Document:

Exhibit 4.4

 

$125,000,000

 

BLUE RIDGE PAPER PRODUCTS INC.

 

9.5% of Senior Secured Notes due 2008

 

 

REGISTRATION RIGHTS AGREEMENT

 

December 17, 2003

JEFFERIES & COMPANY, INC.

11100 Santa Monica Boulevard

10th Floor

Los Angeles, California 90025

 

Ladies and Gentlemen:

 

BLUE RIDGE
PAPER PRODUCTS INC., a Delaware corporation (the “Company”), is issuing
and selling to Jefferies & Company, Inc. (the “Initial Purchaser”),
upon the terms set forth in the Purchase Agreement dated December 10, 2003, by
and among the Company, the Initial Purchaser and the subsidiary guarantor named
therein (the “Purchase Agreement”), $125,000,000 aggregate principal
amount of 9.5% Senior Notes due 2008 issued by the Company (each, a “Note”
and collectively, the “Notes”). 
As an inducement to the Initial Purchaser to enter into the Purchase
Agreement, the Company and the subsidiary guarantor listed in the signature
pages hereto agree with the Initial Purchaser, for the benefit of the Holders
(as defined below) of the Notes (including, without limitation, the Initial
Purchaser), as follows:

 

1.             Definitions

 

Capitalized
terms that are used herein without definition and are defined in the Purchase
Agreement shall have the respective meanings ascribed to them in the Purchase
Agreement.  As used in this Agreement,
the following terms shall have the following meanings:

 

Additional Interest:  See Section 4(a).

 

Advice:  See Section 6(w).

 

Agreement:  This Registration Rights Agreement, dated as
of the Closing Date, among the Company, the Subsidiary Guarantor and the
Initial Purchaser.

 

Applicable Period:  See Section 2(e).

 

Business Day:  A day that is not a Saturday, a Sunday or a
day on which banking institutions in the City of New York are authorized or
required by law or executive order to be closed.

 

Closing Date:  December 17, 2003.

 

 

Collateral Agreements:  Shall have the meaning set forth in the
Indenture.

 

Company:  See the introductory paragraph to this
Agreement.

 

Day:  Unless otherwise expressly provided, a
calendar day.

 

Effectiveness Date:  The 210th day after the Issue
Date.

 

Effectiveness Period:  See Section 3(a).

 

Event Date:  See Section 4(b).

 

Exchange Act:  The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

 

Exchange Notes:  9.5% Senior Secured Notes due 2008 of the
Company, identical in all material respects to the Notes, including the
guarantees endorsed thereon, except for references to series and restrictive
legends.

 

Exchange Offer:  See Section 2(a).

 

Exchange Registration Statement:  See Section 2(a).

 

Filing Date:  The 120th day after the Issue
Date.

 

Holder:  Any registered holder of Registrable Notes.

 

Indemnified Party:  See Section 8(c).

 

Indemnifying Party:  See Section 8(c).

 

Indenture:  The Indenture, dated as of the Closing Date,
among the Company, the Subsidiary Guarantor and U.S. Bank National Association,
as trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms hereof.

 

Initial Purchaser:  See the introductory paragraph to this
Agreement.

 

Initial Shelf Registration:  See Section 3(a).

 

Inspectors:  See Section 6(o).

 

Issue Date:  December 17, 2003

 

Lien:  Shall have the meaning set forth in the
Indenture.

 

Losses:  See Section 8(a).

 

NASD:  National Association of Securities Dealers,
Inc.

 

 

Notes:  See the introductory paragraph to this
Agreement.

 

Participating Broker-Dealer:  See Section 2(e).

 

Person:  An individual, trustee, corporation,
partnership, limited liability company, joint stock company, trust,
unincorporated association, union, business association, firm, government or
agency or political subdivision thereof, or other legal entity.

 

Private Exchange:  See Section 2(f).

 

Private Exchange Notes:  See Section 2(f).

 

Prospectus:  The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable Notes
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

 

Purchase Agreement:  See the introductory paragraph to this
Agreement.

 

Records:  See Section 6(o).

 

Registrable Notes:  (i) Notes, (ii) Private Exchange Notes and
(iii) Exchange Notes received in the Exchange Offer, in each case, that may not
be sold without restriction under federal or state securities laws.

 

Registration Statement:  Any registration statement of the Company
and the Subsidiary Guarantor filed with the SEC under the Securities Act
(including, but not limited to, the Exchange Registration Statement, the Shelf
Registration and any subsequent Shelf Registration) that covers any of the
Registrable Notes pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

 

Rule 144:  Rule 144 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any similar rule (other
than Rule 144A) or regulation hereafter adopted by the SEC providing for offers
and sales of securities made in compliance therewith resulting in offers and
sales by subsequent holders that are not affiliates of an issuer or such
securities being free of the registration and prospectus delivery requirements
of the Securities Act.

 

Rule 144A:  Rule 144A promulgated under the Securities
Act, as such Rule may be amended from time to time, or any similar rule (other
than Rule 144) or regulation hereafter adopted by the SEC.

 

 

Rule 415:  Rule 415 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.

 

Rule 430A:  Rule 430A promulgated under the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.

 

SEC:  The Securities and Exchange Commission.

 

Securities:  The Notes, the Exchange Notes and the
Private Exchange Notes.

 

Securities Act:  The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.

 

Shelf Notice:  See Section 2(j).

 

Shelf Registration:  See Section 3(b).

 

Subsequent Shelf Registration:  See Section 3(b).

 

Subsidiary Guarantor:  Each subsidiary of the Company that
guarantees the obligations of the Company under the Notes and Indenture.  As of the date hereof, the only Subsidiary
Guarantor is BRPP, LLC, a North Carolina limited liability company.

 

TIA:  The Trust Indenture Act of 1939, as amended.

 

Trustee:  The trustee under the Indenture and, if
existent, the trustee under any indenture governing the Exchange Notes and
Private Exchange Notes (if any).

 

Underwritten Registration or Underwritten
Offering:  A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.

 

2.             Exchange Offer

 

(a)           Unless
the Exchange Offer would not be permitted by applicable laws or a policy of the
SEC, the Company shall (and shall cause each Subsidiary Guarantor to) (i)
prepare and file with the SEC promptly after the date hereof, but in no event
later than the Filing Date, a registration statement (the “Exchange
Registration Statement”) on an appropriate form under the Securities Act
with respect to an offer (the “Exchange Offer”) to the Holders of Notes
to issue and deliver to such Holders, in exchange for the Notes, a like
principal amount of Exchange Notes, (ii) cause the Exchange Registration
Statement to become effective as promptly as practicable after the filing
thereof, but in no event later than the Effectiveness Date, (iii) keep the
Exchange Registration Statement effective until the consummation of the
Exchange Offer in accordance with its terms, and (iv) commence the Exchange
Offer and issue on or prior to 45 business days after the date on which the
Exchange Registration Statement is required to be declared effective, Exchange
Notes in exchange for all Notes tendered prior thereto in the Exchange
Offer.  The Exchange Offer shall not be
subject to any conditions, other

 

 

than that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the SEC.

 

(b)           The
Exchange Notes shall be issued under, and entitled to the benefits of, (i) the
Indenture or a trust indenture that is identical to the Indenture (other than
such changes as are necessary to comply with any requirements of the SEC to
effect or maintain the qualifications thereof under the TIA) and (ii) the
Collateral Agreements.

 

(c)           Interest
on the Exchange Notes and Private Exchange Notes will accrue from the last
interest payment due date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
date of original issue of the Notes. 
Each Exchange Note and Private Exchange Note shall bear interest at the rate
set forth thereon; provided, that
interest with respect to the period prior to the issuance thereof shall accrue
at the rate or rates borne by the Notes from time to time during such period.

 

(d)           The
Company may require each Holder as a condition to participation in the Exchange
Offer to represent (i) that any Exchange Notes received by it will be acquired
in the ordinary course of its business, (ii) that at the time of the
commencement and consummation of the Exchange Offer such Holder has not entered
into any arrangement or understanding with any Person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes
in violation of the provisions of the Securities Act, (iii) that if such Holder
is an “affiliate” of the either of the Company within the meaning of Rule 405
of the Securities Act, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable to it,
(iv) if such Holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of the Notes and (v) if such Holder
is a Participating Broker-Dealer, that it will deliver a Prospectus in
connection with any resale of the Exchange Notes.

 

(e)           The
Company shall (and shall cause each Subsidiary Guarantor to) include within the
Prospectus contained in the Exchange Registration Statement a section entitled
“Plan of Distribution” reasonably acceptable to the Initial Purchaser which
shall contain a summary statement of the positions taken or policies made by
the staff of the SEC with respect to the potential “underwriter” status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer for its own account in exchange for Notes that were acquired by it as a
result of market-making or other trading activity (a “Participating
Broker-Dealer”), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the staff
of the SEC.  Such “Plan of Distribution”
section shall also allow, to the extent permitted by applicable policies and regulations
of the SEC, the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including, to

 

 

the extent so
permitted, all Participating Broker-Dealers, and include a statement describing
the manner in which Participating Broker-Dealers may resell the Exchange
Notes.  The Company shall use its best
efforts to keep the Exchange Registration Statement effective and to amend and
supplement the Prospectus contained therein, in order to permit such Prospectus
to be lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such Persons must
comply with such requirements in order to resell the Exchange Notes (the “Applicable
Period”).

 

(f)            If,
upon consummation of the Exchange Offer, the Initial Purchaser holds any Notes
acquired by it and having the status of an unsold allotment in the initial
distribution, the Company (upon the written request from the Initial Purchaser)
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser, in exchange (the “Private
Exchange”) for the Notes held by the Initial Purchaser, a like principal
amount of Senior Secured Notes that are identical to the Exchange Notes except
for the existence of restrictions on transfer thereof under the Securities Act
and securities laws of the several states of the United States (the “Private
Exchange Notes”) (and which are issued pursuant to the same indenture as
the Exchange Notes).  The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.

 

(g)           In
connection with the Exchange Offer, the Company shall (and shall cause each
Subsidiary Guarantor to):

 

(i)            mail
to each Holder a copy of the Prospectus forming part of the Exchange
Registration Statement, together with an appropriate letter of transmittal that
is an exhibit to the Exchange Offer Registration Statement, and any related
documents;

 

(ii)           keep
the Exchange Offer open for not less than 20 Business Days after the date
notice thereof is mailed to the Holders (or longer if required by applicable
law);

 

(iii)          utilize
the services of a depository for the Exchange Offer with an address in the
Borough of Manhattan, the City of New York, which may be the Trustee or an
affiliate thereof;

 

(iv)          permit
Holders to withdraw tendered Registrable Notes at any time prior to the close
of business, New York time, on the last Business Day on which the Exchange
Offer shall remain open; and 

 

(v)           otherwise
comply in all material respects with all applicable laws.

 

(h)           As
soon as practicable after the close of the Exchange Offer or the Private
Exchange, as the case may be, the Company shall (and shall cause each
Subsidiary Guarantor to):

 

 

(i)            accept
for exchange all Registrable Notes validly tendered pursuant to the Exchange
Offer or the Private Exchange, as the case may be, and not validly withdrawn;

 

(ii)           deliver
to the Trustee for cancellation all Registrable Notes so accepted for exchange;
and

 

(iii)          cause
the Trustee to authenticate and deliver promptly to each Holder tendering such
Registrable Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.

 

(i)            The
Exchange Notes and the Private Exchange Notes may be issued under (i) the
Indenture or (ii) an indenture identical to the Indenture (other than such
changes as are necessary to comply with any requirements of the SEC to effect
or maintain the qualification thereof under the TIA), which in either event
will provide that the Exchange Notes will not be subject to the transfer
restrictions set forth in the Indenture, that the Private Exchange Notes will
be subject to the transfer restrictions set forth in the Indenture, and that
the Exchange Notes, the Private Exchange Notes and the Notes, if any, will be
deemed one class of security (subject to the provisions of the Indenture) and
entitled to participate in all the security granted by the Company pursuant to
the Collateral Agreements and in any Subsidiary Guarantee (as such terms are
defined in the Indenture) on an equal and ratable basis.

 

(j)            If:
(i) prior to the consummation of the Exchange Offer, the Holders of a majority
in aggregate principal amount of Registrable Notes determines in its or their
reasonable judgment that (A) the Exchange Notes would not, upon receipt, be
tradeable by the Holders thereof without restriction under the Securities Act
and the Exchange Act and without material restrictions under applicable Blue
Sky or state securities laws, or (B) the interests of the Holders under this
Agreement, taken as a whole, would be materially adversely affected by the
consummation of the Exchange Offer; (ii) applicable interpretations of the staff
of the SEC would not permit the consummation of the Exchange Offer prior to the
Effectiveness Date; (iii) subsequent to the consummation of the Private
Exchange, any Holder of Private Exchange Notes so requests; (iv) the Exchange
Offer is not consummated within 300 days of the Closing Date for any reason; or
(v) in the case of (A) any Holder not permitted by applicable law or SEC policy
to participate in the Exchange Offer, (B) any Holder participating in the
Exchange Offer that receives Exchange Notes that may not be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Company within the meaning of
the Securities Act) or (C) any broker-dealer that holds Notes acquired directly
from the Company or any of its affiliates and, in each such case contemplated
by this clause (v), such Holder notifies the Company within six months of
consummation of the Exchange Offer, then the Company shall promptly (and in any
event within five Business Days) deliver to the Holders (or in the case of an
occurrence of any event described in 

 

 

clause (v) of
this Section 2(j), to any such Holder) and the Trustee notice thereof (the “Shelf
Notice”) and shall file an Initial Shelf Registration pursuant to Section
3.

 

3.             Shelf Registration

 

If a Shelf
Notice is delivered pursuant to Section 2(j), then this Section 3 shall apply
to all Registrable Notes.  Otherwise,
upon consummation of the Exchange Offer in accordance with Section 2, the
provisions of Section 3 shall apply solely with respect to (i) Notes held by
any Holder thereof not permitted to participate in the Exchange Offer, (ii)
Notes held by any broker-dealer that acquired such Notes directly from the
Company or any of its affiliates and (iii) Exchange Notes that are not freely
tradeable as contemplated by Section 2(j)(v) hereof, provided in each case that
the relevant Holder has duly notified the Company within six months of the
Exchange Offer as required by Section 2(j)(v).

 

(a)           Initial
Shelf Registration.  The Company
shall (and shall cause each Subsidiary Guarantor to), as promptly as
practicable, file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Notes (the “Initial Shelf Registration”).  If the Company (and any Subsidiary Guarantor) has not yet filed
an Exchange Registration Statement, the Company shall (and shall cause each
Subsidiary Guarantor to) file with the SEC the Initial Shelf Registration on or
prior to the Filing Date and shall use its best efforts to cause such Initial
Shelf Registration to be declared effective under the Securities Act on or
prior to the Effectiveness Date. 
Otherwise, the Company shall (and shall cause each Subsidiary Guarantor
to) use its best efforts to file with the SEC the Initial Shelf Registration
within 30 days of the delivery of the Shelf Notice and shall use its best
efforts to cause such Shelf Registration to be declared effective under the
Securities Act as promptly as practicable thereafter.  The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale
by Holders in the manner or manners reasonably designated by them (including,
without limitation, one or more underwritten offerings).  The Company and Subsidiary Guarantors shall
not permit any securities other than the Registrable Notes to be included in
any Shelf Registration.  The Company
shall (and shall cause each Subsidiary Guarantor to) use its best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date which is 24 months from the Closing Date (subject to
extension pursuant to the last paragraph of Section 6(w) (the “Effectiveness
Period”), or such shorter period ending when (i) all Registrable Notes
covered by the Initial Shelf Registration have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration (ii) a Subsequent
Shelf Registration covering all of the Registrable Notes covered by and not
sold under the Initial Shelf Registration or an earlier Subsequent Shelf
Registration has been declared effective under the Securities Act or (iii)
there cease to be any outstanding Registrable Notes.

 

(b)           Subsequent
Shelf Registrations.  If the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below)
ceases to be effective for any

 

 

reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Company shall (and shall cause each
Subsidiary Guarantor to) use its best efforts to obtain the prompt withdrawal
of any order suspending the effectiveness thereof, and in any event shall
within 30 days of such cessation of effectiveness amend such Shelf Registration
in a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file (and cause each Subsidiary Guarantor to file) an additional
“shelf “ Registration Statement pursuant to Rule 415 covering all of the
Registrable Notes (a “Subsequent Shelf Registration”).  If a Subsequent Shelf Registration is filed,
the Company shall (and shall cause each Subsidiary Guarantor to) use its best
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Subsequent Shelf
Registration continuously effective for a period equal to the number of days in
the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective.  As used herein
the term “Shelf Registration” means the Initial Shelf Registration and any
Subsequent Shelf Registrations

 

(c)           Supplements
and Amendments.  The Company shall
promptly supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably requested
in writing by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Shelf Registration or by any underwriter of
such Registrable Notes.

 

(d)           Provision
of Information.  No Holder of
Registrable Notes shall be entitled to include any of its Registrable Notes in
any Shelf Registration pursuant to this Agreement unless such Holder furnishes
to the Company and the Trustee in writing, within 20 days after receipt of a
written request therefor, such information as the Company and the Trustee after
conferring with counsel with regard to information relating to Holders that
would be required by the SEC to be included in such Shelf Registration or
Prospectus included therein, may reasonably request for inclusion in any Shelf
Registration or Prospectus included therein, and no such Holder shall be
entitled to Additional Interest pursuant to Section 4 hereof unless and until
such Holder shall have provided such information.

 

4.             Additional
Interest

 

(a)           The
Company and each Subsidiary Guarantor acknowledges and agrees that the Holders
of Registrable Notes will suffer damages if the Company or any Subsidiary
Guarantor fails to fulfill its material obligations under Section 2 or Section
3 hereof and that it would not be feasible to ascertain the extent of such
damages with precision.  Accordingly,
the Company and the Subsidiary Guarantors agree to pay additional cash interest
on the Notes (“Additional Interest”) under the circumstances and to the
extent set forth below (each of which shall be given independent effect):

 

 

(i)            if
neither the Exchange Registration Statement nor the Initial Shelf Registration
has been filed on or prior to the Filing Date, Additional Interest shall accrue
on the Notes over and above any stated interest at a rate of 0.25% per annum of
the principal amount of such Notes for the first 90 days immediately following
the Filing Date, such Additional Interest rate increasing by an additional
0.25% per annum at the beginning of each subsequent 90-day period;

 

(ii)           if
neither the Exchange Registration Statement nor the Initial Shelf Registration
is declared effective on or prior to the Effectiveness Date, Additional
Interest shall accrue on the Notes over and above any stated interest at a rate
of 0.25% per annum of the principal amount of such Notes for the first 90 days
immediately following the Effectiveness Date, such Additional Interest rate
increasing by an additional 0.25% per annum at the beginning of each subsequent
90-day period;

 

(iii)          if
(A) the Company (and any Subsidiary Guarantor) has not exchanged Exchange Notes
for all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 45 Business Days after the Effectiveness Date, (B) the
Exchange Registration Statement ceases to be effective at any time prior to the
time that the Exchange Offer is consummated, (C) if applicable, a Shelf
Registration has been declared effective and such Shelf Registration ceases to
be effective at any time prior to the second anniversary of its effective date
(other than such time as all Notes have been disposed of thereunder) and is not
declared effective again within 30 days, or (D) pending the announcement of a
material corporate transaction, the Company issues a written notice pursuant to
Section 6(e)(v) or (vi) that a Shelf Registration Statement or Exchange
Registration Statement is unusable and the aggregate number of days in any
365-day period for which all such notices issued or required to be issued, have
been, or were required to be, in effect exceeds 120 days in the aggregate or 30
days consecutively, in the case of a Shelf Registration statement, or 15 days
in the aggregate in the case of an Exchange Registration Statement, then
Additional Interest shall accrue on the Notes, over and above any stated
interest, at a rate of 0.25% per annum of the principal amount of such Notes
commencing on (w) the 46th Business Day after the Effectiveness Date, in the
case of (A) above, or (x) the date the Exchange Registration Statement ceases
to be effective without being declared effective again within 30 days, in the
case of clause (B) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (C) above, or (z) the day the Exchange Registration
Statement or Shelf Registration ceases to be usable in case of clause (D)
above, such Additional Interest rate increasing by an additional 0.25% per
annum at the beginning of each such subsequent 90-day period;

 

provided, however, that
the maximum Additional Interest rate on the Notes may not exceed at any one
time in the aggregate 1.00% per annum; and provided

 

 

further, that (1)
upon the filing of the Exchange Registration Statement or Initial Shelf
Registration (in the case of (i) above), (2) upon the effectiveness of the
Exchange Registration Statement or Initial Shelf Registration (in the case of
(ii) above), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of (iii)(A) above), or upon the effectiveness of the Exchange
Registration Statement that had ceased to remain effective (in the case of
clause (iii)(B) above), or upon the effectiveness of a Shelf Registration which
had ceased to remain effective (in the case of (iii)(C) above), Additional
Interest on the Notes as a result of such clause (or the relevant subclause
thereof) or upon the effectiveness of such Registration Statement or Exchange
Registration Statement (in the case of clause (iii)(D) above), as the case may
be, shall cease to accrue.

 

(b)           The
Company shall notify the Trustee within 3 Business Days after each and every
date on which an event occurs in respect of which Additional Interest is
required to be paid (an “Event Date”). 
Any amounts of Additional Interest due pursuant to clause (a)(i),
(a)(ii) or (a)(iii) of this Section 4 will be payable in cash, on the dates and
in the manner provided in the Indenture and whether or not any cash interest
would then be payable on such date, commencing with the first such semi-annual
date occurring after any such Additional Interest commences to accrue.  The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Notes, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.

 

5.             Hold-Back
Agreements

 

The Company
agrees that it will not effect any public or private sale or distribution
(including a sale pursuant to Regulation D under the Securities Act) of any
securities the same as or similar to those covered by a Registration Statement
filed pursuant to Section 2 or 3 hereof (other than Additional Notes (as
defined in the Indenture) issued under the Indenture), or any securities
convertible into or exchangeable or exercisable for such securities, during the
10 days prior to, and during the 90-day period beginning on, the effective date
of any Registration Statement filed pursuant to Sections 2 and 3 hereof unless
the Holders of a majority in the aggregate principal amount of the Registrable
Notes to be included in such Registration Statement consent.

 

6.             Registration
Procedures

 

In connection
with the filing of any Registration Statement pursuant to Sections 2 or 3
hereof, the Company shall (and shall cause each Subsidiary Guarantor to) effect
such registrations to permit the sale of such securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company hereunder, the Company shall (and shall cause each Subsidiary Guarantor
to):

 

 

(a)           Prepare
and file with the SEC as soon as practicable after the date hereof but in any
event on or prior to the Filing Date, the Exchange Registration Statement or if
the Exchange Registration Statement is not filed because of the circumstances
contemplated by Section 2(j), a Shelf Registration as prescribed by Section 3,
and use its best efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; provided that, if (1) a Shelf Registration is filed pursuant
to Section 3 or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto
the Company shall (and shall cause each Subsidiary Guarantor to), if requested,
furnish to and afford the Holders of the Registrable Notes to be registered
pursuant to such Shelf Registration Statement, each Participating
Broker-Dealer, the managing underwriters, if any, and each of their respective
counsel, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein and
all exhibits thereto) proposed to be filed. 
The Company and each Subsidiary Guarantor shall not file any such
Registration Statement or Prospectus or any amendments or supplements thereto
in respect of which the Holders must provide information for the inclusion
therein without the Holders being afforded an opportunity to review such
documentation.

 

(b)           Provide
an indenture trustee for the Registrable Notes, the Exchange Notes or the Private
Exchange Notes, as the case may be, and cause the Indenture (or other indenture
relating to the Registrable Notes) to be qualified under the TIA not later than
the effective date of the first Registration Statement; and in connection
therewith, to effect such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.

 

(c)           Prepare
and file with the SEC such pre-effective amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as
the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period,
as the case may be; cause the related Prospectus to be supplemented by any
Prospectus supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to them with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus.  The
Company and each Subsidiary Guarantor shall not, during the Applicable Period,
voluntarily take any action that would result in selling Holders 

 

 

of the
Registrable Notes covered by a Registration Statement or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period, unless such action
is required by applicable law, rule or regulation or permitted by this
Agreement.

 

(d)           Furnish
to such selling Holders and Participating Broker-Dealers who so request in
writing (i) upon the Company’s receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective, (ii) such reasonable number of copies of such Registration Statement
and of each amendment and supplement thereto (in each case including any
documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus) and each amendment and
supplement thereto, and such reasonable number of copies of the final
Prospectus as filed by the Company and each Subsidiary Guarantor pursuant to
Rule 424(b) under the Securities Act, in conformity with the requirements of
the Securities Act and each amendment and supplement thereto, and (iv) such
other documents (including any amendments required to be filed pursuant to
clause (c) of this Section), as any such Person may reasonably request in
writing.  The Company and the Subsidiary
Guarantors hereby consent to the use of the Prospectus by each of the selling
Holders of Registrable Notes or each such Participating Broker-Dealer, as the
case may be, and the underwriters or agents, if any, and dealers, if any, in
connection with the offering and sale of the Registrable Notes covered by, or
the sale by Participating Broker-Dealers of the Exchange Notes pursuant to,
such Prospectus and any amendment or supplement thereto.

 

(e)           If
(1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period
relating thereto, the Company shall notify in writing the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, the managing underwriters, if any, and each of their respective counsel
promptly (but in any event within 2 Business Days) (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective (including in such notice a written statement that
any Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Company and any
Subsidiary Guarantor contained in any agreement (including any underwriting
agreement)

 

 

contemplated
by Section 6(n) hereof cease to be true and correct, (iv) of the receipt by the
Company or any Subsidiary Guarantor of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition of any information
becoming known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in, or amendments or supplements to, such Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement and the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, (vi) of any reasonable
determination by the Company or any Subsidiary Guarantor that a post-effective
amendment to a Registration Statement would be appropriate and (vii) of any
request by the SEC for amendments to the Registration Statement or supplements
to the Prospectus or for additional information relating thereto.

 

(f)            Use
its best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible date.

 

(g)           If
(A) a Shelf Registration is filed pursuant to Section 3, (B) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period or
(C) reasonably requested in writing by the managing underwriters, if any, or
the Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information or revisions to information therein relating to such underwriters
or selling Holders as the managing underwriters, if any, or such Holders or any
of their respective counsel reasonably request in writing to be included or
made therein and (ii) make all required filings of such Prospectus supplement
or such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplements or post-effective amendment.

 

(h)           Prior
to any public offering of Registrable Notes or any delivery of a Prospectus
contained in the Exchange Registration Statement by any Participating Broker-

 

 

Dealer who
seeks to sell Exchange Notes during the Applicable Period, use its best efforts
to register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may be,
the underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or qualification)
of such Registrable Notes or Exchange Notes, as the case may be, for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer or any
managing underwriter or underwriters, if any, reasonably request in writing; provided that where Exchange Notes held by
Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Company and each Subsidiary Guarantor agree
to cause its counsel to perform Blue Sky investigations and file any
registrations and qualifications required to be filed pursuant to this Section
6(h), keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange Notes
held by Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided
that neither the Company nor any Subsidiary Guarantor shall be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself to taxation in any such jurisdiction where it is not then so subject.

 

(i)            If
(A) a Shelf Registration is filed pursuant to Section 3 or (B) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2 is
requested to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company, and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.

 

(j)            Use
its best efforts to cause the Registrable Notes covered by any Registration
Statement to be registered with or approved by such governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or the
underwriter, if any, to consummate the disposition of such Registrable Notes,
except as may be required solely as a consequence of the nature of such selling
Holder’s business, in which case the Company shall (and shall cause each
Subsidiary Guarantor to) cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals; provided
that neither the Company nor any existing Subsidiary Guarantor shall be
required to (A) qualify generally to do business in any jurisdiction where it
is not then so

 

 

qualified, (B)
take any action that would subject it to general service of process in any
jurisdiction where it is not then so subject or (C) subject itself to taxation
in any such jurisdiction where it is not then so subject.

 

(k)           If
(1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
upon the occurrence of any event contemplated by paragraph 6(e)(v) or 6(e)(vi)
hereof, as promptly as practicable, prepare and file with the SEC, at the
expense of the Company and the Subsidiary Guarantors, a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such Prospectus
will be delivered by a Participating Broker-Dealer, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and, if
SEC review is required, use its best efforts to cause such post-effective
amendment to be declared effective as soon as possible.

 

(l)            Use
its best efforts to cause the Registrable Notes covered by a Registration
Statement to be rated with such appropriate rating agencies, if so requested in
writing by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or the managing
underwriter or underwriters, if any.

 

(m)          Prior
to the initial issuance of the Exchange Notes, (i) provide the Trustee with one
or more certificates for the Registrable Notes in a form eligible for deposit
with The Depository Trust Company and (ii) provide a CUSIP number for the
Exchange Notes.

 

(n)           If
a Shelf Registration is filed pursuant to Section 3, enter into such agreements
(including an underwriting agreement in form, scope and substance as is
customary in underwritten offerings of debt securities similar to the Notes, as
may be appropriate in the circumstances) and take all such other actions in connection
therewith (including those reasonably requested in writing by the managing
underwriters, if any, or the Holders of a majority in aggregate principal
amount of the Registrable Notes being sold) in order to expedite or facilitate
the registration or the disposition of such Registrable Notes, and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, (i) make such
representations and warranties to the Holders and the underwriters, if any,
with respect to the business of the Company and its subsidiaries as then
conducted, and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by

 

 

reference
therein, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings of debt securities similar to
the Notes, as may be appropriate in the circumstances, and confirm the same if
and when reasonably required; (ii) obtain an opinion of counsel to the Company
and the Subsidiary Guarantors and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the Holders of a majority in aggregate principal
amount of the Registrable Notes being sold), addressed to each selling Holder
and each of the underwriters, if any, covering the matters customarily covered
in opinions of counsel to the Company and the Subsidiary Guarantors requested
in underwritten offerings of debt securities similar to the Notes, as may be
appropriate in the circumstances; (iii) obtain “cold comfort” letters and
updates thereof (which letters and updates (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters) from the independent
certified public accountants of the Company and the Subsidiary Guarantors (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in “cold comfort” letters in connection with underwritten offerings of
debt securities similar to the Notes, as may be appropriate in the
circumstances, and such other matters as reasonably requested in writing by the
underwriters; and (iv) deliver such documents and certificates as may be
reasonably requested in writing by the Holders of a majority in aggregate
principal amount of the Registrable Notes being sold and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties of the Company and its subsidiaries made pursuant to clause (i)
above and to evidence compliance with any conditions contained in the
underwriting agreement or other similar agreement entered into by the Company
or any Subsidiary Guarantor.

 

(o)           If
(1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, make available
for inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the “Inspectors”), at the offices where normally kept,
during reasonable business hours, all financial and other records and pertinent
corporate documents of the Company and its subsidiaries (collectively, the “Records”)
as shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information reasonably requested
in writing by any such Inspector in connection with such Registration
Statement.

 

 

Each Inspector
shall agree in writing that it will keep the Records confidential and not
disclose any of the Records unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction, (iii) the information in
such Records is public or has been made generally available to the public other
than as a result of a disclosure or failure to safeguard by such Inspector or
(iv) disclosure of such information is, in the reasonable written opinion of
counsel for any Inspector, necessary or advisable in connection with any
action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, related
to, or involving this Agreement, or any transaction contemplated hereby or
arising hereunder.  Each selling Holder
of such Registrable Notes and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless and
until such is made generally available to the public.  Each Inspector, each selling Holder of such Registrable Notes and
each such Participating Broker-Dealer will be required to further agree that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and, to the extent
practicable, use its best efforts to allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at its expense.

 

(p)           Comply
with all applicable rules and regulations of the SEC and make generally
available to the security holders of the Company with regard to any applicable
Registration Statement earning statements satisfying the provisions of section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.

 

(q)           Upon
consummation of an Exchange Offer or Private Exchange, obtain an opinion of
counsel to the Company and the Subsidiary Guarantors (in form, scope and
substance reasonably satisfactory to the Initial Purchaser), addressed to the
Trustee for the benefit of all Holders participating in the Exchange Offer or
Private Exchange, as the case may be, to the effect that (i) the Company and
the Subsidiary Guarantors have duly authorized, executed and delivered the
Exchange Notes or the Private Exchange Notes, as the case may be, and the
Indenture, (ii) the Exchange Notes or the Private Exchange Notes, as the case
may be, and the Indenture constitute legal, valid and binding obligations of
the Company and the Subsidiary Guarantors, enforceable against the Company and
the Subsidiary

 

 

Guarantors in
accordance with their respective terms, except as such enforcement may be
subject to customary United States and foreign exceptions and (iii) all
obligations of the Company and the Subsidiary Guarantors under the Exchange
Notes or the Private Exchange Notes, as the case may be, and the Indenture are
secured by Liens (as defined in the Indenture) on the assets securing the
obligations of the Company and the Subsidiary Guarantors under the Notes,
Indenture and Collateral Agreements to the extent and as discussed in the
Registration Statement.

