGREEMENT AND ALL DISPUTES ARISING OUT OF OR RELATING TO IT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS THAT WOULD RESULT IN THE APPLICATION OF THE LAW OF ANY STATE OTHER THAN NEW YORK,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.

SECTION 15. TERMINATION.

          This Agreement shall terminate on the date on which the Series terminates in accordance with
the provisions of the Pooling and Servicing Agreement and the Series Supplement; provided, however,
that this Agreement may be terminated by the Master Servicer at any time, without penalty, provided
that such termination does not cause the ratings of the Investor Certificates to be lowered or
withdrawn by either of the Rating Agencies; and provided, further, that all amounts owing to the
Credit Enhancement Provider hereunder with respect to principal and interest on the Loan shall have
been paid in full. Notwithstanding the foregoing, the Credit Enhancement Provider shall have no
rights under this Agreement, and shall not be entitled to any payments hereunder, if and for so
long as there is no Loan outstanding hereunder and no accrued but unpaid interest.

SECTION 16. NOTICES.

          Unless specifically indicated otherwise herein, all notices and other communications provided
for hereunder shall be in writing and, if to the Credit Enhancement Provider, addressed to:

Discover Receivables Financing Corporation

12 Read’s Way

New Castle, Delaware 19720

Attn: Executive Vice President and Secretary

Phone: (302) 323-7167

Fax: (302) 323-7393

or, if to the Seller or the Master Servicer, addressed to:

Discover Bank

12 Read’s Way

New Castle, Delaware 19720

Attn: Michael F. Rickert

Phone: (302) 323-7434

Fax: (302) 323-7393

8

 

or, if to the Trustee, addressed to:

U.S. Bank National Association

209 South LaSalle Street

Suite 300

Chicago, Illinois 60604

Attn: Patricia M. Child

Phone: (312) 836-6713

Fax: (312) 836-6701

or as to any party at such other address as shall be designated by such party in a written notice
to the other parties.

          Any notice or other communication shall be sufficiently given and shall be deemed given when
delivered to the addressee in writing or when transmitted by telecopier, receipt of which by the
addressee is confirmed by telephone.

SECTION 17. BANKRUPTCY.

          To the extent that the Trustee, the Master Servicer or Discover Bank on behalf of the Holder
of the Seller Certificate makes a payment to the Credit Enhancement Provider or the Credit
Enhancement Provider receives any payment or proceeds with respect to the Loan, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any other party under
any state or federal insolvency or bankruptcy law then, to the extent such payment or proceeds are
set aside, the amount or part thereof intended to be satisfied shall be revived and continue in
full force and effect, as if such payment or proceeds had not been received by the Credit
Enhancement Provider.

SECTION 18. LIMITATION OF REMEDIES.

          The Credit Enhancement Provider shall not have the right to cause the Loan or any portion
thereof to become due and payable prior to the due date for the Loan as set forth herein.

SECTION 19. NO PETITION.

     (a) The Credit Enhancement Provider, by entering into this Agreement, hereby
covenants and agrees that it will not at any time institute, join in or otherwise cause the
institution of, against any Seller, the Master Servicer or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any
United States federal or state or similar law prior to a year and a day after the final payment of
all investor certificates issued by any trust with respect to which Discover Bank is the seller.

     (b) Each of Discover Bank and the Trustee, by entering into this Agreement, hereby
covenants and agrees that it will not at any time institute, join in or otherwise cause the
institution of, against the Credit Enhancement Provider, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under any United States
federal or state or similar law prior to a year and a day after the final payment of all investor
certificates issued by any trust with respect to which Discover Bank is the seller.

SECTION 20. AMENDMENTS.

9

 

          This Agreement shall not be amended or modified without the written consent of each of the
parties hereto. No amendment hereto shall become effective without prior confirmation from the
Rating Agencies that such amendment will not cause a lowering or withdrawal of the then current
ratings of the Investor Certificates of the Series. The Master Servicer shall provide a copy of
any amendment hereto to the Rating Agencies.

SECTION 21. SUCCESSORS AND ASSIGNS; REPLACEMENT OF CREDIT ENHANCEMENT PROVIDER.

     (a) This Agreement shall be binding upon, and inure to the benefit of, the Trustee,
the Sellers, the Servicers, the Master Servicer and the Credit Enhancement Provider and their
respective successors and permitted assigns.

     (b) No Seller shall assign its interests hereunder and under the Pooling and
Servicing Agreement or the Series Supplement, or any portion of such interests, except by an
assignment that transfers each such interest to the same assignee.

     (c) In the event that a successor trustee is appointed pursuant to the provisions of
the Pooling and Servicing Agreement to replace the then current Trustee, such successor trustee,
from and after its appointment, shall be the Trustee for purposes of this Agreement and shall
assume all of the rights and obligations of the Trustee hereunder.

     (d) The Credit Enhancement Provider may not assign any of its rights or obligations
hereunder without the prior written consent of Discover Bank on behalf of the Holder of the Seller
Certificate and without prior written confirmation from the Rating Agencies that such assignment
will not result in the lowering or withdrawal of the rating of any Class of any Series then
outstanding.

