Document:

exv10w1

Exhibit 10.1

EXECUTION COPY

SECOND AMENDMENT TO SENIOR SECURED

REVOLVING CREDIT AGREEMENT

          SECOND AMENDMENT TO SENIOR SECURED REVOLVING CREDIT AGREEMENT, dated as of January 9, 2009
(this “Amendment”), among Kaiser Aluminum Corporation, a Delaware corporation (the
“Parent”), Kaiser Aluminum Investments Company, a Delaware corporation (“KAIC”),
Kaiser Aluminum Fabricated Products, LLC, a Delaware limited liability company (“KAFP”),
and Kaiser Aluminium International, Inc., a Delaware corporation (“KAII”, and together with
the Parent, KAIC, KAFP, each a “Borrower” and collectively, the “Borrowers”),
JPMorgan Chase Bank, N.A., a national banking association organized under the laws of the United
States (“JPMorgan Chase”) and each of the other financial institutions party hereto as
lenders (and together with JPMorgan Chase, in its capacity as a lender, the “Lenders”) and
JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative
Agent”) for the Lenders.

W
I T N E S S E
T H:

          WHEREAS, the Borrowers, the original Lenders and the Administrative Agent have entered into
that certain Senior Secured Revolving Credit Agreement, dated as of July 6, 2006 (as amended,
supplemented or modified, the “Credit Agreement”; capitalized terms used herein but not
otherwise defined herein shall have the meanings given such terms in the Credit Agreement); and

          WHEREAS, the Borrowers have requested that the Lenders and the Administrative Agent amend
certain provisions of the Credit Agreement, and the Required Lenders and the Administrative Agent
are willing to so amend the Credit Agreement on the terms and subject to the conditions set forth
herein.

          NOW, THEREFORE, in consideration of the premises and the agreements herein contained,
Borrowers, Required Lenders, and Administrative Agent hereby agree as follows:

ARTICLE I

AMENDMENTS TO CREDIT AGREEMENT

          Section 1.1 Amendments to Section 1.01. Section 1.01 of the Credit Agreement is
hereby amended as follows:

               (a) The following new defined terms are hereby inserted in proper alphabetical order:

     “Swingline Exposure” shall mean, at any time, the sum of the aggregate undrawn
amount of all outstanding Swingline Loans at such time. The Swingline
Exposure of any Lender at any time shall be its Commitment Percentage of the total
Swingline Exposure at such time.

 

 

     “Restricted Payment” means any dividend or other distribution (whether in
cash, securities or other property) with respect to any Equity Interests in the Parent or
any Subsidiary, or any payment (whether in cash, securities or other property), including
any sinking fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such Equity Interests in the Parent or any
Subsidiary or any option, warrant or other right to acquire any such Equity Interests in
the Parent or any Subsidiary.

               (b) The defined term “Departing Lender” is hereby deleted in its entirety.

               (c) The defined term “Alternate Base Rate” is hereby amended and restated in its entirety to
read as follows:

     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest
Period on such day (or if such day is not a Business Day, the immediately preceding
Business Day) plus 1%, provided that, for the avoidance of doubt, the Adjusted LIBO Rate
for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on
any successor or substitute page) at approximately 11:00 a.m. London time on such day
(without any rounding). Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from
and including the effective date of such change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate, respectively.

               (d) The defined term “Applicable Commitment Fee Rate” is hereby amended and restated in its
entirety to read as follows:

     “Applicable Commitment Fee Rate” shall mean, at any time, with respect to the
Commitment Fees payable hereunder, a rate equal to 0.50% per annum.

               (e) The defined term “Applicable Margin” is hereby amended by amending and restating the
pricing grid therein as follows:

	 	 	 	 	 
	 	 	Revolver	 	Revolver
	Quarterly Available Credit	 	ABR Spread	 	Eurodollar Spread
	Category 1

>125,000,000
	 	1.50%	 	               2.50%
	Category 2

< 125,000,000 and
>75,000,000
	 	1.75%	 	2.75%
	Category 3

< 75,000,000
	 	2.00%	 	3.00%

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               (f) The defined term “Commitment Percentage” is hereby amended and restated in its entirety to
read as follows:

     “Commitment Percentage” shall mean, with respect to any Lender, (a) with
respect to Revolving Loans, Letter of Credit Exposure or Swingline Loans, a portion thereof
equal to a fraction the numerator of which is such Lender’s Commitment and the denominator
of which is the Total Commitment (if the Commitments have terminated or expired, the
Commitment Percentages shall be determined based upon the Aggregate Credit Exposure at such
time); and (b) with respect to Protective Advances or with respect to the Aggregate Credit
Exposure, a percentage based upon its share of the Aggregate Credit Exposure and the unused
Commitments.

               (g) The defined term “Defaulting Lender” is hereby amended and restated in its entirety to
read as follows:

     “Defaulting Lender” shall mean any Lender, as determined by the Administrative
Agent, that has (a) failed to fund any portion of its Loans or participations in Letters of
Credit or Swingline Loans within three Business Days of the date required to be funded by
it hereunder, (b) notified any Borrower, the Administrative Agent, the Issuing Bank, the
Swingline Lender or any Lender in writing that it does not intend to comply with any of its
funding obligations under this Agreement or has made a public statement to the effect that
it does not intend to comply with its funding obligations under this Agreement or under
other agreements in which it commits to extend credit, (c) failed, within three Business
Days after request by the Administrative Agent, to confirm that it will comply with the
terms of this Agreement relating to its obligations to fund prospective Loans and
participations in then outstanding Letters of Credit and Swingline Loans, (d) otherwise
failed to pay over to the Administrative Agent or any other Lender any other amount
required to be paid by it hereunder within three Business Days of the date when due, unless
the subject of a good faith dispute, or (e) (i) become or is insolvent or has a parent
company that has become or is insolvent or (ii) become the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to, approval
of or acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any such
proceeding or appointment.

          Section 1.2 Amendment to Section 2.08. Section 2.08 of the Credit Agreement is hereby
amended by amending and restating subsection (b) in its entirety to read as follows:

     (b) Unless the Administrative Agent shall have received notice from a Lender (a) in
the case of a Eurodollar Borrowing, prior to the proposed date of

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any Borrowing or (b) in
the case of an ABR Borrowing, not later than 2:00 p.m., Central time, on the proposed date
of any Borrowing, that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has
made such share available on such date in accordance with paragraph (a) of this
Section 2.08 and may, in reliance upon such assumption, make available to the
applicable Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrowers severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to the applicable Borrower to but
excluding the date of payment to the Administrative Agent, at (i) in the case of such
Lender, the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation or
(ii) in the case of the Borrowers, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

          Section 1.3 Amendment to Section 2.20. Section 2.20 of the Credit Agreement is hereby
amended restated in its entirety to read as follows:

     SECTION 2.20. Mitigation Obligations; Replacement of Lenders.

     (a) If any Lender requests compensation under Section 2.16, or if the
Borrowers are required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.18, then such Lender
shall use reasonable efforts to designate a different lending office for funding or booking
its Loans hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.16
or 2.18, as the case may be, in the future and (ii) would not subject such Lender
to any unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by
any Lender in connection with any such designation or assignment).

     (b) If any Lender requests compensation under Section 2.16, or if the
Borrowers are required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.18, or if any Lender
becomes a Defaulting Lender, then the Borrowers may, at their sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to an
assignee that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment); provided that (i) the Borrowers shall have received the
prior written

4

 

consent of the Administrative Agent (and if a Commitment is being assigned,
the Issuing Bank), which consent shall not unreasonably be withheld, conditioned or
delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in Letter of Credit Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrowers (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation under Section
2.16 or payments required to be made pursuant to Section 2.18, such assignment
will result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require
such assignment and delegation cease to apply.

          Section 1.4 Section 2.23. A new Section 2.23 of the Credit Agreement is hereby added
at the end of Article 2 to read as follows:

     SECTION 2.23. Defaulting Lenders. Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting Lender:

     (a) the Commitment Fee payable pursuant to Section 2.13(a) shall cease to
accrue on the unfunded portion of the Commitment of such Defaulting Lender;

     (b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not
be included in determining whether all Lenders or the Required Lenders have taken or may
take any action hereunder (including any consent to any amendment or waiver pursuant to
Section 9.02), provided that any waiver, amendment or modification requiring the
consent of all Lenders or each affected Lender which affects such Defaulting Lender
differently than other affected Lenders (other than as a result of such Defaulting Lender
having a greater or lesser Revolving Credit Exposure or Commitment than other affected
Lenders) shall require the consent of such Defaulting Lender;

     (c) if any Swingline Exposure or Letter of Credit Exposure exists at the time a Lender
becomes a Defaulting Lender then:

     (i) the Borrowers shall within one Business Day following notice by the
Administrative Agent (x) first, prepay such Swingline Exposure and (y) second, cash
collateralize such Defaulting Lender’s Letter of Credit Exposure in accordance with
the procedures set forth in Section 2.07(j) for so long as such Letter of
Credit Exposure is outstanding; provided that if at any time subsequent to
such cash

5

 

collateralization such Defaulting Lender ceases to be a Defaulting
Lender, such cash collateral shall be released;

     (ii) if the Borrowers cash collateralize such Defaulting Lender’s Letter of
Credit Exposure pursuant to this Section 2.23(c), the Borrowers shall not
be required to pay any letter of credit participation fees to such Defaulting
Lender (or to the Administrative Agent on behalf of such Defaulting Lender)
pursuant to Section 2.13(b) with respect to such Defaulting Lender’s Letter
of Credit Exposure during the period such Defaulting Lender’s Letter of Credit
Exposure is cash collateralized; and

     (iii) if any Defaulting Lender’s Letter of Credit Exposure is not cash
collateralized, then, without prejudice to any rights or remedies of the Issuing
Bank or any Lender hereunder, all facility fees that otherwise would have been
payable to such Defaulting Lender (solely with respect to the portion of such
Defaulting Lender’s Commitment that was utilized by such Letter of Credit Exposure)
and letter of credit fees payable under Section 2.13(b) with respect to
such Defaulting Lender’s Letter of Credit Exposure shall be payable to the Issuing
Bank until such Letter of Credit Exposure is cash collateralized;