 

(r)            If
the Exchange Offer or a Private Exchange is to be consummated, upon delivery of
the Registrable Notes by the Holders to the Company and the Subsidiary
Guarantors (or to such other Person as directed by the Company and the
Subsidiary Guarantors) in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be, the Company and the Subsidiary Guarantors
shall mark, or caused to be marked, on such Registrable Notes that the Exchange
Notes or the Private Exchange Notes, as the case may be, are being issued as
substitute evidence of the indebtedness originally evidenced by the Registrable
Notes; provided that in no event
shall such Registrable Notes be marked as paid or otherwise satisfied.

 

(s)           Cooperate
with each seller of Registrable Notes covered by any Registration Statement and
each underwriter, if any, participating in the disposition of such Registrable
Notes and their respective counsel in connection with any filings required to
be made with the NASD.

 

(t)            Use
its best efforts to take all other steps reasonably necessary to effect the registration
of the Registrable Notes covered by a Registration Statement contemplated
hereby.

 

(u)           The
Company may require each seller of Registrable Notes or Participating
Broker-Dealer as to which any registration is being effected to furnish to the
Company such information regarding such seller or Participating Broker-Dealer
and the distribution of such Registrable Notes as the Company may, from time to
time, reasonably request in writing. 
The Company may exclude from such registration the Registrable Notes of
any seller who fails to furnish such information within a reasonable time
(which time in no event shall exceed 45 days, subject to Section 3(d) hereof)
after receiving such request.  Each
seller of Registrable Notes or Participating Broker-Dealer as to which any
registration is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information
previously furnished by such seller not materially misleading.

 

(v)           Each
Holder of Registrable Notes and each Participating Broker-Dealer agrees by
acquisition of such Registrable Notes or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 6(e)(ii), 6(e)(iv), 6(e)(v), or 6(e)(vi), such Holder will forthwith
discontinue

 

 

disposition of
such Registrable Notes covered by a Registration Statement and such
Participating Broker-Dealer will forthwith discontinue disposition of such
Exchange Notes pursuant to any Prospectus and, in each case, forthwith
discontinue dissemination of such Prospectus until such Holder’s or
Participating Broker-Dealer’s receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6(k), or until it is advised in
writing (the “Advice”) by the Company and the Subsidiary Guarantors that
the use of the applicable Prospectus may be resumed, and has received copies of
any amendments or supplements thereto and, if so directed by the Company and
the Subsidiary Guarantors, such Holder or Participating Broker-Dealer, as the
case may be, will deliver to the Company all copies, other than permanent file
copies, then in such Holder’s  or
Participating Broker-Dealer’s possession, of the Prospectus covering such
Registrable Notes current at the time of the receipt of such notice.  In the event the Company and the Subsidiary
Guarantors shall give any such notice, the Applicable Period shall be extended
by the number of days during such periods from and including the date of the
giving of such notice to and including the date when each Participating
Broker-Dealer shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 6(k) or (y) the Advice.

 

7.             Registration
Expenses

 

(a)           All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company and the Subsidiary Guarantors shall be borne by the
Company and the Subsidiary Guarantors, whether or not the Exchange Offer or a
Shelf Registration is filed or becomes effective, including, without
limitation, (i) all registration and filing fees, including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with any underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws as provided in Section 6(h)
hereof (including, without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the Registrable Notes or
Exchange Notes and determination of the eligibility of the Registrable Notes or
Exchange Notes for investment under the laws of such jurisdictions (x) where
the Holders are located, in the case of the Exchange Notes, or (y) as provided
in Section 6(h), in the case of Registrable Notes or Exchange Notes to be sold
by a Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing Prospectuses if
the printing of Prospectuses is requested by the managing underwriter or
underwriters, if any, or by the Holders of a majority in aggregate principal
amount of the Registrable Notes included in any Registration Statement or by
any Participating Broker-Dealer during the Applicable Period, as the case may
be, (iii) messenger, telephone and delivery expenses incurred in connection
with the performance of their obligations hereunder, (iv) fees and
disbursements of counsel for the Company, the Subsidiary Guarantors and, subject
to 7(b), the Holders, (v) fees and disbursements of all independent certified
public accountants referred to in Section 6 (including, without limitation, the
expenses of any special audit and “cold comfort” letters required by or

 

 

incident to
such performance), (vi) rating agency fees and the fees and expenses incurred
in connection with the listing of the Securities to be registered on any
securities exchange, (vii) Securities Act liability insurance, if the Company
and the Subsidiary Guarantors desire such insurance, (viii) fees and expenses
of all other Persons retained by the Company and the Subsidiary Guarantors,
(ix) fees and expenses of any “qualified independent underwriter” or other
independent appraiser participating in an offering pursuant to Section 3 of
Schedule E to the By-laws of the NASD, but only where the need for such a
“qualified independent underwriter” arises due to a relationship with the
Company and the Subsidiary Guarantors, (x) internal expenses of the Company and
the Subsidiary Guarantors (including, without limitation, all salaries and
expenses of officers and employees of the Company or the Subsidiary Guarantors
performing legal or accounting duties), (xi) the expense of any annual audit,
(xii) the fees and expenses of the Trustee and the Exchange Agent and (xiii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.

 

(b)           The
Company and the Subsidiary Guarantors shall reimburse the Holders for the
reasonable fees and disbursements of not more than one counsel chosen by the
Holders of a majority in aggregate principal amount of the Registrable Notes to
be included in any Registration Statement. 
The Company and the Subsidiary Guarantors shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the issuance or
delivery of the Exchange Notes or Private Exchange Notes in exchange for the
Notes; provided that the Company
shall not be required to pay taxes payable in respect of any transfer involved
in the issuance or delivery of any Exchange Note or Private Exchange Note in a
name other than that of the Holder of the Note in respect of which such
Exchange Note or Private Exchange Note is being issued.  The Company and the Subsidiary Guarantors
shall reimburse the Holders for fees and expenses (including reasonable fees
and expenses of counsel to the Holders) relating to any enforcement of any
rights of the Holders under this Agreement.

 

8.             Indemnification

 

(a)           Indemnification
by the Company and the Subsidiary Guarantors.  The Company and the Subsidiary Guarantors jointly and severally
agree to indemnify and hold harmless each Holder of Registrable Notes, Exchange
Notes or Private Exchange Notes and each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period, each Person, if any, who controls
each such Holder (within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act) and the officers, directors and partners of
each such Holder, Participating Broker-Dealer and controlling person, to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys’ fees as provided in this Section 8) and
expenses (including, without limitation, reasonable costs and expenses incurred
in connection with investigating, preparing, pursuing or

 

 

defending
against any of the foregoing) (collectively, “Losses”), as incurred,
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus, or
in any amendment or supplement thereto, or in any preliminary prospectus, or
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as
such Losses are primarily based upon information relating to such Holder or
Participating Broker-Dealer and furnished in writing to the Company and the
Subsidiary Guarantors (or reviewed and approved in writing) by such Holder or
Participating Broker-Dealer or their counsel expressly for use therein; provided, however,
that the Company and the Subsidiary Guarantors will not be liable to any
Indemnified Party (as defined below) under this Section 8 to the extent Losses
were primarily caused by an untrue statement or omission or alleged untrue
statement or omission that was contained or made in any preliminary prospectus
and corrected in the Prospectus or any amendment or supplement thereto if (i)
the Prospectus does not contain any other untrue statement or omission or
alleged untrue statement or omission of a material fact that was the subject
matter of the related proceeding, (ii) any such Losses resulted from an action,
claim or suit by any Person who purchased Registrable Notes or Exchange Notes
which are the subject thereof from such Indemnified Party and (iii) it is
established in the related proceeding that such Indemnified Party failed to
deliver or provide a copy of the Prospectus (as amended or supplemented) to
such Person with or prior to the confirmation of the sale of such Registrable
Notes or Exchange Notes sold to such Person if required by applicable law,
unless such failure to deliver or provide a copy of the Prospectus (as amended
or supplemented) was a result of noncompliance by the Company with Section 6 of
this Agreement.  The Company and the
Subsidiary Guarantors also agree to indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, their officers, directors, agents and employees and each
Person who controls such Persons (within the meaning of Section 5 of the
Securities Act or Section 20(a) of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Holders or the
Participating Broker-Dealer.

 

(b)           Indemnification
by Holder.  In connection with any
Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus in which a Holder is
participating, such Holder shall furnish to the Company and the Subsidiary
Guarantors in writing such information as the Company and the Subsidiary Guarantors
reasonably request for use in connection with any Registration Statement,
Prospectus or form of prospectus, any amendment or supplement thereto, or any
preliminary prospectus and shall indemnify and hold harmless the Company, the
Subsidiary Guarantors, their respective directors and each Person, if any, who
controls the Company and the Subsidiary Guarantors (within the meaning of
Section 15 of the Securities Act and Section 20(a) of the Exchange Act), and
the directors, officers and partners of such controlling persons, to the
fullest extent lawful, from and against all Losses

 

 

arising out of
or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but
only to the extent, that such losses are finally judicially determined by a
court of competent jurisdiction in a final, unappealable order to have resulted
primarily from an untrue statement or alleged untrue statement of a material
fact or omission or alleged omission of a material fact contained in or omitted
from any information so furnished in writing by such Holder to the Company and
the Subsidiary Guarantors expressly for use therein.  Notwithstanding the foregoing, in no event shall the liability of
any selling Holder be greater in amount than such Holder’s Maximum Contribution
Amount (as defined below).

 

(c)           Conduct
of Indemnification Proceedings.  If
any proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an “Indemnified Party”), such Indemnified Party
shall promptly notify the party or parties from which such indemnity is sought
(the “Indemnifying Party” or “Indemnifying Parties”, as
applicable) in writing; provided,
that the failure to so notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the extent (but
only to the extent) that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal) that the
Indemnifying Parties have been prejudiced materially by such failure.

 

The
Indemnifying Party shall have the right, exercisable by giving written notice
to an Indemnified Party, within 20 Business Days after receipt of written
notice from such Indemnified Party of such proceeding, to assume, at its
expense, the defense of any such proceeding, provided,
that an Indemnified Party shall have the right to employ separate counsel in
any such proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume
the defense of such proceeding or shall have failed to employ counsel
reasonably satisfactory to such Indemnified Party; or (3) the named parties to
any such proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party or any of its affiliates or controlling
persons, and such Indemnified Party shall have been advised by counsel that
there may be one or more defenses available to such Indemnified Party that are
in addition to, or in conflict with, those defenses available to the
Indemnifying Party or such affiliate or controlling person (in which case, if
such Indemnified Party notifies the Indemnifying Parties in writing that it
elects to employ separate counsel at the expense of the Indemnifying Parties,
the Indemnifying Parties shall not have the right to assume the defense and the
reasonable fees and expenses of such counsel shall be at the expense of the
Indemnifying Party; it being understood, however, that, the Indemnifying Party
shall not, in connection with any one such proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction, arising out of the same general allegations or

 

 

circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for such Indemnified Party).

 

No
Indemnifying Party shall be liable for any settlement of any such proceeding
effected without its written consent, which shall not be unreasonably withheld,
but if settled with its written consent, or if there be a final judgment for
the plaintiff in any such proceeding, each Indemnifying Party jointly and
severally agrees, subject to the exceptions and limitations set forth above, to
indemnify and hold harmless each Indemnified Party from and against any and all
Losses by reason of such settlement or judgment.  The Indemnifying Party shall not enter into any settlement or
compromise that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to each Indemnified Party of a release, in form and
substance reasonably satisfactory to the Indemnified Party, from all liability
in respect of such proceeding for which such Indemnified Party would be entitled
to indemnification hereunder (whether or not any Indemnified Party is a party
thereto).

 

(d)           Contribution.  If the indemnification provided for in this
Section 8 is unavailable to an Indemnified Party or is insufficient to hold
such Indemnified Party harmless for any Losses in respect of which this Section
8 would otherwise apply by its terms (other than by reason of exceptions
provided in this Section 8), then each applicable Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall have a joint and several
obligation to contribute to the amount paid or payable by such Indemnified
Party as a result of such Losses, in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party, on the one hand, and such
Indemnified Party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations.  The
relative fault of such Indemnifying Party, on the one hand, and Indemnified
Party, on the other hand, shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such Indemnifying Party or Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent any such statement or omission. 
The amount paid or payable by an Indemnified Party as a result of any
Losses shall be deemed to include any legal or other fees or expenses incurred
by such party in connection with any proceeding, to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in Section 8(a) or 8(b) was available to such party.

 

The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 8(d) were determined by pro rata allocation or by other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 8(d), a selling
Holder shall not be required to contribute, in the aggregate, any amount in
excess of such Holder’s Maximum Contribution Amount.  A selling Holder’s “Maximum Contribution Amount” shall
equal the excess of (i) the aggregate proceeds received by such Holder pursuant
to the sale of such Registrable Notes or Exchange Notes over (ii) the aggregate
amount of damages that such Holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement

 

 

or omission or alleged
omission.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. 
The Holders’ obligations to contribute pursuant to this Section 8(d) are
several in proportion to the respective principal amount of the Registrable
Securities held by each Holder hereunder and not joint.  The Company’s and Subsidiary Guarantors’
obligations to contribute pursuant to this Section 8(d) are joint and several.

 

The indemnity
and contribution agreements contained in this Section 8 are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

 

9.             Rules 144 and 144A

 

The Company
covenants that it shall (a) file the reports required to be filed by it (if so
required) under the Securities Act and the Exchange Act in a timely manner and,
if at any time the Company is not required to file such reports, it will, upon
the written request of any Holder of Registrable Notes, make publicly available
other information necessary to permit sales pursuant to Rule 144 and 144A and
(b) take such further action as any Holder may reasonably request in writing,
all to the extent required from time to time to enable such Holder to sell
Registrable Notes without registration under the Securities Act pursuant to the
exemptions provided by Rule 144 and Rule 144A. 
Upon the request of any Holder, the Company shall deliver to such Holder
a written statement as to whether it has complied with such information and
requirements.

 

10.           Underwritten Registrations of Registrable Notes

 

If any of the
Registrable Notes covered by any Shelf Registration is to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will manage the offering will be selected by the Holders of a
majority in aggregate principal amount of such Registrable Notes included in
such offering; provided, however,
that such investment banker or investment bankers and manager or managers must
be reasonably acceptable to the Company.

 

No Holder of
Registrable Notes may participate in any underwritten registration hereunder
unless such Holder (a) agrees to sell such Holder’s Registrable Notes on the
basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.

 

11.           Miscellaneous

 

(a)           No
Inconsistent Agreements.  The
Company and each of the Subsidiary Guarantors have not entered, as of the date
hereof, and the Company and each of the Subsidiary Guarantors shall not enter,
after the date of this Agreement, into any agreement with respect to any of its
securities that is inconsistent with the rights granted to the Holders of
Securities in this Agreement or otherwise conflicts with the provisions
hereof.  The Company and each of the
Subsidiary

 

 

Guarantors
have not entered and will not enter into any agreement with respect to any of
its securities that will grant to any Person piggy-back rights with respect to
a Registration Statement.

 

(b)           Adjustments
Affecting Registrable Notes.  The
Company shall not, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders to include such Registrable Notes in a registration undertaken pursuant
to this Agreement.

 

(c)           Amendments
and Waivers.  The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise than with
the prior written consent of the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes in
circumstances that would adversely affect any Holders of Registrable Notes; provided, however,
that Section 8 and this Section 11(d) may not be amended, modified or
supplemented without the prior written consent of each Holder.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being tendered pursuant to the Exchange Offer or sold pursuant
to a Notes Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being tendered or being sold by such Holders
pursuant to such Notes Registration Statement.

 

(d)           Notices.  All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, next-day air courier or telecopier:

 

(i)            if
to a Holder of Securities or to any Participating Broker-Dealer, at the most
current address of such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar of the Notes, with a copy in like
manner to the Initial Purchaser as follows:

 

	
   

  	
  Jefferies
  & Company, Inc.

  
	
   

  	
  11100 Santa
  Monica Boulevard, 10th Floor

  
	
   

  	
  Los Angeles,
  California 90025

  
	
   

  	
  Facsimile
  No.: 310-575-5611

  
	
   

  	
  Attention
  :  Lloyd H. Feller, Esq.

  

 

with a copy
to:

 

	
   

  	
  Mayer,
  Brown, Rowe & Maw LLP

  
	
   

  	
  1675 Broadway

  
	
   

  	
  New York,
  New York 10019

  
	
   

  	
  Facsimile
  No.: (212) 262-1910

  

 

 

	
   

  	
  Attention:

  	
  Jin Kim,
  Esq. and

  
	
   

  	
   

  	
  James J.
  Junewicz, Esq.

  

 

(ii)           if to the Initial
Purchaser, at the address specified in Section 11(e)(1);

 

(iii)          if to the Company or any
Subsidiary Guarantor, as follows:

 

	
   

  	
  Blue Ridge
  Paper Products Inc.

  
	
   

  	
  41 Main
  Street

  
	
   

  	
  Canton,
  North Carolina 28716

  
	
   

  	
  Facsimile
  No.: (828) 646-6101

  
	
   

  	
  Attention:  Chief Executive Officer

  

 

with a copy
to:

 

	
   

  	
  Proskauer
  Rose LLP

  
	
   

  	
  1585
  Broadway

  
	
   

  	
  New York,
  New York 10036

  
	
   

  	
  Facsimile
  No.: (212) 969-2900

  
	
   

  	
  Attention:  Julie M. Allen, Esq.

  

 

All such
notices and communications shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after being
deposited in the United States mail, postage prepaid, if mailed, one business
day after being deposited in the United States mail, postage prepaid, if
mailed; one business day after being timely delivered to a next-day air courier
guaranteeing overnight delivery; and when receipt is acknowledged by the
addressee, if telecopied.

 

Copies of all
such notices, demands or other communications shall be concurrently delivered
by the Person giving the same to the Trustee under the Indenture at the address
specified in such Indenture.

 

(e)           Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto, including, without limitation and without the need for
an express assignment, subsequent Holders of Securities.

 

(f)            Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(g)           Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(h)           Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF

 

 

LAW.  THE COMPANY HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITS AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. 
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.  THE COMPANY IRREVOCABLY
CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.

 

(i)            Severability.  If any term, provision, covenant or
restriction of this Agreement is  held
by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.  It
is hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.

 

(j)            Securities
Held by the Company or Its Affiliates. 
Whenever the consent or approval of Holders of a specified percentage of
Securities is required hereunder, Securities held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.

 

 

(k)           Third
Party Beneficiaries.  Holders and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.

 

(l)            Entire
Agreement.  This Agreement, together
with the Purchase Agreement, the Indenture and the Collateral Agreements, is
intended by the parties as a final and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understanding, correspondence,
conversations and memoranda between the Initial Purchaser on the one hand and
the Company and the Subsidiary Guarantors on the  other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged herein and
replaced hereby.

 

 

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

 

 

	
   

  	
  BLUE RIDGE
  PAPER PRODUCTS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard
  A. Lozyniak

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRPP, LLC as
  Subsidiary Guarantor

  
	
   

  	
  By:

  	
  Blue Ridge
  Paper Products Inc.,

  its Sole Member and Manager

  
	
   

  	
   

  

 

	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John
  Wadsworth

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  ACCEPTED AND
  AGREED TO:

  	
   

  
	
   

  	
   

  
	
  JEFFERIES
  & COMPANY, INC.

  	
   

  
	
   

  	
   

  

 

	
   

  	
   

  
	
  By:

  	
  /s/ Raymond
  J. Minella

  
	
  Name:

  	
  Raymond J.
  Minella

  
	
  Title:

  	
  Managing
  Director

  
	
   

  	
  Director,
  Investment Banking Capital MarketsExhibit 10.1

 

EXECUTION COPY

 

 

CREDIT AGREEMENT

 

Dated as of December 17, 2003

 

among

 

BLUE RIDGE PAPER PRODUCTS INC.,

 

as Borrower,

 

THE OTHER CREDIT PARTIES SIGNATORY HERETO,

 

as Credit Parties,

 

THE LENDERS SIGNATORY HERETO

 

FROM TIME TO TIME,

 

as Lenders,

 

and

 

GENERAL ELECTRIC CAPITAL CORPORATION,

 

as Agent and Lender

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  AMOUNT AND TERMS OF CREDIT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1.

  	
  Credit Facilities.

  	
   

  
	
   

  	
  1.2.

  	
  Letters of Credit

  	
   

  
	
   

  	
  1.3.

  	
  Prepayments.

  	
   

  
	
   

  	
  1.4.

  	
  Use
  of Proceeds/Refinancing and Replacement of Prior Credit Agreement

  	
   

  
	
   

  	
  1.5.

  	
  Interest and Applicable Margins.

  	
   

  
	
   

  	
  1.6.

  	
  Eligible Accounts

  	
   

  
	
   

  	
  1.7.

  	
  Eligible Inventory

  	
   

  
	
   

  	
  1.8.

  	
  Cash Management Systems

  	
   

  
	
   

  	
  1.9.

  	
  Fees.

  	
   

  
	
   

  	
  1.10.

  	
  Receipt of Payments

  	
   

  
	
   

  	
  1.11.

  	
  Application and Allocation of Payments.

  	
   

  
	
   

  	
  1.12.

  	
  Loan
  Account and Accounting

  	
   

  
	
   

  	
  1.13.

  	
  Indemnity.

  	
   

  
	
   

  	
  1.14.

  	
  Access

  	
   

  
	
   

  	
  1.15.

  	
  Taxes.

  	
   

  
	
   

  	
  1.16.

  	
  Capital Adequacy; Increased Costs;
  Illegality.

  	
   

  
	
   

  	
  1.17.

  	
  Single
  Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1.

  	
  Conditions to the Initial Loans

  	
   

  
	
   

  	
  2.2.

  	
  Further Conditions to Each Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1.

  	
  Corporate Existence; Compliance with Law

  	
   

  
	
   

  	
  3.2.

  	
  Executive Offices, Collateral Locations,
  FEIN

  	
   

  
	
   

  	
  3.3.

  	
  Corporate Power, Authorization, Enforceable
  Obligations

  	
   

  
	
   

  	
  3.4.

  	
  Financial Statements and Projections

  	
   

  
	
   

  	
  3.5.

  	
  Material Adverse Effect

  	
   

  
	
   

  	
  3.6.

  	
  Ownership of Property; Liens

  	
   

  
	
   

  	
  3.7.

  	
  Labor Matters

  	
   

  
	
   

  	
  3.8.

  	
  Ventures, Subsidiaries and Affiliates;
  Outstanding Stock and Indebtedness

  	
   

  
	
   

  	
  3.9.

  	
  Government Regulation

  	
   

  
	
   

  	
  3.10.

  	
  Margin Regulations

  	
   

  
	
   

  	
  3.11.

  	
  Taxes

  	
   

  
	
   

  	
  3.12.

  	
  ERISA.

  	
   

  
	
   

  	
  3.13.

  	
  No Litigation

  	
   

  
	
   

  	
  3.14.

  	
  Brokers

  	
   

  
	
   

  	
  3.15.

  	
  Intellectual Property

  	
   

  
	
   

  	
  3.16.

  	
  Full Disclosure

  	
   

  
	
   

  	
  3.17.

  	
  Environmental Matters.

  	
   

  
	
   

  	
  3.18.

  	
  Insurance

  	
   

  

 

 

	
   

  	
  3.19.

  	
  Deposit and Disbursement Accounts

  	
   

  
	
   

  	
  3.20.

  	
  Government Contracts

  	
   

  
	
   

  	
  3.21.

  	
  Customer and Trade Relations

  	
   

  
	
   

  	
  3.22.

  	
  Bonding; Licenses

  	
   

  
	
   

  	
  3.23.

  	
  Solvency

  	
   

  
	
   

  	
  3.24.

  	
  International Paper Subordinated Debt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL STATEMENTS AND INFORMATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1.

  	
  Reports and Notices.

  	
   

  
	
   

  	
  4.2.

  	
  Communication with Accountants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1.

  	
  Maintenance of Existence and Conduct of
  Business

  	
   

  
	
   

  	
  5.2.

  	
  Payment of Charges.

  	
   

  
	
   

  	
  5.3.

  	
  Books and Records

  	
   

  
	
   

  	
  5.4.

  	
  Insurance; Damage to or Destruction of
  Collateral.

  	
   

  
	
   

  	
  5.5.

  	
  Compliance with Laws

  	
   

  
	
   

  	
  5.6.

  	
  Supplemental Disclosure

  	
   

  
	
   

  	
  5.7.

  	
  Intellectual Property

  	
   

  
	
   

  	
  5.8.

  	
  Environmental Matters

  	
   

  
	
   

  	
  5.9.

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

  	
   

  
	
   

  	
  5.10.

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1.

  	
  Mergers, Subsidiaries, Etc.

  	
   

  
	
   

  	
  6.2.

  	
  Investments; Loans and Advances

  	
   

  
	
   

  	
  6.3.

  	
  Indebtedness.

  	
   

  
	
   

  	
  6.4.

  	
  Employee Loans and Affiliate Transactions.

  	
   

  
	
   

  	
  6.5.

  	
  Capital Structure and Business

  	
   

  
	
   

  	
  6.6.

  	
  Guaranteed Indebtedness

  	
   

  
	
   

  	
  6.7.

  	
  Liens

  	
   

  
	
   

  	
  6.8.

  	
  Sale of Stock and Assets

  	
   

  
	
   

  	
  6.9.

  	
  ERISA

  	
   

  
	
   

  	
  6.10.

  	
  Financial Covenants

  	
   

  
	
   

  	
  6.11.

  	
  Hazardous Materials

  	
   

  
	
   

  	
  6.12.

  	
  Sale-Leasebacks

  	
   

  
	
   

  	
  6.13.

  	
  Restricted Payments

  	
   

  
	
   

  	
  6.14.

  	
  Change of Corporate Name or Location;
  Change of Fiscal Year

  	
   

  
	
   

  	
  6.15.

  	
  No Impairment of Intercompany Transfers

  	
   

  
	
   

  	
  6.16.

  	
  Leases; Real Estate Purchases.

  	
   

  
	
   

  	
  6.17.

  	
  Changes Relating to Other Indebtedness and
  Material Contracts.

  	
   

  
	
   

  	
  6.18.

  	
  Holdings and IP Subsidiary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1.

  	
  Termination

  	
   

  
	
   

  	
  7.2.

  	
  Survival of Obligations Upon Termination of
  Financing Arrangements

  	
   

  

 

 

	
  8.

  	
  EVENTS OF DEFAULT; RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1.

  	
  Events of Default

  	
   

  
	
   

  	
  8.2.

  	
  Remedies.

  	
   

  
	
   

  	
  8.3.

  	
  Waivers by Credit Parties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT
  OF AGENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1.

  	
  Assignment and Participations.

  	
   

  
	
   

  	
  9.2.

  	
  Appointment of Agent

  	
   

  
	
   

  	
  9.3.

  	
  Agent’s Reliance, Etc.

  	
   

  
	
   

  	
  9.4.

  	
  GE Capital and Affiliates

  	
   

  
	
   

  	
  9.5.

  	
  Lender Credit Decision

  	
   

  
	
   

  	
  9.6.

  	
  Indemnification

  	
   

  
	
   

  	
  9.7.

  	
  Successor Agent

  	
   

  
	
   

  	
  9.8.

  	
  Setoff and Sharing of Payments

  	
   

  
	
   

  	
  9.9.

  	
  Advances; Payments; Non-Funding Lenders;
  Information; Actions in Concert.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  SUCCESSORS AND ASSIGNS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.

  	
  Successors and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1.

  	
  Complete Agreement; Modification of
  Agreement.

  	
   

  
	
   

  	
  11.2.

  	
  Amendments and Waivers.

  	
   

  
	
   

  	
  11.3.

  	
  Fees and Expenses

  	
   

  
	
   

  	
  11.4.

  	
  No
  Waiver

  	
   

  
	
   

  	
  11.5.

  	
  Remedies

  	
   

  
	
   

  	
  11.6.

  	
  Severability

  	
   

  
	
   

  	
  11.7.

  	
  Conflict of Terms

  	
   

  
	
   

  	
  11.8.

  	
  Confidentiality

  	
   

  
	
   

  	
  11.9.

  	
  GOVERNING LAW

  	
   

  
	
   

  	
  11.10.

  	
  Notices

  	
   

  
	
   

  	
  11.11.

  	
  Section Titles

  	
   

  
	
   

  	
  11.12.

  	
  Counterparts

  	
   

  
	
   

  	
  11.13.

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
  11.14.

  	
  Press Releases and Related Matters

  	
   

  
	
   

  	
  11.15.

  	
  Reinstatement

  	
   

  
	
   

  	
  11.16.

  	
  Advice of Counsel

  	
   

  
	
   

  	
  11.17.

  	
  No Strict Construction

  	
   

  

 

 

INDEX OF APPENDICES

 

	
  Annex A (Recitals)

  	
   

  	
  –

  	
   

  	
  Definitions

  
	
  Annex B (Section 1.2)

  	
   

  	
  –

  	
   

  	
  Letters of Credit

  
	
  Annex C (Section 1.8)

  	
   

  	
  –

  	
   

  	
  Cash Management System

  
	
  Annex D (Section 2.1(a))

  	
   

  	
  –

  	
   

  	
  Closing Checklist

  
	
  Annex E (Section 4.1(a))

  	
   

  	
  –

  	
   

  	
  Financial Statements and Projections --
  Reporting

  
	
  Annex F (Section 4.1(b))

  	
   

  	
  –

  	
   

  	
  Collateral Reports

  
	
  Annex G (Section 6.10)

  	
   

  	
  –

  	
   

  	
  Financial Covenants

  
	
  Annex H (Section 9.9(a))

  	
   

  	
  –

  	
   

  	
  Lenders’ Wire Transfer Information

  
	
  Annex I (Section 11.10)

  	
   

  	
  –

  	
   

  	
  Notice Addresses

  
	
  Annex J (from Annex A- Commitments definition)

  	
   

  	
  –

  	
   

  	
  Commitments as of Closing Date

  

 

	
  Exhibit 1.1(a)(i)

  	
   

  	
  –

  	
   

  	
  Form of Notice of Revolving Credit Advance

  
	
  Exhibit 1.1(a)(ii)

  	
   

  	
  –

  	
   

  	
  Form of Revolving Note

  
	
  Exhibit 1.1(c)(ii)

  	
   

  	
  –

  	
   

  	
  Form of Swing Line Note

  
	
  Exhibit 1.5(e)

  	
   

  	
  –

  	
   

  	
  Form of Notice of Conversion/Continuation

  
	
  Exhibit 4.1(b)

  	
   

  	
  –

  	
   

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit 9.1(a)

  	
   

  	
  –

  	
   

  	
  Form of Assignment Agreement

  
	
  Exhibit B-1

  	
   

  	
  –

  	
   

  	
  Application for Standby Letter of Credit

  
	
  Exhibit B-2

  	
   

  	
  –

  	
   

  	
  Application for Documentary Letter of Credit

  

 

	
  Schedule  1.1

  	
   

  	
  –

  	
   

  	
  Agent’s Representatives

  
	
  Disclosure Schedule  1.4

  	
   

  	
  –

  	
   

  	
  Sources and Uses; Funds Flow Memorandum

  
	
  Disclosure Schedule  3.1

  	
   

  	
  –

  	
   

  	
  Type of Entity; State of Organization

  
	
  Disclosure Schedule  3.2

  	
   

  	
  –

  	
   

  	
  Executive Offices, Collateral Locations, FEIN

  
	
  Disclosure Schedule  3.4(A)

  	
   

  	
  –

  	
   

  	
  Financial Statements

  
	
  Disclosure Schedule  3.4(B)

  	
   

  	
  –

  	
   

  	
  Pro Forma

  
	
  Disclosure Schedule  3.4(C)

  	
   

  	
  –

  	
   

  	
  Projections

  
	
  Disclosure Schedule  3.5

  	
   

  	
  –

  	
   

  	
  Defaults

  
	
  Disclosure Schedule  3.6

  	
   

  	
  –

  	
   

  	
  Real Estate and Leases

  
	
  Disclosure Schedule  3.7

  	
   

  	
  –

  	
   

  	
  Labor Matters

  
	
  Disclosure Schedule  3.8

  	
   

  	
  –

  	
   

  	
  Ventures, Subsidiaries and Affiliates; Outstanding Stock

  
	
  Disclosure Schedule  3.11

  	
   

  	
  –

  	
   

  	
  Tax Matters

  
	
  Disclosure Schedule  3.12

  	
   

  	
  –

  	
   

  	
  ERISA Plans

  
	
  Disclosure Schedule  3.13

  	
   

  	
  –

  	
   

  	
  Litigation

  
	
  Disclosure Schedule  3.15

  	
   

  	
  –

  	
   

  	
  Intellectual Property

  
	
  Disclosure Schedule  3.17

  	
   

  	
  –

  	
   

  	
  Hazardous Materials

  
	
  Disclosure Schedule  3.18

  	
   

  	
  –

  	
   

  	
  Insurance

  
	
  Disclosure Schedule  3.19

  	
   

  	
  –

  	
   

  	
  Deposit and Disbursement Accounts

  
	
  Disclosure Schedule  3.20

  	
   

  	
  –

  	
   

  	
  Government Contracts

  
	
  Disclosure Schedule  3.22

  	
   

  	
  –

  	
   

  	
  Bonds; Patent, Trademark Licenses

  
	
  Disclosure Schedule  5.1

  	
   

  	
  –

  	
   

  	
  Trade Names

  
	
  Disclosure Schedule  6.3

  	
   

  	
  –

  	
   

  	
  Indebtedness

  
	
  Disclosure Schedule  6.4(a)

  	
   

  	
  –

  	
   

  	
  Transactions with Affiliates

  

 

 

	
  Disclosure Schedule  6.7

  	
   

  	
  –

  	
   

  	
  Existing Liens

  
	
  Disclosure Schedule B-1

  	
   

  	
  –

  	
   

  	
  Existing Letters of Credit

  

 

 

This CREDIT AGREEMENT (this “Agreement”), dated as of December 17,
2003, among BLUE RIDGE PAPER PRODUCTS INC., a Delaware corporation (“Borrower”);
the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”),
for itself, as Lender, and as Agent for Lenders, and the other Lenders
signatory hereto from time to time.