SECTION 22. PARTICIPATION.

          Any successor Credit Enhancement Provider that is not a special-purpose corporation that is an
affiliate of Discover Bank may, without the consent of the Trustee, the Trust, any Seller, the
Master Servicer, any Servicer or any Certificateholder of the Series, sell participations to one or
more banks or other entities in all or a portion of its rights under this Agreement (including all
or a portion of the Loan); provided, however, that (a) the Credit Enhancement Provider’s
obligations under this Agreement shall remain unchanged, (b) the Credit Enhancement Provider shall
remain solely responsible to the other parties hereto for the performance of such obligations, (c)
the Trustee, the Trust, the Sellers and the Master Servicer shall continue to deal solely and
directly with the Credit Enhancement Provider in connection with the Credit Enhancement Provider’s
rights and obligations under this Agreement, and (d) the Credit Enhancement Provider shall retain
the sole right to enforce the obligations of the Trustee, the Trust, the Sellers or the Master
Servicer under this Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement.

10

 

          IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly executed and
delivered by the undersigned thereunto duly authorized as of the day and year first above written.

	 	 	 	 	 
	 	DISCOVER RECEIVABLES FINANCING

CORPORATION,

as Credit Enhancement Provider

 	 
	 	By:  	/s/ Jai Sooklal
 	 
	 	 	Name:  	Jai Sooklal 	 
	 	 	Title:  	Vice President 	 
	 
	 	DISCOVER BANK,

as Master Servicer, Servicer and Seller

 	 
	 	By:  	/s/ Michael F. Rickert
 	 
	 	 	Name:  	Michael F. Rickert 	 
	 	 	Title:  	Vice President, Chief Financial Officer
and Treasurer 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION,

as Trustee

 	 
	 	By:  	/s/ Patricia M. Child
 	 
	 	 	Name:  	Patricia M. Child 	 
	 	 	Title:  	Vice President 	 

11EX-10.1 GRAPHIC PACKAGING INTERNATIONAL/SEVERANCE

 

Exhibit 10.1

GRAPHIC PACKAGING INTERNATIONAL, INC.

SEVERANCE PAY PLAN

Effective May 1, 2007

 

 

Table of Contents

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	ARTICLE 1. DEFINITIONS	 	 	5	 
	 

	 	 	1.1.	 	 	Active Employee
	 	 	5	 
	 

	 	 	1.2.	 	 	Administrator
	 	 	5	 
	 

	 	 	1.3.	 	 	Affiliated Entity
	 	 	5	 
	 

	 	 	1.4.	 	 	Anniversary Date
	 	 	5	 
	 

	 	 	1.5.	 	 	Code
	 	 	5	 
	 

	 	 	1.6.	 	 	Creditable Leave of Absence
	 	 	5	 
	 

	 	 	1.7	 	 	Effective Date
	 	 	5	 
	 

	 	 	1.8.	 	 	Eligible Employee
	 	 	5	 
	 

	 	 	1.9.	 	 	Employee
	 	 	5	 
	 

	 	 	1.10.	 	 	Employer
	 	 	6	 
	 

	 	 	1.11.	 	 	Employment
	 	 	6	 
	 

	 	 	1.12.	 	 	ERISA
	 	 	6	 
	 

	 	 	1.13.	 	 	Family and Medical Leave
	 	 	6	 
	 

	 	 	1.14.	 	 	Hire Date
	 	 	6	 
	 

	 	 	1.15.	 	 	Hour of Service
	 	 	6	 
	 

	 	 	1.16.	 	 	Plan
	 	 	6	 
	 

	 	 	1.17.	 	 	Plan Year
	 	 	6	 
	 

	 	 	1.18.	 	 	Release
	 	 	6	 
	 

	 	 	1.19.	 	 	Section
	 	 	6	 
	 

	 	 	1.20.	 	 	Severance Pay
	 	 	6	 
	 

	 	 	1.21.	 	 	Severance Payment Period
	 	 	6	 
	 

	 	 	1.22.	 	 	Suitable Position
	 	 	7	 
	 

	 	 	1.23.	 	 	Termination Date
	 	 	7	 
	 

	 	 	1.24.	 	 	Year of Service
	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 2. SEVERANCE PAY PROGRAM	 	 	8	 
	 

	 	 	2.1.	 	 	Eligibility Requirements
	 	 	8	 
	 

	 	 	2.2.	 	 	Severance Pay
	 	 	8	 
	 

	 	 	2.3.	 	 	Form of Payment
	 	 	9	 
	 

	 	 	2.4.	 	 	Benefit Continuation
	 	 	9	 
	 

	 	 	2.5.	 	 	Outplacement Assistance
	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 3. RELEASE AND GENERAL RULES	 	 	10	 
	 