     (d) so long as any Lender is a Defaulting Lender, the Issuing Bank shall not be
required to issue, amend or increase any Letter of Credit, unless it is satisfied that the
related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders
and/or cash collateral will be provided by the Borrowers in accordance with Section
2.23(c) or pursuant to Section 2.23(e)(iii) or any combination thereof
satisfactory to the Issuing Bank; and

     (e) any amount payable to such Defaulting Lender hereunder (whether on account of
principal, interest, fees or otherwise and including any amount that would otherwise be
payable to such Defaulting Lender pursuant to Section 2.19(d) but excluding
Section 2.20(b)) shall, in lieu of being distributed to such Defaulting Lender, be
retained by the Administrative Agent in a segregated account and, subject to any applicable
requirements of law, be applied at such time or times as may be determined by the
Administrative Agent (i) first, to the payment of any amounts owing by such Defaulting
Lender to the Administrative Agent hereunder, (ii) second, pro rata, to the payment of any
amounts owing by such Defaulting Lender to the Issuing Bank or Swingline Lender hereunder,
(iii)
third, if so determined by the Administrative Agent or requested by an Issuing Bank or
Swingline Lender, to be held in such account as cash collateral for future funding
obligations of the Defaulting Lender of any participating interest in any Swingline Loan or
Letter of Credit, (iv) fourth, to the funding of any Loan in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as
determined by the Administrative Agent, (v) fifth, if so determined by the Administrative
Agent and the Borrowers’ Agent, held in such account as cash collateral for future funding
obligations of the Defaulting Lender of any Loans under this Agreement, (vi) sixth, to the
payment of any

6

 

amounts owing to the Lenders or an Issuing Bank or Swingline Lender as a
result of any judgment of a court of competent jurisdiction obtained by any Lender or such
Issuing Bank or Swingline Lender against such Defaulting Lender as a result of such
Defaulting Lender’s breach of its obligations under this Agreement, (vii) seventh, to the
payment of any amounts owing to the Borrowers as a result of any judgment of a court of
competent jurisdiction obtained by the Borrowers against such Defaulting Lender as a result
of such Defaulting Lender’s breach of its obligations under this Agreement, and (viii)
eighth, to such Defaulting Lender or as otherwise directed by a court of competent
jurisdiction; provided that if such payment is (x) a prepayment of the principal amount of
any Loans or reimbursement obligations in respect of Letter of Credit Disbursements for
which a Defaulting Lender has funded its participation obligations and (y) made at a time
when the conditions set forth in Section 4.02 are satisfied, such payment shall be
applied solely to prepay the Loans of, and reimbursement obligations owed to, all
non-Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans, or
reimbursement obligations owed to, any Defaulting Lender.

          Section 1.5 Amendment to Section 6.05. Section 6.05 of the Credit Agreement is hereby
amended restated in its entirety to read as follows:

     SECTION 6.05 Dividends; Capital Stock. Declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent
or otherwise) to do so; provided that (i) any Borrower may declare or make, agree
to pay or make, or incur an obligation to pay or make Restricted Payments to any other
Borrower that is its direct parent; (ii) any Borrower (other than the Parent) or
Significant Subsidiary may declare or make, agree to pay or make, or incur an obligation to
pay or make dividends ratably with respect to its Equity Interests; (iii) the Parent may
declare or make, agree to pay or make, or incur an obligation to pay or make, dividends
with respect to its Equity Interests payable solely in shares of the Parent’s common stock;
(iv) the Parent may make cash payments in lieu of fractional shares representing
insignificant interests in the Parent in connection with the exercise of warrants, options,
or other securities convertible into or exchangeable for Equity Interests in the Parent in
an aggregate amount not to exceed $1,000,000 in any Fiscal Year and (v) the Parent may
declare and pay dividends ratably with respect to its Equity Interests in an aggregate
amount not to exceed $25,000,000 during any Fiscal Year, provided that no such
dividend may be paid unless at the time of such payment
and after giving effect thereto, (A) no Default is continuing or would result
therefrom and (B) Availability (calculated on a pro forma basis immediately after giving
effect to the payment of such dividend) is at least $100,000,000.

          Section 1.6 Amendment to Section 9.02. Section 9.02 of the Credit Agreement is hereby
further amended by deleting the period at the end of subsection (b) thereof, and replacing it with
the following:

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“(it being understood that any change to Section 2.23 shall require the consent of
the Administrative Agent, the Swingline Lender and the Issuing Bank).”

ARTICLE II

CONDITIONS TO CLOSING

          Section 2.1 Immediately upon the satisfaction of all of the following conditions, the
amendments contained in Article I of this Amendment shall become effective (the date on which the
applicable conditions are satisfied being the “Effective Date”):

               (a) Amendment. The Borrowers and the Required Lenders shall have delivered a duly
executed counterpart of this Amendment to the Administrative Agent.

               (b) Representations and Warranties. Each of the representations and warranties set
forth in Article 3 of the Credit Agreement (as amended by this Amendment) or in any other Loan
Document shall be true and correct in all material respects (except that any representation and
warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and
correct in all respects) on and as of the Effective Date with the same effect as though made on and
as of such Effective Date, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties shall have been true
and correct in all material respects (except that those that are qualified as to “materiality” or
“Material Adverse Effect” shall be true and correct in all respects) on and as of such earlier
date).

               (c) Default. No Default or Event of Default shall have occurred and be continuing and
no Default or Event of Default shall result from entering into this Amendment.

               (d) Officer’s Certificate. The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Responsible Officer of Parent, confirming
compliance with the conditions precedent set forth in (b) and (c) of this Article II.

               (e) Amendment Fee. The Borrowers shall have paid each Lender that consents to this
Amendment on or before 5 p.m. Central time on January 9, 2009 an amendment fee equal to 25 basis
points on such Lender’s Commitments.

               (f) Fee Letter. The Administrative Agent shall have received a duly executed
counterpart of that certain Fee Letter among the Administrative Agent, J.P. Morgan Securities Inc.
and the Borrowers and shall have paid all fees payable thereunder.

               (g) Fees and Expenses. The Borrowers shall have paid all fees and expenses
(including, without limitation, legal fees and expenses) payable pursuant to the Loan Documents
that have been invoiced in reasonable detail on or prior to the date hereof.

8

 

ARTICLE III

MISCELLANEOUS

          Section 3.1 Effect of Amendment. Except as expressly set forth herein, this Amendment
shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect
the rights and remedies of the Administrative Agent or any Lender under the Loan Documents, and
shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Loan Documents, all of which are ratified and affirmed in
all respects and shall continue in full force and effect except that, on and after the Effective
Date, each reference to the Credit Agreement in the Loan Documents shall mean and be a reference to
the Credit Agreement as amended by the Amendment. Nothing herein shall be deemed to entitle any
Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the
terms, conditions, obligations, covenants or agreements contained in the Loan Documents in similar
or different circumstances. This Amendment is a Loan Document executed pursuant to the Credit
Agreement and shall be construed, administered and applied in accordance with the terms and
provisions thereof.

          Section 3.2 No Representations by Lenders or Administrative Agent. The Borrowers
hereby acknowledge that they have not relied on any representation, written or oral, express or
implied, by any Lender or the Administrative Agent, other than those expressly contained herein, in
entering into this Amendment.

          Section 3.3 Representations of the Borrowers. Each Borrower represents and warrants
to the Administrative Agents and the Lenders that (a) the execution, delivery and performance by it
of this Amendment are within such entity’s powers and have been duly authorized by all necessary
corporate or limited liability company action, (b) it has received all necessary governmental,
regulatory or other approvals for the execution and delivery of this Amendment, and the execution,
delivery and performance by it of this Amendment do not and will not contravene or conflict with
any provision of (i) any law, (ii) any judgment, decree or order or (iii) its articles of
incorporation, bylaws, articles or certificate of formation or operating agreement, as applicable,
(c) the execution, delivery and performance by it of this Amendment do not and will not contravene
or conflict with or constitute a default under, or cause any lien to arise under, any provision of
any material agreement or instrument binding upon any Borrower or upon any of the respective
property of a Borrower, and (d) this Amendment and the Credit Agreement, as amended by this
Amendment, are legal, valid and binding obligations of such entity, enforceable against it in
accordance with its respective terms.

          Section 3.4 Successors and Assigns. This Amendment shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders and the Administrative Agent.

          Section 3.5 Headings; Entire Agreement. The headings and captions hereunder are for
convenience only and shall not affect the interpretation or construction

9

 

of this Amendment. This
Agreement contains the entire understanding of the parties hereto with regard to the subject matter
contained herein.

          Section 3.6 Severability. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          Section 3.7 Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall constitute an original, but all of which taken together shall
constitute one and the same instrument. Delivery of an executed counterpart of a signature page to
this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of
this Amendment.

          Section 3.8 Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York, but giving effect to federal laws applicable to
national banks.

          Section 3.9 Costs and Expenses. Whether or not the transactions hereby contemplated
shall be consummated, Borrowers shall pay all reasonable out-of-pocket expenses of Administrative
Agent associated with this Amendment, including the reasonable out-of-pocket fees and expenses of
Administrative Agent’s counsel.

[Remainder of this page is intentionally left blank.]

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

	 	 	 	 	 
	 	BORROWERS:

KAISER ALUMINUM CORPORATION

 	 
	 	By:  	/s/ Melinda C. Ellsworth
 	 
	 	 	Name:  	Melinda C. Ellsworth 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 
	 	KAISER ALUMINUM INVESTMENTS COMPANY

 	 
	 	By:  	/s/ Melinda  C. Ellsworth
 	 
	 	 	Name:  	Melinda C. Ellsworth 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 
	 	KAISER ALUMINUM FABRICATED PRODUCTS, LLC

 	 
	 	By:  	/s/ Melinda  C. Ellsworth
 	 
	 	 	Name:  	Melinda C. Ellsworth 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 
	 	KAISER ALUMINIUM INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Melinda C. Ellsworth
 	 
	 	 	Name:  	Melinda C. Ellsworth 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.,	 	 
	 	 	individually, as Administrative Agent, Issuing Bank and Swingline Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Devin Mock
 

Name: J. Devin Mock
	 	 
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	2200 Ross Avenue, 9th Floor	 	 
	 	 	Mail Code: TX1-2921	 	 
	 	 	Dallas, TX 75201	 	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	LENDERS:

THE CIT GROUP/BUSINESS CREDIT, INC.