 

RECITALS

 

WHEREAS, Borrower has requested that Lenders extend a revolving credit
facility to Borrower of up to Forty Five Million Dollars ($45,000,000) in the
aggregate for the purpose of replacing and refinancing, in part, the
indebtedness of Borrower under that certain Credit Agreement, dated as of May
14, 1999 (as amended to date, the “Prior Credit Agreement”), among
Borrower, the other Credit Parties party thereto, the lenders party thereto and
GE Capital as a lender and as agent for the lenders thereunder, and to provide
(a) working capital financing for Borrower, (b) funds for other general
corporate purposes of Borrower and (c) funds for other purposes permitted
hereunder; and for these purposes, Lenders are willing to make certain loans
and other extensions of credit to Borrower of up to such amount upon the terms
and conditions set forth herein; and

 

WHEREAS, Borrower has agreed to secure all of its obligations under the
Loan Documents by granting to Agent, for the benefit of Agent and Lenders, (a)
a first priority security interest in all of its existing and after acquired
Accounts and Inventory, as well as all Chattel Paper, Documents, General
Intangibles, Instruments, Investment Property and other personal property
arising out of or relating to such Accounts and Inventory (collectively, the “Lender
Priority Collateral”) and (b) a second priority security interest, subject
to Permitted Encumbrances, in all of its existing and after acquired Real
Estate, Equipment and other personal property (other than the Lender Priority
Collateral) (collectively, the “Noteholder Priority Collateral”); and

 

WHEREAS, Blue Ridge Holding Corp., a Delaware corporation (“Holdings”),
is willing to guarantee all of the obligations of Borrower to Agent and Lenders
under the Loan Documents; and

 

WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement
and the other Loan Documents, the rules of construction set forth in Annex A
shall govern.  All Annexes, Disclosure
Schedules, Exhibits and other attachments (collectively, “Appendices”)
hereto, or expressly identified to this Agreement, are incorporated herein by
reference, and taken together with this Agreement, shall constitute but a
single agreement.  These Recitals shall
be construed as part of the Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:

 

 

AMOUNT AND
TERMS OF CREDIT

 

Credit
Facilities.

 

Revolving
Credit Facility.

 

Subject to the terms and conditions hereof,
each Revolving Lender agrees to make available to Borrower from time to time
until the Commitment Termination Date its Pro Rata Share of advances (each, a “Revolving
Credit Advance”).  The Pro Rata
Share of the Revolving Loan of any Revolving Lender shall not at any time
exceed its separate Revolving Loan Commitment. 
The obligations of each Revolving Lender hereunder shall be several and
not joint.  Until the Commitment
Termination Date, Borrower may from time to time borrow, repay and reborrow
under this Section 1.1(a); provided, that the amount of any Revolving
Credit Advance to be made at any time shall not exceed Borrowing Availability
at such time.  Borrowing Availability
may be further reduced by Reserves imposed by Agent in its reasonable credit
judgment.  Each Revolving Credit Advance
shall be made on notice by Borrower to one of the representatives of Agent
identified in Schedule 1.1 at the address specified therein.  Any such notice must be given no later than
(1) 11:00 a.m. (New York time) on the Business Day of the proposed Revolving
Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m. (New York
time) on the date which is three (3) Business Days prior to the proposed
Revolving Credit Advance, in the case of a LIBOR Loan.  Each such notice (a ”Notice of
Revolving Credit Advance”) must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(a)(i), and
shall include the information required in such Exhibit and such other
information as may be required by Agent. 
If Borrower desires to have the Revolving Credit Advances bear interest
by reference to a LIBOR Rate, it must comply with Section 1.5(e).

 

Except as provided in Section 1.12,
Borrower shall execute and deliver to each Revolving Lender a note to evidence
the Revolving Loan Commitment of that Revolving Lender.  Each note shall be in the principal amount
of the Revolving Loan Commitment of the applicable Revolving Lender, dated the
Closing Date and substantially in the form of Exhibit 1.1(a)(ii)  (each a “Revolving Note” and,
collectively, the “Revolving Notes”). 
Each Revolving Note shall represent the obligation of Borrower to pay
the amount of Revolving Lender’s Revolving Loan Commitment or, if less, such
Revolving Lender’s Pro Rata Share of the aggregate unpaid principal amount of
all Revolving Credit Advances to Borrower together with interest thereon as
prescribed in Section 1.5.  The
entire unpaid balance of the Revolving Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date.

 

Any provision of this Agreement to the
contrary notwithstanding, at the request of Borrower, in its discretion Agent
may (but shall have absolutely no obligation to), make Revolving Credit
Advances to Borrower on behalf of Revolving Lenders in amounts that cause the
outstanding balance of the aggregate Revolving Loan to exceed the Borrowing
Base (less the Swing Line Loan) (any such excess Revolving Credit Advances are
herein referred to collectively as “Overadvances”); provided that (A) no
such event or occurrence shall cause or constitute a waiver of Agent’s, the
Swing Line Lender’s or Revolving Lenders’ right to refuse to make any further
Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any
Letter of Credit Obligations, as the case may be, at any time that an
Overadvance exists, and

 

 

(B) no Overadvance shall result in a Default or Event of Default due to
Borrower’s failure to comply with Section 1.3(b)(i) for so long as Agent
permits such Overadvance to remain outstanding, but solely with respect to the
amount of such Overadvance.  In
addition, Overadvances may be made even if the conditions to lending set forth
in Section 2 have not been met. 
All Overadvances shall constitute Index Rate Loans, shall bear interest
at the Default Rate and shall be payable on the earlier of demand or the
Commitment Termination Date.  Except as
otherwise provided in Section 1.11(b), the authority of Agent to make
Overadvances is limited to an aggregate amount not to exceed $4,500,000 at any
time, shall not cause the Revolving Loan to exceed the Maximum Amount, and may
be revoked prospectively by a written notice to Agent signed by Revolving
Lenders holding more than 50% of the Revolving Loan Commitments.

 

Intentionally
Omitted.

 

Swing Line
Facility.

 

Agent shall notify the Swing Line Lender upon
Agent’s receipt of any Notice of Revolving Credit Advance.  Subject to the terms and conditions hereof,
the Swing Line Lender may, in its discretion, make available from time to time
until the Commitment Termination Date advances (each, a “Swing Line Advance”)
in accordance with any such notice.  The
provisions of this Section 1.1(c) shall not relieve Revolving Lenders of
their obligations to make Revolving Credit Advances under Section 1.1(a);
provided that if the Swing Line Lender makes a Swing Line Advance pursuant to
any such notice, such Swing Line Advance shall be in lieu of any Revolving
Credit Advance that otherwise may be made by Revolving Credit Lenders pursuant
to such notice.  The aggregate amount of
Swing Line Advances outstanding shall not exceed at any time the lesser of (A)
the Swing Line Commitment and (B) the lesser of the Maximum Amount and (except
for Overadvances) the Borrowing Base, in each case, less the outstanding
balance of the Revolving Loan at such time (“Swing Line Availability”).  Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this Section
1.1(c).  Each Swing Line Advance
shall be made pursuant to a Notice of Revolving Credit advance delivered by
Borrower to Agent in accordance with Section 1.1(a).  Any such notice must be given no later than
11:00 a.m. (New York time) on the Business Day of the proposed Swing Line
Advance.  Unless the Swing Line Lender
has received at least one Business Day’s prior written notice from Requisite
Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender
shall, notwithstanding the failure of any condition precedent set forth in Section
2.2, be entitled to fund that Swing Line Advance, and to have such
Revolving Lender make Revolving Credit Advances in accordance with Section
1.1(c)(iii) or purchase participating interests in accordance with Section
1.1(c)(iv).   Notwithstanding any
other provision of this Agreement or the other Loan Documents, the Swing Line
Loan shall constitute an Index Rate Loan. 
Borrower shall repay the aggregate outstanding principal amount of the
Swing Line Loan upon demand therefor by Agent.

 

Borrower shall execute and deliver to the
Swing Line Lender a promissory note to evidence the Swing Line Commitment.  Such note shall be in the principal amount
of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date
and substantially in the form of Exhibit 1.1(c)(ii)  (the “Swing Line Note”). The Swing
Line Note shall represent the obligation of Borrower to pay the amount of the
Swing Line Commitment or, if less, the aggregate unpaid principal amount of all
Swing Line Advances made to Borrower together with

 

 

interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Swing Line
Loan and all other noncontingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment Termination
Date if not sooner paid in full.

 

The Swing Line Lender, at any time and from
time to time no less frequently than once weekly, shall on behalf of Borrower
(and Borrower hereby irrevocably authorizes the Swing Line Lender to so act on
its behalf) request each Revolving Lender (including the Swing Line Lender) to
make a Revolving Credit Advance to Borrower (which shall be an Index Rate Loan)
in an amount equal to that Revolving Lender’s Pro Rata Share of the principal
amount of the Swing Line Loan (the “Refunded Swing Line Loan”)
outstanding on the date such notice is given. 
Unless any of the events described in Sections 8.1(h) or 8.1(i)
has occurred (in which event the procedures of Section 1.1(c)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a
Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m.
(New York time), in immediately available funds on the Business Day next
succeeding the date that notice is given. 
The proceeds of those Revolving Credit Advances shall be immediately
paid to the Swing Line Lender and applied to repay the Refunded Swing Line
Loan.

 

If, prior to refunding a Swing Line Loan with
a Revolving Credit Advance pursuant to Section 1.1(c)(iii), one of the
events described in Sections 8.1(h) or 8.1(i) has occurred, then,
subject to the provisions of Section 1.1(c)(v) below, each Revolving Lender
shall, on the date such Revolving Credit Advance was to have been made for the
benefit of Borrower, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan in an amount equal to its Pro
Rata Share of such Swing Line Loan. 
Upon request, each Revolving Lender shall promptly transfer to the Swing
Line Lender, in immediately available funds, the amount of its participation
interest.

 

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

 

Reliance on
Notices.  Agent
shall be entitled to rely upon, and shall be fully protected in relying upon,
any Notice of Revolving Credit Advance, Notice of Conversion/Continuation or
similar notice believed by Agent to be genuine.  Agent may assume that each Person executing and delivering any
notice in accordance herewith was duly

 

 

authorized, unless the responsible individual acting thereon for Agent
has actual knowledge to the contrary.

 

Letters of
Credit. 
Subject to and in accordance with the terms and conditions contained
herein and in Annex B, Borrower shall have the right to request, and
Revolving Lenders agree to incur, or purchase participations in, Letter of
Credit Obligations in respect of Borrower.

 

Prepayments.

 

Voluntary
Prepayments, Reductions and Terminations in Revolving Loan Commitments.  Borrower may at any time on at least five
(5) days’ prior written notice to Agent permanently reduce (but not terminate)
the Revolving Loan Commitment; provided that (A) any such reductions
shall be in a minimum amount of $5,000,000 and integral multiples of $1,000,000
in excess of such amount, (B) the Revolving Loan Commitment shall not be
reduced to an amount less than $30,000,000, and (C) after giving effect to such
reductions, Borrower shall comply with Section 1.3(b)(i).  Borrower may at any time on at least ten
(10) days’ prior written notice to Agent terminate the Revolving Loan
Commitment, provided that upon such termination all Loans and other
Obligations shall be immediately due and payable in full and all Letter of
Credit Obligations shall be cash collateralized or otherwise satisfied in
accordance with Annex B hereto. 
Any voluntary prepayment and reduction or termination of the Revolving
Loan Commitment must be accompanied by payment of the Fee required by Section
1.9(c), if any, plus the payment of any LIBOR funding breakage costs in
accordance with Section 1.13(b). 
Upon any such reduction or termination of the Revolving Loan Commitment,
Borrower’s right to request Revolving Credit Advances, or request that Letter
of Credit Obligations be incurred on its behalf, or request Swing Line
Advances, shall simultaneously be permanently reduced or terminated, as the
case may be; provided that a permanent reduction of the Revolving Loan
Commitment shall not require a corresponding pro rata reduction in the L/C
Sublimit.

 

Mandatory
Prepayments.

 

If at any time the outstanding balances of
the Revolving Loan and the Swing Line Loan exceed the lesser of (A) the Maximum
Amount and (B) the Borrowing Base, Borrower shall immediately repay the
aggregate outstanding Revolving Credit Advances to the extent required to eliminate
such excess.  If any such excess remains
after repayment in full of the aggregate outstanding Revolving Credit Advances,
Borrower shall provide cash collateral for the Letter of Credit Obligations in
the manner set forth in Annex B to the extent required to eliminate such
excess.  Notwithstanding the foregoing,
any Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid in
accordance with Section 1.1(a)(iii).

 

Subject to the terms of the Intercreditor
Agreement, immediately upon receipt by any Credit Party of cash proceeds of any
asset disposition (other than proceeds of asset dispositions described in the
final sentence of this clause (ii)), Borrower shall prepay the Loans in an
amount equal to all such proceeds, net of (A) commissions and other reasonable
and customary transaction costs, fees and expenses properly attributable to
such transaction and payable by Borrower in connection therewith (in each case,
paid to non-Affiliates), (B) transfer taxes and deed or mortgage recording
taxes, (C) amounts payable to holders of senior Liens on such asset (to the
extent such Liens constitute Permitted Encumbrances hereunder), if any, and

 

 

(D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith.  Any such prepayment
shall be applied in accordance with Section 1.3(c).  The following shall not be subject to
mandatory prepayment under this clause (ii):  (1) proceeds of sales of Inventory in the ordinary course of
business or sales or other dispositions of surplus, aged or unassigned
Inventory; (2) proceeds of sales or other dispositions of the investments
described in Section 6.2(d); and (3) proceeds of dispositions of
obsolete or unused Equipment, Fixtures or Real Estate, to the extent permitted
under this Agreement, which are reinvested within 360 days following receipt
thereof in assets that replace the assets that were the subject of such asset
disposition or in long-term assets (including expenditures for maintenance,
repair or improvement of existing long-term assets) that are or will be used in
the business of the Credit Parties or in businesses reasonably related thereto.

 

Application of
Certain Mandatory Prepayments.  Any prepayments made by Borrower pursuant to
Sections 1.3(b)(ii) above shall be applied as follows: first, to
Fees and reimbursable expenses of Agent then due and payable pursuant to any of
the Loan Documents; second, to interest then due and payable on the
Swing Line Loan; third, to the principal balance of the Swing Line Loan
until the same has been repaid in full; fourth, to interest then due and
payable on the Revolving Credit Advances; fifth, to the outstanding
principal balance of Revolving Credit Advances until the same has been paid in
full; and sixth, to any Letter of Credit Obligations, to provide cash
collateral therefor in the manner set forth in Annex B, until all such
Letter of Credit Obligations have been fully cash collateralized in the manner
set forth in Annex B.  Neither
the Revolving Loan Commitment nor the Swing Line Commitment shall be
permanently reduced by the amount of any such prepayments; provided, however,
that, if any asset disposition occurs that would result in a mandatory
prepayment pursuant to Section 1.3(b)(ii) and such asset disposition
would constitute an “Asset Sale” (as defined in the Senior Secured Notes
Indenture), then the Revolving Loan Commitment shall be permanently reduced by
the amount of any such prepayment to the extent that the assets sold in such
asset disposition constitute Lender Priority Collateral.

 

Application of
Prepayments from Insurance Proceeds and Condemnation Proceeds.  Prepayments from insurance or condemnation
proceeds in accordance with Section 5.4(c), shall be applied as follows:
insurance proceeds from casualties or losses to Lender Priority Collateral
shall be applied first, to the Swing Line Loans and, second, to the Revolving
Credit Advances; insurance or condemnation proceeds from casualties or losses
to Noteholder Priority Collateral shall be applied in accordance with the terms
of the Intercreditor Agreement.  Neither
the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be
permanently reduced by the amount of any such prepayments; provided, however,
that, if any event occurs that would result in a prepayment from insurance or
condemnation proceeds and such event would constitute an “Asset Sale” (as
defined in the Senior Secured Notes Indenture), then the Revolving Loan
Commitment shall be permanently reduced by the amount of any such prepayment to
the extent that the assets giving rise to the insurance or condemnation
proceeds constitute Lender Priority Collateral.  If the precise amount of insurance or condemnation proceeds
allocable to Lender Priority Collateral as compared to Noteholder Priority
Collateral are not otherwise determined, the allocation and application of
those proceeds shall be in accordance with the terms of the Intercreditor
Agreement.

 

 

No Implied
Consent. 
Nothing in this Section 1.3 shall be construed to constitute
Agent’s or any Lender’s consent to any transaction that is not permitted by
other provisions of this Agreement or the other Loan Documents.

 

Use of
Proceeds/Refinancing and Replacement of Prior
Credit Agreement.  This Agreement
constitutes a refinancing and replacement of the Prior Credit Agreement.  Borrower shall utilize the proceeds of the
Loans made on the Closing Date solely for the purpose of partially funding the
Refinancing.  Disclosure Schedule
(1.4) contains a description of Borrower’s sources and uses of funds as of
the Closing Date, including Loans and Letter of Credit Obligations to be made
or incurred on that date, and a funds flow memorandum detailing how funds from
each source are to be transferred to particular uses.  Following the Closing Date, Borrower shall utilize the proceeds
of the Loans solely for the purpose of the financing of Borrower’s ordinary
working capital and general corporate needs.

 

Interest and Applicable Margins.

 

Borrower shall
pay interest to Agent, for the ratable benefit of Lenders in accordance with
the various Loans being made by each Lender, in arrears on each applicable
Interest Payment Date, at the following rates: (i) with respect to the
Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index
Margin per annum or, at the election of Borrower, the applicable LIBOR Rate
plus the Applicable Revolver LIBOR Margin per annum; and (ii) with respect to
the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin
per annum.

 

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

 

	
  Applicable Revolver Index Margin

  	
   

  	
  1.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  3.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable L/C Margin

  	
   

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Unused Line Fee Margin

  	
   

  	
  0.375

  	
  %

  

 

The Applicable Revolver Index Margin and the
Applicable Revolver LIBOR Margin may be adjusted by reference to the following
grids:

 

	
  If Borrowing Availability is:

  	
   

  	
  Level of
  Applicable Margins:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  < $15,000,000

  	
   

  	
  Level I

  	
   

  
	
  3
  $15,000,000, but < $30,000,000

  	
   

  	
  Level II

  	
   

  
	
  3
  $30,000,000

  	
   

  	
  Level III

  	
   

  

 

 

	
   

  	
   

  	
  Applicable
  Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  
	
  Applicable Revolver Index Margin

  	
   

  	
  1.25

  	
  %

  	
  1.00

  	
  %

  	
  0.75

  	
  %

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  3.00

  	
  %

  	
  2.75

  	
  %

  	
  2.50

  	
  %

  

 

Adjustments in the Applicable Margins commencing with the Fiscal
Quarter beginning July 1, 2004 shall be implemented quarterly on a prospective
basis, based on the average daily Borrowing Availability for the immediately
preceding quarter and in accordance with the preceding grids.  If an Event of Default has occurred and is
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day of the first
calendar month following the date on which such Event of Default is waived or
cured.

 

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

 

All
computations of Fees calculated on a per annum basis and interest shall be made
by Agent on the basis of a 360-day year, in each case for the actual number of
days occurring in the period for which such interest and Fees are payable.  The Index Rate is a floating rate determined
for each day.  Each determination by
Agent of interest rates and Fees hereunder shall be presumptive evidence of the
correctness of such rates and Fees.

 

So long as an
Event of Default has occurred and is continuing under Section 8.1(a), (h) or
(i), or so long as any other Event of Default has occurred and is
continuing and at the election of Agent (or upon the written request of
Requisite Lenders) confirmed by written notice from Agent to Borrower, the
interest rates applicable to the Loans and the Letter of Credit Fees shall be
increased by two percentage points (2%) per annum above the rates of interest
or the rate of such Fees otherwise applicable hereunder unless Agent or Requisite
Lenders elect to impose a smaller increase (the “Default Rate”), and all
outstanding Obligations shall bear interest at the Default Rate applicable to
such Obligations.  Interest and Letter
of Credit Fees at the Default Rate shall accrue from the initial date of such
Event of Default until that Event of Default is cured or waived and shall be
payable upon demand.

 

Subject to the
conditions precedent set forth in Section 2.2, Borrower shall have the
option to (i) request that any Revolving Credit Advance be made as a LIBOR
Loan, (ii) convert at any time all or any part of outstanding Loans (other than
the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any
LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in
accordance with Section 1.13(b) if such conversion is made prior to the
expiration of the LIBOR Period applicable thereto, or (iv) continue all or any
portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the
expiration of the applicable LIBOR Period and the succeeding LIBOR Period of
that continued Loan shall commence on the first day after the last day of the
LIBOR Period of the Loan to be continued. 
Any Loan or group of Loans having the same proposed LIBOR Period to be
made or continued as, or converted into, a LIBOR Loan must be in a minimum
amount of $5,000,000 and integral multiples of $500,000 in excess of such
amount.  Any such election must be made
by 11:00 a.m.

 

 

(New York time) on the Third Business Day prior to (1) the date of
any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end
of each LIBOR Period with respect to any LIBOR Loans to be continued as such,
or (3) the date on which Borrower wishes to convert any Index Rate Loan to
a LIBOR Loan for a LIBOR Period designated by Borrower in such election.  If no election is received with respect to a
LIBOR Loan by 11:00 a.m. (New York time) on the Third Business Day prior to the
end of the LIBOR Period with respect thereto (or if a Default or an Event of
Default has occurred and is continuing or the additional conditions precedent
set forth in Section 2.2 shall not have been satisfied), that LIBOR Loan
shall be converted to an Index Rate Loan at the end of its LIBOR Period.  Borrower must make such election by notice
to Agent in writing, by telecopy or overnight courier.  In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.5(e).

 

Notwithstanding
anything to the contrary set forth in this Section 1.5, if a court
of competent jurisdiction determines in a final order that the rate of interest
payable hereunder exceeds the highest rate of interest permissible under law
(the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.  In no event
shall the total interest received by any Lender pursuant to the terms hereof
exceed the amount that such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate.

 

Eligible
Accounts. 
All of the Accounts owned by Borrower and reflected in the most recent
Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible
Accounts” for purposes of this Agreement, except any Account to which any
of the exclusionary criteria set forth below applies.  Agent shall have the right to establish, modify or eliminate
Reserves against Eligible Accounts from time to time in its reasonable credit
judgment.  In addition, Agent reserves
the right, at any time and from time to time after the Closing Date, to adjust
any of the criteria set forth below, to establish new criteria and to adjust
advance rates with respect to Eligible Accounts, in its reasonable credit
judgment, subject to the approval of Requisite Lenders in the case of
adjustments or new criteria or changes in advance rates which have the effect
of making more credit available. 
Eligible Accounts shall not include any Account of Borrower:

 

that does not
arise from the sale of goods or the performance of services by Borrower in the
ordinary course of its business;

 

(i) upon which
Borrower’s right to receive payment is not absolute or is contingent upon the
fulfillment of any condition whatsoever or (ii) as to which Borrower is not
able to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process, or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant
to a contract under which the Account Debtor’s

 

 

obligation to pay that invoice is subject to Borrower’s completion of
further performance under such contract or is subject to the equitable lien of
a surety bond issuer;

 

to the extent
that any defense, counterclaim, setoff or dispute is asserted as to such
Account;

 

that is not a
true and correct statement of bona fide indebtedness incurred in the amount of
the Account for merchandise sold to or services rendered and accepted by the
applicable Account Debtor;

 

with respect
to which an invoice, reasonably acceptable to Agent in form and substance, has
not been sent to the applicable Account Debtor;

 

that (i) is
not owned by Borrower or (ii) is subject to any Lien of any other Person, other
than Liens in favor of Agent, on behalf of itself and Lenders, and the junior
Lien securing the Indebtedness under the Senior Secured Notes;

 

that arises
from a sale to any director, officer, other employee or Affiliate of any Credit
Party, or to any entity that has any common officer or director with any Credit
Party;

 

that is the
obligation of an Account Debtor that is the United States government or a
political subdivision thereof, or any state, county or municipality or
department, agency or instrumentality thereof unless Agent, in its sole
discretion, has agreed to the contrary in writing and Borrower, if necessary or
desirable, has complied with respect to such obligation with the Federal
Assignment of Claims Act of 1940, or any applicable state, county or municipal
law restricting the assignment thereof with respect to such obligation;

 

that is the
obligation of an Account Debtor located in a foreign country other than Canada
(excluding the provinces of Quebec, Newfoundland, Nunavut and the Northwest
Territories) unless payment thereof is assured by a letter of credit assigned
and delivered to Agent, satisfactory to Agent as to form, amount and issuer;

 

to the extent
Borrower or any Subsidiary thereof is liable for goods sold or services
rendered by the applicable Account Debtor to Borrower or any Subsidiary thereof
but only to the extent of the potential offset;

 

that arises
with respect to goods that are delivered on a bill-and-hold, cash-on-delivery
basis or placed on consignment, guaranteed sale or other terms by reason of
which the payment by the Account Debtor is or may be conditional;

 

that is in
default; provided, that, without limiting the generality of the
foregoing, an Account shall be deemed in default upon the occurrence of any of
the following:

 

the Account is not paid within the earlier
of: sixty (60) days following its due date or ninety (90) days following its
original invoice date; provided, however, that, as to any
Account that is the obligation of an Account Debtor located in a foreign
country and payment thereof is assured by a letter of credit in accordance with
Section 1.6(i) above, such

 

 

Account shall be deemed in default if the Account is not paid within
the earlier of ninety (90) days following its due date or one hundred twenty
(120) days following its original invoice date;

 

the Account Debtor obligated upon such
Account suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or

 

a petition is filed by or against any Account
Debtor obligated upon such Account under any bankruptcy law or any other
federal, state or foreign (including any provincial) receivership, insolvency
relief or other law or laws for the relief of debtors;

 

that is the
obligation of an Account Debtor if fifty percent (50%) or more of the Dollar
amount of all Accounts owing by that Account Debtor are ineligible under the
other criteria set forth in this Section 1.6;

 

as to which
Agent’s Lien thereon, on behalf of itself and Lenders, is not a first priority
perfected Lien;

 

as to which
any of the representations or warranties pertaining to such Account in the Loan
Documents are untrue;

 

to the extent
such Account is evidenced by a judgment, Instrument or Chattel Paper;

 

to the extent
such Account exceeds any credit limit established by Agent, in its reasonable
credit judgment;

 

to the extent
that such Account, together with all other Accounts owing to such Account
Debtor (other than the following Account Debtors: Coca-Cola Company, Florida’s
Natural, Dean Foods, Mead Westvaco, Pactiv and Pepsico) and its Affiliates as
of any date of determination exceed 10% of all Eligible Accounts; or

 

that is
payable in any currency other than Dollars.

 

Eligible
Inventory. 
All of the Inventory owned by the Borrower and reflected in the most
recent Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible
Inventory” for purposes of this Agreement, except any Inventory to which
any of the exclusionary criteria set forth below applies.  Agent shall have the right to establish,
modify, or eliminate Reserves against Eligible Inventory from time to time in
its reasonable credit judgment.  In
addition, Agent reserves the right, at any time and from time to time after the
Closing Date, to adjust any of the criteria set forth below, to establish new
criteria and to adjust advance rates with to Eligible Inventory in its
reasonable credit judgment, subject to the approval of Requisite Lenders in the
case of adjustments, new criteria or changes in advance rates which have the
effect of making more credit available. 
Eligible Inventory shall not include any Inventory of Borrower that:

 

is not owned
by Borrower free and clear of all Liens and rights of any other Person
(including the rights of a purchaser that has made progress payments and the
rights of a

 

 

surety that has issued a bond to assure Borrower’s performance with
respect to that Inventory), except the Liens in favor of Agent, on behalf of
itself and Lenders, and the junior Lien securing the Indebtedness under the
Senior Secured Notes;

 

(i) is not
located on premises owned, leased or rented by Borrower and set forth in Disclosure
Schedule (3.2) or (ii) is stored at a leased location, unless Agent
has given its prior consent thereto and unless (x) a reasonably satisfactory
landlord waiver has been delivered to Agent, or (y) Reserves satisfactory to
Agent have been established with respect thereto, (iii) is stored with a
bailee or warehouseman unless a reasonably satisfactory, acknowledged bailee
letter has been received by Agent and Reserves reasonably satisfactory to Agent
have been established with respect thereto, or (iv) is located at an owned
location subject to a mortgage in favor of a lender other than Agent, unless a
reasonably satisfactory mortgagee waiver has been delivered to Agent, or (v) is
located at any site if the aggregate book value of Inventory at any such
location is less than $200,000;

 

is placed on
consignment or is in transit, except for Inventory in transit between domestic
locations of Credit Parties as to which Agent’s Liens have been perfected at
origin and destination;

 

is covered by
a negotiable document of title, unless such document has been delivered to
Agent with all necessary endorsements, free and clear of all Liens except those
in favor of Agent and Lenders, and the junior Lien securing the Indebtedness
under the Senior Secured Notes;

 

obsolete, slow
moving (in excess of one year’s supply), unsalable, shopworn, seconds, damaged
or unfit for sale, other than “broke Inventory” which is defined as raw
materials Inventory that is damaged or has been cut into nonstandard sizes but
which, in each case, can be recycled or reprocessed into new paper Inventory;

 

consists of
display items or packing or shipping materials, manufacturing supplies,
work-in-process Inventory (other than work-in-process Inventory that is (i)
coated board Inventory with no printing or (ii) in generic roll form, which, in
each case, is readily marketable) or replacement parts;

 

consists of
goods which have been returned by the buyer;

 

is not of a
type held for sale in the ordinary course of Borrower’s business;

 

is not subject
to a first priority lien in favor of Agent on behalf of itself and Lenders,
subject to Permitted Encumbrances as set forth in clause (e) of the
definition thereof (subject to Reserves satisfactory to Agent);

 

breaches any
of the representations or warranties pertaining to Inventory set forth in the
Loan Documents;

 

consists of
any costs associated with “freight-in” charges;

 

 

consists of
Hazardous Materials or goods that can be transported or sold only with licenses
that are not readily available;

 

is not covered
by casualty insurance reasonably acceptable to Agent; or

 

is subject to
any patent or trademark license requiring the payment of royalties or fees or
requiring the consent of the licensor for a sale thereof by Agent.

 

Cash
Management Systems.  On or prior to the Closing Date, Borrower will establish and will
maintain until the Termination Date, the cash management systems described in Annex
C (the “Cash Management Systems”).

 

Fees.

 

Borrower shall
pay to GE Capital, individually, the Fees specified in the GE Capital Fee
Letter.