	 	 	3.1.	 	 	Offset for Money Owed to the Employer
	 	 	10	 
	 

	 	 	3.2.	 	 	Offset for Other Severance Benefits
	 	 	10	 
	 

	 	 	3.3	 	 	Offset for Notice Payments
	 	 	10	 
	 

	 	 	3.4.	 	 	Release and Payment of Benefits
	 	 	10	 
	 

	 	 	3.5.	 	 	Return of Employer Property
	 	 	10	 
	 

	 	 	3.6.	 	 	Other Benefits
	 	 	10	 
	 

	 	 	3.7.	 	 	Reemployment
	 	 	10	 
	 

	 	 	3.8	 	 	Payments to Estate
	 	 	10	 
	 

	 	 	3.9.	 	 	Special Rule for Specified Employees
	 	 	11	 

-2-

 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	3.10.	 	 	Exclusive Source of Benefits
	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 4. FUNDING POLICY AND BASIS OF PAYMENTS TO AND FROM THE PLAN	 	 	12	 
	 

	 	 	4.1.	 	 	Funding of Severance Benefits
	 	 	12	 
	 

	 	 	4.2	 	 	Payments from the Plan
	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 5. ADMINISTRATION	 	 	13	 
	 

	 	 	5.1.	 	 	Administration and Interpretation of the Plan
	 	 	13	 
	 

	 	 	5.2.	 	 	Information
	 	 	14	 
	 

	 	 	5.3.	 	 	Fiduciary Provisions
	 	 	14	 
	 

	 	 	5.4.	 	 	Indemnification
	 	 	14	 
	 

	 	 	5.5.	 	 	Expenses of Administration
	 	 	14	 
	 

	 	 	5.6.	 	 	Accounts and Records
	 	 	14	 
	 

	 	 	5.7.	 	 	Notification of Employees
	 	 	14	 
	 

	 	 	5.8.	 	 	Rights Against Employer
	 	 	14	 
	 

	 	 	5.9.	 	 	Employer and Plan Identification Number
	 	 	14	 
	 

	 	 	5.10.	 	 	Agent for the Service of Legal Process
	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 6. CLAIMS PROCEDURE	 	 	15	 
	 

	 	 	6.1.	 	 	Filing a Claim
	 	 	15	 
	 

	 	 	6.2.	 	 	Notification to Claimant of Decision
	 	 	15	 
	 

	 	 	6.3.	 	 	Review Procedure
	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 7. MISCELLANEOUS	 	 	17	 
	 

	 	 	7.1.	 	 	State Law
	 	 	17	 
	 

	 	 	7.2.	 	 	Gender and Number
	 	 	17	 
	 

	 	 	7.3.	 	 	Nonassignability
	 	 	17	 
	 

	 	 	7.4.	 	 	Employment Not Guaranteed
	 	 	17	 
	 

	 	 	7.5.	 	 	Additional Taxes or Penalties
	 	 	17	 
	 

	 	 	7.6.	 	 	Right of Recovery
	 	 	17	 
	 

	 	 	7.7.	 	 	No Guarantee of Tax Consequences
	 	 	17	 
	 

	 	 	7.8.	 	 	Severability
	 	 	17	 
	 

	 	 	7.9.	 	 	Entire Plan
	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 8. AMENDMENT AND TERMINATION	 	 	19	 
	 

	 	 	8.1.	 	 	Amendments
	 	 	19	 
	 

	 	 	8.2.	 	 	Termination
	 	 	19	 

-3-

 

GRAPHIC PACKAGING INTERNATIONAL, INC.

SEVERANCE PAY PLAN

     Graphic Packaging International, Inc. (the “Employer”) hereby amends and restates the
Riverwood International Separation Pay Policy as the Graphic Packaging International, Inc.
Severance Pay Plan (the “Plan”) and terminates the Graphic Packaging Severance Pay Plan effective
April 1, 2007 for the benefit of its employees. This Plan supersedes all prior workforce reduction
or severance policies and programs for which the Eligible Employees under this Plan may have been
eligible. The purpose of the Plan is to provide for the payment of severance benefits to certain
Eligible Employees whose Employment is terminated under the conditions outlined in this Plan. The
Plan is intended to be a welfare benefit plan under § 3(2)(B) of ERISA.

-4-

 

ARTICLE 1. DEFINITIONS

1.1. Active Employee. “Active Employee” means an Employee who is performing the regular
duties of his or her position with the Employer; provided, however, that if an Employee on a
Creditable Leave of Absence gives notice of his or her intention to return to Employment from the
Creditable Leave of Absence but cannot do so because of a reason specified in Section 2.1(b), then
the Employee shall be an Active Employee on the date the Employee would otherwise have returned to
Employment.

1.2. Administrator. “Administrator” means the Employer unless the Employer appoints a plan
administrator in writing in accordance with Section 5.1.

1.3. Affiliated Entity. “Affiliated Entity” means any corporation or other entity, now or
hereafter formed, that is affiliated with the Employer, either directly or indirectly, through
stock ownership or control, and which is (a) included in the controlled group of corporations
(within the meaning of Code § 1563(a) without regard to Code § 1563(a)(4) and Code § 1563(e)(3)(C))
in which the Employer is also included; (b) included in the group of entities (whether or not
incorporated) under common control (within the meaning of Code § 414(c)) in which the Employer is
also included; (c) included in an affiliated service group (within the meaning of Code § 414(m)) in
which the Employer is also included; or (d) required to be aggregated with the Employer by Code §
414(o).