 	 
	 	By:  	/s/ Chris Handler
 	 
	 	 	Name:  	Chris Handler 	 
	 	 	Title:  	Assistant Vice President 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Michael White
 	 
	 	 	Name:  	Michael White 	 
	 	 	Title:  	Associate 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Robert M. Dalton
 	 
	 	 	Name:  	Robert M. Dalton 	 
	 	 	Title:  	Vice President 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	WELLS FARGO FOOTHILL, LLC

 	 
	 	By:  	/s/ Michael P. Baranowski
 	 
	 	 	Name:  	Michael P. Baranowski 	 
	 	 	Title:  	Vice President 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	UBS AG, STAMFORD BRANCH

 	 
	 	By:  	/s/ Irja R. Otsa
 	 
	 	 	Name:  	Irja R. Otsa 	 
	 	 	Title:  	Associate Director

Banking Products Services, US 	 
	 
	 	 	 
	 	By:  	                                      /s/ Richard L. Tavrow
 	 
	 	 	Name:  	Richard L. Tavrow 	 
	 	 	Title:  	Director

Banking Products Services, US 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	PNC BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Philip K. Liebscher
 	 
	 	 	Name:  	Philip K. Liebscher 	 
	 	 	Title:  	Senior Vice President 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	KEYBANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Paul A. Taubeneck
 	 
	 	 	Name:  	Paul A. Taubeneck 	 
	 	 	Title:  	Vice President 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]

 

 

	 	 	 	 	 
	 	BANK OF THE WEST

 	 
	 	By:  	/s/ Cecile Segovia
 	 
	 	 	Name:  	Cecile Segovia 	 
	 	 	Title:  	Vice President

Bank of the West 	 
	 

[SECOND AMENDMENT – KAISER ALUMINUM CORPORATION]exv10w1

Exhibit 10.1

January 9, 2009

Wellman, Inc.

3303 Port and Harbor Drive

Port Bienville Industrial Park

Bay St. Louis, MS 39520

Attn: Mark Ruday

          Re: Plan Sponsorship Agreement

Gentlemen:

          Wellman, Inc. (as debtor-in-possession and as reorganized upon consummation of the
Reorganization (as defined below) and the Closing (as defined below), “Wellman”) and the
subsidiaries of Wellman that are signatories hereto (collectively, the “Wellman Subsidiaries”)
intend to reorganize (the “Reorganization”) pursuant to a plan of reorganization under chapter 11
of title 11, of the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”). Wellman,
the Wellman Subsidiaries and the Issuer (as defined below) are collectively referred to herein as
the “Wellman Parties” and each, individually, a “Wellman Party”. Reference is made to the proposed
plan of reorganization (as amended or modified, the “Plan”), attached hereto as Exhibit A. Terms
used in this Plan Sponsorship Agreement (this “Agreement”) with initial capital letters that are
not otherwise defined shall have the meanings ascribed to such terms in the Plan. This Plan
Sponsorship Agreement supersedes and replaces the backstop commitment agreements dated June 25,
2008 and September 16, 2008, respectively, in their entireties and such agreements are no longer of
any force or effect.

          Among other sources, the Plan is predicated upon an infusion of an aggregate of $35 million in
cash from the Plan Sponsors (as defined below). In exchange for such infusion, the Plan provides
for the Plan Sponsors to receive (i) their Applicable Percentage of $40 million in principal amount
of 10% second-lien secured convertible notes (the “Convertible Notes”) of Wellman Holdings, Inc.
(the “Issuer”), a newly formed Delaware corporation that will hold 100% of the equity of Wellman,
Inc. upon consummation of the Reorganization and the Closing on the Effective Date (as defined
below) and (ii) their Applicable Percentage of 60,000 shares of New Common Stock of the Issuer (the
“Plan Sponsor Shares” and, together with the Convertible Notes, the “Plan Sponsor
Consideration”)(it being understood that 60,000 shares of New Common Stock of the Issuer shall also
be issued at the Closing to the holders of the Permitted Third Lien Indebtedness (as defined
below), and that the aggregate number of shares of New Common Stock

 

 

of the Issuer outstanding immediately following the Closing shall not exceed
120,000).1 The Convertible Notes shall be convertible into New Common Stock of the
Issuer on an initial basis of 4.6153 shares of New Common Stock per $1000 of principal amount of
Convertible Notes, subject to customary anti-dilution adjustments (the Permitted Third Lien
Indebtedness to be convertible into New Common Stock of the Issuer on an initial basis of 3.0769
shares of New Common Stock per $1000 of principal amount of Permitted Third Lien Indebtedness,
subject to customary anti-dilution adjustments and to an increase in the conversion price to
reflect, and neutralize the effect of, any “paid-in-kind” interest paid thereon, to the effect that
“paid-in-kind” interest paid shall not result in an increased number of shares being receivable by
the holders of Permitted Third Lien Indebtedness on conversion from the number of shares they would
have received had no “paid-in-kind” interest been paid, it being understood that the initial
aggregate principal amount of Convertible Notes and the initial aggregate principal amount of
Permitted Third Lien Indebtedness would each be convertible into the same aggregate number of
shares of New Common Stock, each representing approximately 50% of the pro forma New Common Stock
(excluding the 60,000 shares issued at the Closing to each of the two groups comprised of holders
of the Permitted Third Lien Indebtedness and holders of the Convertible Notes).

          The Convertible Notes shall (i) be issued pursuant to an indenture (the “Convertible Notes
Indenture”) bear interest at a rate per annum equal to 10 %, plus default interest during the
continuance of an event of default of 2% per annum over the rate otherwise payable, (ii) mature on
the first payment date in 2019, and have mandatory purchase offer provisions in the event of an
Asset Sale (to be defined), the proceeds of which have not been used to permanently reduce
Permitted First Lien Indebtedness to the extent required thereby or to reinvest in long term
assets, (iii) be senior indebtedness of the Issuer, (iv) be guaranteed on a senior basis by each
other Wellman Party, (v) be secured by a second priority lien (which lien shall be second priority
only to the lien securing up to an aggregate of $50 million (subject to annual adjustments for
inflation at the rate set for in the United States Consumer Price Index published by The Bureau of
Labor Statistics) in principal amount of first lien indebtedness (“Permitted First Lien
Indebtedness”) (which maximum aggregate amount of Permitted First Lien Indebtedness may be
increased with the consent of (A) holders of at least 60% of the then outstanding principal amount
of the Convertible Notes and (B) holders of at least 60% of the then outstanding principal amount
of the Permitted Third Lien Indebtedness) and shall be senior to the lien securing all other
indebtedness issued pursuant to the Plan in satisfaction of the First Lien Term Loan and Second
Lien Term Loan pre-petition indebtedness of Wellman, which shall be in an aggregate principal
amount not to exceed $60 million plus the amount of any “paid-in-kind” interest paid in accordance
with the terms of the indenture relating thereto either evidenced by new notes or by accretion in
the principal amount of the existing notes (“Permitted Third Lien Indebtedness”)) on all of the
assets of each Wellman Party, (vi) shall permit certain other indebtedness, including, without
limitation, purchase money debt and capital lease obligations in an aggregate amount taken together
not to exceed $5 million and other general indebtedness in an aggregate amount not to exceed $2
million, in each case, subject to annual adjustments for inflation at the rate set for in the
United States Consumer Price Index published by The Bureau of Labor Statistics and (vii) shall be subject
to,

 

			
	1	 	The Plan Sponsor Consideration includes a fee
consisting of $5 million principal amount of additional Convertible Notes (the
“Plan Sponsor Fee”). The Plan Sponsor Fee shall be delivered in the
same manner as that set forth in clause 2(b)(ii) below and at the same time as
the Plan Sponsor Consideration.

2

 

and have the benefits of, one or more Intercreditor Agreements (collectively, the
“Intercreditor Agreement”) between the holders of (or the duly authorized representative of the
holders of) the Permitted First Lien Indebtedness, the Permitted Third Lien Indebtedness and the
Convertible Notes. The Convertible Notes shall be mandatorily convertible in connection with a
proposed sale of all or substantially all of the assets of the Wellman Parties, or a merger or
similar transaction involving the Issuer or Wellman and its subsidiaries, which has been approved
by the Supermajority Equity Holders; provided however that each holder of Convertible Notes that
voted in opposition of such transaction will have the option of being redeemed at 100% of the then
outstanding principal of such holders’ Convertible Notes plus accrued and unpaid interest.
“Supermajority Equity Holders” mean holders of 70% of the New Common Shares (giving pro forma
effect to conversion by the holders of the Convertible Notes and the Permitted Third Lien
Indebtedness) determined on an “as converted” fully diluted basis assuming conversion of all
outstanding Convertible Notes and Permitted Third Lien Indebtedness. If the Issuer has received a
proposal for a sale of all or substantially all of the assets of the Wellman Parties, or a merger
or similar transaction involving the Issuer or Wellman and its subsidiaries, or the Issuer has a
good-faith belief that an initial public offering of the Issuer will be made, or that a sale of all
or substantially all of the assets of the Wellman Parties, or a merger or similar transaction
involving the Issuer or Wellman and its subsidiaries will be consummated, then the Issuer will have
the ability to institute up to a 60 day moratorium on the ability of each holder of Convertible
Notes to convert such holder’s Convertible Notes into New Common Stock. Such 60 day moratorium
shall be extendible by the board of directors by up to an additional 60 day period, after which the
right to convert must be honored for at least 30 days before the Issuer may impose any new
moratorium.