 

As additional
compensation for the Revolving Lenders, Borrower shall pay to Agent, for the
ratable benefit of such Lenders, in arrears, on the first Business Day of each
month prior to the Commitment Termination Date and on the Commitment
Termination Date, a Fee for Borrower’s non-use of available funds in an amount
equal to the Applicable Unused Line Fee Margin per annum (calculated on the
basis of a 360 day year for actual days elapsed) multiplied by the difference
between (x) the Maximum Amount (as it may be reduced from time to time) and (y)
the average for the period of the daily closing balances of the Revolving Loan
and the Swing Line Loan outstanding during the period for which the such Fee is
due.

 

If Borrower
prepays the Revolving Loan and reduces or terminates the Revolving Loan
Commitment, whether voluntarily or involuntarily and whether before or after
acceleration of the Obligations or if the Commitments are otherwise terminated,
Borrower shall pay to Agent, for the benefit of Lenders as liquidated damages
and compensation for the costs of being prepared to make funds available
hereunder an amount equal to the Applicable Percentage (as defined below)
multiplied by the amount of the reduction of the Revolving Loan Commitment.  As used herein, the term “Applicable
Percentage” shall mean (x) one percent (1.00%), in the case of a prepayment
on or prior to the first anniversary of the Closing Date and (y) one-half of
one percent (0.50%), in the case of a prepayment after the first anniversary of
the Closing Date but on or prior to the second anniversary thereof.  The Credit Parties agree that the Applicable
Percentages are a reasonable calculation of Lenders’ lost profits in view of
the difficulties and impracticality of determining actual damages resulting from
an early termination of the Commitments. 
Notwithstanding the foregoing, no prepayment fee shall be payable by
Borrower upon a mandatory prepayment made pursuant to Sections 1.3(b) or
1.16(c); provided that Borrower does not permanently reduce or terminate
the Revolving Loan Commitment upon any such prepayment and, in the case of
prepayments made pursuant to Section 1.3(b)(ii), the transaction giving
rise to the applicable prepayment is expressly permitted under Section 6.

 

Borrower shall
pay to Agent, for the ratable benefit of Revolving Lenders, the Letter of
Credit Fee as provided in Annex B.

 

 

Receipt of
Payments. 
Borrower shall make each payment under this Agreement not later than
2:00 p.m. (New York time) on the day when due in immediately available funds in
Dollars to the Collection Account.  For
purposes of computing interest and Fees and determining Borrowing Availability
as of any date, all payments shall be deemed received on the Business Day on
which immediately available funds therefor are received in the Collection
Account prior to 2:00 p.m. New York time. 
Payments received after 2:00 p.m. New York time on any Business Day or
on a day that is not a Business Day shall be deemed to have been received on
the following Business Day.

 

Application
and Allocation of Payments.

 

So long as no
Event of Default has occurred and is continuing, (i) payments consisting of
proceeds of Accounts received in the ordinary course of business shall be
applied, first, to the Swing Line Loan and, second, to the Revolving Loan; (ii)
voluntary prepayments shall be applied in accordance with the provisions of Section
1.3(a); and (iii) mandatory prepayments shall be applied as set forth in Sections
1.3(c) and 1.3(d).  All payments and
prepayments applied to a particular Loan shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata Share.  As to any other payment, and as to all
payments made when an Event of Default has occurred and is continuing or
following the Commitment Termination Date, Borrower, subject to the terms of
the Intercreditor Agreement, hereby irrevocably waives the right to direct the
application of any and all payments received from or on behalf of Borrower, and
Borrower hereby irrevocably agrees that Agent shall, subject to the terms of
the Intercreditor Agreement, have the continuing exclusive right to apply any
and all such payments against the Obligations as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account or any other
books and records.  In the absence of a
specific determination by Agent with respect thereto, payments shall be applied
to amounts then due and payable in the following order: (1) to Fees and Agent’s
expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the other Loans,
ratably in proportion to the interest accrued as to each Loan; (5) to principal
payments on the other Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of the other Loans and outstanding Letter
of Credit Obligations; and (6) to all other Obligations including expenses of
Lenders to the extent reimbursable under Section 11.3.

 

Agent is
authorized to, and at its sole election may, charge to the Revolving Loan
balance on behalf of Borrower and cause to be paid all Fees, expenses, Charges,
costs (including insurance premiums in accordance with Section 5.4(a))
and interest and principal, other than principal of the Revolving Loan, owing
by Borrower under this Agreement or any of the other Loan Documents if and to
the extent Borrower fails to pay promptly any such amounts as and when due,
even if the amount of such charges would exceed Borrowing Availability at such
time.  At Agent’s option and to the
extent permitted by law, any charges so made shall constitute part of the
Revolving Loan hereunder.

 

Loan Account
and Accounting.  Agent shall
maintain a loan account (the “Loan Account”) on its books to record: all
Advances, all payments made by Borrower, and all other debits and credits as
provided in this Agreement with respect to the Loans or any other
Obligations.  All entries in the Loan
Account shall be made in accordance with Agent’s

 

 

customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent’s most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by Borrower; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect Borrower’s duty to pay the Obligations.  Agent shall render to Borrower a monthly accounting
of transactions with respect to the Loans setting forth the balance of the Loan
Account for the immediately preceding month. 
Unless Borrower notifies Agent in writing of any objection to any such
accounting (specifically describing the basis for such objection), within
thirty (30) days after the date thereof, each and every such accounting shall
be presumptive evidence of all matters reflected therein.  Only those items expressly objected to in
such notice shall be deemed to be disputed by Borrower.  Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.

 

Indemnity.

 

Each Credit
Party that is a signatory hereto shall jointly and severally indemnify and hold
harmless each of Agent, Lenders and their respective Affiliates, and each such
Person’s respective officers, directors, employees, attorneys, agents and
representatives (each, an “Indemnified Person”), from and against any
and all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys’ fees and disbursements and other
costs of investigation or defense, including those incurred upon any appeal)
that may be instituted or asserted against or incurred by any such Indemnified
Person as the result of credit having been extended, suspended or terminated
under this Agreement and the other Loan Documents and the administration of
such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and legal
costs and expenses arising out of or incurred in connection with disputes
between or among any  parties to any of the Loan Documents
(collectively, “Indemnified Liabilities”); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person
to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person’s gross negligence or
willful misconduct.  NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT,
ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT
OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

To induce
Lenders to provide the LIBOR Rate option on the terms provided herein, if (i)
any LIBOR Loans are repaid in whole or in part prior to the last day of any
applicable LIBOR Period (whether that repayment is made pursuant to any
provision of this Agreement or any other Loan Document or occurs as a result of
acceleration, by operation of law or otherwise); (ii) Borrower shall default in
payment when due of the principal amount of or

 

 

interest on any LIBOR Loan; (iii) Borrower shall refuse to accept any
borrowing of, or shall request a termination of any borrowing, conversion into
or continuation of LIBOR Loans after Borrower has given notice requesting the
same in accordance herewith; or (iv) Borrower shall fail to make any prepayment
of a LIBOR Loan after Borrower has given a notice thereof in accordance
herewith, then Borrower shall indemnify and hold harmless each Lender from and
against all losses, costs and expenses resulting from or arising from any of
the foregoing.  Such indemnification
shall include any loss (including loss of margin) or expense arising from the reemployment
of funds obtained by it or from fees payable to terminate deposits from which
such funds were obtained.  For the
purpose of calculating amounts payable to a Lender under this subsection, each
Lender shall be deemed to have actually funded its relevant LIBOR Loan through
the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal
to the amount of that LIBOR Loan and having a maturity comparable to the
relevant LIBOR Period; provided, that each Lender may fund each of its
LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be
utilized only for the calculation of amounts payable under this
subsection.  This covenant shall survive
the termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.  As promptly as
practicable under the circumstances, each Lender shall provide Borrower with
its written calculation of all amounts payable pursuant to this Section
1.13(b), and such calculation shall be binding on the parties hereto unless
Borrower shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.

 

Access.  Each Credit Party that is a party hereto
shall, during normal business hours, from time to time upon two (2) Business
Days’ prior notice as frequently as Agent reasonably requests: (a) provide
Agent and any of its officers, employees and agents access to its properties,
facilities, advisors, officers and employees of each Credit Party and to the
Collateral, (b) permit Agent, and any of its officers, employees and agents, to
inspect, audit and make extracts from any Credit Party’s books and records, and
(c) permit Agent, and its officers, employees and agents, to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory and
other Collateral of any Credit Party. 
If an Event of Default has occurred and is continuing, each such Credit
Party shall provide such access to Agent and to each Lender at all times and
without advance notice.  Furthermore, so
long as any Event of Default has occurred and is continuing, Borrower shall
provide Agent and each Lender with access to its suppliers and customers.  Each Credit Party shall make available to
Agent and its counsel reasonably promptly originals or copies of all books and
records that Agent may reasonably request. 
Each Credit Party shall deliver any document or instrument necessary for
Agent, as it may from time to time request, to obtain records from any service
bureau or other Person that maintains records for such Credit Party, and shall
maintain duplicate records or supporting documentation on media, including
computer tapes and discs owned by such Credit Party.  Agent will give Lenders at least five (5) days’ prior written
notice of regularly scheduled audits. 
Representatives of other Lenders may accompany Agent’s representatives
on regularly scheduled audits at no charge to Borrower.  Unless a Default or Event of Default shall
have occurred and be continuing, Borrower shall not be required to pay for more
than two (2) collateral field examinations per Fiscal Year.

 

Taxes.

 

Any and all
payments by Borrower hereunder or under the Notes shall be made, in accordance
with this Section 1.15, free and clear of and without deduction for any
and all

 

 

present or future Taxes.  If
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under the Notes, (i) the sum payable shall be
increased as much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 1.15) Agent or Lenders, as applicable, receive an amount
equal to the sum they would have received had no such deductions been made,
(ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law.  Within thirty (30) days
after the date of any payment of Taxes, Borrower shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof.

 

Each Credit
Party that is a signatory hereto shall indemnify and, within ten (10) days of
demand therefor, pay Agent and each Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable under this Section
1.15) paid by Agent or such Lender, as appropriate, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.

 

Each Lender
organized under the laws of a jurisdiction outside the United States (a “Foreign
Lender”) as to which payments to be made under this Agreement or under the
Notes are exempt from United States withholding tax under an applicable statute
or tax treaty shall provide to Borrower and Agent a properly completed and
executed IRS Form W-8ECI or Form W-8BEN or other applicable form, certificate
or document prescribed by the IRS or the United States certifying as to such Foreign
Lender’s entitlement to such exemption (a “Certificate of Exemption”).  Any foreign Person that seeks to become a
Lender under this Agreement shall provide a Certificate of Exemption to
Borrower and Agent prior to becoming a Lender hereunder.  No foreign Person may become a Lender
hereunder if such Person fails to deliver a Certificate of Exemption in advance
of becoming a Lender.

 

Capital Adequacy; Increased Costs;
Illegality.

 

If any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender’s capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction.  A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by such
Lender to Borrower and to Agent shall be presumptive evidence of the matters
set forth therein.

 

If, due to
either (i) the introduction of or any change in any law or regulation (or
any change in the interpretation thereof) or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), in each case adopted after the
Closing Date, there shall be any increase in the cost to any Lender

 

 

of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost.  A certificate as to the amount of such
increased cost, submitted to Borrower and to Agent by such Lender, shall be
presumptive evidence of the matters set forth therein.  Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this Section
1.16(b).

 

Notwithstanding
anything to the contrary contained herein, if the introduction of or any change
in any law or regulation (or any change in the interpretation thereof) shall
make it unlawful, or any central bank or other Governmental Authority shall
assert that it is unlawful, for any Lender to agree to make or to make or to
continue to fund or maintain any LIBOR Loan, then, unless that Lender is able
to make or to continue to fund or to maintain such LIBOR Loan at another branch
or office of that Lender without, in that Lender’s reasonable opinion,
materially adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Borrower
through Agent, (i) the obligation of such Lender to agree to make or to
make or to continue to fund or maintain LIBOR Loans shall terminate and
(ii) Borrower shall forthwith prepay in full all outstanding LIBOR Loans
owing to such Lender, together with interest accrued thereon, unless
Borrower, within five (5) Business Days after the delivery of such notice and
demand, converts all LIBOR Loans into Index Rate Loans.

 

Within thirty
(30) days after receipt by Borrower of written notice and demand from any
Lender (an “Affected Lender”) for payment of additional amounts or
increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b),
Borrower may, at its option, notify Agent and such Affected Lender of its
intention to replace the Affected Lender. 
So long as no Default or Event of Default has occurred and is
continuing, Borrower, with the consent of Agent, may obtain, at Borrower’s
expense, a replacement Lender (“Replacement Lender”) for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent.  If Borrower obtains a Replacement Lender
within ninety (90) days following notice of its intention to do so, the
Affected Lender must sell and assign its Loans and Commitments to such
Replacement Lender for an amount equal to the principal balance of all Loans
held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale and such assignment shall not require the
payment of an assignment fee to Agent; provided, that Borrower shall
have reimbursed such Affected Lender for the additional amounts or increased
costs that it is entitled to receive under this Agreement through the date of
such sale and assignment. 
Notwithstanding the foregoing, Borrower shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within 15 days following its receipt of
Borrower’s notice of intention to replace such Affected Lender.  Furthermore, if Borrower gives a notice of
intention to replace and does not so replace such Affected Lender within ninety
(90) days thereafter, Borrower’s rights under this Section 1.16(d) shall
terminate with respect to such Affected Lender and Borrower shall promptly pay
all increased costs or additional amounts demanded by such Affected Lender pursuant
to Sections 1.15(a), 1.16(a) and 1.16(b).

 

 

Single Loan.  All Loans to Borrower and all of the other
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until
the Termination Date, by all of the Collateral.

 

CONDITIONS PRECEDENT

 

Conditions to
the Initial Loans.  No Lender shall be obligated to make any Loan or incur any Letter
of Credit Obligations on the Closing Date, or to take, fulfill, or perform any
other action hereunder, until the following conditions have been satisfied or
provided for in a manner reasonably satisfactory to Agent, or waived in writing
by Agent and Requisite Lenders:

 

Credit
Agreement; Loan Documents.  This Agreement or counterparts hereof shall have been duly
executed by, and delivered to, Borrower, each other Credit Party, Agent and
Lenders; and Agent shall have received such documents, instruments, agreements
and legal opinions as Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the Closing Checklist attached hereto as Annex
D, each in form and substance reasonably satisfactory to Agent.

 

Approvals.  Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons, including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions, including, without
limitation, the consent of International Paper, or (ii) an officer’s
certificate in form and substance reasonably satisfactory to Agent affirming
that no such consents or approvals are required.

 

Opening
Availability. 
The Eligible Accounts and Eligible Inventory supporting the initial
Revolving Credit Advance and the initial Letter of Credit Obligations incurred
and the amount of the Reserves to be established on the Closing Date shall be sufficient
in value, as determined by Agent, to provide Borrower with Borrowing
Availability, after giving effect to the initial Revolving Credit Advance, the
incurrence of any initial Letter of Credit Obligations and the consummation of
the Related Transactions (on a pro forma basis, with trade payables being paid
currently, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least $15,000,000.

 

Payment of
Fees.  Borrower
shall have paid the Fees required to be paid on the Closing Date in the
respective amounts specified in Section 1.9 (including the Fees
specified in the GE Capital Fee Letter), and shall have reimbursed Agent for
all fees, costs and expenses of closing presented as of the Closing Date.

 

Capital
Structure: Other Indebtedness.  The capital and corporate structure of each
Credit Party and the terms and conditions of all Indebtedness of each Credit
Party shall be acceptable to Agent in its sole discretion.

 

Due Diligence.  Agent shall have completed its business and
legal due diligence, including a roll forward of its previous Collateral audit
with results reasonably satisfactory to Agent. 
In addition, Borrower shall have demonstrated to Agent’s reasonable
satisfaction that no amounts will be payable during the term of this Agreement
under the Earn-out.

 

 

Consummation
of Related Transactions.  Agent shall have received final and complete copies of each of
the other Related Transactions Documents, each of which shall be in full force
and effect in form and substance reasonably satisfactory to Agent.  The other Related Transactions shall have
been consummated in accordance with the terms of the other Related Transactions
Documents.  Without limiting the
generality of the foregoing, (i) Holdings shall have received at least
$107,000,000 in cash from the issuance of the Senior Secured Notes, (ii) each
of the Senior Secured Notes Documents shall be in form and substance
satisfactory to Agent and (iii) the trustee for the holders of the Senior
Secured Notes shall have entered into the Intercreditor Agreement, which shall
be in form and substance satisfactory to Agent.

 

Amendment of
Seller Note. 
International Paper shall have agreed to extend the final maturity of
the Seller Note to a date no earlier than May 14, 2009, on terms and conditions
satisfactory to Agent.

 

Further
Conditions to Each Loan.  Except as otherwise expressly provided herein, no Lender shall be
obligated to fund any Advance, convert or continue any Loan as a LIBOR Loan or
incur any Letter of Credit Obligation, if, as of the date thereof:

 

any
representation or warranty by any Credit Party contained herein or in any other
Loan Document is untrue or incorrect as of such date as determined by Agent or
Requisite Lenders, except to the extent that such representation or warranty
expressly relates to an earlier date and except for changes therein expressly
permitted or expressly contemplated by this Agreement, and Agent or Requisite
Lenders have determined not to make such Advance, convert or continue any Loan
as LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact
that such warranty or representation is untrue or incorrect;

 

 (i) any Default or Event of Default has
occurred and is continuing or would result after giving effect to any Advance
(or the incurrence of any Letter of Credit Obligation), and Agent or Requisite
Lenders shall have determined not to make any Advance, convert or continue any
Loan as a LIBOR Loan or incur any Letter of Credit Obligation as a result of
that Default or Event of Default; or

 

after giving
effect to any Advance (or the incurrence of any Letter of Credit Obligations),
the outstanding principal amount of the Revolving Loan would exceed the lesser
of the Borrowing Base and the Maximum Amount, in each case, less the then
outstanding principal amount of the Swing Line Loan.

 

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

 

REPRESENTATIONS AND WARRANTIES

 

To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and
severally, make the following representations and

 

 

warranties to Agent and each Lender with respect to all Credit Parties,
each and all of which shall survive the execution and delivery of this
Agreement.

 

Corporate Existence; Compliance with Law.  Each Credit Party (a) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization set forth in Disclosure Schedule (3.1);
(b) is duly qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not result in exposure to losses or liabilities which could
reasonably be expected to have a Material Adverse Effect; (c) has the requisite
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease and to conduct its business as now conducted or proposed to be conducted;
(d) subject to specific representations regarding Environmental Laws, has all
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct;
(e) is in compliance with its charter and bylaws or partnership or operating
agreement, as applicable; and (f) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws, is in
compliance with all applicable provisions of law, except where the failure to
comply, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

 

Executive Offices, Collateral Locations,
FEIN.  As of the Closing Date, each
Credit Party’s name as it appears in official filings in its state of
incorporation or organization, state of incorporation or organization,
organization type, organization number, if any, issued by its state
incorporation or organization, and the current location of each Credit Party’s
chief executive office and the warehouses and premises at which any Collateral
is located are set forth in Disclosure Schedule (3.2), and none of such
locations has changed within four (4) months preceding the Closing Date.  In addition, Disclosure Schedule (3.2)
lists the federal employer identification number of each Credit Party.

 

Corporate Power, Authorization, Enforceable
Obligations.  The execution,
delivery and performance by each Credit Party of the Loan Documents to which it
is a party and the creation of all Liens provided for therein: (a) are within
such Person’s power; (b) have been duly authorized by all necessary corporate,
limited liability company or limited partnership action; (c) do not contravene
any provision of such Person’s charter, bylaws or partnership or operating
agreement as applicable; (d) do not violate any law or regulation, or any order
or decree of any court or Governmental Authority; (e) do not conflict with or
result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon any of the
property of such Person other than those in favor of Agent, on behalf of itself
and Lenders, pursuant to the Loan Documents; and (g) do not require the consent
or approval of any Governmental Authority or any other Person, except those
referred to in Section 2.1(c), all of which will have been duly
obtained, made or complied with prior to the Closing Date.  Each of the Loan Documents shall be duly
executed and delivered by each Credit Party that is a party thereto and each such
Loan Document shall constitute a legal,

 

 

valid and binding obligation of such Credit Party enforceable against
it in accordance with its terms.

 

Financial
Statements and Projections.  Except for the Projections, all Financial
Statements concerning Holdings and its Subsidiaries that are referred to below
have been prepared in accordance with GAAP consistently applied throughout the
periods covered (except as disclosed therein and except, with respect to
unaudited Financial Statements, for the absence of footnotes and normal year-end
audit adjustments) and present fairly in all material respects the financial
position of the Persons covered thereby as at the dates thereof and the results
of their operations and cash flows for the periods then ended.

 

Financial
Statements. 
The following Financial Statements attached hereto as Disclosure
Schedule (3.4(a)) have been delivered on the date hereof:

 

The audited consolidated and consolidating
balance sheets at December 31, 2002 and the related statements of income and
cash flows of Holdings and its Subsidiaries for the Fiscal Year then ended,
certified by KPMG.

 

The unaudited balance sheet(s) at September
30, 2003 and the related statement(s) of income and cash flows of Holdings and
its Subsidiaries for the three Fiscal Quarters then ended.

 

Pro Forma.  The Pro Forma delivered on the date hereof
and attached hereto as Disclosure Schedule (3.4(b)) was prepared by
Borrower giving pro forma effect to the Related Transactions, was based
on the unaudited consolidated and consolidating balance sheets of Borrower and
its Subsidiaries dated September 30, 2003, and was prepared in accordance with
GAAP, with only such adjustments thereto as would be required in accordance
with GAAP.

 

Projections.  The Projections delivered on the date hereof
and attached hereto as Disclosure Schedule (3.4(c)) have been prepared
by Borrower in light of the past operations of its businesses and reflect
projections for the three year period beginning on January 1, 2004 on a
quarter-by-quarter basis for the first year and on a year-by-year basis
thereafter.  The Projections are based
upon the same accounting principles as those used in the preparation of the
financial statements described above and the estimates and assumptions stated
therein, all of which Borrower believes to be reasonable and fair in light of
current conditions and current facts known to Borrower and, as of the Closing
Date, reflect Borrower’s good faith and reasonable estimates of the future
financial performance of Borrower for the period set forth therein.  The Projections are not a guaranty of future
performance, and actual results may differ from the Projections.

 

Material
Adverse Effect. 
Between September 30, 2003 and the Closing Date, (a) no Credit Party has
incurred any obligations, contingent or noncontingent liabilities, liabilities
for Charges, long-term leases or unusual forward or long-term commitments that
are not reflected in the Pro Forma and that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) no contract,
lease or other agreement or instrument has been entered into by any Credit
Party or has become binding upon any Credit Party’s assets and no law or
regulation applicable to any Credit Party has been adopted that has had or
could reasonably be

 

 

expected to have a Material Adverse Effect, and (c) except as set forth
on Disclosure Schedule (3.5), no Credit Party is in default and to the
best of Borrower’s knowledge no third party is in default under any material
contract, lease or other agreement or instrument, that alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.  Since September 30, 2003, no event has
occurred, that alone or together with other events, could reasonably be
expected to have a Material Adverse Effect.

 

Ownership of
Property; Liens. 
As of the Closing Date, the real estate (“Real Estate”) listed in
Disclosure Schedule (3.6) constitutes all of the real property owned,
leased, subleased, or used by any Credit Party other than vacant lots which are
not used in the business of any Credit Party and at which no Collateral is
located having a value not in excess of $500,000 for any individual property
and not in excess of $1,500,000 in the aggregate.  Each Credit Party owns good and marketable fee simple title to
all of its owned Real Estate, and valid and marketable leasehold interests in
all of its leased Real Estate, all as described on Disclosure Schedule (3.6),
and copies of all such leases or a summary of terms thereof reasonably
satisfactory to Agent have been delivered to Agent.  Disclosure Schedule (3.6) further describes any Real
Estate with respect to which any Credit Party is a lessor, sublessor or
assignor as of the Closing Date.  Each
Credit Party also has good and marketable title to, or valid leasehold
interests in, all of its personal property and assets.  As of the Closing Date, none of the
properties and assets of any Credit Party are subject to any Liens other than
Permitted Encumbrances and Liens securing Indebtedness under the Senior Secured
Notes, and there are no facts, circumstances or conditions known to any Credit
Party that may result in any Liens (including Liens arising under Environmental
Laws) other than Permitted Encumbrances and Liens securing Indebtedness under
the Senior Secured Notes.  Each Credit
Party has received all deeds, assignments, waivers, consents, nondisturbance
and attornment or similar agreements, bills of sale and other documents, and
has duly effected all recordings, filings and other actions necessary to
establish, protect and perfect such Credit Party’s right, title and interest in
and to all such Real Estate and other properties and assets.  Disclosure Schedule (3.6) also
describes any purchase options, rights of first refusal or other similar contractual
rights pertaining to any Real Estate. 
As of the Closing Date, no portion of any Credit Party’s Real Estate has
suffered any material damage by fire or other casualty loss that has not
heretofore been repaired and restored in all material respects to its original
condition or otherwise remedied.  As of
the Closing Date, all material permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and used for all
of the purposes for which it is currently occupied and used have been lawfully
issued and are in full force and effect.

 

Labor Matters.  Except as set forth on Disclosure
Schedule (3.7), as of the Closing Date: (a) no strikes or other material
labor disputes against any Credit Party are pending or, to any Credit Party’s
knowledge, threatened; (b) hours worked by and payment made to employees of
each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d)
no Credit Party is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus,
restricted stock, stock option, or stock appreciation plan or agreement or any
similar plan, agreement or arrangement (and true and complete copies of any
agreements described on Disclosure Schedule (3.7) have been delivered to
Agent); (e) there is no organizing activity

 

 

involving any Credit Party pending or, to any Credit Party’s knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party’s knowledge,
threatened with the National Labor Relations Board, and no labor organization
or group of employees of any Credit Party has made a pending demand for
recognition; and (g) there are no material complaints or charges against
any Credit Party pending or, to the knowledge of any Credit Party, threatened
to be filed with any Governmental Authority or arbitrator based on, arising out
of, in connection with, or otherwise relating to the employment or termination
of employment by any Credit Party of any individual.

 

Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness.  Except as
set forth in Disclosure Schedule (3.8), as of the Closing Date, no
Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person.  All of the issued and outstanding Stock of
each Credit Party is owned by each of the Stockholders and in the amounts set
forth in Disclosure Schedule (3.8). 
Except as set forth in Disclosure Schedule (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock
or other equity securities of its Subsidiaries.  All outstanding Indebtedness and Guaranteed Indebtedness of each
Credit Party as of the Closing Date (except for the Obligations) is described
in Section 6.3 (including Disclosure Schedule (6.3)).

 

Government
Regulation. 
No Credit Party is an “investment company” or an “affiliated person” of,
or “promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in the Investment Company Act of 1940.  No Credit Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, or
any other federal or state statute that restricts or limits its ability to
incur Indebtedness or to perform its obligations hereunder. The making of the
Loans by Lenders to Borrower, the incurrence of the Letter of Credit
Obligations on behalf of Borrower, the application of the proceeds thereof and
repayment thereof and the consummation of the Related Transactions will not
violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission.

 

Margin
Regulations. 
No Credit Party is engaged, nor will it engage, principally or as one of
its important activities, in the business of extending credit for the purpose
of “purchasing” or “carrying” any “margin stock” as such terms are defined in
Regulation U of the Federal Reserve Board as now and from time to time
hereafter in effect (such securities being referred to herein as “Margin
Stock”).  No Credit Party owns any
Margin Stock, and none of the proceeds of the Loans or other extensions of
credit under this Agreement will be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock, for the purpose of reducing
or retiring any Indebtedness that was originally incurred to purchase or carry
any Margin Stock or for any other purpose that might cause any of the Loans or
other extensions of credit under this Agreement to be considered a “purpose
credit” within the meaning of Regulations T, U or X of the Federal Reserve
Board.  No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.

 

Taxes.  All Federal and other material tax returns,
reports and statements, including information returns, required by any
Governmental Authority to be filed by any Credit Party

 

 

have been filed with the appropriate Governmental Authority, and all
Charges have been paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto for nonpayment thereof, excluding Charges
or other amounts being contested in accordance with Section 5.2(b).  Proper and accurate amounts have been
withheld by each Credit Party from its respective employees for all periods in
full and complete compliance with all applicable federal, state, local and
foreign laws and such withholdings have been timely paid to the respective
Governmental Authorities.  Disclosure
Schedule (3.11) sets forth as of the Closing Date those taxable years for
which any Credit Party’s tax returns are currently being audited by the IRS or
any other applicable Governmental Authority and any assessments or threatened
assessments in connection with such audit, or otherwise currently outstanding.  Except as described in Disclosure
Schedule (3.11), as of the Closing Date, no Credit Party has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. 
None of the Credit Parties and their respective predecessors are liable
for any Charges: (a) under any agreement (including any tax sharing agreements)
or (b) to each Credit Party’s knowledge, as a transferee.  As of the Closing Date, no Credit Party has
agreed or been requested to make any adjustment under IRC Section 481(a), by
reason of a change in accounting method or otherwise, which would reasonably be
expected to have a Material Adverse Effect.

 

ERISA.

 

Disclosure
Schedule (3.12) lists as of the Closing Date, all
Plans and separately identifies all Pension Plans, including Title IV Plans,
Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare
Plans.  Copies of all such listed Plans,
together with a copy of the latest form IRS/DOL 5500-series for each such Plan
have been delivered to Agent.  Except
with respect to Multiemployer Plans, each Qualified Plan has been determined by
the IRS to qualify under Section 401 of the IRC, the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the IRC, and, nothing has occurred that could reasonably be expected to
cause the loss of such qualification or tax-exempt status.  Each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the IRC, including the
timely filing of all reports required under the IRC or ERISA, including the
statement required by 29 CFR Section 2520.104-23.  Neither any Credit Party nor ERISA Affiliate has failed to make
any material contribution or pay any material amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of any such
Plan.  Neither any Credit Party nor
ERISA Affiliate has engaged in a non-exempt “prohibited transaction,” as
defined in Section 406 of ERISA and Section 4975 of the IRC, in connection with
any Plan, that would subject any Credit Party to a material tax on prohibited
transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC.

 

Except as set
forth in Disclosure Schedule (3.12): (i) no Title IV Plan has any
material Unfunded Pension Liability; (ii) no ERISA Event or event described in
Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge
of any Credit Party, threatened material claims (other than claims for benefits
in the normal course), sanctions, actions or lawsuits, asserted or instituted
against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no
Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any
material liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no

 

 

Title IV Plan of any Credit Party or ERISA Affiliate has been
terminated, whether or not in a “standard termination” as that term is used in
Section 4041 of ERISA, nor has any Title IV Plan of any Credit Party or ERISA
Affiliate (determined at any time within the past five years) with material
Unfunded Pension Liabilities been transferred outside of the “controlled group”
(within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or
ERISA Affiliate; (vi) except in the case of any ESOP or any eligible individual
account plan (as defined in Section 407(d)(3) of ERISA), Stock of all Credit
Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10%
of fair market value of the assets of any Plan measured on the basis of fair
market value as of the latest valuation date of any Plan; and (vii) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the Standard &
Poor’s Corporation or an equivalent rating by another nationally recognized
rating agency.

 

No Litigation.  No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority
or before any arbitrator or panel of arbitrators (collectively, “Litigation”),
(a) that challenges any Credit Party’s right or power to enter into or
perform any of its obligations under the Loan Documents to which it is a party,
or the validity or enforceability of any Loan Document or any action taken
thereunder, or (b) that has a reasonable risk of being determined adversely to
any Credit Party and that, if so determined, could reasonably be expected to
have a Material Adverse Effect.  Except
as set forth on Disclosure Schedule (3.13), as of the Closing Date there
is no Litigation pending or threatened that seeks damages in excess of $250,000
or injunctive relief against, or alleges criminal misconduct of, any Credit
Party.

 

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

 

Intellectual
Property. 
As of the Closing Date, each Credit Party owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now
conducted by it or presently proposed to be conducted by it, and each Patent,
Trademark, Copyright and License is listed, together with application or
registration numbers, as applicable, in Disclosure Schedule (3.15).  Each Credit Party conducts its business and
affairs without infringement of or interference with any Intellectual Property
of any other Person in any material respect. 
Except as set forth in Disclosure Schedule (3.15), no Credit
Party is aware of any material infringement claim by any other Person with
respect to any Intellectual Property.