1.4. Anniversary Date. “Anniversary Date” means the date an Eligible Employee begins
Employment upon hire or rehire by the Employer and each anniversary of that date.

1.5. Code. “Code” means the Internal Revenue Code of 1986, as amended. All references to
any section of the Code shall be deemed to refer not only to such section but to any amendment
thereof and any successor statutory provision.

1.6. Creditable Leave of Absence. “Creditable Leave of Absence” means a period of absence
from Employment because of an approved leave of absence other than personal leaves of absence.

1.7. Effective Date. “Effective Date” means April 1, 2007.

1.8. Eligible Employee. “Eligible Employee” means an Employee who has satisfied the
requirements of Section 2.1. If an Employee does not meet these requirements, the Employee is not
eligible for benefits under the Plan.

1.9. Employee. “Employee” means any individual who provides services to the Employer as a
common law employee and who is not (a) a temporary employee as defined by the Employer’s personnel
policies, (b) an employee who has a written employment and termination agreement or a written
employment agreement which waives participation in the Plan, (c) a “leased employee” as defined in
Code § 414(n)(2), (d) an individual covered by a collective bargaining agreement under which
benefits were the subject of good faith bargaining, unless such agreement expressly provides for
participation in the Plan, (e) an individual who is classified by the Employer as an independent
contractor (even if reclassified as a common law employee as a result of

-5-

 

administrative or judicial proceedings), or (f) any employee who is not on the United States
payroll.

1.10. Employer. “Employer” means Graphic Packaging International, Inc., located at 814
Livingston Court SE, Marietta Georgia 30067, 770-644-3000, which is also the Plan Sponsor.

1.11. Employment. “Employment” means an Employee’s employment with the Employer, which
begins on the date the Employee first performs an Hour of Service and ends on the Employee’s
Termination Date.

1.12. ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended. All references to any section of ERISA shall be deemed to refer not only to such section
but to any amendment thereof and any successor statutory provision.

1.13. Family and Medical Leave. “Family and Medical Leave” means a leave of absence taken
pursuant to the Family and Medical Leave Act of 1993.

1.14. Hire Date. An Employee’s Hire Date is the date on which the Employee’s most recent
employment with the Employer began, except that, if the Employee had a break-in-service that
resulted in an adjusted vesting service date, any applicable adjusted vesting service date will be
used as the Hire Date in calculating Severance Pay under this Plan (but not to calculate
eligibility for benefits under the Plan).

1.15. Hour of Service. “Hour of Service” means each hour for which an Employee is paid or
entitled to payment from the Employer for the performance of duties.

1.16. Plan. “Plan” means the Graphic Packaging International, Inc. Severance Pay Plan.

1.17. Plan Year. “Plan Year” means the twelve consecutive month period beginning each
January 1 and ending each December 31.

1.18. Release. “Release” means the separation agreement and general release prepared by
and acceptable to the Employer. The Release is intended to legally bind the Employee and the
Employer regarding the termination of the Employee’s Employment with the Employer and, among other
things, provide for a full release and waiver by the Employee of all possible claims against the
Employer and its Affiliated Entities and all directors, officers, employees, agents, and
representatives of the Employer and its Affiliated Entities, including, but not limited to, claims
arising out of the Employee’s Employment with, and termination of Employment by, the Employer.

1.19. Section. “Section” means a section of this Plan.

1.20. Severance Pay. “Severance Pay” means the benefit payable to an Eligible Employee
under this Plan, calculated under Section 2.2.

1.21. Severance Payment Period. “Severance Payment Period” means the period beginning on
the date an Eligible Employee terminates Employment and ending on the date that is the last day

-6-

 

of the number of months, weeks and days for which the Eligible Employee is eligible to receive
Severance Pay, calculated pursuant to Section 2.2.

1.22. Suitable Position. A Suitable Position is a position with the Employer, an
Affiliated Entity or with another company or entity that has purchased substantially all of the
assets or the business of one of the Employer’s facilities that the Employer feels the Employee is
capable of performing by reason of education, training and skills. The location of the Suitable
Position may be up to 50 miles greater than the distance between the employee’s present work
location and present residence (no relocation assistance will be provided).

1.23. Termination Date. “Termination Date” means the last date on which an Employee
performs an Hour of Service.

1.24. Year of Service. “Year of Service” means a one-year period, beginning on the
Employee’s Hire Date, as defined in Section 1.14, and each Anniversary Date thereafter, during
which period the Employee is continuously employed by the Employer. Periods during which an
Employee is on a Creditable Leave of Absence shall be treated as periods of continuous Employment.
Fractional or partial Years of Service will be disregarded. Service with a predecessor company
will not be counted for calculating Years of Service, unless provided otherwise in the purchase
agreement pursuant to which the Employer acquired the predecessor company. Years of Service as a
regular part-time employee will be prorated based on hours worked.