3

 

          The Permitted Third Lien Indebtedness shall be both payment subordinated and lien subordinated
to the Convertible Notes and the Permitted First Lien Indebtedness in a manner and pursuant to
documentation that is no less favorable to the holders of the Convertible Notes than are the terms
of such documentation between the holders of the Permitted First Lien Indebtedness and the holders
of the Convertible Notes to the holders of the Permitted First Lien Indebtedness and otherwise in
form and substance satisfactory to the Plan Sponsors, with no cross default to the Convertible
Notes or the Permitted First Lien Indebtedness, a standstill and cash payment blockage upon default
under the Convertible Notes and other customary payment subordination provisions, provided that so
long as Available Cash (to be mutually agreed) exists to pay cash interest on the Permitted Third
Lien Indebtedness and no default exists under the Permitted First Lien Indebtedness or the
Convertible Notes, the payment subordination terms shall not prohibit cash payment of interest on
the Permitted Third Lien Indebtedness. The Permitted Third Lien Indebtedness shall be mandatorily
convertible in connection with a proposed sale of all or substantially all of the assets of the
Wellman Parties, or a merger or similar transaction involving the Issuer or Wellman and its
subsidiaries, which has been approved by the Supermajority Equity Holders; provided however that
each holder of Permitted Third Lien Indebtedness that voted in opposition of such transaction will
have the option of being redeemed at 100% of the then outstanding principal amount of such holders’
Permitted Third Lien Indebtedness plus accrued and unpaid interest (including “paid-in-kind”
interest). If the Issuer has received a proposal for a sale of all or substantially all of the
assets of the Wellman Parties, or a merger or similar transaction involving the Issuer or Wellman
and its subsidiaries, or the Issuer has a good-faith belief that an initial public offering of the
Issuer will be made, or that a sale of all or substantially all of the assets of the Wellman
Parties, or a merger or similar transaction involving the Issuer or Wellman and its subsidiaries
will be consummated, then the Issuer will have the ability to institute up to a 60 day moratorium
on the ability of each holder of Permitted Third Lien Indebtedness to convert such holder’s
Permitted Third Lien Indebtedness into New Common Stock. Such 60 day moratorium shall be
extendible by the board of directors by up to an additional 60 day period, after which the right to
convert must be honored for at least 30 days before the Issuer may impose any new moratorium.

          The Convertible Notes, the Convertible Notes Indenture, the guarantees, mortgages and other
security and support and other related documents evidencing or relating to the foregoing (including
the Intercreditor Agreement) are collectively referred to herein as the “Second Lien Documents”.
The notes and the financing agreements evidencing the Permitted First Lien Indebtedness, and the
guarantees, mortgages and other security and support and other related documents evidencing or
relating to the foregoing, are collectively referred to herein as the “First Lien Documents”. The
notes and the indenture evidencing the Permitted Third Lien Indebtedness, and the guarantees,
mortgages and other security and support and other related documents evidencing or relating to the
foregoing, are collectively referred to herein as the “Third Lien Documents”.

1. The Commitments.

          (a) Subject to the terms and conditions hereof, including the accuracy of the representations
and warranties of the Issuer as of the date hereof and, other than those representations and
warranties that speak only as of an earlier specified date, as of the Effective Date, compliance by
the Issuer with its covenants and other agreements to be performed or

4

 

observed by it hereunder, including those required to have been performed or observed prior to and
on the Effective Date, the occurrence of the Effective Date on or prior to January 31, 2009, and
satisfaction of all conditions set forth herein on or prior to January 31, 2009 (collectively, the
“Plan Sponsor Conditions”), each of SOLA, Ltd. and/or certain affiliates, funds, or managed
accounts designated by SOLA, Ltd. (collectively, the “SOLA Parties”), and BlackRock Financial
Management, Inc. and/or certain affiliates, funds, or managed accounts designated by BlackRock
Financial Management, Inc. (collectively, the “BlackRock Parties” and together with the SOLA
Parties, collectively, the “Plan Sponsors” and each a “Plan Sponsor”), severally agree to fund, in
the case of the SOLA Parties, $17.5 million in cash, and in the case of the BlackRock Parties,
$17.5 million in cash (such respective amounts, as to each Plan Sponsor, its “Applicable Portion”,
and the percentage of the aggregate Plan Infusion to be provided as aforesaid by each Plan Sponsor,
respectively, its “Applicable Percentage”), aggregating $35 million in cash (the “Plan Infusion”)
in exchange for the Plan Sponsor Consideration (the agreement of each Plan Sponsor described in
this Section 1(a) shall be referred to herein as its “Plan Sponsor Commitment”). Each Plan Sponsor
shall fulfill its Plan Sponsor Commitment, on the terms and conditions described herein and subject
to the Plan Sponsor Conditions, by paying, or causing one or more of its affiliates to pay, the
Plan Infusion.

          (b) The Plan Sponsor agrees that, if Plan Sponsor Conditions shall have been timely satisfied,
it will not change its vote for each Second Lien Term Loan Claim held by it or any of its
controlled affiliates in favor of the Plan.

2. The Closing.

          (a) The delivery of the Plan Sponsor Consideration and payment of the Plan Infusion shall take
place at the offices of Kirkland & Ellis LLP, Citigroup Center, 153 East 53rd Street, New York, New
York 10022 on the Effective Date (but subject to satisfaction of the Plan Sponsor Conditions) (the
“Closing”).

     (b) Upon Closing on the Effective Date:

     (i) Each Plan Sponsor, in satisfaction of its Plan Sponsor Commitment, shall pay by
wire transfer, pursuant to the instructions provided by the Issuer, its Applicable Portion
of the Plan Infusion;

     (ii) The Issuer shall deliver to each Plan Sponsor (or its designees) its Applicable
Percentage of the Plan Sponsor Consideration. If the Convertible Notes are in global form,
The Depositary Trust Company (“DTC”) shall credit the account of each Plan Sponsor in DTC’s
system designated by such Plan Sponsor with portions of the global certificate representing
such Plan Sponsor’s Applicable Percentage of the Convertible Notes (which global certificate
shall be issued to DTC or its nominee) purchased by each Plan Sponsor pursuant to its Plan
Sponsor Commitment;

     (iii) The Issuer shall deliver all certificates, instruments, and other documents
required to satisfy the conditions set forth in this Plan Sponsorship Agreement; and

5

 

     (iv) Wellman shall pay the reasonable out-of-pocket fees, costs, and expenses incurred
in connection with this Plan Sponsorship Agreement by the Plan Sponsors,
including, without limitation, all reasonable fees and expenses of Gibson, Dunn &
Crutcher, as special counsel the Plan Sponsors (all of the fees, costs, and expenses set
forth in this Section 2(b)(iv), collectively “Expenses”).

3. Representations and Warranties.

          (a) Each of the Wellman Parties hereby jointly and severally represents and warrants as of the
date of this Plan Sponsorship Agreement, and as of the Effective Date and the Closing (both before
and after giving effect to the transactions contemplated to occur at the Closing on the Effective
Date), to the Plan Sponsors that:

     (i) Each Wellman Party is duly organized, validly existing, and in good standing under
the laws of its jurisdiction of organization and has all requisite corporate or other power
and authority to own, lease, and operate its properties and assets and to conduct its
business as now being conducted, subject, except in the case of the Issuer, to the
restrictions that may result solely from its status as a debtor-in-possession under the
Bankruptcy Code. Such Wellman Party is duly qualified to transact business in each other
jurisdiction in which the nature of property owned or leased by it or the conduct of its
business requires it to be so qualified, except where the failure to be duly qualified to
transact business, would not reasonably be expected to have a Material Adverse Effect;

     (ii) All of the outstanding shares of capital stock of Wellman are duly authorized,
validly issued, fully paid, and nonassessable, and all such shares are and will be owned as
of the Effective Date and consummation of the Closing by the Issuer free and clear of all
liens, preemptive rights, rights of first refusal, subscription, and similar rights that
would not be cancelled and extinguished under the Plan on the Effective Date. All of the
outstanding shares of capital stock of each of Wellman’s subsidiaries are duly authorized,
validly issued, fully paid, and nonassessable, and all such shares are owned by Wellman or
another wholly owned subsidiary of Wellman free and clear of all liens, preemptive rights,
rights of first refusal, subscription, and similar rights that would not be cancelled and
extinguished under the Plan on the Effective Date;

     (iii) Such Wellman Party has the requisite corporate or other power and authority to
execute and deliver, as applicable, this Plan Sponsorship Agreement, the Plan, the
Disclosure Statement, and, subject to the approval of the Bankruptcy Court, the definitive
documents necessary or appropriate to consummate the transactions contemplated hereby and
thereby, and, as applicable, to file such documents with the Bankruptcy Court and, subject
to the approval of the Bankruptcy Court, consummate the transactions contemplated hereby and
thereby. The formulation, preparation, and, as applicable, filing of this Plan Sponsorship
Agreement, the Plan, the Disclosure Statement, and such definitive documents have been, or
shall have been on the filing date thereof, as applicable, (A) duly and validly authorized
by all necessary corporate or other action on the part of such Wellman Party and (B) duly
and validly executed and delivered by such Wellman Party. Upon the entry of an order by the
Bankruptcy Court confirming the Plan (the “Confirmation Order”), this Plan Sponsorship
Agreement (in the case of each Wellman Party) and the Plan (in the case of each Wellman
Party other than the Issuer) shall
constitute a valid and binding obligation of each Wellman Party enforceable against it
in accordance with its terms;

6

 