 

Full
Disclosure. 
No information contained in this Agreement, any of the other Loan
Documents, any Projections, Financial Statements or Collateral Reports or other
written reports from time to time prepared by any Credit Party and delivered
hereunder or any written statement prepared by any Credit Party and furnished
by or on behalf of any Credit Party to Agent or any Lender pursuant to the
terms of this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. 
Projections from time to time delivered hereunder are or will be based
upon the estimates and assumptions stated therein, all of which Borrower
believed at the time of delivery to be

 

 

reasonable and fair in light of current conditions and current facts
known to Borrower as of such delivery date, and reflect Borrower’s good faith
and reasonable estimates of the future financial performance of Borrower and of
the other information projected therein for the period set forth therein.  Such Projections are not a guaranty of
future performance and actual results may differ from those set forth in such
Projections.  The Liens granted to
Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents
will at all times be fully perfected first priority Liens in and to the
Collateral described therein, subject, as to priority, only to Permitted Encumbrances.

 

Environmental Matters.

 

Except as set
forth in Disclosure Schedule (3.17), as of the Closing Date: (i) the
Real Estate is free of contamination from any Hazardous Material except for
such contamination that is not reasonably likely to result in a Material
Adverse Effect; (ii) no Credit Party has caused or suffered to occur any
Release of Hazardous Materials on, at, in, under, above, to, from or about any
of its Real Estate, except for Releases that, individually or in the aggregate,
are not reasonably likely to result in a Material Adverse Effect; (iii) the
Credit Parties are and have been in compliance with all Environmental Laws,
except for such noncompliance which would not reasonably be likely to result in
a Material Adverse Effect; (iv) the Credit Parties have obtained, and are in
compliance with, all Environmental Permits required by Environmental Laws for
the operations of their respective businesses as presently conducted or as
proposed to be conducted, except where the failure to so obtain or comply with
such Environmental Permits would not result in a Material Adverse Effect, and
all such Environmental Permits are valid, uncontested and in good standing; (v)
no Credit Party is involved in operations or knows of any facts, circumstances
or conditions, including any Releases of Hazardous Materials, that are
reasonably likely to result in a Material Adverse Effect, and no Credit Party
has permitted any current or former tenant or occupant of the Real Estate to
engage in any such operations; (vi) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
which seeks damages, penalties, fines, costs or expenses reasonably likely to
result in a Material Adverse Effect; (vii) no written notice has been received
by any Credit Party identifying it as a “potentially responsible party” or
requesting information under CERCLA or analogous state statutes, and to the
knowledge of the Credit Parties, there are no facts, circumstances or
conditions that may result in any Credit Party being identified as a
“potentially responsible party” under CERCLA or analogous state statutes,
except with respect to notices, requests, conditions or circumstances not
reasonably likely, individually or in the aggregate, to result in a Material
Adverse Effect; and (viii) the Credit Parties have provided to Agent copies of
all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities, in
each case relating to any Credit Party, in each case prepared, delivered or
provided since May 14, 1999, and in each case in the Credit Parties’ possession
or custody.

 

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

 

 

Insurance.  Disclosure Schedule (3.18) lists all
insurance policies of any nature maintained, as of the Closing Date, for
current occurrences by each Credit Party, as well as a summary of the terms of
each such policy.

 

Deposit and
Disbursement Accounts.  Disclosure Schedule (3.19) lists all banks and other
financial institutions at which any Credit Party maintains deposit or other
accounts as of the Closing Date, including any Disbursement Accounts, and such
Schedule correctly identifies the name, address and telephone number of each
depository, the name in which the account is held, a description of the purpose
of the account, and the complete account number therefor.

 

Government
Contracts. 
Except as set forth in Disclosure Schedule (3.20), as of the
Closing Date, no Credit Party is a party to any contract or agreement with any
Governmental Authority and no Credit Party’s Accounts are subject to the Federal
Assignment of Claims Act (31 U.S.C. Section 3727) or any similar state or local
law.

 

Customer and
Trade Relations. 
As of the Closing Date, there exists no actual or, to the knowledge of
any Credit Party, threatened termination or cancellation of, or any material
adverse modification or change in:  the
business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the ten largest customers of such Credit Party; or the business
relationship of any Credit Party with any supplier essential to its operations.

 

Bonding;
Licenses. 
Except as set forth on Disclosure Schedule (3.22), as of the
Closing Date, no Credit Party is a party to or bound by any surety bond agreement
or bonding requirement with respect to products or services sold by it or any
trademark or patent license agreement with respect to products sold by it.

 

Solvency.  Both before and after giving effect to (a)
the Loans and Letter of Credit Obligations to be made or incurred on the
Closing Date or such other date as Loans and Letter of Credit Obligations
requested hereunder are made or incurred, (b) the disbursement of the proceeds
of such Loans pursuant to the instructions of Borrower, (c) the Refinancing and
the consummation of the other Related Transactions and (d) the payment and
accrual of all transaction costs in connection with the foregoing, each Credit
Party is and will be Solvent.

 

International
Paper Subordinated Debt.  Borrower has delivered to Agent a complete and correct copy of
the Seller Note.  The Subordination
Agreement is, to the best of each Credit Party’s knowledge, enforceable against
International Paper by Agent, for the benefit of itself and Lenders.  All Obligations, including the Obligations
to pay principal of and interest on the Loans, the Obligations to pay Fees, and
the Letter of Credit Obligations, constitute senior Indebtedness entitled to
the benefits of the Subordination Agreement. 
Neither Borrower nor Holdings has incurred any indebtedness for borrowed
money in violation of Section 3(g) or any other provision of the Seller
Note.  The principal of and interest on
the Loans, the Obligation to pay Fees, all Letter of Credit Obligations and all
other Obligations will constitute “senior debt” as that or any similar term is
or may be used in any other instrument evidencing or applicable to any other
Subordinated Debt.  Each of Holdings and
Borrower acknowledge that Agent and each Lender are entering into this
Agreement and are extending the Commitments in reliance upon the provisions of
the Subordination Agreement and this Section 3.24.

 

 

FINANCIAL STATEMENTS AND INFORMATION

 

Reports and
Notices.

 

Each Credit
Party executing this Agreement hereby agrees that from and after the Closing
Date and until the Termination Date, it shall deliver to Agent or to Agent and
Lenders, as required, the Financial Statements, notices, Projections and other
information at the times, to the Persons and in the manner set forth in Annex
E.

 

Each Credit
Party executing this Agreement hereby agrees that from and after the Closing
Date and until the Termination Date, it shall deliver to Agent or to Agent and
Lenders, as required, the various Collateral Reports (including Borrowing Base
Certificates in the form of Exhibit 4.1(b)) at the times, to the Persons
and in the manner set forth in Annex F.

 

Communication
with Accountants. 
Each Credit Party executing this Agreement authorizes (a) Agent and (b)
so long as an Event of Default has occurred and is continuing, each Lender, to
communicate directly with its independent certified public accountants,
including KPMG, and authorizes and shall instruct those accountants and
advisors to communicate to Agent and each Lender information relating to any
Credit Party with respect to the business, results of operations and financial
condition of any Credit Party.

 

AFFIRMATIVE COVENANTS

 

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

 

Maintenance of Existence and Conduct of
Business.  Each Credit Party
shall:  do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and its material rights and franchises; continue to conduct its
business substantially as now conducted or as otherwise permitted
hereunder;  at all times maintain,
preserve and protect all of its assets and properties used or useful in the conduct
of its business, and keep the same in good repair, working order and condition
in all material respects (taking into consideration ordinary wear and tear) and
from time to time make, or cause to be made, all necessary or appropriate
repairs, replacements and improvements thereto consistent with industry
practices; and transact business only in such corporate and trade names as are
set forth in Disclosure Schedule (5.1).

 

Payment of
Charges.

 

Subject to Section
5.2(b), each Credit Party shall pay and discharge or cause to be paid and
discharged promptly all Charges payable by it, including (i) Charges
imposed upon it, its income and profits, or any of its property (real, personal
or mixed) and all Charges with respect to tax, social security and unemployment
withholding with respect to its employees, (ii) lawful claims for labor,
materials, supplies and services or otherwise, and (iii) all storage or
rental charges payable to warehousemen and bailees, in each case, before any
thereof shall become past due, except in the case of clauses (ii) and (iii)
where the failure to pay or discharge such Charges would not result in
aggregate liabilities in excess of $200,000.

 

 

Each Credit
Party may in good faith contest, by appropriate proceedings, the validity or
amount of any Charges, Taxes or claims described in Section 5.2(a); provided,
that (i) adequate reserves with respect to such contest are maintained on the
books of such Credit Party, in accordance with GAAP; (ii) no Lien shall be
imposed to secure payment of such Charges (other than payments to warehousemen
and/or bailees) that is superior to any of the Liens securing payment of the
Obligations and such contest is maintained and prosecuted continuously and with
diligence and operates to suspend collection or enforcement of such Charges,
(iii) none of the Collateral becomes subject to forfeiture or loss as a result
of such contest, and (iv) such Credit Party shall promptly pay or discharge
such contested Charges, Taxes or claims and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Agent evidence reasonably
acceptable to Agent of such compliance, payment or discharge, if such contest
is terminated or discontinued adversely to such Credit Party or the conditions
set forth in this Section 5.2(b) are no longer met.

 

Books and
Records. 
Each Credit Party shall keep adequate books and records with respect to
its business activities in which proper entries, reflecting all financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financial Statements attached as Disclosure Schedule (3.4(a)).

 

Insurance; Damage to or Destruction of Collateral.

 

The Credit
Parties shall, at their sole cost and expense, maintain the policies of
insurance described on Disclosure Schedule (3.18) as in effect on the
date hereof or other policies of insurance providing substantially equivalent
coverage reasonably acceptable to Agent in form and with insurers reasonably
acceptable to Agent.  Such policies of
insurance shall contain provisions pursuant to which the insurer agrees to
provide thirty (30) days prior written notice to Agent in the event of any
non-renewal, cancellation or amendment of such insurance policy.  If any Credit Party at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, Agent may at any time
or times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto which Agent deems advisable.  Agent shall have no obligation to obtain
insurance for any Credit Party or pay any premiums therefor.  By doing so, Agent shall not be deemed to
have waived any Default or Event of Default arising from any Credit Party’s
failure to maintain such insurance or pay any premiums therefor.  All sums so disbursed, including attorneys’
fees, court costs and other charges related thereto, shall be payable on demand
by Borrower to Agent and shall be additional Obligations hereunder secured by
the Collateral.

 

Agent reserves
the right at any time upon any change in any Credit Party’s risk profile
(including any change in the product mix maintained by any Credit Party or any
laws affecting the potential liability of such Credit Party) to require, as
promptly as is practicable, but in no event more than ten (10) Business Days
after written notice to the Credit Party in question, additional forms and
limits of insurance to, in Agent’s reasonable credit judgment, adequately
protect both Agent’s and Lender’s interests in all or any portion of the
Collateral and to ensure that each Credit Party is protected by insurance in
amounts and with coverage customary for its industry.  If requested by Agent, each Credit Party shall deliver to Agent
from time to time a

 

 

report of a reputable insurance broker, reasonably satisfactory to
Agent, with respect to its insurance policies.

 

Borrower shall deliver to Agent, in form and
substance reasonably satisfactory to Agent, endorsements to (i) all “All Risk”
and business interruption insurance naming Agent, on behalf of itself and
Lenders, as loss payee, and (ii) all general liability and other liability
policies naming Agent, on behalf of itself and Lenders, as additional
insured.  Borrower irrevocably makes,
constitutes and appoints Agent (and all officers, employees or agents
designated by Agent), so long as any Default or Event of Default has occurred
and is continuing or the anticipated insurance proceeds exceed $1,000,000, as
Borrower’s true and lawful agent and attorney-in-fact for the purpose of
making, settling and adjusting claims under such “All Risk” policies of
insurance, endorsing the name of Borrower on any check or other item of payment
for the proceeds of such “All Risk” policies of insurance and for making all determinations
and decisions with respect to such “All Risk” policies of insurance.  Agent shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing power-of-attorney.  Borrower shall promptly notify Agent of any
loss, damage, or destruction to the Collateral in the amount of $250,000 or
more, whether or not covered by insurance. 
After deducting from such proceeds (i) the expenses, if any, incurred by
Agent in the collection or handling thereof and (ii) amounts required to be
paid to creditors (other than Lenders) having Permitted Encumbrances, Agent
may, at its option, apply such proceeds to the reduction of the Obligations in
accordance with Section 1.3(d), or permit or require Borrower to
use such money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction.  Notwithstanding the
foregoing, if the casualty giving rise to such insurance proceeds could not
reasonably be expected to have a Material Adverse Effect and such insurance
proceeds do not exceed $1,000,000 in the aggregate, Agent shall permit Borrower
to replace, restore, repair or rebuild the property; provided that if
Borrower has not completed or entered into binding agreements to complete such
replacement, restoration, repair or rebuilding within 360 days of such
casualty, Agent may apply such insurance proceeds to the Obligations in
accordance with Section 1.3(d). 
All insurance proceeds which are to be made available to Borrower to
replace, repair, restore or rebuild the Collateral shall be applied by Agent to
reduce the outstanding principal balance of the Revolving Loan (which
application shall not result in a permanent reduction of the Revolving Loan
Commitment) and upon such application, Agent shall establish a Reserve against
the Borrowing Base in an amount equal to the amount of such proceeds so
applied.  All insurance proceeds made
available to any Credit Party that is not a Borrower to replace, repair,
restore or rebuild Collateral shall be deposited in a cash collateral
account.  Thereafter, such funds shall
be made available to Borrower to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower shall request a Revolving
Credit Advance or release from the cash collateral account be made to Borrower
in the amount requested to be released; (ii) so long as the conditions set
forth in Section 2.2 have been met, Revolving Lenders shall make such
Revolving Credit Advance or Agent shall release funds from the cash collateral
account; and (iii) in the case of insurance proceeds applied against the
Revolving Loan, the Reserve established with respect to such insurance proceeds
shall be reduced by the amount of such Revolving Credit Advance.  To the extent not used to replace, repair,
restore or rebuild the Collateral, such insurance proceeds shall be applied in
accordance with Section 1.3(d).

 

 

Compliance
with Laws. 
Each Credit Party shall comply with all federal, state, local and
foreign laws and regulations applicable to it, including ERISA, labor laws, and
Environmental Laws and Environmental Permits, except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

 

Supplemental
Disclosure. 
From time to time as may be reasonably requested by Agent (which request
will not be made more frequently than once each year absent the occurrence and
continuance of an Event of Default) or at Credit Parties’ election, the Credit
Parties shall supplement each Disclosure Schedule hereto, or any representation
herein or in any other Loan Document, with respect to any matter hereafter arising
that, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or as an
exception to such representation or that is necessary to correct any
information in such Disclosure Schedule or representation which has been
rendered inaccurate thereby (and, in the case of any supplements to any
Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to
show the changes made therein); provided that (a) no such supplement to
any such Disclosure Schedule or representation shall amend, supplement or
otherwise modify any Disclosure Schedule or representation, or be or be deemed
a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Agent and Requisite Lenders in
writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.

 

Intellectual
Property. 
Each Credit Party will conduct its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect and shall comply in all material respects with
the terms of its Licenses.

 

Environmental Matters.  Each Credit Party shall and shall cause each
Person within its control to: (a) conduct its operations and keep and maintain
its Real Estate in compliance with all Environmental Laws and Environmental
Permits other than noncompliance that could not reasonably be expected to have a
Material Adverse Effect; (b) implement any and all investigation, remediation,
removal and response actions as are required to comply with Environmental Laws
and Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate in all material
respects; (c) notify Agent promptly after such Credit Party becomes aware of
any violation of Environmental Laws or Environmental Permits or any Release on,
at, in, under, above, to, from or about any Real Estate that is reasonably
likely to result in Environmental Liabilities in excess of $250,000; and (d)
promptly forward to Agent a copy of any written order, notice, request for
information or any written communication or report received by such Credit
Party in connection with any such violation or Release or any other matter
relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess of
$250,000 in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or threatened any action in connection with
any such violation, Release or other matter. 
If Agent at any time has a reasonable basis to believe that there may be
a violation of any Environmental Laws or Environmental Permits by any Credit
Party or any Environmental Liability arising thereunder, or a Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate, that, in each case, could reasonably be expected to have a Material
Adverse Effect, then, after reasonable notice, each Credit Party

 

 

shall, upon Agent’s written request (i) cause the performance of such
environmental audits including subsurface sampling of soil and groundwater, and
preparation of such environmental reports, at Borrower’s expense, as Agent may
from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Agent and shall be in
form and substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. 
Borrower shall reimburse Agent for the costs of such audits and tests
and the same will constitute a part of the Obligations secured hereunder.

 

Landlords’ Agreements, Mortgagee Agreements,
Bailee Letters and Real Estate Purchases. 
Each Credit Party shall use commercially reasonable efforts to obtain a
landlord’s agreement, mortgagee agreement or bailee letter, as applicable, from
the lessor of each leased property, mortgagee of owned property or bailee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located, which agreement or letter shall contain
a waiver or subordination of all Liens or claims that the landlord, mortgagee
or bailee may assert against the Collateral at that location, and shall
otherwise be reasonably satisfactory in form and substance to Agent. With
respect to such locations or warehouse space leased or owned as of the Closing
Date and thereafter, if Agent has not received a landlord or mortgagee
agreement or bailee letter as of the Closing Date (or, if later, as of the date
such location is acquired or leased), Borrower’s Eligible Inventory at that
location shall, in Agent’s discretion, be excluded from the Borrowing Base or
be subject to such Reserves as may be established by Agent in its reasonable
credit judgment.  After the Closing
Date, no real property or warehouse space shall be leased by any Credit Party
and no Inventory shall be shipped to a processor or converter under
arrangements established after the Closing Date unless either (a) a
satisfactory landlord agreement or bailee letter, as appropriate, shall first
have been obtained with respect to such location or (b) any Inventory located
at any such location shall be excluded from the Borrowing Base.  Each Credit Party shall timely and fully pay
and perform its obligations under all leases and other agreements with respect
to each leased location or public warehouse where any Collateral is or may be
located.  To the extent permitted
hereunder, if any Credit Party proposes to acquire a fee ownership interest in
Real Estate after the Closing Date, it shall first provide to Agent a mortgage
or deed of trust granting Agent a Lien on such Real Estate (which Lien shall be
subordinate to the Lien securing the Indebtedness under the Senior Secured
Notes), together with environmental audits, mortgage title insurance
commitment, real property survey, local counsel opinion(s), and, if required by
Agent, supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each
case, in form and substance reasonably satisfactory to Agent.

 

Further
Assurances. 
Each Credit Party executing this Agreement agrees that it shall and
shall cause each other Credit Party to, at such Credit Party’s expense and upon
the reasonable request of Agent, duly execute and deliver, or cause to be duly
executed and delivered, to Agent such further instruments and do and cause to
be done such further acts as may be necessary or proper in the reasonable
opinion of Agent to carry out more effectively the provisions and purposes of
this Agreement and each Loan Document.

 

 

NEGATIVE
COVENANTS

 

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

 

Mergers,
Subsidiaries, Etc.  No Credit Party shall directly or indirectly, by operation of law
or otherwise, (a) form or acquire any Subsidiary, or (b) merge with,
consolidate with, acquire all or substantially all of the assets or Stock of,
or otherwise combine with or acquire, any Person.

 

Investments;
Loans and Advances.  Except as otherwise expressly permitted by this Section 6,
no Credit Party shall make or permit to exist any investment in, or make,
accrue or permit to exist loans or advances of money to, any Person, through
the direct or indirect lending of money, holding of securities or otherwise,
except that:  (a) Borrower may hold
investments comprised of notes payable, or stock or other securities issued by
Account Debtors to Borrower pursuant to negotiated agreements with respect to
settlement of such Account Debtor’s Accounts in the ordinary course of
business, so long as the aggregate amount of such Accounts so settled by
Borrower does not exceed $250,000 in any Fiscal Year; (b) each Credit Party may
maintain its existing investments in its Subsidiaries as of the Closing Date;
(c) so long as Agent has not delivered an Activation Notice, Borrower may make
investments, subject to Control Letters in favor of Agent for the benefit of
Lenders or otherwise subject to a perfected security interest in favor of Agent
for the benefit of Lenders, in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii)
certificates of deposit maturing no more than one year from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States of America, each having combined capital, surplus and undivided
profits of not less than $300,000,000 and having a senior unsecured rating of
“A” or better by a nationally recognized rating agency (an “A Rated Bank”),
(iv) time deposits maturing no more than thirty (30) days from the date of
creation thereof with A Rated Banks and (v) mutual funds that invest solely in
one or more of the investments described in clauses (i) through (iv)
above; and (d) Borrower may make other investments not exceeding $250,000 in
the aggregate at any time outstanding.

 

Indebtedness.

 

No Credit
Party shall create, incur, assume or permit to exist any Indebtedness, except
(without duplication) (i) Indebtedness secured by purchase money security
interests and Capital Leases permitted in Section 6.7(c), (ii) the Loans
and the other Obligations, (iii) unfunded pension fund and other employee
benefit plan obligations and liabilities to the extent they are permitted to
remain unfunded under applicable law and could not, in the aggregate, be
reasonably expected to result in a Material Adverse Effect, (iv) existing
Indebtedness described in Disclosure Schedule (6.3) and refinancings
thereof or amendments or modifications thereof that do not have the effect of
increasing the principal amount thereof or changing the amortization thereof
(other than to extend the same) and that are otherwise on terms and conditions
no less favorable to any Credit Party, Agent or any Lender, as reasonably
determined by Agent, than the terms of the Indebtedness being refinanced,
amended or modified, (v) unsecured subordinated Indebtedness of Holdings as
evidenced by the Seller Note, (vi)

 

 

Indebtedness of Borrower under the Senior Secured Notes, (vii) other
unsecured Indebtedness of the Credit Parties not exceeding $1,500,000 in
aggregate principal amount at any time outstanding, (viii) Indebtedness not
exceeding $5,000,000 in an aggregate principal amount outstanding at any time
incurred for the purpose of financing the payment of insurance premiums of the
Borrower, provided, that each and every Person providing such
Indebtedness has agreed, in a writing which is in form and substance
satisfactory to Agent, to notify Agent not less than fifteen (15) days in
advance prior to any cancellation of any insurance coverage so financed, and
(ix) Indebtedness under interest rate cap, swap or collar agreements, or other
agreements or arrangements designed to provide protection against fluctuations
in interest rates; provided, that, such Indebtedness is unsecured.

 

No Credit
Party shall, directly or indirectly, voluntarily purchase, redeem, defease or
prepay any principal of, premium, if any, interest or other amount payable in
respect of any Indebtedness prior to its scheduled maturity, other than (i) the
Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset
securing such Indebtedness has been sold or otherwise disposed of in accordance
with Sections 6.8(b) or (c); and (iii) Indebtedness permitted by Section
6.3(a)(iv) upon any refinancing thereof in accordance with Section
6.3(a)(iv).  Other than the
prepayment of principal of up to $7,000,000 on the Closing Date from the
proceeds of the Senior Secured Notes, Holdings shall not pay or otherwise make
any payment of principal, interest or any other amount payable in respect of
the Seller Note other than non-cash payments of interest (i.e., PIK interest)
on the Seller Note.

 

Employee Loans and Affiliate Transactions.

 

Except as
otherwise expressly permitted in this Section 6 with respect to
Affiliates, no Credit Party shall enter into or be a party to any transaction
with any other Credit Party or any Affiliate thereof except in the ordinary
course of and pursuant to the reasonable requirements of such Credit Party’s
business and upon fair and reasonable terms that are no less favorable to such
Credit Party than would be obtained in a comparable arm’s length transaction
with a Person not an Affiliate of such Credit Party.  In addition, if any such transaction or series of related
transactions involves payments in excess of $100,000 in the aggregate, the
terms of these transactions must be disclosed in advance to Agent and
Lenders.  All such transactions existing
as of the date hereof are described in Disclosure Schedule (6.4(a)).

 

No Credit
Party shall enter into any lending or borrowing transaction with any employees
of any Credit Party, except (i) loans to their respective employees in the
ordinary course of business consistent with past practices for travel and
entertainment expenses up to a maximum of $50,000 in the aggregate at any one
time outstanding, (ii) loans to their respective employees in the ordinary
course of business consistent with past practices for relocation expenses up to
a maximum of $250,000 in the aggregate at any one time outstanding, (iii) loans
to their respective officers and other members of senior management for the
purchase by such officer or member of senior management of shares of Stock of
Holdings up to a maximum of $1,000,000 in the aggregate at any one time
outstanding and (iv) other loans and advances to their respective officers,
directors and employees up to a maximum of $100,000 in the aggregate at any one
time outstanding.

 

 

Capital
Structure and Business.  No Credit Party shall (a) amend its charter or bylaws in a manner
that would adversely affect Agent or Lenders or such Credit Party’s duty or
ability to repay the Obligations, (b) engage in any business other than the
businesses currently engaged in by it or (c) make any change in its capital
structure as described on Disclosure Schedule (3.8), including the
issuance of any shares of Stock, warrants or other securities convertible into
Stock or any revision of the terms of its outstanding Stock, except that Holdings
may (i) make additional equity contributions in cash to Borrower in the form,
and solely in the form, of additional purchases of shares of common Stock of
Borrower by Holdings and (ii) issue shares of Stock of Holdings and options to
purchase shares of Stock of Holdings to directors, officers and employees of
Borrower or Holdings in an aggregate amount not to exceed ten percent (10%) of
the equity of Holdings on a fully diluted basis and (iii) issue shares of
common Stock of Holdings to the Holdings ESOP in an aggregate amount not to
exceed forty percent (40%) of the equity of Holdings on a fully diluted basis.

 

Guaranteed
Indebtedness. 
No Credit Party shall create, incur, assume or permit to exist any
Guaranteed Indebtedness except (a) by endorsement of instruments or items of
payment for deposit to the general account of any Credit Party, and (b) for
Guaranteed Indebtedness incurred for the benefit of any other Credit Party if
the primary obligation is expressly permitted by this Agreement.

 

Liens.  No Credit Party shall create, incur, assume
or permit to exist any Lien on or with respect to its Accounts or any of its
other properties or assets (whether now owned or hereafter acquired) except for
(a) Permitted Encumbrances; (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule (6.7) securing Indebtedness described
on Disclosure Schedule (6.3) and permitted refinancings, extensions and
renewals thereof, including extensions or renewals of any such Liens; provided
that the principal amount so secured is not increased and the Lien does not
attach to any other property; (c) Liens created after the date hereof by
conditional sale or other title retention agreements (including Capital Leases)
or in connection with purchase money Indebtedness with respect to Equipment and
Fixtures acquired by any Credit Party in the ordinary course of business,
involving the incurrence of an aggregate amount of purchase money Indebtedness
and Capital Lease Obligations of (i) in the case of the No. 20 paper machine
winder at the Canton facility, not more than $5,000,000 outstanding at any one
time (provided that such Lien attaches only to the specific winder
subject to such purchase money debt and such Indebtedness is incurred within
twenty (20) days following such purchase and does not exceed 100% of the
purchase price of the specific winder) and (ii) in the case of all other
Equipment and Fixtures, not more than $5,000,000 outstanding at any one time
for all such Liens (provided that such Liens attach only to the assets
subject to such purchase money debt and such Indebtedness is incurred within
twenty (20) days following such purchase and does not exceed 100% of the
purchase price of the subject assets); (d) the following Liens securing the
Indebtedness under the Senior Secured Notes: (i) a first priority Lien on the
Noteholder Priority Collateral which shall be senior to Agent’s Lien, on behalf
of Lenders, on such Collateral and (ii) a second priority Lien on the Lender
Priority Collateral which shall be junior to Agent’s Lien, on behalf of
Lenders, on such Collateral; (e) Liens arising from precautionary financing
statement filings with respect to operating leases entered into by any Credit
Party in the ordinary course of business; and (f) Liens securing Indebtedness
permitted to be incurred under Section 6.3(a)(viii), provided, that (i)
any such Liens shall secure only the principal amount of Indebtedness so
incurred plus interest thereon plus immaterial fees in connection therewith,
(ii) the scope of any

 

 

such Liens shall be limited to whatever amounts are payable to Borrower
with reference to the insurance policies for which the premiums were so
financed and (iii) either (A) any such Liens shall be junior in interest
and expressly subordinated to the Liens granted by Borrower in favor of Agent,
on behalf of itself and Lenders, or (B) the Agent shall have established a
reserve against the Borrowing Base in an amount equal to the amount of the
insurance premiums so financed (as such amount may be reduced from time to time
based upon repayments of such Indebtedness). 
In addition, no Credit Party shall become a party to any agreement,
note, indenture or instrument, or take any other action, that would prohibit the
creation of a Lien on any of its properties or other assets in favor of Agent,
on behalf of itself and Lenders, as additional collateral for the Obligations,
except operating leases, Capital Leases or Licenses which prohibit Liens upon
the assets that are subject thereto.

 

Sale of Stock
and Assets. 
No Credit Party shall sell, transfer, convey, assign or otherwise
dispose of any of its properties or other assets, including the Stock of any of
its Subsidiaries (whether in a public or a private offering or otherwise) or
any of its Accounts, other than (a) the sale of Inventory in the ordinary
course of business or the sale or other disposition of surplus, aged or
unassigned Inventory, (b) the sale or other disposition by a Credit Party of
Equipment, Fixtures or Real Estate that are obsolete or no longer used or
useful in such Credit Party’s business and having a value not exceeding
$1,500,000 in the aggregate in any Fiscal Year and (c) the sale or other
disposition of the investments described in Section 6.2(d).  In the event of any sale or other disposition
permitted by the terms of clause (b) of this Section 6.8, Agent agrees
that it shall release its Lien on the property that is the subject of such sale
or disposition.

 

ERISA.  No Credit Party shall, or shall cause or
permit any ERISA Affiliate to, cause or permit to occur (i) an event that could
result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA or (ii) an ERISA Event to the extent such ERISA Event could
reasonably be expected to have a Material Adverse Effect.

 

Financial
Covenants. 
Borrower shall not breach or fail to comply with any of the Financial
Covenants.

 

Hazardous
Materials. 
No Credit Party shall cause or permit a Release of any Hazardous
Material on, at, in, under, above, to, from or about any of the Real Estate
where such Release would violate in any respect, or form the basis for any
Environmental Liabilities under, any Environmental Laws or Environmental
Permits, other than such violations or Environmental Liabilities that could not
reasonably be expected to have a Material Adverse Effect.

 

Sale-Leasebacks.  No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.