-7-

 

ARTICLE 2. SEVERANCE PAY PROGRAM

2.1. Eligibility Requirements. An Employee, as defined in Section 1.9, is eligible for
benefits under this Article 2 if he or she meets following requirements:

	 	(a)	 	The Employee must have completed at least one Year of Service, based on the
Employee’s most recent Hire Date.
	 
	 	(b)	 	The Employee’s Employment with the Employer must be terminated by the Employer
because of cost-cutting measures, structural changes (including outsourcing), business
or facility divestment, facility closure, permanent job discontinuance, qualifications
mismatch, or lack of work, as determined at the discretion of the Administrator.
	 
	 	(c)	 	The Employee’s Employment with the Employer must not be terminated because of
voluntary resignation, cause, substandard performance, election of retirement that is
not involved in an Employer-initiated separation for a reason listed in Section 2.1(b),
or approval for long-term disability, as determined at the discretion of the
Administrator.
	 
	 	(d)	 	The Employee must not be offered a Suitable Position, as defined in Section
1.22. The Employee may choose either to accept the Suitable Position or Severance Pay
and benefits under this Plan if the Employee is offered a Suitable Position that
involves: (i) for a salaried employee, a reduction in salary grade or an option to
transfer to an hourly position; or (ii) for an hourly employee, a 25% or greater
reduction in the hourly rate.
	 
	 	(e)	 	The Employee must be an Active Employee and continue to work productively for
the Employer, as determined at the sole discretion of the Administrator, until it is
determined by the Administrator that the Employee’s services are no longer necessary.
	 
	 	(f)	 	The Employee’s Termination Date must be on or after the Effective Date of this
Plan.
	 
	 	(g)	 	The Employee must execute (and not revoke) a Release, as provided in Section
3.4.

2.2. Severance Pay. Subject to Article 3, the amount of Severance Pay payable to an
Eligible Employee under this Article 2 shall be determined by multiplying the amount of benefit
indicated in the Table below for the Employee’s salary grade times the Employee’s Years of Service,
as defined in Section 1.24. However, the Employee’s Severance Payment Period shall not be less
than the stated minimum or exceed the stated maximum number of months or partial months applicable
to the Employee’s salary grade attained at termination.

-8-

 

	 	 	 	 	 	 	 
	Salary Grade/Status	 	Benefit	 	Minimum	 	Maximum
	88 and below and all non-union hourly

	 	1/2 month per full year of service
	 	1/2 month
	 	6 months
	90-93

	 	1/2 month per full year of service
	 	1 months
	 	8 months
	94-96

	 	5/8 month per full year of service
	 	2 months
	 	10 months
	97-99

	 	3/4 month per full year of service
	 	3 months
	 	12 months
	100 and above

	 	1 month per full year of service
	 	6 months
	 	12 months

2.3. Form of Payment. Severance Pay will be paid on each of the Employer’s regular
pay days to an Eligible Employee in substantially equal installments not larger than the Employee’s
base salary for the pay period immediately prior to his or her Termination Date, until the amount
of Severance Pay to which the Employee is entitled has been exhausted. The Employer will withhold
any amounts required by the federal, state, or local law.

2.4. Benefit Continuation. Medical, dental or vision benefits and health care spending
account may continue for the Severance Payment Period, up to a maximum of three (3) months.
Employee contributions to the benefit plans will remain the same as during employment for this
extension period. This continuation is considered alternative coverage under the Consolidated
Omnibus Budget Reconciliation Act (COBRA). Core, supplemental and dependent life may continue
under for the Severance Payment Period, up to a maximum of three months. Accidental death and
dismemberment, and dependent care spending accounts terminate at the end of the last active pay
period. Short- and long-term disability terminate on the Termination Date.

2.5. Outplacement Assistance. The Employer may, in its discretion, offer an Eligible
Employee outplacement counseling assistance.

-9-

 

ARTICLE 3. RELEASE AND GENERAL RULES

3.1. Offset for Money Owed to the Employer. An Eligible Employee’s benefit under this Plan
shall be reduced by any amount that the Eligible Employee owes to the Employer on his or her
Termination Date.

3.2. Offset for Other Severance Benefits. In the event that an Eligible Employee receives
(or has received) benefits under this Plan or any other severance-type plan, program, or
arrangement sponsored by the Employer, the benefit otherwise payable under this Plan will be
reduced in a corresponding amount, unless such other severance plan, program, or arrangement
specifically provides that the benefits payable thereunder are in addition to the benefits payable
under this Plan.

3.3. Offset for Notice Payments. In the event the Employee receives notice payments to
which the Employee may be entitled under any applicable law, including the Worker Adjustment and
Retraining Notification (“WARN”) Act or any similar state statute, the benefit otherwise payable
under this Plan will be reduced in a corresponding amount.