     (iv) Subject to entry of the Confirmation Order, (A) the execution and delivery of this
Plan Sponsorship Agreement, the Plan, and each of the definitive documents necessary to
effect the Reorganization by such Wellman Party, as applicable, do not and shall not (1)
violate any provision of the articles of incorporation or by-laws or other organizational
documents of such Wellman Party or (2) conflict with, violate, constitute a breach of, or
result in the creation of a lien or any other encumbrance against, such Wellman Party or its
properties pursuant to any contract, agreement, or instrument by which such Wellman Party or
any of its subsidiaries is bound or any judgment, order, decree, law, statute, rule,
regulation, or other judicial or governmental restriction to which such Wellman Party or any
of its subsidiaries is subject; and (B) the performance of this Plan Sponsorship Agreement,
the Plan, and each of the definitive documents necessary to effect the Reorganization by
such Wellman Party, as applicable, and the consummation by such Wellman Party of the
transactions contemplated hereby and thereby in accordance with the terms hereof and thereof
shall not (1) violate any provision of the articles of incorporation or by-laws or other
organizational documents of such Wellman Party as such documents are proposed to be amended
pursuant to the Plan or (2) conflict with, violate, constitute a breach of, or result in the
creation of a lien or any other encumbrance against, such Wellman Party or its properties
pursuant to any contract, agreement, or instrument by which such Wellman Party or any of its
subsidiaries shall be bound or any judgment, order, decree, law, statute, rule, regulation,
or other judicial or governmental restriction to which such Wellman Party or any of its
subsidiaries shall be subject in each case immediately after the effective date of the Plan
(the “Effective Date”);

     (v) Subject to the filing of the certificate of incorporation for Wellman Holdings,
Inc. (in form and substance satisfactory to each Plan Sponsor), (A) all of the outstanding shares of capital stock of the Issuer constituting Plan Sponsor Shares will be, from and
after the Effective Date, duly authorized, validly issued, fully paid, and nonassessable,
and all such shares are and will be owned as of the Effective Date and consummation of the
Closing by the Plan Sponsors, in their respective Applicable Percentages thereof, free and
clear of all liens, preemptive rights, rights of first refusal, subscription, and similar
rights, and (B) the shares of New Common Stock of Wellman Holdings Inc. issuable upon
conversion of the Convertible Notes, have been, or as of the Effective Date shall be, duly
authorized and reserved for issuance, and when issued against payment therefor upon
conversion of the Convertible Notes, shall be validly issued, fully paid, non-assessable,
and free of all liens, preemptive rights, rights of first refusal, subscription, and similar
rights;

     (vi) Wellman has heretofore delivered to the Plan Sponsor (i) an unaudited consolidated
balance sheet as of September 30, 2008 (the “Third Quarter 2008 Balance Sheet”) and (ii) a
stand-alone business plan (the “Business Plan”) dated December 26, 2008 (the “Business Plan
Date”). The Third Quarter 2008 Balance Sheet was prepared in conformity with GAAP, is
complete and correct in all material respects and fairly presents in all material respects
the assets and liabilities of Wellman and its subsidiaries as of September 30, 2008 (the
“Balance Sheet Date”). Neither Wellman nor any of its

7

 

subsidiaries has any contingent obligation, contingent liability, or liability for
taxes, long term lease, or unusual forward or long term commitment or other material
liability, liquidated or unliquidated, that could reasonably be expected to have a Material
Adverse Effect (defined below) and is not reflected on the Third Quarter 2008 Balance Sheet
or in the Business Plan;

     (vii) Since the Balance Sheet Date, no Material Adverse Effect has occurred with
respect to Wellman individually or the Wellman Parties taken as a whole;

     (viii) Each Wellman Party owns or has long term leases for all of its material real and
personal properties, subject to existing liens, and on the Effective Date all such assets
shall be free and clear of all liens except as shall be permitted under the Plan or as shall
be described in the Disclosure Statement;

     (ix) There is no litigation, proceeding, or governmental investigation (collectively,
“Litigation”) to which such Wellman Party is a party which is pending, or to the knowledge
of such Wellman Party, threatened, against such Wellman Party or any properties or rights of
such Wellman Party which would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Such Wellman Party is not in violation of any term of any
judgment, writ, decree, injunction, or order entered by any court or governmental authority
and outstanding against it or any of its properties or rights, subject, where applicable, to
the restrictions that may result solely from its status as a debtor-in-possession under the
Bankruptcy Code;

     (x) No Wellman Party is in conflict with, or in default or violation of, any law,
order, or agreement applicable to it or by which any property or asset of such Wellman Party
is bound or affected;

     (xi) Assuming the representations of the Plan Sponsors set forth in Section 3(b)(v)
through (viii) are true and correct, the offering and issuance of the Plan Sponsor Shares
and of the Convertible Notes to the Plan Sponsors hereunder, together with the New Common
Stock issuable upon conversion of the Convertible Notes, shall be exempt from registration
under the Securities Act pursuant to Section 4(2) thereof; and

     (xii) Notwithstanding anything herein to the contrary, each Wellman Party acknowledges,
represents, warrants and agrees that (a) the transactions contemplated hereby are arm’s
length commercial transactions between the Issuer, on the one hand, and the Plan Sponsors,
on the other, (b) in connection therewith and with the processes leading to such
transactions, each Plan Sponsor is acting solely as a principal and not the agent or
fiduciary of any Wellman Party or, as applicable, its debtor estate, (c) the Plan Sponsor
has not assumed an advisory or fiduciary responsibility in favor of any of the Wellman
Parties or, as applicable, their debtor estates with respect to any legal, tax, investment,
accounting, regulatory, or other matters involving the transactions contemplated herein or
the processes leading thereto (irrespective of whether any Plan Sponsor has advised or is
currently advising any such Wellman Party on other matters), and (d) the Issuer and the
Wellman Parties have consulted their own legal and financial advisors to the extent they
deemed appropriate. The Issuer and the Wellman Parties represent, warrant and agree that

8

 

they will not claim that the Plan Sponsor has rendered advisory services of any nature
or respect, or owes a fiduciary or similar duty to any of the Wellman Parties or their
shareholders or estates, in connection with the transactions contemplated herein or the
processes leading thereto.

     The representations, warranties and agreements set forth in this Section 3(a)
(collectively, the “Surviving Representations”) shall survive as if made on, and shall be
deemed assumed and made by, the Issuer and Reorganized Wellman and the Surviving Entities
(defined below).

          (b) Each Plan Sponsor hereby severally represents and warrants to Wellman and the Issuer that:

     (i) It is a limited liability company, limited partnership, corporation, or other
entity, as the case may be, duly organized, validly existing, and in good standing under the
laws of its state of organization and has all requisite power and authority to execute,
deliver, and perform its obligations hereunder and to consummate the transactions
contemplated hereby;

     (ii) The execution, delivery, and performance of this Plan Sponsorship Agreement by
such Plan Sponsor and the consummation by such Plan Sponsor of the transactions contemplated
hereby have been duly and validly authorized by all necessary action on the part of such
Plan Sponsor;

     (iii) This Plan Sponsorship Agreement has been duly executed and delivered by such Plan
Sponsor and constitutes the legal, valid, and binding obligation of such Plan Sponsor,
enforceable against such Plan Sponsor in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or affecting the enforcement of creditors’ rights in general and by
general principles of equity;

     (iv) the execution, delivery, and performance of this Plan Sponsorship Agreement by it
and the consummation by such Plan Sponsor of the transactions contemplated hereby do not and
shall not (A) violate any provision of the articles of incorporation or by-laws or other
organizational documents of such Plan Sponsor or (B) conflict with, violate, constitute a
breach of, or result in the creation of a lien or any other encumbrance against, such Plan
Sponsor or its properties pursuant to any material contract, agreement, or instrument by
which such Plan Sponsor is bound or any judgment, order, decree, law, statute, rule,
regulation, or other judicial or governmental restriction to which such Plan Sponsor is
subject;

     (v) It is (A) an “accredited investor” within the meaning of Regulation D of the
Securities Act, and (B) a “qualified institutional buyer” as such term is defined under Rule
144A of the Securities Act;

     (vi) It acknowledges that it has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby and understands and is able to bear any economic risk associated
with such investment;

9

 

     (vii) The Plan Sponsor Shares and the Convertible Notes to be received by such Plan
Sponsor hereunder at the Closing, and the New Common Stock receivable upon conversion of
such Convertible Notes, will be acquired for such Plan Sponsor’s own account or on behalf of
managed accounts and not with a view to the resale or distribution of any part thereof in
violation of the Securities Act, and such Plan Sponsor has no present intention of selling,
granting any participation in, or otherwise distributing the same in violation of the
Securities Act. Notwithstanding anything in this Section 3(b)(vii) to the contrary, by
making the representations herein, such Plan Sponsor does not agree to hold the Plan Sponsor
Shares, Convertible Notes or New Common Stock of the Issuer for any minimum or other
specific term and reserves the right to dispose of such Plan Sponsor Shares, Convertible
Notes or New Common Stock at any time in accordance with or pursuant to a registration
statement or an exemption from the registration requirements under the Securities Act and
any applicable state securities laws; and

     (viii) It has been afforded the opportunity to ask questions and receive answers
concerning Wellman and to obtain additional information.

4. Certain Conditions.

          (a) The obligations of each Plan Sponsor to consummate the transactions contemplated herein
shall be subject to the satisfaction (or waiver by the Plan Sponsors) of each of the following
conditions:

     (i) (x) the Confirmation Order, in a form satisfactory to the Plan Sponsor, shall have
been entered by the Bankruptcy Court, which order shall provide for, among other things, the
approval, and the execution and delivery by the Wellman Parties where applicable, of this
Plan Sponsorship Agreement, the Plan, and each of the other definitive documents necessary
to effect the Reorganization by each Wellman Party, as applicable, including the First Lien
Documents, the Second Lien Documents and the Third Lien Documents, (y) no order staying,
reversing, modifying, or amending the Confirmation Order shall be in effect, and (z) none of
the Wellman Parties shall have made a public announcement, entered into an agreement, or
filed any pleading, evidencing its intention to support or that otherwise supports any
transaction with respect to the reorganization or sale of any of the Wellman Parties or
otherwise shall have taken any action that is materially inconsistent with the transactions
contemplated by the Plan or this Plan Sponsorship Agreement or the First Lien Documents, the
Second Lien Documents or the Third Lien Documents;

     (ii) any plan of reorganization of Wellman shall be consummated only on terms
consistent with the Plan and the First Lien Documents, the Second Lien Documents and the
Third Lien Documents, and all of the conditions precedent to the confirmation and
effectiveness of the Plan and to the execution and delivery by all parties intended to be
signatory thereto of the First Lien Documents, the Second Lien Documents and the Third Lien
Documents and to the closing of the financings, and consummation of the other
transactions contemplated by the foregoing shall have been satisfied, in all material
respects, in a manner satisfactory to the Plan Sponsors;