 

Restricted
Payments. 
No Credit Party shall make any Restricted Payment, except (a) officer,
director and employee loans permitted under Section 6.4(b) above,
(b) scheduled non-cash payments of interest (i.e., PIK interest) with
respect to the Seller Note, (c) dividends by Holdings paid to its stockholders
in the form of common Stock of Holdings, (d) the repurchase or redemption of
Holdings’ Stock and options with respect to Holdings’ Stock held by directors,
officers or employees of, or former directors, officers or employees of,
Borrower or Holdings in accordance with the following terms and conditions: (1)
if Borrowing Availability both before

 

 

and after giving effect thereto is equal to at least $15,000,000, such
repurchases and redemptions shall be permitted so long as the aggregate
cumulative amount of such repurchases and redemptions from and after the
Closing Date shall not exceed $2,500,000, (2) if Borrowing Availability both
before and after giving effect thereto is equal to an amount less than
$15,000,000 but greater than or equal to $3,500,000, then the aggregate amount
of such repurchases and redemptions shall not exceed $500,000 in any period of
twelve (12) consecutive months and (3) if Borrowing Availability both before
and after giving effect thereto is less than $3,500,000, such repurchases and
redemptions shall not be permitted, (e) dividends and distributions not to
exceed $500,000 in any Fiscal Year from Borrower to Holdings to enable Holdings
to pay its ordinary course expenses (e.g., franchise taxes, reasonable legal
and accounting expenses and directors’ and officers’ insurance premiums and to
reimburse its directors for reasonable out-of-pocket costs and expenses
incurred in attending board of directors meetings, but not for payment of
directors’ fees), (f) dividends and distributions from Borrower to Holdings in
an amount equal to Borrower’s proportionate share of Holdings’ then due and
payable consolidated, combined or unitary income tax liabilities, (g) the
accrual by Holdings of the management fee payable to KPS Management, LLC so
long as no cash payments are made by Holdings or any other Credit Party in
respect of such management fee, (h) the repurchase or redemption of Holdings’
common Stock from former employees in connection with the Holdings ESOP in
accordance with the following terms and conditions: (1) if Borrowing
Availability both before and after giving effect thereto is equal to at least
$15,000,000, such repurchases and redemptions shall be permitted so long as the
aggregate cumulative amount of such repurchases and redemptions from and after
the Closing Date shall not exceed $7,500,000, (2) if Borrowing Availability
both before and after giving effect thereto is equal to an amount less than
$15,000,000 but greater than or equal to $3,500,000, then the aggregate amount
of such repurchases and redemptions shall not exceed (A) in the period from the
Closing Date until the first anniversary of the Closing Date, $1,000,000, (B)
in the period from the first anniversary of the Closing Date until the second
anniversary of the Closing Date, $1,000,000, (C) in the period from the second
anniversary of the Closing Date until the third anniversary of the Closing
Date, $1,500,000, (D) in the period from the third anniversary of the Closing
Date until the fourth anniversary of the Closing Date, $2,000,000 and (E) in
the period from and after the fourth anniversary of the Closing Date,
$2,500,000 and (3) if Borrowing Availability both before and after giving
effect thereto is less than $3,500,000, such repurchases and redemptions shall
not be permitted, (i) repurchases of Stock deemed to occur upon exercise of
stock options, if such Stock represents a portion of the exercise price of such
stock options and such repurchase involves no cash payment by any Credit Party
and (j) other Restricted Payments in an amount not to exceed $2,000,000 in the
aggregate in any Fiscal Year so long as each of the following conditions are
satisfied: (1) Borrowing Availability shall be equal to at least $20,000,000
both before and after giving effect to any such Restricted Payment, (2) the
Fixed Charge Coverage Ratio of Borrower on a consolidated basis for the
12-month period then ended shall be equal to at least 1.00 to 1.00 both before
and after giving effect to any such Restricted Payment and (3) no Default or
Event of Default shall have occurred and be continuing or would result from the
making of such Restricted Payment; provided, further, that, with
respect to any payment permitted pursuant to clauses  (d), (e)
or (h) above, no Default or Event of Default under Sections 8.1(a),
(h) or (i) and no payment default under the Senior Secured Notes
shall have occurred and be continuing or would result after giving effect
thereto.  Neither Holdings nor Borrower
shall take any action or suffer to exist any action, if a consequence thereof
would be for Borrower to become obligated

 

 

(or contingently obligated) to prepay all or any portion of the
Earn-out or Holdings to become obligated (or contingently obligated) to prepay
all or any portion of the Seller Note prior to its maturity.

 

Change of
Corporate Name or Location; Change of Fiscal
Year.  No Credit Party shall (a)
change its name as it appears in official filings in the state of its
incorporation or other organization, (b) change its chief executive office,
principal place of business, corporate offices or warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
the Collateral, (c) change the type of entity that it is, (d) change its
organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its state of incorporation
or organization, in each case without at least thirty (30) days prior written
notice to Agent and after Agent’s written acknowledgment that any reasonable action
requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Lenders, in any
Collateral, has been completed or taken, and provided that any such new
location shall be in the continental United States.  No Credit Party shall change its Fiscal Year.

 

No Impairment of Intercompany Transfers.  No Credit Party shall directly or indirectly
enter into or become bound by any agreement, instrument, indenture or other
obligation (other than this Agreement and the other Loan Documents) that could
directly or indirectly restrict, prohibit or require the consent of any Person
with respect to the payment of dividends or distributions or the making or
repayment of intercompany loans by a Subsidiary of Borrower to Borrower.

 

Leases; Real
Estate Purchases. 
No Credit Party shall enter into any operating lease for Equipment or
Real Estate, other than operating leases for Equipment or Real Estate entered
into by Borrower so long as the aggregate of all such operating lease payments
payable in any Fiscal Year by Borrower shall not exceed $2,500,000.  No Credit Party shall purchase any fee
simple ownership interest in Real Estate after the Closing Date, other than
purchases by Borrower of fee simple ownership interests in Real Estate for an
aggregate consideration during the term of this Agreement not to exceed
$1,500,000; provided, that, (i) each of the requirements set
forth in the last sentence of Section 5.9 has been satisfied, as
reasonably determined by Agent, and (ii) no Default or Event of Default shall
have occurred and be continuing or would result after giving effect to such
purchase.

 

Changes Relating to Other Indebtedness and
Material Contracts.

 

No Credit
Party shall in any way amend, modify or otherwise change the Seller Note or the
Earn-out.

 

No Credit
Party shall amend, modify or otherwise change the IP License Agreement if such
amendment, modification or other change would adversely affect the rights or
obligations of any Credit Party, Agent or any Lender.

 

No Credit
Party shall change or amend the terms of any Senior Secured Note Document if
the effect of such amendment is to:  (i)
increase the interest rate on the Senior Secured Notes; (ii) change the dates
upon which payments of principal or interest are due on the

 

 

Senior Secured Notes other than to extend such dates; (iii) change any
default or event of default other than to delete or make less restrictive any
default provision therein, or add any covenant thereto; (iv) change the
redemption or prepayment provisions of the Senior Secured Notes other than to
extend the dates therefor or to reduce the premiums payable in connection
therewith; or (v) change or amend any other term if such change or amendment
would materially increase the obligations of the Credit Party thereunder or
confer additional material rights on the holders of the Senior Secured Notes in
a manner adverse to any Credit Party, Agent or any Lender.

 

Holdings and
IP Subsidiary. 
Holdings shall not engage in any trade or business, or own any assets
(other than Stock of its Subsidiaries) or incur any Indebtedness or Guaranteed
Indebtedness (other than the Obligations). 
The IP Subsidiary shall not engage in any trade or business (other than
licensing Intellectual Property to Borrower), or own any assets (other than (a)
Intellectual Property, (b) no more than $2,500,000 in the aggregate in cash or
Cash Equivalents, all of which cash or Cash Equivalents shall be held in a
manner pursuant to which the Agent, on behalf of itself and the Lenders, shall
have a first priority perfected security interest and (c) other assets in an
aggregate amount not to exceed $50,000) or incur any Indebtedness or Guaranteed
Indebtedness (other than the Obligations).

 

TERM

 

Termination.  The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and the Loans
and all other Obligations shall be automatically due and payable in full on
such date.

 

Survival of Obligations Upon Termination
of Financing Arrangements.  Except
as otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Agent and Lenders
relating to any unpaid portion of the Loans or any other Obligations, due or
not due, liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date.  Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations of or binding upon the Credit Parties, and all
rights of Agent and each Lender, all as contained in the Loan Documents, shall
not terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that the provisions of Section 11, the payment
obligations under Sections 1.15 and 1.16, and the indemnities contained
in the Loan Documents shall survive the Termination Date.

 

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

Events of
Default. 
The occurrence of any one or more of the following events (regardless of
the reason therefor) shall constitute an “Event of Default” hereunder:

 

Borrower (i)
fails to make any payment of principal of, or interest on, or Fees owing in
respect of, the Loans or any of the other Obligations when due and payable, or
(ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable
hereunder or under any other

 

 

Loan Document within ten (10) days following Agent’s demand for such
reimbursement or payment of expenses.

 

Any Credit
Party fails or neglects to perform, keep or observe any of the provisions of Sections
1.4, 1.8, 5.4(a) or 6, or any of the provisions set forth in Annexes C
or G, respectively.

 

Borrower fails
or neglects to perform, keep or observe any of the provisions of Section 4.1
or any provisions set forth in Annexes E or F, respectively, and the
same shall remain unremedied for five (5) Business Days or more.

 

Any Credit
Party fails or neglects to perform, keep or observe any other provision of this
Agreement or of any of the other Loan Documents (other than any provision
embodied in or covered by any other clause of this Section 8.1) and the
same shall remain unremedied for thirty (30) days or more.

 

A default or
breach occurs under any other agreement, document or instrument to which any
Credit Party is a party that is not cured within any applicable grace period
therefor, and such default or breach (i) involves the failure to make any
payment when due in respect of the Senior Secured Notes or any other
Indebtedness or Guaranteed Indebtedness (other than the Obligations) of any
Credit Party in excess of $2,500,000 in the aggregate (including (x) undrawn
committed or available amounts and (y) amounts owing to all creditors under any
combined or syndicated credit arrangements), or (ii) causes, or permits any
holder of the Senior Secured Notes or such other Indebtedness or Guaranteed
Indebtedness or a trustee to cause, the Senior Secured Notes or other
Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of
$2,500,000  in the aggregate to become
due prior to its stated maturity or prior to its regularly scheduled dates of
payment, or cash collateral to be demanded in respect thereof, in each case,
regardless of whether such default is waived, or such right is exercised, by
such holder or trustee.

 

Any
information contained in any Borrowing Base Certificate is untrue or incorrect
in any respect (other than (i) inadvertent, immaterial errors that, after
giving effect to the appropriate correction thereto does not result in
Borrowing Availability being less than $15,000,000) and (ii) errors
understating the Borrowing Base), or any representation or warranty herein or
in any Loan Document or in any written statement, report, financial statement
or certificate (other than a Borrowing Base Certificate) made or delivered to
Agent or any Lender by any Credit Party is untrue or incorrect in any material
respect as of the date when made or deemed made.

 

Assets of any
Credit Party with a fair market value of $250,000 or more are attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of any Credit Party and such condition continues for thirty (30) days
or more.

 

A case or
proceeding is commenced against any Credit Party seeking a decree or order in
respect of such Credit Party (i) under the Bankruptcy Code or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) for such Credit Party or for any

 

 

substantial part of any such Credit Party’s assets, or
(iii) ordering the winding-up or liquidation of the affairs of such Credit
Party, and such case or proceeding shall remain undismissed or unstayed for
sixty (60) days or more or a decree or order granting the relief sought in such
case or proceeding is granted by a court of competent jurisdiction.

 

Any Credit
Party (i) files a petition seeking relief under the Bankruptcy Code or any
other applicable federal, state or foreign bankruptcy or other similar law,
(ii) consents to or fails to contest in a timely and appropriate manner to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Credit Party or for any substantial part of any such Credit Party’s assets,
(iii) makes an assignment for the benefit of creditors, or (iv) takes any
action in furtherance of any of the foregoing, or (v) admits in writing its
inability to, or is generally unable to, pay its debts as such debts become
due.

 

A final
judgment or judgments for the payment of money in excess of $1,000,000 in the
aggregate at any time are outstanding against one or more of the Credit Parties
(which judgments are not covered by insurance policies as to which liability
has been accepted by the insurance carrier), and the same are not, within
thirty (30) days after the entry thereof, discharged or execution thereof
stayed or bonded pending appeal, or such judgments are not discharged prior to
the expiration of any such stay.

 

Any material
provision of any Loan Document for any reason ceases to be valid, binding and
enforceable in accordance with its terms (or any Credit Party shall challenge
the enforceability of any Loan Document or shall assert in writing, or engage
in any action or inaction based on any such assertion, that any provision of
any of the Loan Documents has ceased to be or otherwise is not valid, binding
and enforceable in accordance with its terms), or any Lien created under any
Loan Document ceases to be a valid and perfected first priority Lien (except as
otherwise permitted herein or therein) in any of the Collateral purported to be
covered thereby.

 

A default or
breach occurs under the Seller Note.

 

Any event
occurs as a result of which (i) Borrower becomes obligated (or contingently
obligated) to pay all or any portion of the Earn-out or (ii) other than the
prepayment of principal of up to $7,000,000 on the Closing Date from the
proceeds of the Senior Secured Notes, Holdings becomes obligated (or
contingently obligated) to pay all or any portion of the Seller Note prior to
its maturity.

 

A breach (as
opposed to an allegation of a breach) occurs under any of the Union Contracts
which could reasonably be expected to have a Material Adverse Effect or any of
the Union Contracts ceases to be in effect.

 

Any Change of
Control occurs.

 

Any event
occurs, whether or not insured or insurable, as a result of which
revenue-producing activities generating more than 25% of revenues for the
Fiscal Year preceding such event cease or are substantially curtailed and such
cessation or curtailment continues for more than forty-five (45) days.

 

 

Remedies.

 

If any Event
of Default has occurred and is continuing, Agent may (and at the written
request of the Requisite Lenders shall), without notice, suspend the Revolving
Loan facility with respect to additional Advances and/or the incurrence of
additional Letter of Credit Obligations, whereupon any additional Advances and
additional Letter of Credit Obligations shall be made or incurred in Agent’s
sole discretion (or in the sole discretion of the Requisite Lenders, if such
suspension occurred at their direction) so long as such Default or Event of
Default is continuing.  If any Event of
Default has occurred and is continuing, Agent may (and at the written request
of Requisite Lenders shall), without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Loans and the
Letter of Credit Fees to the Default Rate.

 

If any Event
of Default has occurred and is continuing, Agent may (and at the written
request of the Requisite Lenders shall), without notice: (i) terminate the
Revolving Loan facility with respect to further Advances or the incurrence of
further Letter of Credit Obligations; (ii) reduce the Revolving Loan Commitment
from time to time; (iii) declare all or any portion of the Obligations,
including all or any portion of any Loan to be forthwith due and payable, and
require that the Letter of Credit Obligations be cash collateralized in the
manner set forth in Annex B, all without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by Borrower and
each other Credit Party; or (iv) exercise any rights and remedies provided
to Agent under the Loan Documents or at law or equity, including all remedies
provided under the Code; provided, that upon the occurrence of an Event
of Default specified in Sections 8.1(h) or (i), the Commitments shall be
immediately terminated and all of the Obligations, including the Revolving
Loan, shall become immediately due and payable without declaration, notice or
demand by any Person.

 

Waivers by
Credit Parties. 
Except as otherwise provided for in this Agreement or by applicable law,
each Credit Party waives: (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which any Credit Party may in any way be liable, and hereby ratifies and
confirms whatever Agent may do in this regard, (b) all rights to notice and a
hearing prior to Agent’s taking possession or control of, or to Agent’s
replevy, attachment or levy upon, the Collateral or any bond or security that
might be required by any court prior to allowing Agent to exercise any of its
remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.

 

ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

 

Assignment and Participations.

 

Subject to the
terms of this Section 9.1, any Lender may make an assignment to a
Qualified Assignee of, or sale of participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any
portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder.

 

 

Any assignment by a Lender shall: 
(i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an “Assignment Agreement”
substantially in the form attached hereto as Exhibit 9.1(a) and
otherwise in form and substance reasonably satisfactory to, and acknowledged
by, Agent; (ii) be conditioned on such assignee Lender representing to the
assigning Lender and Agent that it is purchasing the applicable Loans to be
assigned to it for its own account, for investment purposes and not with a view
to the distribution thereof; (iii) after giving effect to any such partial
assignment, the assignee Lender shall have Commitments in an amount at least
equal to $5,000,000 and the assigning Lender shall have retained Commitments in
an amount at least equal to $ $5,000,000; (iv) include a payment to Agent of an
assignment fee of $3,500 and (v) so long as no Default or Event of Default has
occurred and is continuing, require the consent of Borrower, which shall not be
unreasonably withheld or delayed with respect to an assignment to a Qualified
Assignee; provided that no such consent shall be required for an assignment to
a Qualified Assignee described in clause (i)(a) of the definition of such
term.  In the case of an assignment by a
Lender under this Section 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as all other Lenders
hereunder.  The assigning Lender shall
be relieved of its obligations hereunder with respect to its Commitments or
assigned portion thereof from and after the date of such assignment.  Borrower hereby acknowledges and agrees that
any assignment shall give rise to a direct obligation of Borrower to the
assignee and that the assignee shall be considered to be a “Lender”.  In all instances, each Lender’s liability to
make Loans hereunder shall be several and not joint and shall be limited to
such Lender’s Pro Rata Share of the applicable Commitment.  In the event Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Agent or any such
Lender shall so notify Borrower and Borrower shall, upon the request of Agent
or such Lender, execute new Notes in exchange for the Notes, if any, being
assigned.  Notwithstanding the foregoing
provisions of this Section 9.1(a), any Lender may at any time pledge the
Obligations held by it and such Lender’s rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank, and any lender that is an
investment fund may assign the Obligations held by it and such Lender’s rights
under this Agreement and the other Loan Documents to another investment fund
managed by the same investment advisor; provided, that no such pledge to
a Federal Reserve Bank shall release such Lender from such Lender’s obligations
hereunder or under any other Loan Document.

 

Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrower hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be entitled to require such Lender
to take or omit to take any action hereunder except actions directly affecting
(i) any reduction in the principal amount of, or interest rate or Fees payable
with respect to, any Loan in which such holder participates, (ii) any extension
of the scheduled amortization of the principal amount of any Loan in which such
holder participates or the final maturity date thereof, and (iii) any release
of all or substantially all of the Collateral (other than in accordance with
the terms of this Agreement, the Collateral Documents or the other Loan
Documents).  Solely for purposes of Sections
1.13, 1.15, 1.16 and 9.8, Borrower acknowledges and agrees that a
participation shall give rise to a direct obligation of Borrower to the
participant and the participant shall be considered to be a “Lender”.  Except as set forth in the preceding
sentence neither Borrower nor any other Credit Party shall have any obligation
or duty to any participant.  Neither
Agent nor any Lender (other than the Lender selling a participation) shall

 

 

have any duty to any participant and may continue to deal solely with
the Lender selling a participation as if no such sale had occurred.

 

Except as
expressly provided in this Section 9.1, no Lender shall, as between
Borrower and that Lender, or Agent and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.

 

Each Credit
Party executing this Agreement shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 as reasonably
required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as shall be requested
and the preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants.  Each Credit Party executing this Agreement
shall certify the correctness, completeness and accuracy of all descriptions of
the Credit Parties and their respective affairs contained in any selling
materials provided by it and all other information provided by it and included
in such materials, except that any Projections delivered by Borrower shall only
be certified by Borrower as having been prepared by Borrower in compliance with
the representations contained in Section 3.4(c).

 

A Lender may
furnish any information concerning Credit Parties in the possession of such
Lender from time to time to assignees and participants (including prospective
assignees and participants); provided that such Lender shall obtain from
assignees or participants confidentiality covenants substantially equivalent to
those contained in Section 11.8.

 

(f)            So long as no Event
of Default has occurred and is continuing, no Lender shall assign or sell
participations in any portion of its Loans or Commitments to a potential Lender
or participant, if, as of the date of the proposed assignment or sale, the
assignee Lender or participant would be subject to capital adequacy or similar
requirements under Section 1.16(a), increased costs under Section
1.16(b), an inability to fund LIBOR Loans under Section 1.16(c), or
withholding taxes in accordance with Section 1.15(a).

 

Appointment of
Agent. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents.  The provisions of this Section
9.2 are solely for the benefit of Agent and Lenders and no Credit Party nor
any other Person shall have any rights as a third party beneficiary of any of
the provisions hereof.  In performing
its functions and duties under this Agreement and the other Loan Documents,
Agent shall act solely as an agent of Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for any Credit Party or any other Person.  Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents.  The duties of
Agent shall be mechanical and administrative in nature and Agent shall not
have, or be deemed to have, by reason of this Agreement, any other Loan
Document or otherwise a fiduciary relationship in respect of any Lender.  Except as expressly set forth in this
Agreement and the other Loan Documents, Agent shall not have any duty to
disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any
Account Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither

 

 

Agent nor any of its Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.

 

If Agent shall request instructions from Requisite Lenders or all
affected Lenders with respect to any act or action (including failure to act)
in connection with this Agreement or any other Loan Document, then Agent shall
be entitled to refrain from such act or taking such action unless and until
Agent shall have received instructions from Requisite Lenders or all affected
Lenders, as the case may be, and Agent shall not incur liability to any Person
by reason of so refraining.  Agent shall
be fully justified in failing or refusing to take any action hereunder or under
any other Loan Document (a) if such action would, in the opinion of Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b)
if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting hereunder or under any other Loan Document in accordance with the
instructions of Requisite Lenders or all affected Lenders, as applicable.

 

Agent’s
Reliance, Etc. 
Neither Agent nor any of its Affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
or the other Loan Documents, except for damages caused by its or their own
gross negligence or willful misconduct. 
Without limiting the generality of the foregoing, Agent:  (a) 
may treat the payee of any Note as the holder thereof until Agent
receives written notice of the assignment or transfer thereof signed by such
payee and in form reasonably satisfactory to Agent; (b) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts;
(c) makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations made in or in
connection with this Agreement or the other Loan Documents; (d) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of any Credit Party or to inspect the Collateral
(including the books and records) of any Credit Party; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.

 

GE Capital and
Affiliates. 
With respect to its Commitments hereunder, GE Capital shall have
the same rights and powers under this Agreement and the other Loan Documents as
any other Lender and may exercise the same as though it were not Agent; and the
term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include
GE Capital in its individual capacity. 
GE Capital and its Affiliates may lend money to, invest in, and
generally engage in

 

 

any kind of business with, any Credit Party, any of their Affiliates
and any Person who may do business with or own securities of any Credit Party
or any such Affiliate, all as if GE Capital were not Agent and without any duty
to account therefor to Lenders.  GE
Capital and its Affiliates may accept fees and other consideration from any
Credit Party for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.   GE Capital has also purchased certain equity interests in
Holdings.  Each Lender acknowledges the
potential conflict of interest between GE Capital as a Lender holding interests
in the Loans, GE Capital as a stockholder of Holdings, and GE Capital as Agent
and consents thereto.

 

Lender Credit
Decision. 
Each Lender acknowledges that it has, independently and without reliance
upon Agent or any other Lender and based on the Financial Statements referred
to in Section 3.4(a) and such other documents and information as it has
deemed appropriate, made its own credit and financial analysis of the Credit
Parties and its own decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.  Each Lender
acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and
expressly consents to, and waives any claim based upon, such conflict of
interest.

 

Indemnification.  Lenders agree to indemnify Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted to be taken by Agent in connection
therewith; provided, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent’s gross negligence
or willful misconduct.  Without limiting
the foregoing, each Lender agrees to reimburse Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including reasonable counsel
fees) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement and each other Loan
Document, to the extent that Agent is not reimbursed for such expenses by
Credit Parties.

 

Successor
Agent. 
Agent may resign at any time by giving not less than thirty (30) days’
prior written notice thereof to Lenders and Borrower.  Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent.  If
no successor Agent shall have been so appointed by the Requisite Lenders and
shall have accepted such appointment within thirty (30) days after the
resigning Agent’s giving notice of resignation, then the resigning Agent may,
on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a
Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a commercial bank
or financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $300,000,000.  If no successor Agent has been appointed
pursuant to the foregoing, within thirty (30) days after the date such notice
of

 

 

resignation was given by the resigning Agent, such resignation shall
become effective and the Requisite Lenders shall thereafter perform all the
duties of Agent hereunder until such time, if any, as the Requisite Lenders
appoint a successor Agent as provided above. Any successor Agent appointed by
Requisite Lenders hereunder shall be subject to the approval of Borrower, such
approval not to be unreasonably withheld or delayed; provided that such
approval shall not be required if a Default or an Event of Default has occurred
and is continuing.  Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. 
Upon the earlier of the acceptance of any appointment as Agent hereunder
by a successor Agent or the effective date of the resigning Agent’s
resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue.  After any resigning Agent’s
resignation hereunder, the provisions of this Section 9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
acting as Agent under this Agreement and the other Loan Documents.

 

Setoff and
Sharing of Payments.  In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default and subject to Section
9.9(f), each Lender is hereby authorized at any time or from time to time,
without prior notice to any Credit Party or to any Person other than Agent, any
such notice being hereby expressly waived, to offset and to appropriate and to
apply any and all balances held by it at any of its offices for the account of
Borrower or any Guarantor (regardless of whether such balances are then due to
Borrower or any Guarantor) and any other properties or assets at any time held
or owing by that Lender or that holder to or for the credit or for the account
of Borrower or any Guarantor against and on account of any of the Obligations
that are not paid when due; provided that the Lender exercising such offset
rights shall give notice thereof to the affected Credit Party promptly after
exercising such rights.  Any Lender
exercising a right of setoff or otherwise receiving any payment on account of
the Obligations in excess of its Pro Rata Share thereof shall purchase for cash
(and the other Lenders or holders shall sell) such participations in each such
other Lender’s or holder’s Pro Rata Share of the Obligations as would be
necessary to cause such Lender to share the amount so offset or otherwise received
with each other Lender or holder in accordance with their respective Pro Rata
Shares, (other than offset rights exercised by any Lender with respect to Sections
1.13, 1.15 or 1.16).  Each Lender’s
obligation under this Section 9.8 shall be in addition to and not in
limitation of its obligations to purchase a participation in an amount equal to
its Pro Rata Share of the Swing Line Loans under Section 1.1.  Borrower and each Guarantor agrees, to the
fullest extent permitted by law, that (a) any Lender may exercise its right to
offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers’ lien, counterclaim or similar rights with
respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation.  Notwithstanding the
foregoing, if all or any portion of the offset amount or payment otherwise
received is thereafter recovered from the Lender that has exercised the right
of offset, the purchase of participations by that Lender shall be rescinded and
the purchase price restored without interest.

 

 

Advances; Payments; Non-Funding Lenders;
Information; Actions in Concert.

 

Advances;
Payments.

 

Revolving Lenders shall refund or participate
in the Swing Line Loan in accordance with clauses (iii) and (iv) of Section
1.1(c).  If the Swing Line Lender
declines to make a Swing Line Loan or if Swing Line Availability is zero, Agent
shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving
Advance and in any event prior to 1:00 p.m. (New York time) on the date such
Notice of Revolving Advance is received, by telecopy, telephone or other
similar form of transmission.  Each
Revolving Lender shall make the amount of such Lender’s Pro Rata Share of such
Revolving Credit Advance available to Agent in same day funds by wire transfer
to Agent’s account as set forth in Annex H not later than 3:00 p.m. (New
York time) on the requested funding date, in the case of an Index Rate Loan and
not later than 11:00 a.m. (New York time) on the requested funding date in the
case of a LIBOR Loan.  After receipt of
such wire transfers (or, in the Agent’s sole discretion, before receipt of such
wire transfers), subject to the terms hereof, Agent shall make the requested
Revolving Credit Advance to Borrower. 
All payments by each Revolving Lender shall be made without setoff,
counterclaim or deduction of any kind.

 

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

 

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

 

 

behalf of any Revolving Lender and is not reimbursed therefor on the
same Business Day as such Advance is made, Agent shall be entitled to retain
for its account all interest accrued on such Advance until reimbursed by the
applicable Revolving Lender.

 

Return of
Payments.

 

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

 

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

 

Non-Funding
Lenders.  The
failure of any Non-Funding Lender to make any Revolving Credit Advance or any
payment required by it hereunder, or to purchase any participation in any Swing
Line Loan to be made or purchased by it on the date specified therefor shall
not relieve any other Lender (each such other Revolving Lender, an “Other
Lender”) of its obligations to make such Advance or purchase such
participation on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make an Advance,
purchase a participation or make any other payment required hereunder.  Notwithstanding anything set forth herein to
the contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a “Lender” or a
“Revolving Lender” (or be included in the calculation of “Requisite Lenders”
hereunder) for any voting or consent rights under or with respect to any Loan
Document.  At Borrower’s request, Agent
or a Person acceptable to Agent shall have the right with Agent’s consent and
in Agent’s sole discretion (but shall have no obligation) to purchase from any
Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at
Agent’s request, sell and assign to Agent or such Person, all of the
Commitments of that Non-Funding Lender for an amount equal to the principal
balance of all Loans held by such Non-Funding Lender and all accrued interest
and fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment Agreement.

 

Dissemination
of Information. 
Agent shall use reasonable efforts to provide Lenders with any notice of
Default or Event of Default received by Agent from, or delivered by Agent to,
any Credit Party, with notice of any Event of Default of which Agent has
actually become aware and with notice of any action taken by Agent following
any Event of Default; provided, that Agent shall not be liable to any Lender
for any failure to do so, except to the extent that such failure is
attributable to Agent’s gross negligence or willful misconduct.  Lenders acknowledge that Borrower is
required to provide Financial Statements and Collateral Reports to

 

 

Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.

 

Actions in
Concert. 
Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action to
protect or enforce its rights arising out of this Agreement or the Notes
(including exercising any rights of setoff) without first obtaining the prior
written consent of Agent and Requisite Lenders, it being the intent of Lenders
that any such action to protect or enforce rights under this Agreement and the
Notes shall be taken in concert and at the direction or with the consent of
Agent or Requisite Lenders.

 

SUCCESSORS AND ASSIGNS

 

Successors and
Assigns. 
This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of each Credit Party, Agent, Lenders and their
respective successors and assigns (including, in the case of any Credit Party,
a debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein.  No Credit
Party may assign, transfer, hypothecate or otherwise convey its rights,
benefits, obligations or duties hereunder or under any of the other Loan
Documents without the prior express written consent of Agent and Lenders.  Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agent and Lenders shall be void.  The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of each Credit Party, Agent and
Lenders with respect to the transactions contemplated hereby and no Person
shall be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Loan Documents.

 

MISCELLANEOUS

 

Complete Agreement; Modification of Agreement.  The Loan Documents constitute the complete
agreement between the parties with respect to the subject matter thereof and
may not be modified, altered or amended except as set forth in Section 11.2.  Any letter of interest, commitment letter,
fee letter or confidentiality agreement, if any, between any Credit Party and
Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement. 
Notwithstanding the foregoing, the GE Capital Fee Letter shall survive
the execution and delivery of this Agreement and shall continue to be binding
obligations of the parties.

 

Amendments and
Waivers.

 

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

 

 

No amendment,
modification, termination or waiver shall, unless in writing and signed by
Agent and each Lender directly affected thereby:  (i) increase the principal amount of any Lender’s Commitment
(which action shall be deemed to directly affect all Lenders); (ii) reduce the
principal of, rate of interest on or Fees payable with respect to any Loan or
Letter of Credit Obligations of any affected Lender; (iii) extend any scheduled
payment date (other than payment dates of mandatory prepayments under Section
1.3(b)(ii)) or final maturity date of the principal amount of any Loan of
any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment
of interest or Fees as to any affected Lender; (v) release any Guaranty or,
except as otherwise permitted herein or in the other Loan Documents, release,
or permit any Credit Party to sell or otherwise dispose of, any substantial
portion of the Collateral (which action shall be deemed to directly affect all
Lenders); (vi) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans that shall be required for Lenders or any
of them to take any action hereunder; and (vii) amend or waive this Section
11.2 or the definition of the term “Requisite Lenders” insofar as such
definition affects the substance of this Section 11.2.  Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer under
this Agreement or any other Loan Document shall be effective unless in writing
and signed by Agent or L/C Issuer, as the case may be, in addition to Lenders
required hereinabove to take such action. 
Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given.  No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or
waiver of any provision of any Note shall be effective without the written
concurrence of the holder of that Note. 
No notice to or demand on any Credit Party in any case shall entitle
such Credit Party or any other Credit Party to any other or further notice or
demand in similar or other circumstances. 
Any amendment, modification, termination, waiver or consent effected in
accordance with this Section 11.2 shall be binding upon each holder of
the Notes at the time outstanding and each future holder of the Notes.

 

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

 

Upon payment
in full in cash and performance of all of the Obligations (other than
indemnification Obligations), termination of the Commitments and a release of all
claims against Agent and Lenders, and so long as no suits, actions proceedings,
or claims are pending or threatened against any Indemnified Person asserting
any damages, losses or liabilities that are Indemnified Liabilities, Agent
shall deliver to Borrower termination statements, mortgage

 

 

releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.

 

Fees and
Expenses. 
Borrower shall reimburse (i) Agent for all fees, costs and expenses
(including the reasonable fees and expenses of all of its counsel, advisors,
consultants and auditors) incurred in connection with the negotiation,
preparation and filing and/or recordation of the Loan Documents and
(ii) Agent (and, with respect to clauses (b) and (c) below, all
Lenders) for all fees, costs and expenses, including the reasonable fees, costs
and expenses of counsel or other advisors (including environmental and
management consultants and appraisers), incurred in connection with:

 

any amendment,
modification or waiver of, or consent with respect to, or termination of, any
of the Loan Documents or Related Transactions Documents or advice in connection
with the syndication and administration of the Loans made pursuant hereto or
its rights hereunder or thereunder;

 

any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, any Lender, any Credit Party or any other Person and whether as a party,
witness or otherwise) in any way relating to the Collateral, any of the Loan
Documents or any other agreement to be executed or delivered in connection
herewith or therewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against any or all of the Credit Parties or any other
Person that may be obligated to Agent by virtue of the Loan Documents,
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Loans during
the pendency of one or more Events of Default; provided that in the case
of reimbursement of counsel for Lenders other than Agent, such reimbursement
shall be limited to one counsel for all such Lenders; provided, further,
that no Person shall be entitled to reimbursement under this clause (b)
in respect of any litigation, contest, dispute, suit, proceeding or action to
the extent any of the foregoing results from such Person’s gross negligence or
willful misconduct;

 

any attempt to
enforce any remedies of Agent or any Lender against any or all of the Credit
Parties or any other Person that may be obligated to Agent or any Lender by
virtue of any of the Loan Documents, including any such attempt to enforce any
such remedies in the course of any work-out or restructuring of the Loans
during the pendency of one or more Events of Default; provided, that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;

 

any workout or
restructuring of the Loans during the pendency of one or more Events of
Default; and

 

efforts to (i)
monitor the Loans or any of the other Obligations, (ii) evaluate, observe or
assess any of the Credit Parties or their respective affairs, and (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of any of the Collateral;

 

including, as to each of clauses (a) through (e) above, all
reasonable attorneys’ and other professional and service providers’ fees
arising from such services and other advice, assistance or

 

 

other representation, including those in connection with any appellate
proceedings, and all expenses, costs, charges and other fees incurred by such
counsel and others in connection with or relating to any of the events or
actions described in this Section 11.3, all of which shall be payable,
on demand, by Borrower to Agent. 
Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and other
consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.