3.4. Release and Payment of Benefits. Prior to receiving any benefit described in Article
2, an Employee must return to the Administrator a Release waiving any and all claims the Employee
may have against the Employer and its Affiliated Entities, including but not limited to any notice
or payments to which Employee might otherwise be entitled under any applicable law, including the
Worker Adjustment and Retraining Notification Act (“WARN”) and any similar state law. The Release
must be voluntarily executed by the Employee, and the Employee must not revoke such Release within
any applicable revocation period that may be required by law from time to time. Severance Pay
benefits will not begin until, at the earliest, the day after the last day on which the Eligible
Employee may revoke the signed Release submitted to the Administrator.

3.5. Return of Employer Property. To be eligible to receive Severance Pay under this Plan,
an Employee must return all Employer property that is in the Employee’s possession, custody or
control. Employer property includes, but is not limited to, all keys, credit cards, computers, and
other items or equipment provided to the Employee for use during employment, together with all
written and recorded materials, documents, computer discs or memory cards, plans, records, notes,
files, drawings or papers, and any copies thereof, relating to the affairs of the Employer,
including in particular all notes and records relating to customers of Employer.

3.6. Other Benefits. The benefits of an Eligible Employee under any other Employer benefit
plan or program not addressed in Section 2 above are governed solely by the terms of those plans
and programs, and shall neither be affected by nor affect payments under this Plan, except as
provided in Section 3.2.

3.7. Reemployment. If an Employee who is receiving Severance Pay under this Plan is
re-employed by the Employer or an Affiliated Entity before the expiration of the Employee’s
Severance Payment Period, the payment of Severance Pay and benefits will stop as of the date the
Employee is rehired.

-10-

 

3.8. Payments to Estate. If an Eligible Employee dies before receiving all of the
Severance Pay to which he or she is entitled under the Plan, the remaining Severance Pay shall be
paid to the Employee’s estate no less frequently than the Severance Pay was being paid to the
Employee. No Severance Pay will be granted to the heirs of an Employee who dies while employed by
the Employer.

3.9. Special Rule for Specified Employees. Generally, this Plan is intended to provide
separation pay upon an involuntary separation from service, which would be exempt from the
requirements of Section 409A of the Code. However, if any payment under this Plan is not exempt
from the requirements of Section 409A of the Code and is made to an individual who is a “specified
employee” (as defined in Section 409A of the Code and regulations thereunder), such payment shall
not be made until the date that is six months and a day following the Employee’s Termination Date.
Any payments that would otherwise be made during such six-month period shall be held by the
Employer and paid in a lump sum on the day following the end of such six-month period.

3.10. Exclusive Source of Benefits. The Plan is the only benefit plan providing Severance
Pay or similar benefits for Eligible Employees, and to the extent any other written or unwritten
plans, programs, practices or arrangements providing separation benefits for such employees are
deemed to have existed, they are hereby canceled and superseded by this Plan. Any Employee of the
Employer who does not meet the requirements to participate in this Plan is not entitled to any plan
or program of special separation benefits, severance payments or similar benefits upon termination
of employment.

-11-

 

ARTICLE 4. FUNDING POLICY AND BASIS OF PAYMENTS TO AND FROM THE PLAN

4.1. Funding of Severance Benefits. The Employer shall pay the benefits determined under
this Plan from its general assets.

4.2. Payments from the Plan. Payments from the Plan shall be paid out of the general
assets of the Employer at the time payments are required. Except in specific circumstances where
it must do so in accordance with proper accounting procedures, the Employer is not required to set
aside amounts in advance of the date payments are required.

-12-

 

ARTICLE 5. ADMINISTRATION

5.1. Administration and Interpretation of the Plan. The Employer shall be the
Administrator unless the Employer appoints an Administrator in writing. If the Employer appoints a
committee to serve as the Administrator, the committee shall consist of not less than three
members. Any member of the committee may resign at any time by giving notice to the Employer. Any
resignation shall take effect on the date of receipt of such notice or at any later date specified
in the notice. No member of the committee shall receive any compensation for his or her services
as a member of the committee. A majority of the members of the committee shall constitute a quorum
for the transaction of business. All resolutions or other actions taken by the committee shall
require the written approval or affirmative vote of a majority of the members of the committee.
The Administrator shall have all powers necessary or convenient to administer the Plan, including,
in addition to such other powers as the law may provide, the following:

	 	(a)	 	the power to establish rules and procedures for the purpose of administration
of this Plan;
	 
	 	(b)	 	the exclusive right to interpret the Plan and to decide any matters arising in
connection with the administration and operation of the Plan; and
	 
	 	(c)	 	the power to appoint such agents, attorneys, accountants, and consultants and
any other person required for proper administration of the Plan.

The Administrator shall have the absolute and exclusive discretionary right and final authority in
all matters related to the discharge of its responsibilities and the exercise of authority under
the Plan, including, without limitation, the construction of the terms of the Plan, the
determination of eligibility for coverage and benefits, and the amount of benefits, and all
determinations of the Plan Administrator shall be final and binding upon all parties. The
decisions of the Administrator shall be conclusive and binding upon all persons having or claiming
to have any right or interest in or under the Plan, and no such decision shall be modified under
judicial review unless such decision is proven to be arbitrary or capricious.

The Administrator may delegate some or all of its authority under the Plan to any person or persons
provided that any such delegation is in writing.