10

 

     (iii) any and all documentation relating to the Plan and the First Lien Documents, the
Second Lien Documents and the Third Lien Documents, (including, without limitation, the
Plan, any intercreditor agreement between the holders of the Permitted First Lien
Indebtedness and the holders of the Convertible Notes, any intercreditor agreement between
the holders of the Permitted First Lien Indebtedness and the holders of the Permitted Third
Lien Indebtedness, any intercreditor agreement between the holders of the Convertible Notes
and the holders of the Permitted Third Lien Indebtedness and the First Lien Documents, the
Second Lien Documents and the Third Lien Documents themselves), and the transactions
contemplated hereby and thereby and by the Plan, including, without limitation, each of the
definitive documents necessary to effect the Reorganization, shall be in form and substance
satisfactory to the Plan Sponsors and shall be consistent with the Plan and the exhibits
attached thereto, and any and all amendments or modifications to the Plan on or after the
initial filing date thereof, or to the proposed forms of the First Lien Documents, the
Second Lien Documents and the Third Lien Documents approved by the Plan Sponsors, shall be
in form and substance satisfactory to the Plan Sponsors;

     (iv) the cash payment obligations under (a) the Wellman Industries, Inc. Hourly
Employees Pension Plan and (b) the Fiber Industries, Inc. Retirement Income Plan shall be in
an amount acceptable to the Plan Sponsors;

     (v) the total amount of cash to be distributed on the Effective Date to the holders of
Allowed General Administrative Claims (as defined in the Plan) (including cure and section
503(b)(9) claims) shall be no more than $12 million;

     (vi) each Plan Sponsor shall have received its Applicable Percentage of the Plan
Sponsor Fee or such fee shall be paid contemporaneously with the issuance of the Plan
Sponsor Shares and the Convertible Notes to the Plan Sponsors as contemplated in Section
2(b)(ii);

     (vii)  the representations and warranties of each of the Wellman Parties contained
in this Plan Sponsorship Agreement and of each of the parties thereto (other than the Plan
Sponsors) contained in any of the First Lien Documents, the Second Lien Documents or the
Third Lien Documents that are qualified as to materiality, material adverse effect, Material
Adverse Effect, or similar qualifiers, and the representation and warranty contained in
Section 3(a)(xi) and (xii), shall be true and correct in all respects, on and as of the date
hereof and, with respect to the Wellman Parties that are to continue in existence
immediately following the Effective Date, or the successors of Wellman or new entities
created pursuant to the Plan, including the Issuer (the “Surviving Entities”), and any other
parties thereto (other than the Plan Sponsors), as of and after giving effect to the Closing
and the Effective Date and the execution and delivery of, and consummation of the
transactions contemplated by, the Plan and the First Lien Documents, the Second Lien
Documents and the Third Lien Documents, with the same force and effect as though made on and
as of such date, and (x) the representations and warranties of each of the Wellman Parties
contained in this Plan Sponsorship Agreement and of each of the parties thereto

11

 

(other than the Plan Sponsors) contained in any of the First Lien Documents, the Second
Lien Documents or the Third Lien Documents that are not so qualified shall be true and
correct in all material respects on and as of the date hereof and, with respect to the
Surviving Entities, and any other parties thereto (other than the Plan Sponsors), as of and
after giving effect to the Closing and the Effective Date and the execution and delivery of,
and consummation of the transactions contemplated by, the Plan and the First Lien Documents,
the Second Lien Documents and the Third Lien Documents, with the same force and effect as
though made on and as of such date, (y) each of the other parties to the First Lien
Documents, the Second Lien Documents and the Third Lien Documents shall have performed or
complied with, in all material respects, its covenants and other agreements required to be
performed or complied with under the First Lien Documents, the Second Lien Documents or the
Third Lien Documents, as applicable, on or prior to the Effective Date, and (z) Wellman
shall have performed or complied with, in all material respects, its covenants and other
agreements required to be performed or complied with under this Plan Sponsorship Agreement
and the First Lien Documents, the Second Lien Documents and the Third Lien Documents on or
prior to the Effective Date and shall not be in breach of any thereof (and Wellman or
Reorganized Wellman shall have delivered to each Plan Sponsor a certificate of its Chief
Executive Officer or Chief Financial Officer to the effect that each of the conditions
specified in this Section 4(a)(vii) is satisfied in all respects);

     (viii) The First Lien Documents, the Second Lien Documents and the Third Lien Documents
shall have been duly executed and delivered by, or shall by court order have become
effective and binding upon, and shall be enforceable against, each party thereto and each
person or entity purported to be bound thereby. The indebtedness and other obligations of
the Wellman Parties under the Second Lien Documents shall be secured by valid and perfected
liens on all of the assets of the Wellman Parties pursuant to and in accordance with the
Second Lien Documents, having the priority contemplated in the preamble to this Plan
Sponsorship Agreement.;

     (ix)  the organizational documents of the Wellman Parties shall be satisfactory in
form and substance to the Sponsors, and shall provide for an initial board of directors
comprised of 7 members, including four designated by holders of the Convertible Notes, one
designated by the holders of First Lien Term Loan pre-petition indebtedness of Wellman, one
designated by the holders of the Second Lien Term Loan pre-petition indebtedness of Wellman,
and the seventh to be the CEO of the Issuer, and that thereafter, (1) five members of the
board of directors shall be elected by the vote of the holders of a majority of the voting
power of the outstanding shares of New Common Stock and holders of the outstanding
Convertible Notes and Permitted Third Lien Indebtedness (with holders of the Convertible
Notes and the Permitted Third Lien Indebtedness voting on a “as converted” fully diluted
basis), (2) for so long as at least $10,000,000 in aggregate principal amount of Permitted
Third Lien Indebtedness remains outstanding, or the aggregate principal amount of the
Permitted Third Lien Indebtedness is not less than 50% of the aggregate of the principal
amount of the Convertible Notes and the Permitted Third Lien Indebtedness, one member of the
board of directors shall be elected by the vote of holders of Permitted Third Lien
Indebtedness representing at least a majority of the aggregate principal amount of the
outstanding Permitted Third Lien Indebtedness and (3)

12

 

one member of the board of the directors shall be the then-CEO of the Issuer (except as
otherwise provided in the Amended and Restated Certificate of Incorporation of the Issuer);
(x) the holders of New Common Stock, Convertible Notes and Permitted Third Lien Indebtedness
shall enter into a registration rights agreement which shall provide that following an
initial public offering by the Issuer, any such parties holding Common Stock, Convertible
Notes and Permitted Third Lien Indebtedness representing in the aggregate at least 10% in
voting power of the Common Stock, Convertible Notes and Permitted Third Lien Indebtedness,
voting together as a single class on an as-converted basis, shall have demand and piggyback
registration rights with respect to shares of New Common Stock of the Issuer owned by such
holder; (y) the Convertible Notes to be purchased by the Plan Sponsors pursuant to its Plan
Sponsor Commitment shall be issued and distributed in accordance with the Plan and this Plan
Sponsorship Agreement pursuant to an exemption from registration under the Securities Act
and any state or local law requiring registration for the offer or sale of a security, and
(z) other than the Plan Sponsors and any entity that is an underwriter as defined in
subsection (b) of Section 1145 of the Bankruptcy Code, subject to the approval of the
Bankruptcy Court in the Confirmation Order, the issuance of the Convertible Notes shall
qualify for an exemption from registration under the Securities Act and any state or local
law requiring registration for the offer or sale of a security;

     (x) no provision of any applicable law or regulation and no judgment, injunction,
decree, or other legal restraint shall prohibit the consummation of the Plan or the
transactions contemplated thereby, or the entry into by the parties thereto of this Plan
Sponsorship Agreement, the First Lien Documents, the Second Lien Documents and the Third
Lien Documents and the consummation of the transactions contemplated thereby; and

     (xi) In the case of each Plan Sponsor, the other Plan Sponsor shall not have defaulted
in payment of its Applicable Portion of the Plan Infusion.

          (b) The obligations of each of the Wellman Parties to consummate the transactions contemplated
herein shall be subject to the satisfaction (or waiver by Wellman) of each of the following
conditions:

     (i)  the Confirmation Order shall have been entered by the Bankruptcy Court and (y)
the conditions precedent to the effectiveness of the Plan shall have been satisfied or
waived in accordance with the Plan;

     (ii)  the representations and warranties of the Plan Sponsors contained in this Plan
Sponsorship Agreement that are qualified as to materiality, material adverse effect, or
similar qualifiers, and the representations and warranties of the Plan Sponsors contained in
Section 3(b)(v), (vi), and (vii), shall be true and correct in all respects, on and as of
the date hereof and the Effective Date, with the same force and effect as though made on and
as of such date (except to the extent that any such representation or warranty is made as of
a specified date, in which case such representation or warranty shall be true and correct as
of such specified date), and (y) the representations and warranties of the Plan

13

 

Sponsor contained in this Plan Sponsorship Agreement that are not so qualified shall be
true and correct in all material respects on and as of the date hereof and the Effective
Date, with the same force and effect as though made on and as of such date (except to the
extent that any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall be true and correct in all material respects as
of such specified date), and (z) the Plan Sponsors shall have performed or complied with, in
all material respects, their covenants required to be performed or complied with under this
Plan Sponsorship Agreement on or prior to the Effective Date (and the Plan Sponsors shall
each have delivered to Wellman a certificate to the effect that each of the conditions
specified in this Section 4(b)(ii) is satisfied in all respects with respect to such Plan
Sponsor); and

     (iii) no provision of any applicable law or regulation and no judgment, injunction,
decree, or other legal restraint shall prohibit the consummation of the Plan or the
transactions contemplated thereby, or the entry into by the parties thereto of this Plan
Sponsorship Agreement, the First Lien Documents, the Second Lien Documents and the Third
Lien Documents and the consummation of the transactions contemplated thereby.