 

No Waiver.  Agent’s or any Lender’s failure, at any time
or times, to require strict performance by the Credit Parties of any provision
of this Agreement or any other Loan Document shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance herewith or therewith.  Any suspension or waiver of an Event of Default shall not
suspend, waive or affect any other Event of Default whether the same is prior
or subsequent thereto and whether the same or of a different type.  Subject to the provisions of Section 11.2,
none of the undertakings, agreements, warranties, covenants and representations
of any Credit Party contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default by any Credit Party shall be
deemed to have been suspended or waived by Agent or any Lender, unless such
waiver or suspension is by an instrument in writing signed by an officer of or
other authorized employee of Agent and the applicable required Lenders and
directed to Borrower specifying such suspension or waiver.

 

Remedies.  Agent’s and Lenders’ rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies that Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise.  Recourse to the Collateral shall not be
required.

 

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

 

Conflict of
Terms. 
Except as otherwise provided in this Agreement or any of the other Loan
Documents by specific reference to the applicable provisions of this Agreement,
if any provision contained in this Agreement conflicts with any provision in
any of the other Loan Documents, the provision contained in this Agreement
shall govern and control.

 

Confidentiality.  Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintain the confidentiality of its own confidential information) to
maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agent and each Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender; (b) to any
bona fide assignee or participant or

 

 

potential assignee or participant that has agreed to comply with the
covenant contained in this Section 11.8 (and any such bona fide assignee
or participant or potential assignee or participant may disclose such information
to Persons employed or engaged by them as described in clause (a)
above); (c) as required or requested by any Governmental Authority or
reasonably believed by Agent or such Lender to be compelled by any court
decree, subpoena or legal or administrative order or process; (d) as, on the
advice of Agent’s or such Lender’s counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Agent or such Lender is a party; or
(f) that ceases to be confidential through no fault of Agent or any
Lender.  Notwithstanding anything to the
contrary set forth herein or in any other agreement to which the parties hereto
are parties or by which they are bound, the obligations of confidentiality
contained herein and therein, as they relate to the transactions contemplated
by the Credit Agreement and the other loan documents (the “Transaction”),
shall not apply to the federal tax structure or federal tax treatment of the
Transaction, and each party hereto (and any employee, representative, agent of
any party hereto) may disclose to any and all persons, without limitation of
any kind, the federal tax structure and federal tax treatment of the
Transaction.  The preceding sentence is
intended to cause the Transaction to be treated as not having been offered
under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under Section
6011 of the Internal Revenue Code of 1986, as amended, and shall be construed
in a manner consistent with such purpose. 
In addition, each party hereto acknowledges that it has no proprietary
or exclusive rights to the federal tax structure of the Transaction or any
federal tax matter or federal tax idea related to the Transaction.

 

GOVERNING LAW.  EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN
DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.  EACH CREDIT
PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT
AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK COUNTY AND; PROVIDED, FURTHER THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.  EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH

 

 

COURT, AND EACH CREDIT PARTY HEREBY WAIVES
ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM  NON  CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.  EACH CREDIT
PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I
OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

 

Notices.  Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other parties, or whenever any of the parties
desires to give or serve upon any other parties any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 11.10); (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Annex I or to such other address (or facsimile number) as may be
substituted by notice given as herein provided.  The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice.  Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to any Person
(other than Borrower or Agent) designated in Annex I to receive copies
shall in no way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.

 

Section Titles.  The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.

 

Counterparts.  This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement.

 

WAIVER OF JURY
TRIAL.  BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY

 

 

(RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS.  THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.

 

Press Releases
and Related Matters.  Each Credit Party executing this Agreement agrees that neither it
nor its Affiliates will in the future issue any press releases or other public
disclosure using the name of GE Capital or its affiliates or referring to this
Agreement, the other Loan Documents or the Related Transactions Documents
without at least two (2) Business Days’ prior notice to GE Capital and without
the prior written consent of GE Capital unless (and only to the extent that)
such Credit Party or Affiliate is required to do so under law and then, in any
event, such Credit Party or Affiliate will consult with GE Capital before
issuing such press release or other public disclosure.  Each Credit Party consents to the
publication by Agent or any Lender of advertising material relating to the
financing transactions contemplated by this Agreement using Borrower’s name,
product photographs, logo or trademark. 
Agent or such Lender shall provide a draft of any advertising material
to each Credit Party for review and comment prior to the publication
thereof.  Agent reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.

 

Reinstatement.  This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Credit Party for liquidation or reorganization, should any Credit
Party become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Credit Party’s assets, and shall continue to be
effective or to be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment or
performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.

 

Advice of
Counsel. 
Each of the parties represents to each other party hereto that it has
discussed this Agreement and, specifically, the provisions of Sections 11.9
and 11.13, with its counsel.

 

No Strict
Construction. 
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no

 

 

presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  BLUE RIDGE PAPER
  PRODUCTS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Lozyniak

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Richard A. Lozyniak

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION, as Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James F. DeSantis

  	
   

  
	
   

  	
   

  	
  Duly Authorized Signatory

  	
   

  
							

 

 

The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.

 

	
   

  	
  BLUE RIDGE HOLDING
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Lozyniak

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Richard A. Lozyniak

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  BRPP, LLC

  
	
   

  	
  By: Blue Ridge Paper Products Inc., sole
  Member and Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wadsworth

  	
   

  
	
   

  	
  Name:

  	
   

  	
  John Wadsworth

  	
   

  
	
   

  	
  Title:

  	
   

  	
  CFO

  	
   

  
							

 

 

ANNEX A (Recitals)

to

CREDIT AGREEMENT

 

DEFINITIONS

 

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

 

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

 

“Accounting Changes” has the meaning ascribed thereto in Annex G.

 

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

 

“Activation Event” and “Activation Notice” have the meanings
ascribed thereto in Annex C.

 

“Advance” means any Revolving Credit Advance or Swing Line
Advance, as the context may require.

 

“Affiliate” means, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c)
each of such Person’s officers, directors, joint venturers and partners and (d)
in the case of Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower.  For the purposes of this definition, “control”
of a Person shall mean the

 

 

possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” shall specifically exclude Agent and each
Lender.

 

“Agent” means GE Capital in its capacity as Agent for Lenders or
its successor appointed pursuant to Section 9.7.

 

“Agreement” means the Credit Agreement by and among Borrower,
the other Credit Parties party thereto, GE Capital, as Agent and Lender and the
other Lenders from time to time party thereto, as the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

“Appendices” has the meaning ascribed to it in the recitals to
the Agreement.

 

“Applicable L/C Margin” means the per annum fee, from time to
time in effect, payable with respect to outstanding Letter of Credit
Obligations as determined by reference to Section 1.5(a).

 

“Applicable Margins” means collectively the Applicable L/C
Margin, the Applicable Unused Line Fee Margin, the Applicable Revolver Index
Margin and the Applicable Revolver LIBOR Margin.

 

“Applicable Revolver Index Margin” means the per annum interest
rate margin from time to time in effect and payable in addition to the Index
Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a).

 

“Applicable Revolver LIBOR Margin” means the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).

 

“Applicable Unused Line Fee Margin” means the per annum fee,
from time to time in effect, payable in respect of Borrower’s non-use of
committed funds pursuant to Section 1.9(b), which fee is determined
by reference to Section 1.5(a).

 

“Assignment Agreement” has the meaning ascribed to it in Section 9.1(a).

 

“Bankruptcy Code” means the provisions of Title 11 of the United
States Code, 11 U.S.C. §§ 101 et seq.

 

“Blocked Accounts” has the meaning ascribed to it in Annex C.

 

“Borrower” has the meaning ascribed thereto in the preamble to
the Agreement.

 

“Borrower Pledge Agreement” means the Pledge Agreement of even
date herewith executed by Borrower in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its Subsidiaries.

 

“Borrowing Availability” means, as of any date of determination,
the Borrowing Base, less the sum of the Revolving Loan and Swing Line
Loan then outstanding.

 

 

“Borrowing Base” means, as of any date of determination by
Agent, from time to time, an amount equal to the sum at such time of:

 

(a)                                  up to 85% of the book
value of Borrower’s Eligible Accounts at such time; and

 

(b)                                 up to 60% of the book
value of Borrower’s Eligible Inventory valued at the lower of cost (determined
on a first-in, first-out basis) or market;

 

in each case, less any Reserves established by Agent at such time.

 

“Borrowing Base Certificate” means a certificate to be executed
and delivered from time to time by Borrower in the form attached to the
Agreement as Exhibit 4.1(b).

 

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

 

“Capital Expenditures” means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life
of more than one year and that are required to be capitalized under GAAP.

 

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

 

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

 

“Cash Collateral Account” has the meaning ascribed to it Annex
B.

 

“Cash Equivalents” has the meaning ascribed to it in Annex B.

 

“Cash Management Systems” has the meaning ascribed to it in Section 1.8.

 

“Champion Asset Purchase Agreement” means that Asset Purchase
Agreement (with all exhibits and schedules thereto), dated as of March 29,
1999, by and among Borrower, Holdings and Champion International Corporation.

 

“Change of Control” means any event, transaction, occurrence or
series of events, transactions or occurrences, as a result of which (a) KPS
shall cease to own and control all of the economic and voting rights associated
with ownership of at least thirty-three percent (33%) of the outstanding
capital Stock of Holdings on a fully diluted basis, (b) Holdings shall cease to
own and control all (100%) of the economic and voting rights associated with
ownership of all (100%) of the outstanding capital Stock of Borrower, (c)
individuals who, on the Closing Date, constituted the board of directors of
Holdings (together with any new directors whose

 

 

election by the board of directors of Holdings or whose nomination for
election by the stockholders of Holdings was approved by a majority of the
directors then still in office who either were directors on the Closing Date or
whose elections or nomination for election was previously so approved) cease
for any reason other than death or disability to constitute a majority of the
directors then in office, (d) KPS shall cease to control a majority of the
seats on the board of directors of Holdings or (e) any event occurs which would
result in a “Change of Control” as defined in the Senior Secured Notes
Indenture.

 

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

 

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

 

“Closing Date” means December 17, 2003.

 

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

 

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

 

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

 

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

 

“Collateral Reports” means the reports with respect to the
Collateral referred to in Annex F.

 

 

“Collection Account” means that certain account of Agent,
account number  502-328-54 in the name
of Agent at DeutscheBank Trust Company Americas in New York, New York ABA No.
021 001 033, or such other account as may be specified in writing by Agent as
the “Collection Account.”

 

“Commitment Termination Date” means the earliest of (a)
December 15, 2008, (b) the date of termination of Lenders’ obligations to
make Advances and to incur Letter of Credit Obligations or permit existing
Loans to remain outstanding pursuant to Section 8.2(b), and (c) the
date of indefeasible prepayment in full by Borrower of the Loans and the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to Annex
B, and the permanent reduction of the Commitments to zero dollars ($0).

 

“Commitments” means (a) as to any Lender, such Lender’s
Revolving Loan Commitment (including without duplication the Swing Line
Lender’s Swing Line Commitment as a subset of its Revolving Loan Commitment) as
set forth on Annex J to the Agreement or in the most recent Assignment
Agreement executed by such Lender and (b) as to all Lenders, the aggregate of
all Lenders’ Revolving Loan Commitments (including without duplication the
Swing Line Lender’s Swing Line Commitment as a subset of its Revolving Loan
Commitment), which aggregate commitment shall be Forty Five Million Dollars
($45,000,000) on the Closing Date, as to each of clauses (a) and (b), as
such Commitments may be reduced, amortized or adjusted from time to time in
accordance with the Agreement.

 

“Compliance Certificate” has the meaning ascribed to it in Annex
E.

 

“Contracts” means all “contracts,” as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.

 

“Control Letter” means a letter agreement between Agent and (i)
the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party, (ii) a securities intermediary with
respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the
name of any Credit Party, (iii) a futures commission merchant or clearing
house, as applicable, with respect to commodity accounts and commodity
contracts held by any Credit Party, whereby, among other things, the issuer,
securities intermediary or futures commission merchant limits any security
interest in the applicable financial assets in a manner reasonably satisfactory
to Agent, acknowledges the Lien of Agent, on behalf of itself and Lenders, on
such financial assets, and agrees to follow the instructions or entitlement
orders of Agent without further consent by the affected Credit Party.

 

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

 

 

“Copyright Security Agreements” means the Copyright Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.

 

“Copyrights” means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all copyrights and General
Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, and (b) all reissues, extensions or renewals thereof.

 

“Credit Parties” means Holdings, Borrower, and each of their
respective Subsidiaries.

 

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

 

“Default Rate” has the meaning ascribed to it in Section 1.5(d).

 

“Deposit Accounts” means all “deposit accounts” as such term in
defined in the Code, now or hereafter held in the name of any Credit Party.

 

“Disbursement Accounts” has the meaning ascribed to it in Annex
C.

 

“Disclosure Schedules” means the Schedules prepared by Borrower
and denominated as Disclosure Schedules (1.4) through (6.7) and Disclosure
Schedule B-1 in the Index to the Agreement.

 

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

 

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

 

“Earn-out” means the obligations of Borrower to pay Additional
Consideration (as such term is defined in the Champion Asset Purchase
Agreement) to International Paper pursuant to Section 3.4 of the Champion
Asset Purchase Agreement.

 

“EBITDA” means, with respect to any Person for any fiscal
period, without duplication, an amount equal to (a) consolidated net income of
such Person for such period, determined in accordance with GAAP, minus
(b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain (but not any
aggregate net loss) during such period arising from the sale, exchange or other
disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) any other non-cash
gains that have been added in determining consolidated net income, in each case
to the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication, plus
(c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii)
loss from extraordinary items for such period, (iv) the amount of non-cash
charges (including depreciation and amortization) for such period, (v)
amortized debt

 

 

discount for such period, (vi) the amount of any non-cash expense as
the result of any grant to any members of the management of such Person of any
Stock or restricted Stock, (vii) the amount of non-cash Holdings ESOP expenses
for such period, (viii) the amount of any provision for profit sharing for such
period pursuant to the Union Contracts and (ix) the amount of any management
fee payable to KPS Management, LLC to the extent that such fee is not paid in
cash, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication.  For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a Person: (1) the income (or deficit) of any other Person accrued
prior to the date it became a Subsidiary of, or was merged or consolidated
into, such Person or any of such Person’s Subsidiaries; (2) the income (or
deficit) of any other Person (other than a Subsidiary) in which such Person has
an ownership interest, except to the extent any such income has actually been
received by such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (4) any restoration to income
of any contingency reserve, except to the extent that provision for such
reserve was made out of income accrued during such period; (5) any write-up of
any asset; (6) any net gain from the collection of the proceeds of life
insurance policies; (7) any net gain arising from the acquisition of any
securities, or the extinguishment, under GAAP, of any Indebtedness, of such
Person, (8) in the case of a successor to such Person by consolidation or
merger or as a transferee of its assets, any earnings of such successor prior
to such consolidation, merger or transfer of assets, and (9) any deferred
credit representing the excess of equity in any Subsidiary of such Person at
the date of acquisition of such Subsidiary over the cost to such Person of the
investment in such Subsidiary.

 

“Eligible Accounts” has the meaning ascribed to it in Section 1.6
of the Agreement.

 

“Eligible Inventory” has the meaning ascribed to it in Section 1.7
of the Agreement.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

“ERISA Event” means, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a
plan year in which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any
Credit Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing
of a notice of intent to terminate a Title IV Plan or the treatment of a plan
amendment as a termination under Section 4041 of ERISA; (e) the
institution of proceedings to terminate a Title IV Plan or Multiemployer Plan
by the PBGC; (f) the failure by any Credit Party or ERISA Affiliate to make
when due required contributions to a Multiemployer Plan or Title IV Plan unless
such failure is cured within thirty (30) days; (g) any other event or condition
that would reasonably be expected to constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Title IV

 

 

Plan or Multiemployer Plan or for the imposition of liability under
Section 4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer
Plan under Section 4041A of ERISA or the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) the
loss of a Qualified Plan’s qualification or tax exempt status; or (j) the
termination of a Plan described in Section 4064 of ERISA.

 

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

 

“Event of Default” has the meaning ascribed to it in Section 8.1.

 

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

 

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

 

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

 

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

 

“Financial Covenants” means the financial covenants set forth in
Annex G.

 

“Financial Statements” means the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Borrower
delivered in accordance with Section 3.4 and Annex E.

 

“Fiscal Month” means any of the monthly accounting periods of
Borrower.

 

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

 

“Fiscal Year” means any of the annual accounting periods of
Holdings and Borrower ending on December 31 of each year.

 

“Fixed Charges” means, with respect to any Person for any fiscal
period, (a) the aggregate of all cash Interest Expense paid or accrued during
such period, plus (b) scheduled payments of principal with respect to
Indebtedness during such period, plus (c) Capital Expenditures during
such period (other than that portion of such Capital Expenditures financed by
lenders other than the Lenders hereunder) plus (d) income taxes paid or
payable in cash with respect to such fiscal period, plus
(e) repurchases or redemptions of common Stock of Holdings (and options
with respect to common Stock of Holdings) from former employees in connection
with the Holdings ESOP or from directors, officers or employees or former
directors, officers or employees.

 

“Fixed Charge Coverage Ratio” means, with respect to any Person
for any fiscal period, the ratio of EBITDA to Fixed Charges.

 

 

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

 

“fully diluted basis” means, in reference to the outstanding
capital Stock of Holdings, that the outstanding capital Stock of Holdings shall
be determined assuming (i) the exercise or conversion, as applicable, of all
outstanding options, warrants and other similar equity securities of Holdings,
(ii) that all outstanding agreements and other rights to acquire capital Stock
of Holdings have been exercised, (iii) that the Holdings ESOP (at all times,
even if at the time of determination the Holdings ESOP actually holds a lesser
amount of the capital Stock of Holdings) holds shares of common Stock of
Holdings in an amount equal to forty percent (40%) of the outstanding capital
Stock of Holdings and (iv) that the directors, officers and employees of
Borrower (at all times, even if at the time of determination such directors,
officers and employees actually hold a lesser amount of the capital Stock of
Holdings) hold shares of common Stock of Holdings (whether through direct
ownership, stock options or otherwise) in an amount equal to ten percent (10%)
of the outstanding capital Stock of Holdings.

 

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

 

“GAAP” means generally accepted accounting principles in the
United States of America, consistently applied, as such term is further defined
in Annex G to the Agreement.

 

“GE Capital” means General Electric Capital Corporation, a
Delaware corporation.

 

“GE Capital Fee Letter” means that certain letter, dated as of
the date hereof, between GE Capital and Borrower with respect to certain Fees
to be paid from time to time by Borrower to GE Capital.

 

“General Intangibles” means “general intangibles,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all

 

 

liability, life, key man and business interruption insurance, and all
unearned premiums), uncertificated securities, chooses in action, deposit,
checking and other bank accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, rights of indemnification, all books and records, correspondence,
credit files, invoices and other papers, including without limitation all
tapes, cards, computer runs and other papers and documents in the possession or
under the control of such Credit Party or any computer bureau or service
company from time to time acting for such Credit Party.

 

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

 

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

 

“Guaranteed Indebtedness” means, as to any Person, any
obligation of such Person guaranteeing, providing comfort or otherwise
supporting any Indebtedness, lease, dividend, or other obligation (“primary
obligation”) of any other Person (the “primary obligor”) in any
manner, including any obligation or arrangement of such Person to
(a) purchase or repurchase any such primary obligation, (b) advance
or supply funds (i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, (d) protect the beneficiary of such arrangement from loss
(other than product warranties given in the ordinary course of business) or (e) indemnify
the owner of such primary obligation against loss in respect thereof.  The amount of any Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed Indebtedness, or, if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof.

 

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

 

“Guarantors” means Holdings, each Subsidiary of Borrower and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of Agent, for itself and the ratable benefit of Lenders, in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.

 

 

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

 

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

 

“Holdings ESOP” means a tax-qualified employee stock ownership
plan (as well as, if so elected by Holdings, a non-qualified supplemental
employee stock ownership account established for the sole purpose of containing
excess contributions) to which Holdings shall be able to issue shares of its
common Stock in an aggregate amount up to forty percent (40%) of the
outstanding capital Stock of Holdings on a fully diluted basis.

 

“Holdings Guaranty” means the guaranty of even date herewith
executed by Holdings in favor of Agent and Lenders.

 

“Indebtedness” means, with respect to any Person, without
duplication (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for which is deferred 6 months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are unsecured and not overdue by more than 6 months
unless being contested in good faith, (b) all reimbursement and other
obligations with respect to letters of credit, bankers’ acceptances and surety
bonds, whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations and
the present value (discounted at the Index Rate as in effect on the Closing
Date) of future rental payments under all synthetic leases, (f) all obligations
of such Person under commodity purchase or option agreements or other commodity
price hedging arrangements, in each case whether contingent or matured, (g) all
obligations of such Person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising
from fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.

 

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.13.

 

“Indemnified Person” has the meaning ascribed to it in Section 1.13.

 

 

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

 

“Index Rate Loan” means a Loan or portion thereof bearing
interest by reference to the Index Rate.

 

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

 

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

 

“Intercreditor Agreement” means the Intercreditor Agreement of
even date herewith among Agent, the Senior Secured Notes Trustee and the Credit
Parties.

 

“Interest Expense” means, with respect to any Person for any
fiscal period, cash interest expense of such Person determined in accordance
with GAAP for the relevant period ended on such date, including cash interest
expense with respect to any Funded Debt of such Person.

 

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

 

“International Paper” means International Paper Company, a New
York corporation, and the successor-in-interest to Champion International
Corporation.

 

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

 

“Investment Property” means all “investment property” as such
term is defined in the Code now owned or hereafter acquired by any Credit
Party, wherever located, including (i) all securities,

 

 

whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (ii) all securities
entitlements of any Credit Party, including the rights of such Credit Party to
any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account; (iii)
all securities accounts of any Credit Party; (iv) all commodity contracts of any
Credit Party; and (v) all commodity accounts held by any Credit Party.

 

“IP Subsidiary” means BRPP, LLC, a North Carolina limited
liability company, the sole member of which shall be the Borrower.

 

“IP License Agreement” means that certain License Agreement,
dated as of May 1, 2001, by and between the IP Subsidiary, as licensor, and
Borrower, as licensee, as amended, supplemented or otherwise modified from time
to time as expressly permitted to be so amended, supplemented or modified
pursuant to the terms and provisions of the Agreement.

 

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

 

“IRS” means the Internal Revenue Service.

 

“KPS” means KPS Special Situations Fund, L.P. and KPS
Supplemental Fund, L.P., collectively.

 

“L/C Issuer” has the meaning ascribed to it in Annex B.

 

“L/C Sublimit” has the meaning ascribed to in it Annex B.

 

“Lender Priority Collateral” has the meaning ascribed thereto in
the recitals to this Agreement.

 

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

 

“Letter of Credit Fee” has the meaning ascribed to it in Annex
B.

 

“Letter of Credit Obligations” means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of
a participation as set forth in Annex B with respect to any Letter of
Credit.  The amount of such Letter of
Credit Obligations shall equal the maximum amount that may be payable by Agent
or Lenders thereupon or pursuant thereto.

 

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

 

 

“Letter-of-Credit Rights” means “letter-of-credit rights” as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, including rights to payment or performance under a letter of credit,
whether or not such Credit Party, as beneficiary, has demanded or is entitled
to demand payment or performance.

 

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

 

“LIBOR Loan” means a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.

 

“LIBOR Period” means, with respect to any LIBOR Loan, each
period commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower’s irrevocable notice to Agent as set forth in Section 1.5(e);
provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:

 

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

 

(b)                                 any LIBOR Period that
would otherwise extend beyond the Commitment Termination Date shall end two (2)
LIBOR Business Days prior to such date;

 

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

 

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

 

(e)                                  Borrower shall select
LIBOR Periods so that there shall be no more than 6 separate LIBOR Loans in
existence at any one time.

 

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

 

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

 

(b)                                 a number equal to 1.0 minus
the aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day that is two (2) LIBOR
Business Days prior to the beginning of such LIBOR Period (including

 

 

basic, supplemental, marginal and emergency reserves under any
regulations of the Federal Reserve Board or other Governmental Authority having
jurisdiction with respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Federal Reserve Board that are required to be maintained by
a member bank of the Federal Reserve System.

 

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

 

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

 

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

 

“Litigation” has the meaning ascribed to it in Section 3.13.

 

“Loan Account” has the meaning ascribed to it in Section 1.12.

 

“Loan Documents” means the Agreement, the Notes, the Collateral
Documents, the Master Standby Agreement, the Master Documentary Agreement, and
all other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, Agent or any
Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, letter of credit agreements and all other
written matter whether heretofore, now or hereafter executed by or on behalf of
any Credit Party, or any employee of any Credit Party, and delivered to Agent
or any Lender in connection with the Agreement or the transactions contemplated
thereby.  Any reference in the Agreement
or any other Loan Document to a Loan Document shall include all appendices,
exhibits or schedules thereto, and all amendments, restatements, supplements or
other modifications thereto, and shall refer to the Agreement or such Loan
Document as the same may be in effect at any and all times such reference
becomes operative.

 

“Loans” means the Revolving Loan and the Swing Line Loan.

 

“Lock Boxes” has the meaning ascribed to it in Annex C.

 

“Margin Stock” has the meaning ascribed to it in Section 3.10.

 

“Master Documentary Agreement” means the Master Agreement for
Documentary Letters of Credit dated as of the Closing Date between Borrower, as
Applicant, and GE Capital, as Issuer.

 

 

“Master Standby Agreement” means the Master Agreement for
Standby Letters of Credit dated as of the Closing Date between Borrower, as
Applicant, and GE Capital, as Issuer.

 

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

 

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

 

“Mortgaged Properties” has the meaning assigned to it in Annex
D.

 

“Mortgages” means each of the mortgages, deeds of trust,
leasehold mortgages, leasehold deeds of trust, collateral assignments of leases
or other real estate security documents delivered by any Credit Party to Agent
on behalf of itself and Lenders with respect to the Mortgaged Properties, all
in form and substance reasonably satisfactory to Agent.

 

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

 

“Non-Funding Lender” has the meaning ascribed to it in Section 9.9(a)(ii).

 

“Noteholder Priority Collateral” has the meaning ascribed
thereto in the recitals to this Agreement.

 

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

 

“Notice of Conversion/Continuation” has the meaning ascribed to
it in Section 1.5(e).

 

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

 

“Obligations” means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment
of monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement, letter of credit agreement or other instrument, arising
under the Agreement or any of the other Loan Documents.  This term includes all principal, interest
(including all interest that accrues after the commencement of any case or proceeding
by or against any Credit Party in bankruptcy, whether or not allowed in such
case or proceeding), Fees, hedging obligations under swaps, caps and collar
arrangements provided by any Lender, expenses, attorneys’ fees and any other
sum chargeable to any Credit Party under the Agreement or any of the other Loan
Documents.

 

 

“Overadvance” has the meaning ascribed to it in Section 1.1(a)(iii).

 

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

 

“Patent Security Agreements” means the Patent Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.

 

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

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

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

 

“Permitted Encumbrances” means the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or which are being contested in accordance with Section 5.2(b);
(b) pledges or deposits of money securing statutory obligations under workmen’s
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or deposits
of money securing bids, tenders, contracts (other than contracts for the
payment of money) or leases to which any Credit Party is a party as lessee made
in the ordinary course of business; (d) inchoate and unperfected workers’,
mechanics’  or similar liens arising in
the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (e) carriers’, warehousemen’s,
suppliers’ or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount not in
excess of $50,000 at any time, so long as such Liens attach only to Inventory;
(f) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Credit Party is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j);
(h) zoning restrictions, easements, licenses, or other restrictions on the use
of any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) presently existing or hereafter created
Liens in favor of Agent, on behalf of Lenders; and (j) Liens expressly
permitted under clauses (b), (c) and (d)(i) of Section 6.7
of the Agreement.

 

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

 

 

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

 

“Pledge Agreements” means the Borrower Pledge Agreement and any
other pledge agreement entered into after the Closing Date by any Credit Party
(as required by the Agreement or any other Loan Document).

 

“Prior Credit Agreement” has the meaning ascribed thereto in the
recitals to this Agreement.

 

“Proceeds” means “proceeds,” as such term is defined in the
Code, including (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Credit Party from time to time with respect
to any of the Collateral, (b) any and all payments (in any form whatsoever)
made or due and payable to any Credit Party from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any Governmental Authority (or any Person
acting under color of governmental authority), (c) any claim of any Credit
Party against third parties (i) for past, present or future infringement of any
Patent or Patent License, or  (ii) for
past, present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any
Credit Party against third parties with respect to any litigation or dispute
concerning any of the Collateral including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights in, or damage to, Collateral, (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
Stock, and (f) any and all other amounts, rights to payment or other
property acquired upon the sale, lease, license, exchange or other disposition
of Collateral and all rights arising out of Collateral.

 

“Pro Forma” means the unaudited consolidated and consolidating
balance sheet of Holdings and its Subsidiaries as of December 17,
2003  after giving pro  forma
effect to the Related Transactions.

 

“Projections” means Borrower’s forecasted consolidated and
consolidating:  (a) balance sheets; (b)
profit and loss statements; (c) cash flow statements; and (d) capitalization
statements, all prepared on a Subsidiary by Subsidiary or division-by-division
basis, if applicable, and otherwise consistent with the historical Financial
Statements of Borrower, together with appropriate supporting details and a statement
of underlying assumptions.

 

“Pro Rata Share” means with respect to all matters relating to
any Lender (a) prior to the Commitment Termination Date, the percentage
obtained by dividing (i) the Revolving Loan Commitment of that Lender by (ii)
the aggregate Revolving Loan Commitments of all Lenders and (b) on and after
the Commitment Termination Date, the percentage obtained by dividing (i) the
aggregate outstanding principal balance of the Loans held by that Lender, by
(ii) the outstanding principal balance of the Loans held by all Lenders.

 

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

 

 

“Qualified Assignee” means (a) any Lender, any Affiliate of any
Lender and, with respect to any Lender that is an investment fund that invests
in commercial loans, any other investment fund that invests in commercial loans
and that is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor, and (b) any commercial bank,
savings and loan association or savings bank or any other entity which is an
“accredited investor” (as defined in Regulation D under the Securities Act)
which extends credit or buys loans as one of its businesses, including
insurance companies, mutual funds, lease financing companies and commercial
finance companies, in each case, which has a rating of BBB or higher from
S&P and a rating of Baa2 or higher from Moody’s at the date that it becomes
a Lender and, in the case of both (a) and (b), which, through its applicable
lending office, is capable of lending to Borrower without the imposition of any
withholding or similar taxes; provided that no Person proposed to become a
Lender after the Closing Date and determined by Agent to be acting in the
capacity of a vulture fund or distressed debt purchaser shall be a Qualified
Assignee, and no Person or Affiliate of such Person proposed to become a Lender
after the Closing Date and that holds Subordinated Debt or Stock issued by any
Credit Party shall be a Qualified Assignee.

 

“Real Estate” has the meaning ascribed to it in Section 3.6.

 

“Refinancing” means the repayment in full by Borrower of the
obligations under the Prior Credit Agreement on the Closing Date.

 

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

 

“Related Transactions” means the initial borrowing under the
Revolving Loan on the Closing Date, the Refinancing, the issuance of the Senior
Secured Notes, the payment of all fees, costs and expenses associated with all
of the foregoing and the execution and delivery of all of the Related
Transactions Documents.