-13-

 

5.2. Information. The Administrator may require that each Employee supply any pertinent
information and execute any documents necessary under this Plan.

5.3. Fiduciary Provisions. The Administrator shall be a “named fiduciary” under the Plan.
Any person or group of persons may serve in more than one fiduciary capacity with respect to the
Plan. All fiduciaries under the Plan shall discharge their duties with respect to the Plan solely
in the interests of the Employees and their beneficiaries and with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a like character and
with like aims. No fiduciary under the Plan shall be liable for an act or omission of another
person in carrying out any fiduciary responsibility where such fiduciary responsibility is
allocated to such other person by or pursuant to the Plan.

5.4. Indemnification. The Employer shall, to the fullest extent permitted by law,
indemnify each director, officer, or employee of the Employer (including the heirs, executors,
administrators, and other personal representatives of such person) and the Administrator against
expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by a person covered under this indemnification clause in connection with any
threatened, pending, or actual suit, action, or proceeding (whether civil, criminal,
administrative, or investigative in nature, or otherwise) in which the person may be involved by
reason of the fact that the person is or was serving the Plan in any capacity at the request of the
Employer.

5.5. Expenses of Administration. Any expense incurred by the Employer or the Administrator
relative to the administration of the Plan shall be paid by the Employer.

5.6. Accounts and Records. The Administrator shall maintain records concerning the
eligibility of Employees and shall itemize and separately identify the benefits distributed from
the Plan.

5.7. Notification of Employees. The Administrator shall communicate in writing to all
Employees a summary of the terms and conditions of the Plan.

5.8. Rights Against Employer. Neither the establishment of the Plan, nor any modification
of the Plan, nor any distributions from the Plan shall be construed as giving to any current or
former Employee or beneficiary any legal or equitable rights against the Employer, its
shareholders, directors, or officers, as such, or as giving any person the right to be retained in
the employ of the Employer.

5.9. Employer and Plan Identification Number. The Internal Revenue Service has assigned
the Employer the employer identification number 84-0772929. The Plan number assigned to the Plan
is 551.

5.10. Agent for the Service of Legal Process. Legal process may be served on the Employer
by directing such legal service to Corporation Service Corporation, at the address on file with the
Secretary of State’s office in each state where the Employer does business.

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ARTICLE 6. CLAIMS PROCEDURE

6.1. Filing a Claim. If an Employee or former Employee believes that the Employer is
obligated under the terms of the Plan to pay a benefit or there is a dispute as to the benefit
amount, the Employee or former Employee (hereinafter referred to as the “claimant”) shall deliver a
written request to the Administrator, or such person or office as the Administrator shall designate
for the processing of claims. Claims should be sent to Administrator, Graphic Packaging
International, Inc. Severance Pay Plan, 814 Livingston Court SE, Marietta Georgia 30067. Upon
receipt of such request, the Administrator may require the claimant to complete such forms and
provide such additional information as may be reasonably necessary to establish the claimant’s
right to benefits under the Plan. A claim is deemed filed upon receipt by the Administrator.

6.2. Notification to Claimant of Decision. The Administrator shall furnish to the claimant
a notice of the decision within 90 days after receipt of the claim. If special circumstances
require more than 90 days to process the claim, this period may be extended for up to an additional
90 days by giving written notice to the claimant before the end of the initial 90-day period
stating the special circumstances requiring the extension and the date by which a final decision is
expected. Failure to provide a notice of decision within the time specified shall constitute a
denial of the claim, and the claimant shall be entitled to require a review of the denial under the
review procedures.

The notice to be provided to every claimant who is denied a claim for benefits shall be in writing
and shall set forth, in a manner calculated to be understood by the claimant, the following:

	 	(a)	 	The specific reason or reasons for the denial;
	 
	 	(b)	 	Specific reference to pertinent Plan provisions on which the denial is based;
	 
	 	(c)	 	A description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or information is
necessary; and
	 
	 	(d)	 	An explanation of the Plan’s claims review procedure describing the steps to be
taken by a claimant who wishes to submit his or her claim for review.

6.3. Review Procedure. The purpose of the review procedure is to provide an Employee or
former Employee claiming benefits a reasonable opportunity to appeal a denial of a claim to the
Administrator for a full and fair review. To accomplish that purpose, the claimant or his or her
duly authorized representative:

	 	(a)	 	May request a review upon written application to the Administrator;
	 
	 	(b)	 	May review pertinent Plan documents; and
	 
	 	(c)	 	May submit issues and comments in writing.

-15-

 

A claimant (or his or her duly authorized representative) shall request a review by filing a
written application for review with the Administrator at any time within 60 days after receipt by
the claimant of written notice of the denial of his or her claim.

The decision on review shall be made by the Administrator, who may in his, her, or its discretion
hold a hearing on the denied claim. The Administrator shall make its decision promptly, which
shall ordinarily be not later than 60 days after the Plan’s receipt of the request for review,
unless special circumstances (such as the need to hold a hearing) require an extension of time for
processing. In that case, a decision shall be rendered as soon as possible, but not later than 120
days after receipt of the request for review. If an extension of time is required due to special
circumstances, written notice of the extension shall be furnished to the claimant prior to the time
the extension commences.