5. Additional Condition.

          The obligations of the Plan Sponsors to consummate the transactions contemplated herein shall
be subject to the satisfaction (or waiver by the Plan Sponsors) of the further condition that there
shall not have occurred between the Balance Sheet Date and the Effective Date a Material Adverse
Effect. For purposes of this Plan Sponsorship Agreement, a “Material Adverse Effect” shall mean
any change, effect, event, occurrence, development, circumstance, or state of facts which, either
alone or in combination, has had or would reasonably be expected to have a materially adverse
effect on the business, properties, operations, financial condition or results of operations of
Wellman and its subsidiaries taken as a whole, or which would reasonably be expected to materially
impair its or their ability to perform its or their obligations under this Plan Sponsorship
Agreement or the First Lien Documents, the Second Lien Documents or the Third Lien Documents or
have a materially adverse effect on or prevent or materially delay the consummation of the
transactions contemplated by this Plan Sponsorship Agreement or the First Lien Documents, the
Second Lien Documents or the Third Lien Documents or the Plan; provided, that in no event shall any
effect directly resulting from the public announcement of this Plan Sponsorship Agreement or the
filing of the Plan or the transactions contemplated hereby or in the Plan, alone or in combination,
be taken into account in determining whether there has been or would reasonably likely be, a
Material Adverse Effect.

6. Satisfaction of the Plan Sponsor Commitment.

          Each Plan Sponsor may, in its sole discretion, satisfy its Plan Sponsor Commitment directly
and/or indirectly through one or more of its affiliates, separate accounts within its control, or
investment funds under its or its affiliates’ management.

14

 

7. Certain Covenants.

          (a) Wellman shall use reasonable best efforts to cause the conditions set forth in Sections 4
and 5 to be satisfied and to consummate the transactions contemplated herein and by the Plan.

          (b) Wellman (i) shall provide 5 days advance written notice to the Plan Sponsors of any
amendments or modifications to any of the documents relating to the Plan and the transactions
contemplated by the Plan, including, without limitation, each of the First Lien Documents, the
Second Lien Documents or the Third Lien Documents or any other definitive documents necessary to
effect the Reorganization, and (ii) must obtain the prior written consent of the Plan Sponsors for
any such amendments or modifications prior to their submission to the Bankruptcy Court.

          (c) Wellman shall use reasonable best efforts to obtain all approvals, waivers, consents, and
other authorizations necessary in connection with the performance of the Plan and this Plan
Sponsorship Agreement and the First Lien Documents, the Second Lien Documents and the Third Lien
Documents.

          (d) Wellman shall use reasonable best efforts to promptly take, or cause to be taken, all
actions and promptly do, or cause to be done, all things necessary, proper, or advisable in order
to (i) obtain a Confirmation Order with respect to the Plan, (ii) include in the Confirmation Order
the approval of the payment of the Plan Sponsor Fee and Expenses, and (iii) consummate the
transactions contemplated by the Plan on terms consistent with the terms set forth in the Plan,
including entry into of each of the First Lien Documents, the Second Lien Documents or the Third
Lien Documents and any other definitive documents necessary to effect the Reorganization. Each of
the Plan Sponsors and Wellman shall cooperate with each other to the extent reasonable in
connection with the foregoing, and none of the Plan Sponsors or Wellman shall take any action for
the purpose of delaying, impairing, or impeding the receipt of any approval, waiver, consent, or
authorization required to be obtained pursuant to this Plan Sponsorship Agreement.

          (e) Wellman shall pay in full all Expenses incurred by the Plan Sponsors in accordance with
Section 2(b)(iv) or, if this Plan Sponsorship Agreement is terminated pursuant to Section 11 or
otherwise prior to the Effective Date, if any, at the time of any such termination, and whether or
not the Closing or the Effective Date or the Reorganization takes place.

          (f) Wellman shall deliver to each of the Plan Sponsors, as soon as practicable but in any
event at least five business days prior to the Effective Date, a written notice which shall (a)
specify the date on which it believes the Effective Date will occur and (b) designate the account
to which each of the Plan Sponsors shall deliver the amounts so payable, as set forth in Section
2(b)(i). Wellman shall deliver to each of the Plan Sponsors no later than the business day
immediately prior to the Effective Date a written notice which shall specify the Effective Date.

8. Certain Notices; Certain Information.

          (a) Wellman hereby covenants that it shall promptly deliver to the Plan Sponsors, and each of
the Plan Sponsor hereby covenants that it shall promptly deliver to Wellman, written notice of any
matter, event, or development that would (i) render any representation or warranty made by it
herein inaccurate or incomplete in any material respect or (ii) constitute or
result in a material breach by it of, or a failure by it to comply with, any material covenant
or other agreement herein.

15

 

          (b) Wellman shall furnish the Plan Sponsors with such information regarding the Wellman
Parties and provide for access by the Plan Sponsors and their advisors and representatives to all
books, records, documents, properties, personnel, advisors, and representatives of Wellman as any
of the Plan Sponsors may request, provided, that, each of the Plan Sponsors agrees that it shall
keep such information confidential in accordance with the confidentiality agreements signed by
Wellman and the Plan Sponsors. All such requests for information made to any of the Wellman
Parties by any of the Plan Sponsors shall be made to the Chief Executive Officer or to the Chief
Financial Officer of Wellman or their designee.

          (c) In addition to the information rights provided for in Section 8(b), for so long as any of
the Convertible Notes are outstanding and are “restricted securities” within the meaning of Rule
144 under the Securities Act (unless such securities can be sold, without limitation, pursuant to
Rule 144 under the Securities Act), the Company, during any period in which it is not subject to
and in compliance with Section 13 or 15(d) of the Exchange Act, will provide to each holder of
Convertible Notes and to each prospective purchaser of such Convertible Notes (as designated by
such holder), upon the request of such holder or prospective purchaser any information required to
be provided by Rule 144A(d)(4) under the Securities Act.

9. Certain Consent Rights. Each of the Wellman Parties hereby covenants that, without the prior
written consent of the Plan Sponsors, it shall not, prior to the Effective Date, enter into any
agreement with respect to its securities (it being understood that no such written consent shall be
required for purposes of the issuance of the securities contemplated by the Plan), or amend any
existing agreement with respect to such securities in any manner inconsistent with the rights of
the Plan Sponsors pursuant to, or the consummation of the transactions contemplated by, this Plan
Sponsorship Agreement or any of the First Lien Documents, the Second Lien Documents or the Third
Lien Documents.

10. Removal of Legends. In the event that, following the transactions contemplated by the Plan
and this Plan Sponsorship Agreement, any certificates, notes, or other forms of evidence of
securities (“Securities”) of Wellman Holdings, Inc. held by any Plan Sponsor bear a restrictive
legend then:

          (a) if such Plan Sponsor delivers to Reorganized Wellman (i) a certificate, in a form
reasonably satisfactory to Reorganized Wellman, certifying that such Securities have been
transferred pursuant to a registration statement that is effective under the Securities Act or (ii)
a certificate, in a form reasonably satisfactory to Reorganized Wellman, certifying that such
Securities have been transferred without registration in accordance with the requirements of Rule
144 under the Securities Act, Reorganized Wellman shall, or shall instruct its transfer agent to
issue, upon surrender of such Securities, one or more new Securities in respect of those so
transferred, which new Securities shall not bear any such legend; and

          (b) if the Plan Sponsor delivers to Reorganized Wellman an opinion of outside counsel to the
Plan Sponsor reasonably acceptable to Reorganized Wellman that, in the opinion of such counsel,
such legend is not, or is no longer, required to ensure compliance with the Securities

16

 

Act, Reorganized Wellman shall, or shall instruct its transfer agent to, issue upon surrender of such
Securities one or more new Securities in replacement thereof, which new Securities shall not bear
any such legend.

11. Termination by Plan Sponsors; Survival. Either Plan Sponsor shall be entitled to terminate
its obligations under this Plan Sponsorship Agreement by giving written notice thereof to Wellman
(a) in the event any of the Wellman Parties (i) breaches this Plan Sponsorship Agreement or the
Plan in any respect deemed material by such Plan Sponsor and, if such breach is capable of cure,
and is a breach other than of the obligations of the Wellman Parties set for the in Section 8(a),
fails to cure such breach within five (5) business days from the receipt of notice of such breach),
(ii) fails to satisfy any of the terms or conditions of, including default in performance of any of
its obligations under, this Plan Sponsorship Agreement or the Plan or any of the First Lien
Documents, the Second Lien Documents or the Third Lien Documents, or the satisfaction of any such
term or condition, or performance of any of such obligations, becomes impossible, (iii) cannot
satisfy all of the conditions set forth in Section 4 and Section 5, or the Closing or Effective
Date does not occur for any reason, by January 31, 2009, or (iv) shall have made a public
announcement, entered into an agreement or filed any pleading evidencing its intention to support,
or otherwise supports, any transaction with respect to the reorganization or sale of any of the
Wellman Parties or their assets or takes any other action that is otherwise materially inconsistent
with the transactions contemplated by this Plan Sponsorship Agreement, the Disclosure Statement, or
the Plan; or (b) upon the termination of the Plan, in which event Wellman shall pay on such
termination date all accrued Expenses in accordance with Section 7(e). Upon any termination of
this Plan Sponsorship Agreement, the provisions of Sections 7(e), 13, 14, 15, 16, 17, 18 and 19
shall survive any such termination, and the parties to this Plan Sponsorship Agreement shall remain
liable for breaches of this Plan Sponsorship Agreement prior to its termination.

12. Indemnification.

          (a) Following the Closing, the Surviving Entities, on a joint and several basis, (each, an
“Indemnifying Party”) shall indemnify, defend, and hold harmless the Plan Sponsors and their
respective affiliates and each of their respective officers, directors, managers, partners,
stockholders, employees, advisors, agents, and other representatives and any affiliate of the
foregoing, and each of its and their respective successors and permitted assigns (each, an
“Indemnified Party”) from and against, and shall promptly reimburse each Indemnified Party for, all
losses, damages, liabilities, costs, and expenses, including, without limitation, interest, court
costs, and reasonable attorneys’ fees and expenses relating to, arising out of, resulting from or
in connection with (i) any breach or inaccuracy of the Surviving Representations, (ii) any breach
or violation by the Wellman Parties of their representations, warranties, covenants and other
agreements set forth in this Plan Sponsorship Agreement, and (iii) any action, suit, or proceeding
by a third-party arising out of or related to this Plan Sponsorship Agreement or the transactions
contemplated hereby (collectively, “Indemnified Liabilities”); provided, however that
Indemnified Liabilities shall exclude any portion of such losses, damages, liabilities, costs, or
expenses to the extent they are found in a final, non-appealable judgment of a court of competent
jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct.