The decision on review shall be in writing and shall include specific reasons for the decision
(written in a manner calculated to be understood by the claimant), as well as specific references
to the pertinent Plan provisions on which the decision is based.

The Administrator’s decision on review shall be final. In the event the decision on review is not
furnished to the claimant within the time required, the claim shall be deemed denied on review.

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ARTICLE 7. MISCELLANEOUS

7.1. State Law. The Plan shall be construed and its provisions enforced and administered
in accordance with ERISA. To the extent, if any, that state laws are not preempted and they apply,
the Plan shall be construed and its provisions enforced and administered under the laws of the
State of Georgia.

7.2. Gender and Number. Words used in the masculine also apply to the feminine where
applicable, and wherever the context of the Plan dictates, the plural includes the singular and the
singular includes the plural.

7.3. Nonassignability. The Plan and the rights, interests, and benefits receivable
hereunder from the general assets of the Employers shall not be assigned, transferred, pledged,
sold, conveyed, or encumbered in any way by the Employee and shall not be subject to execution,
attachment, or similar process. Any attempted sale, conveyance, transfer, assignment, pledge, or
encumbrance of the Plan or of such rights, interests, and benefits, contrary to the foregoing
provisions, or the levy of any attachment of similar process thereupon shall be null and void and
without effect.

7.4. Employment Not Guaranteed. The Plan shall not be deemed to constitute a contract
between the Employer and any Employee or to be a consideration, or an inducement, for the
employment of any Employee by the Employer. Nothing contained in the Plan shall be deemed to give
any Employee the right to be retained in the employ of the Employer or to interfere with the right
of the Employer to discharge or to terminate the Employment of any Employee at any time without
regard to the effect that such discharge or termination may have on any rights under the Plan.

7.5. Additional Taxes or Penalties. If there are any taxes or penalties payable by the
Employer on behalf of any Employee, such taxes or penalties shall be payable by the Employee to the
Employer to the extent such taxes would have been originally payable by the Employee had this Plan
not been in existence.

7.6. Right of Recovery. If the Employer or Administrator or its designee makes any payment
that according to the terms of the Plan should not have been made, it may recover that incorrect
payment, whether or not it was made due to the Employer’s or the Administrator’s own error, from
the person to whom it was made or from any other appropriate party. If any such incorrect payment
is made directly to an Employee, the Employer or its designee may deduct it when making future
payments directly to that Employee or recover such payment by other methods to be determined at the
discretion of the Administrator.

7.7. No Guarantee of Tax Consequences. Neither the Employer nor the Administrator makes
any commitment or guarantee with respect to the tax treatment of Severance Pay under federal,
state, or local laws. The Employer will withhold any taxes required by law.

7.8. Severability. If any provision of this Plan shall be held to be illegal or invalid
for any reason, such illegality or invalidity shall not affect the remaining parts of this Plan,
and this Plan shall be construed and enforced as if such illegal or invalid provision had never
been inserted.

-17-

 

7.9. Entire Plan. The Plan document and the documents specifically incorporated by
reference herein shall constitute the only legally governing documents for the Plan. All
statements made by the Employer or the Administrator shall be deemed representations and not
warranties. No such statements shall void or reduce coverage under the Plan or be used in defense
to a claim unless in writing signed by the Administrator.

-18-

 

ARTICLE 8. AMENDMENT AND TERMINATION

8.1. Amendments. The Employer reserves the right, by action of the Employer, to amend the
Plan at any time and from time to time. In addition, any amendment of the Plan which will not
result in significant cost to the Employer nor have a material effect on the benefits provided
hereunder, and which either (a) will effect a technical or administrative change to the Plan, or
(b) is recommended by counsel as necessary or desirable to comply with applicable law, may be made
by the Administrator (for the Employer).

8.2. Termination. The Employer expects to continue the Plan indefinitely, but the
continuance of the Plan and the payment of benefits for any year are not assumed as contractual
obligations. The Employer reserves the right, by action of the Employer, to terminate the Plan at
any time. Upon final termination of the Plan, the Employer will make appropriate arrangements to
wind up the affairs of the Plan. Prior practices by the Employer or any entity related to the
Employer will not diminish in any way the rights granted to the Employer under this section. Oral
and other informal communications made by the Employer or any representative of the Employer in the
Plan described herein and such communications will not diminish the Employer’s right to amend or
terminate the Plan in any manner.

-19-

 

     The Employer hereby agrees to the provisions of the Plan and in witness of its agreement, the
Employer, by its duly authorized officer, has executed the Plan on the date written below.

	 	 	 	 	 	 	 	 	 
	 	 	GRAPHIC PACKAGING INTERNATIONAL, INC.	 	 
	 	 	Employer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ DAVID W. SCHEIBLE	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	 	 	President and Chief Executive
Officer 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Date:
	 	 	 	April 9, 2007	 	 
	 

	 	 	 	 	 	 	 	 

-20-

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