17

 

          (b) Each Indemnified Party entitled to indemnification hereunder shall (i) give prompt written
notice to the Indemnifying Party of any claim with respect to which it seeks indemnification or
contribution pursuant to this Plan Sponsorship Agreement (provided that failure to give such notice
shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party
shall have been materially prejudiced thereby) and (ii) permit such Indemnifying Party to assume
the defense of such claim with counsel selected by the Indemnified Party and reasonably
satisfactory to the Indemnifying Party; provided, however, that any Indemnified Party entitled to
indemnification hereunder shall have the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (x) the Indemnifying Party has agreed in writing to pay such fees and
expenses, (y) the Indemnifying Party shall have failed to assume the defense of such claim within
20 days of delivery of the written notice of the Indemnified Party with respect to such claim or
failed to employ counsel selected by such Indemnifying Party and satisfactory to such Indemnified
Party, or (z) in the judgment of such Indemnified Party, based upon advice of its counsel, a
conflict of interest may exist between such Indemnified Party and the Indemnifying Party with
respect to any of such claims (in which case, if the Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense of such claim on
behalf of such Indemnified Party). In connection with any settlement negotiated by an Indemnifying
Party, no Indemnifying Party shall, and no Indemnified Party shall be required by an Indemnifying
Party to, (i) enter into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the Indemnified Party of a release from all liability in
respect to such claim or litigation, (ii) enter into any settlement that attributes, by its terms,
liability to the Indemnified Party, or (iii) consent to the entry of any judgment that does not
include as a term thereof a full dismissal of the litigation or proceeding with prejudice. In
addition, without the consent of the Indemnified Party, no Indemnifying Party shall be permitted to
consent to entry of any judgment or enter into any settlement which provides for any action on the
part of the Indemnified Party other than the payment of money damages and expenses which are to be
paid in full by the Indemnifying Party. If an Indemnifying Party fails or elects not to assume the
defense of a claim pursuant to clause (y) above, or is not entitled to assume or continue the
defense of such claim pursuant to clause (z) above, the Indemnified Party shall have the right
without prejudice to its right of indemnification hereunder to, in its discretion, exercise in good
faith and upon advice of counsel its rights to contest, defend, and litigate such claim and may
settle such claim, either before or after the initiation of litigation, at such time and upon such
terms as the Indemnified Party deems fair and reasonable; provided, however that at least 10 days
prior to any settlement, written notice of its intention to settle is given to the Indemnifying
Party.

13. Notices.

          (a) All notices, requests, and other communications hereunder must be in writing and will be
deemed to have been duly given only if delivered personally, by facsimile transmission or
electronic mail in portable document format (.pdf), by nationally recognized overnight courier or
mailed (first class postage prepaid) to the parties at the following addresses or facsimile
numbers.

	 	 	 	 	 	 	 
	 

	 	If to any Plan Sponsor:
	 	 	 	To the address set forth beneath
such Plan Sponsor’s signature to
this Plan Sponsorship

18

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Agreement
	 
	 	 	 	 	 	 
	 

	 	With a copy (which shall

not constitute notice) to:
	 	 	 	Gibson, Dunn & Crutcher

200 Park Avenue

New York, NY 10166-0193

Attn: Robert L. Cunningham, Esq.

Facsimile: (212) 351-5208

Email: rcunningham@gibsondunn.com

and

Akin Gump Strauss Hauer & Feld LLP

One Bryant Park

New York, NY 10036

Attn: Michael S. Stamer, Esq.

         Stephen B. Kuhn, Esq.

Facsimile: (212) 872-1002

Email: mstamer@akingump.com

           skuhn@AkinGump.com
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	     — And —
	 
	 	 	 	 	 	 
	 

	 	If to Wellman:
	 	 	 	Wellman, Inc.

3303 Port and Harbor Drive

Port Bienville Industrial Park

Bay St. Louis, MS 39520

Attn: Mark Ruday

Facsimile: (803) 396-9217

Email:mark.ruday@wellmaninc.com
	 
	 	 	 	 	 	 
	 

	 	With a copy (which shall

not constitute notice) to:
	 	 	 	Kirkland & Ellis LLP

Citicorp Center

153 East 53rd Street

New York, NY 10022

Attn: Jonathan S. Henes

Facsimile: (212) 446-6460

Email: jhenes@kirkland.com

          (b) All such notices, requests and other communications shall be deemed to have been received
(i) in the case of personal delivery or delivery by facsimile, or by electronic mail in portable
document format (.pdf), on the date of such delivery, (ii) in the case of dispatch by nationally
recognized overnight courier, on the next business day following such dispatch and (iii) in the
case of mailing, on the fifth business day after the posting thereof.

19

 

     14. Successors and Assigns; Assignment. The provisions of this Plan Sponsorship Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and (i) any Plan Sponsor may assign, delegate, or otherwise
transfer this Plan Sponsorship Agreement or any of its rights or obligations hereunder without the
consent of Wellman or any of the Surviving Entities, provided, that any such assignment shall not
relieve such Plan Sponsor from liability resulting from a default by any assignee of its
obligations hereunder, and (ii) neither Wellman nor any of the Surviving Entities may assign,
delegate, or otherwise transfer this Plan Sponsorship Agreement or any of their rights or
obligations hereunder without the consent of the Plan Sponsors. Nothing in this Plan Sponsorship
Agreement is intended to confer upon any person or entity not a party hereto (other than
Indemnified Parties) any right, benefit, or remedy of any nature whatsoever under or by reason of
this Plan Sponsorship Agreement, including, without limitation, to confer third party beneficiary
rights.

     15. Entire Agreement. This Agreement contains the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and understandings,
written or oral, with respect to such subject matter. The parties hereto represent and warrant
that there are no other agreements or understandings, written or oral, regarding any of the subject
matter hereof other than as set forth herein and covenant not to enter into any such agreements or
understandings after the date hereof, except pursuant to an amendment, modification, or waiver of
the provisions of this Plan Sponsorship Agreement.

     16. Amendments. This Plan Sponsorship Agreement represents the final agreement and the entire
understanding among the parties hereto with respect to the subject matter hereof and may not be
contradicted by evidence of prior or contemporaneous agreements and understandings of the parties.
There are no unwritten oral agreements or understandings between the parties relating to the
subject matter hereof. This Agreement may not be amended or modified except by a written
instrument signed by each Plan Sponsor and Wellman.

     17. Extensions; Waivers. Any party may, for itself only, (a) extend the time for the
performance of any of the obligations of any other party under this Plan Sponsorship Agreement, (b)
waive any inaccuracies in the representations and warranties of any other party contained herein or
in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any such extension or waiver will be
valid only if set forth in a writing signed by the party to be bound thereby. No waiver by any
party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights arising because of any
prior or subsequent such occurrence. Neither the failure nor any delay on the part of any party to
exercise any right or remedy under this Plan Sponsorship Agreement will operate as a waiver
thereof, nor will any single or partial exercise of any right or remedy preclude any other or
further exercise of the same or of any other right or remedy.

     18. Counterparts. This Plan Sponsorship Agreement may be executed in one or more
counterparts, each of which, when so executed, shall constitute an original and all of which when
taken together shall constitute one and the same instrument, and the counterparts may be delivered
by facsimile transmission or by electronic mail in portable document format (.pdf).

20

 

     19. Governing Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, without regard to such state’s choice of law provisions which would
require the application of the law of any other jurisdiction. By its execution and delivery
of this Plan Sponsorship Agreement, each of the parties irrevocably and unconditionally agrees for
itself that any legal action, suit or proceeding against it with respect to any matter arising
under or arising out of or in connection with this Plan Sponsorship Agreement, shall be brought in
the United States District Court for the Southern District of New York, and by execution and
delivery of this Plan Sponsorship Agreement each of the parties irrevocably accepts and submits
itself to the exclusive jurisdiction of such court, generally and unconditionally, with respect to
any such action, suit, or proceeding. Notwithstanding the foregoing consent, prior to the
consummation of the Plan, each party agrees that the Bankruptcy Court shall have exclusive
jurisdiction of all matters arising out of or in connection with this Plan Sponsorship Agreement.

[Remainder of Page Intentionally Blank]

21

 

          IN WITNESS WHEREOF, Wellman, the Wellman Subsidiaries, and the Plan Sponsors have executed
this Plan Sponsorship Agreement as of the date first written above.

	 	 	 	 	 
	 	WELLMAN, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	WELLMAN SUBSIDIARIES

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Address:

[                    ]

Attn: [                    ]

Tel: [                    ]

Fax: [                    ]

Email: [                    ]

[Signature Page to Plan Sponsorship Agreement]

S-1

 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Address:

[                    ]

Attn: [                    ]

Tel: [                    ]

Fax: [                    ]

Email: [                    ]

[Signature Page to Plan Sponsorship Agreement]

S-2

 

	 	 	 	 	 
	 	PLAN SPONSORS

SOLA, Ltd.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Address:

SOLA, Ltd.

Attn: Joseph Lonetto, Esq.

Tel: (212) 284-4306

Fax: (212) 284-4338

Email: jlonetto@soluslp.com

[Signature Page to Plan Sponsorship Agreement]

S-3

 

	 	 	 	 	 
	 	BlackRock Financial Management, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Address:

BlackRock Financial Management, Inc.

Attn: David Maryles, Esq.

Tel: (212) 810-5097

Fax: (212) 810-5116

Email: david.maryles@blackrock.com

[Signature Page to Plan Sponsorship Agreement]

S-4

 

EXHIBIT A

1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}]]