 

“Related Transactions Documents” means the Loan Documents, the
Senior Secured Notes Documents, the Intercreditor Agreement and all other
agreements or instruments executed in connection with the Related Transactions.

 

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

 

“Requisite Lenders” means Lenders having (a) more than 50%
of the Commitments of all Lenders, or (b) if the Commitments have been
terminated, more than 50% of the aggregate outstanding amount of the Loans.

 

“Reserves” means, with respect to the Borrowing Base of Borrower
(a) reserves established by Agent from time to time against Eligible Inventory
pursuant to Section 5.9, (b) reserves established pursuant to Section 5.4(c),
and (c) such other reserves against Eligible Accounts, Eligible Inventory or
Borrowing Availability of Borrower that Agent may, in its reasonable credit
judgment, establish from time to time. 
Without limiting the generality of the foregoing,

 

 

Reserves established to ensure the payment of accrued Interest Expenses
or Indebtedness shall be deemed to be a reasonable exercise of Agent’s credit judgment.

 

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

 

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

 

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

 

“Revolving Lenders” means, as of any date of determination,
Lenders having a Revolving Loan Commitment.

 

“Revolving Loan” means, at any time, the sum of (i) the
aggregate amount of Revolving Credit Advances outstanding to Borrower plus
(ii) the aggregate Letter of Credit Obligations incurred on behalf of
Borrower.  Unless the context otherwise
requires, references to the outstanding principal balance of the Revolving Loan
shall include the outstanding balance of Letter of Credit Obligations.

 

“Revolving Loan Commitment” means (a) as to any Revolving
Lender, the aggregate commitment of such Revolving Lender to make Revolving
Credit Advances or incur Letter of Credit Obligations as set forth on Annex
J to the Agreement or in the most recent Assignment Agreement executed by
such Revolving Lender and (b) as to all Revolving Lenders, the aggregate
commitment of all Revolving Lenders to make Revolving Credit Advances or incur
Letter of Credit Obligations, which aggregate commitment shall be Forty Five
Million Dollars  ($45,000,000) on the
Closing Date, as such amount may be adjusted, if at all, from time to time in
accordance with the Agreement.

 

 

“Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii).

 

“Security Agreement” means the Security Agreement of even date
herewith entered into by and among Agent, on behalf of itself and Lenders, and
each Credit Party that is a signatory thereto.

 

“Seller Note” means that certain Pay-In-Kind Senior Subordinated
Promissory Note, dated the Closing Date, made by Holdings payable to the order
of International Paper in the original principal amount of $30,000,000.

 

 “Senior Secured Notes”
means those 9.5% Senior Secured Notes of Borrower due December 15, 2008 in
the original principal amount of $125,000,000 issued pursuant to the Senior
Secured Notes Indenture, as the same may be amended, supplemented, restated or
otherwise modified from time to time, including any “Exchange Notes” (as
defined in the Senior Secured Notes Indenture) issued in exchange therefor.

 

“Senior Secured Notes Documents” means the Senior Secured Notes,
the Senior Secured Notes Indenture and any other agreement, document or
instrument now or at any time hereafter guaranteeing or securing the
Indebtedness under the Senior Secured Notes, as the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

“Senior Secured Notes Indenture” means that certain Indenture of
even date herewith between Borrower and the Senior Secured Notes Trustee, as
the same may be amended, supplemented, restated or otherwise modified from time
to time.

 

“Senior Secured Notes Trustee” means U.S. Bank National
Association.

 

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

 

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

 

“Stock” means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other “equity security” (as such term is defined in Rule
3a11-1 of

 

 

the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934).

 

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

 

“Subordinated Debt” means the Earn-out, the Indebtedness of
Holdings evidenced by the Seller Note and any other Indebtedness of any Credit
Party subordinated to the Obligations in a manner and form satisfactory to
Agent and Lenders, in their sole discretion, as to right and time of payment
and as to any other rights and remedies thereunder.

 

“Subordination Agreement” means the Subordination Agreement,
dated as of May 14, 1999, among GE Capital as agent, on behalf of itself and
the lenders under the Prior Credit Agreement, each Credit Party that is a
signatory thereto, and International Paper.

 

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

 

“Subsidiary Guaranty” means the Subsidiary Guaranty of even date
herewith executed by each Subsidiary of Borrower in favor of Agent, on behalf
of itself and Lenders.

 

“Supporting Obligations” means all “supporting obligations” as
such term is defined in the Code, including letters of credit and guaranties
issued in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.

 

“Swing Line Advance” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Swing Line Availability” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Swing Line Commitment” means, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of
the Revolving Loan Commitment of the Swing Line Lender.

 

“Swing Line Lender” means GE Capital.

 

“Swing Line Loan” means at any time, the aggregate amount of
Swing Line Advances outstanding to Borrower.

 

 

“Swing Line Note” has the meaning ascribed to it in Section 1.1(c)(ii).

 

“Taxes” means taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions
under the laws of which Agent and Lenders are organized or conduct business or
any political subdivision thereof.

 

“Termination Date” means the date on which (a) the Loans
have been indefeasibly repaid in full, (b) all other Obligations under the
Agreement and the other Loan Documents have been completely discharged,
(c) all Letter of Credit Obligations have been cash collateralized,
cancelled or backed by standby letters of credit in accordance with Annex B,
and (d) Borrower shall not have any further right to borrow any monies
under the Agreement.

 

“Title IV Plan” means a Pension Plan (other than a Multiemployer
Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.

 

“Trademark Security Agreements” means the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.

 

“Trademark License” means rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use any
Trademark.

 

“Trademarks” means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues,
extensions or renewals thereof; and (c) all goodwill associated with or
symbolized by any of the foregoing.

 

“Unfunded Pension Liability” means, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with
Title IV of ERISA, all determined as of the most recent valuation date for each
such Title IV Plan using the actuarial assumptions for funding purposes in
effect under such Title IV Plan, and (b) for a period of five (5) years
following a transaction which might reasonably be expected to be covered by
Section 4069 of ERISA, the liabilities (whether or not accrued) that could
be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.

 

“Union Contracts” means the collective bargaining agreements
between Borrower and the Paper, Allied-Industrial, Chemical and Energy Workers
Union, dated as of May 14, 1999, and Borrower and the Bellwood Printing
Pressmen, Assistants and Specialty Workers Union, dated November 4, 2000,
as the same may be amended, supplemented, replaced, renewed or otherwise
modified from time to time.

 

 

“Welfare Plan” means a Plan described in Section 3(1) of
ERISA.

 

Rules of construction with respect to accounting terms used in the Agreement
or the other Loan Documents shall be as set forth in Annex G.  All other undefined terms contained in any
of the Loan Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein; in the event that any term is defined differently in different
Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or
clause as contained in the Agreement. 
The words “herein,” “hereof” and “hereunder” and other words of similar
import refer to the Agreement as a whole, including all Annexes, Exhibits and
Schedules, as the same may from time to time be amended, restated, modified or
supplemented, and not to any particular section, subsection or clause
contained in the Agreement or any such Annex, Exhibit or Schedule.

 

Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. 
The words “including”, “includes” and “include” shall be deemed to be
followed by the words “without limitation”; the word “or” is not exclusive;
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations.  Whenever any provision in any Loan Document
refers to the knowledge (or an analogous phrase) of any Credit Party, such
words are intended to signify that such Credit Party has actual knowledge or
awareness of a particular fact or circumstance or that such Credit Party, if it
had exercised reasonable diligence, would have known or been aware of such fact
or circumstance.

 

 

ANNEX
B (Section 1.2)

to

CREDIT AGREEMENT

 

LETTERS OF CREDIT

 

(a)                                  Issuance.
Subject to the terms and conditions of the Agreement, Agent and Revolving
Lenders agree to incur, from time to time prior to the Commitment Termination
Date, upon the request of Borrower and for Borrower’s account, Letter of Credit
Obligations by causing Letters of Credit to be issued by GE Capital or a Subsidiary
thereof or a bank or other legally authorized Person selected by or acceptable
to Agent in its sole discretion (each, an “L/C Issuer”) for Borrower’s
account and guaranteed by Agent; provided, that if the L/C Issuer is a
Revolving Lender, then such Letters of Credit shall not be guaranteed by Agent
but rather each Revolving Lender shall, subject to the terms and conditions
hereinafter set forth, purchase (or be deemed to have purchased) risk
participations in all such Letters of Credit issued with the written consent of
Agent, as more fully described in paragraph (b)(ii) below.  The aggregate amount of all such Letter of
Credit Obligations shall not at any time exceed the least of (i) Ten Million
Dollars ($10,000,000) (the “L/C Sublimit”), and (ii) the Maximum
Amount less the aggregate outstanding principal balance of the Revolving Credit
Advances and the Swing Line Loan, and (iii) the Borrowing Base less the
aggregate outstanding principal balance of the Revolving Credit Advances and
the Swing Line Loan.  No such Letter of
Credit shall have an expiry date that is more than one year following the date
of issuance thereof, unless otherwise determined by Agent in its sole
discretion (including with respect to customary evergreen provisions), and
neither Agent nor Revolving Lenders shall be under any obligation to incur
Letter of Credit Obligations in respect of, or purchase risk participations in,
any Letter of Credit having an expiry date that is later than the Commitment
Termination Date.  Agent and Revolving
Lenders agree that the letters of credit issued under the Prior Credit
Agreement and set forth on Disclosure Schedule (B-1) hereto shall
remain outstanding and shall be deemed to be Letters of Credit issued hereunder
and the obligations in connection with such Letters of Credit shall be Letter
of Credit Obligations hereunder.

 

(b)(i)  Advances Automatic;
Participations.  In the event that
Agent or any Revolving Lender shall make any payment on or pursuant to any
Letter of Credit Obligation, such payment shall then be deemed automatically to
constitute a Revolving Credit Advance under Section 1.1(a) of the
Agreement regardless of whether a Default or Event of Default has occurred and
is continuing and notwithstanding Borrower’s failure to satisfy the conditions
precedent set forth in Section 2, and each Revolving Lender shall
be obligated to pay its Pro Rata Share thereof in accordance with the
Agreement.  The failure of any Revolving
Lender to make available to Agent for Agent’s own account its Pro Rata Share of
any such Revolving Credit Advance or payment by Agent under or in respect of a
Letter of Credit shall not relieve any other Revolving Lender of its obligation
hereunder to make available to Agent its Pro Rata Share thereof, but no
Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available such other Revolving Lender’s Pro Rata Share of any
such payment.

 

(ii)                                  If
it shall be illegal or unlawful for Borrower to incur Revolving Credit Advances
as contemplated by paragraph (b)(i) above because of an Event of Default
described in Sections 8.1(h) or (i) or otherwise or if it shall be
illegal or unlawful for any

 

 

Revolving Lender to be deemed to have assumed a ratable share of the
reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer is a
Revolving Lender, then (i) immediately and without further action whatsoever,
each Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Revolving Lender’s Pro Rata Share
(based on the Revolving Loan Commitments) of the Letter of Credit Obligations
in respect of all Letters of Credit then outstanding and (ii) thereafter,
immediately upon issuance of any Letter of Credit, each Revolving Lender shall
be deemed to have irrevocably and unconditionally purchased from Agent (or such
L/C Issuer, as the case may be) an undivided interest and participation in such
Revolving Lender’s Pro Rata Share (based on the Revolving Loan Commitments) of
the Letter of Credit Obligations with respect to such Letter of Credit on the
date of such issuance.  Each Revolving
Lender shall fund its participation in all payments or disbursements made under
the Letters of Credit in the same manner as provided in the Agreement with
respect to Revolving Credit Advances.

 

(c)                                  Cash
Collateral.  (i) If Borrower is
required to provide cash collateral for any Letter of Credit Obligations
pursuant to the Agreement, including Section 8.2 of the Agreement,
prior to the Commitment Termination Date, Borrower will pay to Agent for the
ratable benefit of itself and Revolving Lenders cash or cash equivalents
acceptable to Agent (“Cash Equivalents”) in an amount equal to 105% of the
maximum amount then available to be drawn under each applicable Letter of
Credit outstanding.  Such funds or Cash
Equivalents shall be held by Agent in a cash collateral account (the “Cash
Collateral Account”) maintained at a bank or financial institution
acceptable to Agent.  The Cash
Collateral Account shall be in the name of Borrower and shall be pledged to,
and subject to the control of, Agent, for the benefit of Agent and Lenders, in
a manner satisfactory to Agent. 
Borrower hereby pledges and grants to Agent, on behalf of itself and
Lenders, a security interest in all such funds and Cash Equivalents held in the
Cash Collateral Account from time to time and all proceeds thereof, as security
for the payment of all amounts due in respect of the Letter of Credit
Obligations and other Obligations, whether or not then due.  The Agreement, including this Annex B,
shall constitute a security agreement under applicable law.

 

(ii)                                  If
any Letter of Credit Obligations, whether or not then due and payable, shall for
any reason be outstanding on the Commitment Termination Date, Borrower shall
either (A) provide cash collateral therefor in the manner described above, or
(B) cause all such Letters of Credit and guaranties thereof, if any, to be
canceled and returned, or (C) deliver a stand-by letter (or letters) of credit
in guarantee of such Letter of Credit Obligations, which stand-by letter (or
letters) of credit shall be of like tenor and duration (plus thirty (30)
additional days) as, and in an amount equal to 105% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a
Person, and shall be subject to such terms and conditions, as are be satisfactory
to Agent in its sole discretion.

 

(iii)                               From
time to time after funds are deposited in the Cash Collateral Account by
Borrower, whether before or after the Commitment Termination Date, Agent may
apply such funds or Cash Equivalents then held in the Cash Collateral Account
to the payment of any amounts, and in such order as Agent may elect, as shall
be or shall become due and payable by Borrower to Agent and Lenders with
respect to such Letter of Credit Obligations of Borrower and, upon the
satisfaction

 

 

in full of all Letter of Credit Obligations of Borrower, to any other
Obligations then due and payable.

 

(iv)                              Neither
Borrower nor any Person claiming on behalf of or through Borrower shall have
any right to withdraw any of the funds or Cash Equivalents held in the Cash
Collateral Account, except that upon the termination of all Letter of Credit
Obligations and the payment of all amounts payable by Borrower to Agent and
Lenders in respect thereof, any funds remaining in the Cash Collateral Account
shall be applied to other Obligations then due and owing and upon payment in
full of such Obligations any remaining amount shall be paid to Borrower or as
otherwise required by law.  Interest
earned on deposits in the Cash Collateral Account shall be held as additional
collateral.

 

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

 

(e)                                  Request
for Incurrence of Letter of Credit Obligations.  Borrower shall give Agent at least two (2) Business Days’ prior
written notice requesting the incurrence of any Letter of Credit
Obligation.  The notice shall be
accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) and a completed Application for Standby Letter of Credit or
Application for Documentary Letter of Credit, as applicable in the form Exhibit
B-1 or B-2 attached hereto. 
Notwithstanding anything contained herein to the contrary, Letter of
Credit applications by Borrower and approvals by Agent and the L/C Issuer may
be made and transmitted pursuant to electronic codes and security measures
mutually agreed upon and established by and among Borrower, Agent and the L/C
Issuer.

 

(f)                                    Obligation
Absolute.  The obligation of
Borrower to reimburse Agent and Revolving Lenders for payments made with respect
to any Letter of Credit Obligation shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligations of each Revolving Lender to make payments to
Agent with respect to Letters of Credit shall be unconditional and
irrevocable.  Such obligations of
Borrower and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following:

 

(i)                                     any lack of
validity or enforceability of any Letter of Credit or the Agreement or the
other Loan Documents or any other agreement;

 

 

(ii)                                  the existence of any
claim, setoff, defense or other right that Borrower or any of its Affiliates or
any Lender may at any time have against a beneficiary or any transferee of any
Letter of Credit (or any Persons or entities for whom any such transferee may
be acting), Agent, any Lender, or any other Person, whether in connection with
the Agreement, the Letter of Credit, the transactions contemplated herein or
therein or any unrelated transaction (including any underlying transaction
between Borrower or any of its Affiliates and the beneficiary for which the
Letter of Credit was procured);

 

(iii)                               any draft, demand,
certificate or any other document presented under any Letter of Credit proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;

 

(iv)                              payment by Agent (except
as otherwise expressly provided in paragraph (g)(ii)(C) below) or any L/C
Issuer under any Letter of Credit or guaranty thereof against presentation of a
demand, draft or certificate or other document that does not comply with the
terms of such Letter of Credit or such guaranty;

 

(v)                                 any other circumstance
or event whatsoever, that is similar to any of the foregoing; or

 

(vi)                              the fact that a Default
or an Event of Default has occurred and is continuing.

 

(g)                                 Indemnification;
Nature of Lenders’ Duties.

 

(i)                                     In
addition to amounts payable as elsewhere provided in the Agreement, Borrower
hereby agrees to pay and to protect, indemnify, and save harmless Agent and
each Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys’ fees and
allocated costs of internal counsel) that Agent or any Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or guaranty thereof, or (B) the failure of Agent or any
Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of any act
or omission, whether rightful or wrongful, of any present or future de jure or
de facto government or Governmental Authority, in each case other than to the
extent as a result of the gross negligence or willful misconduct of Agent or
such Lender (as finally determined by a court of competent jurisdiction).

 

(ii)                                  As
between Agent and any Lender and Borrower, Borrower assumes all risks of the
acts and omissions of, or misuse of any Letter of Credit by beneficiaries of
any Letter of Credit.  In furtherance
and not in limitation of the foregoing, to the fullest extent permitted by law
neither Agent nor any Lender shall be responsible for:  (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document issued by any party in
connection with the application for and issuance of any Letter of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, that may prove to be invalid or ineffective for any reason;
(C) failure of the beneficiary of any Letter of Credit to

 

 

comply fully with conditions required in order to demand payment under
such Letter of Credit; provided, that in the case of any payment by
Agent under any Letter of Credit or guaranty thereof, Agent shall be liable to
the extent such payment was made solely as a result of its gross negligence or
willful misconduct (as finally determined by a court of competent jurisdiction)
in determining that the demand for payment under such Letter of Credit or
guaranty thereof complies on its face with any applicable requirements for a
demand for payment under such Letter of Credit or guaranty thereof; (D) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they may be in
cipher; (E) errors in interpretation of technical terms; (F) any loss or delay
in the transmission or otherwise of any document required in order to make a
payment under any Letter of Credit or guaranty thereof or of the proceeds
thereof; (G) the credit of the proceeds of any drawing under any Letter of
Credit or guaranty thereof; and (H) any consequences arising from causes beyond
the control of Agent or any Lender. None of the above shall affect, impair, or
prevent the vesting of any of Agent’s or any Lender’s rights or powers
hereunder or under the Agreement.

 

(iii)                               Nothing
contained herein shall be deemed to limit or to expand any waivers, covenants
or indemnities made by Borrower in favor of any L/C Issuer in any letter of
credit application, reimbursement agreement or similar document, instrument or
agreement between Borrower and such L/C Issuer, including a Master Documentary
Agreement and a Master Standby Agreement entered into with Agent.

 

 

ANNEX
C (Section 1.8)

to

CREDIT AGREEMENT

 

CASH MANAGEMENT SYSTEM

 

Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:

 

(a)                                  On
or before the Closing Date and until the Termination Date, Borrower shall (i)
establish lock boxes (“Lock Boxes”) or, at Agent’s discretion, blocked
accounts (“Blocked Accounts”) at one or more of the banks set forth in Disclosure
Schedule (3.19), and shall request in writing and otherwise take such
reasonable steps to ensure that all Account Debtors forward payment directly to
such Lock Boxes, and (ii) deposit and cause its Subsidiaries to deposit or
cause to be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof, all cash, checks, drafts or
other similar items of payment relating to or constituting payments made in
respect of any and all Collateral (whether or not otherwise delivered to a Lock
Box) into one or more Blocked Accounts in Borrower’s name or any such
Subsidiary’s name and at a bank identified in Disclosure
Schedule (3.19) (each, a “Relationship Bank”).

 

(b)                                 Borrower
may maintain, in its name, an account (each a “Disbursement Account” and
collectively, the “Disbursement Accounts”) at a bank acceptable to Agent
into which Agent shall, from time to time, deposit proceeds of Revolving Credit
Advances and Swing Line Advances made to Borrower pursuant to Section 1.1
for use by Borrower in accordance with the provisions of Section 1.4.

 

(c)                                  Within
sixty (60) days after the Closing Date, each bank where a Disbursement Account
is maintained and all other Relationship Banks, shall have entered into
tri-party blocked account agreements with Agent, for the benefit of itself and
Lenders, and Borrower and Subsidiaries thereof, as applicable, in form and
substance reasonably acceptable to Agent, which shall become operative on the
date such agreement is signed.  Each
such blocked account agreement shall provide, among other things, that (i) all
items of payment deposited in such account and proceeds thereof are held by
such bank as agent or bailee-in-possession for Agent, on behalf of itself and
Lenders, (ii) the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of payment,
and (iii) from and after the date of such blocked account agreement, with
respect to banks at which a Blocked Account is maintained, such bank agrees,
from and after the receipt of a notice (an “Activation Notice”) from
Agent (which Activation Notice may be given by Agent at any time at which (1) a
Default or Event of Default has occurred and is continuing or (2) the then
outstanding balance of the Revolving Loan and the Swing Line Loan is greater
than $25,000,000 and Borrowing Availability at such time is less than
$15,000,000 (any of the foregoing being referred to herein as an “Activation
Event”)), to forward immediately all amounts in each Blocked Account to the
Collection Account and to commence the process of daily sweeps from such
Blocked Account into the Collection Account.

 

 

From and after the date Agent has delivered an Activation Notice to any
bank with respect to any Blocked Account(s), Borrower shall not, and shall not
cause or permit any Subsidiary thereof to, accumulate or maintain cash in
Disbursement Accounts or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.

 

(d)                                 So
long as no Event of Default has occurred and is continuing, Borrower may amend Disclosure
Schedule (3.19) to add or replace a Relationship Bank, Lock Box or
Blocked Account or to replace any Disbursement Account; provided, that
(i) (A) such additional or replacement Relationship Bank is First Citizens
Bank, Key Bank or BB&T Bank or (B) Agent shall have consented in writing in
advance to the opening of such account or Lock Box with the relevant bank, and
(ii) prior to the time of the opening of any such account or Lock Box (whether
at one of the banks listed in clause (i)(A) above or at another bank to which
Agent shall have consented pursuant to clause (i)(B) above), Borrower or its
Subsidiaries, as applicable, and such bank shall have executed and delivered to
Agent a tri-party blocked account agreement, in form and substance reasonably
satisfactory to Agent. Borrower shall close any of its accounts (and establish
replacement accounts in accordance with the foregoing sentence) promptly and in
any event within thirty (30) days following notice from Agent that the
creditworthiness of any bank holding an account is no longer acceptable in
Agent’s reasonable judgment, or as promptly as practicable and in any event
within sixty (60) days following notice from Agent that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts or Lock Boxes of the bank holding such accounts or Agent’s
liability under any tri-party blocked account agreement with such bank is no
longer acceptable in Agent’s reasonable judgment.

 

(e)                                  The
Lock Boxes, Blocked Accounts and Disbursement Accounts shall be cash collateral
accounts, with all cash, checks and other similar items of payment in such
accounts securing payment of the Loans and all other Obligations, and in which
Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on
behalf of itself and Lenders, pursuant to the Security Agreement.

 

(f)                                    All
amounts deposited in the Collection Account shall be deemed received by Agent
in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11.  In no event shall any amount be so applied
unless and until such amount shall have been credited in immediately available
funds to the Collection Account.

 

(g)                                 Borrower
shall and shall cause its Affiliates, officers, employees, agents, directors or
other Persons acting for or in concert with Borrower (each a “Related Person”)
to (i) hold in trust for Agent, for the benefit of itself and Lenders, all
checks, cash and other items of payment received by Borrower or any such
Related Person, and (ii) within one (1) Business Day after receipt by Borrower
or any such Related Person of any checks, cash or other items of payment,
deposit the same into a Blocked Account. 
Borrower on behalf of itself and each Related Person acknowledges and
agrees that all cash, checks or other items of payment constituting proceeds of
Collateral are part of the Collateral. 
All proceeds of the sale or other disposition of any Collateral, shall
be deposited directly into Blocked Accounts.

 

 

ANNEX
D (Section 2.1(a))

to

CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

In addition to, and not in limitation of, the conditions described in Section 2.1
of the Agreement, pursuant to Section 2.1(a), the following items
must be received by Agent in form and substance satisfactory to Agent on or
prior to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning ascribed thereto in Annex A to the
Agreement):

 

A.                                   Appendices.  All Appendices to the Agreement, in form and
substance satisfactory to Agent.

 

B.                                     Revolving
Notes and Swing Line Note.  Duly
executed originals of the Revolving Notes and Swing Line Note for each
applicable Lender, dated the Closing Date.

 

C.                                     Security
Agreement.  Duly executed originals
of the Security Agreement, dated the Closing Date, and all instruments,
documents and agreements executed pursuant thereto.

 

D.                                    Insurance.  Satisfactory evidence that the insurance
policies required by Section 5.4 
are in full force and effect, together with appropriate evidence showing
loss payable and/or additional insured clauses or endorsements, as reasonably
requested by Agent, in favor of Agent, on behalf of Lenders.

 

E.                                      Security
Interests and Code Filings.  (a)
Evidence satisfactory to Agent that Agent (for the benefit of itself and
Lenders) has a valid and perfected first priority security interest in the
Collateral, including (i) such documents duly executed by each Credit Party
(including financing statements under the Code and other applicable documents
under the laws of any jurisdiction with respect to the perfection of Liens) as
Agent may request in order to perfect its security interests in the Collateral
and (ii) copies of Code search reports listing all effective financing statements
that name any Credit Party as debtor, together with copies of such financing
statements, none of which shall cover the Collateral, except for those relating
to the Prior Credit Agreement (all of which shall be terminated on the Closing
Date) and Permitted Encumbrances.

 

(b)                                 Evidence
reasonably satisfactory to Agent, including copies, of all UCC-1 and other
financing statements filed in favor of any Credit Party with respect to each
location, if any, at which Inventory may be consigned.

 

(c)                                  Control
Letters from (i) all issuers of uncertificated securities and financial assets
held by Borrower, (ii) all securities intermediaries with respect to all
securities accounts and securities entitlements of Borrower, and (iii) all
futures commission agents and clearing houses with respect to all commodities
contracts and commodities accounts held by Borrower.

 

F.                                      Termination
Statements.  UCC-3 or other
appropriate termination statements, in form and substance satisfactory to
Agent, releasing all liens under the Prior Credit Agreement upon any of the
personal property of each Credit Party, and termination of all blocked account
agreements,

 

 

bank agency agreements or other similar agreements or arrangements or
arrangements relating to the Prior Credit Agreement.

 

G.                                     Intellectual
Property Security Agreements.  Duly
executed originals of Trademark Security Agreements, Copyright Security
Agreements and Patent Security Agreements, each dated the Closing Date and
signed by each Credit Party which owns Trademarks, Copyrights and/or Patents,
as applicable, all in form and substance reasonably satisfactory to Agent,
together with all instruments, documents and agreements executed pursuant
thereto.

 

H.                                    Holdings
Guaranty.  Duly executed originals
of the Holdings Guaranty, dated the Closing Date, and all documents,
instruments and agreements executed pursuant thereto.

 

I.                                         Subsidiary
Guaranties.  Guaranties executed by
and each direct and indirect Subsidiary of Borrower in favor of Agent, for the
benefit of Lenders.

 

J.                                        Initial
Borrowing Base Certificate.  Duly
executed originals of an initial Borrowing Base Certificate from Borrower,
dated the Closing Date, reflecting information concerning Eligible Accounts and
Eligible Inventory of Borrower as of the most recently completed month prior to
the Closing Date.

 

K.                                    Initial
Notice of Revolving Credit Advance. 
Duly executed originals of a Notice of Revolving Credit Advance, dated
the Closing Date, with respect to the initial Revolving Credit Advance to be
requested by Borrower on the Closing Date.

 

L.                                      Letter
of Direction.  Duly executed
originals of a letter of direction from Borrower addressed to Agent, on behalf
of itself and Lenders, with respect to the disbursement on the Closing Date of
the proceeds of the initial Revolving Credit Advance.

 

M.                                 Cash
Management System; Blocked Account Agreements.  Evidence satisfactory to Agent that, as of the Closing Date, Cash
Management Systems complying with Annex C to the Agreement have been
established and are currently being maintained in the manner set forth in such Annex
C, together with copies of duly executed tri-party blocked account and lock
box agreements, reasonably satisfactory to Agent, with the banks as required by
Annex C.

 

N.                                    Charter
and Good Standing.  For each Credit
Party, such Person’s (a) charter and all amendments thereto, (b) good standing
certificates (including verification of tax status) in its state of
incorporation and (c) good standing certificates (including verification of tax
status) and certificates of qualification to conduct business in each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, each dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized Governmental Authority.

 

O.                                    Bylaws
and Resolutions.  For each Credit
Party, (a) such Person’s bylaws, together with all amendments thereto and (b)
resolutions of such Person’s Board of Directors, approving and authorizing the
execution, delivery and performance of the Loan Documents to which such Person
is a party and the transactions to be consummated in connection therewith, each
certified as of the Closing Date by such Person’s corporate secretary or an
assistant secretary as being in full force and effect without any modification
or amendment.

 

 

P.                                      Incumbency
Certificates.  For each Credit
Party, signature and incumbency certificates of the officers of each such
Person executing any of the Loan Documents, certified as of the Closing Date by
such Person’s corporate secretary or an assistant secretary as being true,
accurate, correct and complete.

 

Q.                                    Opinions
of Counsel.  Duly executed originals
of opinions of Proskauer Rose LLP, counsel for the Credit Parties, together
with any local counsel opinions reasonably requested by Agent, each in form and
substance reasonably satisfactory to Agent and its counsel, dated the Closing
Date.

 

R.                                     Pledge
Agreements.  Duly executed originals
of each of the Pledge Agreements.

 

S.                                      Accountants’
Letter.  A letter from the Credit
Parties to their independent auditors authorizing the independent certified
public accountants of the Credit Parties to communicate with Agent and Lenders
in accordance with Section 4.2.

 

T.                                     Appointment
of Agent for Service.  An appointment
of CT Corporation as each Credit Party’s agent for service of process.

 

U.                                    Fee
Letter.  Duly executed originals of
the GE Capital Fee Letter.

 

V.                                     Officer’s
Certificate.  Agent shall have
received duly executed originals of a certificate of the Chief Executive
Officer or Chief Financial Officer of Borrower, dated the Closing Date, stating
that, since September 30, 2003 (a) no event or condition has occurred or
is existing which could reasonably be expected to have a Material Adverse
Effect; (b) there has been no material adverse change in the industry in which
Borrower operates; (c) no Litigation has been commenced which, if successful,
would have a Material Adverse Effect or could challenge any of the transactions
contemplated by the Agreement and the other Loan Documents; (d) there have been
no Restricted Payments made by any Credit Party; and (e) there has been no
material increase in liabilities, liquidated or contingent, and no material
decrease in assets of Borrower or any of its Subsidiaries.

 

W.                                Waivers.  Agent, on behalf of Lenders, shall have
received landlord waivers and consents, bailee letters and mortgagee agreements
in form and substance satisfactory to Agent, in each case as required pursuant
to Section 5.9.

 

X.                                    Mortgages.  Mortgages covering all of the Real Estate
(the “Mortgaged Properties”) together with: (a) title insurance
policies, current as-built surveys, zoning letters and certificates of
occupancy, in each case reasonably satisfactory in form and substance to Agent,
in its sole discretion; (b) evidence that counterparts of the Mortgages have
been recorded in all places to the extent necessary or desirable, in the
judgment of Agent, to create a valid and enforceable first priority lien
(subject to Permitted Encumbrances) on each Mortgaged Property in favor of
Agent for the benefit of itself and Lenders (or in favor of such other trustee
as may be required or desired under local law); and (c) an opinion of counsel
in each state in which any Mortgaged Property is located in form and substance
and from counsel reasonably satisfactory to Agent.

 

Y.            Intercreditor
Agreement.  Duly executed originals
of the Intercreditor Agreement, in form and substance satisfactory to Agent, in
its sole discretion.

 

 

Z.                                     Environmental
Reports.  Agent shall have received
copies of the recently completed Phase I Environmental Site Assessment Report
on the Canton, North Carolina property of Borrower, the scope, form and results
of such report to be satisfactory to Agent.

 

AA.                         Audited
Financials; Financial Condition. 
Agent shall have received the Financial Statements, Projections and
other materials set forth in Section 3.4, certified by Borrower’s
Chief Financial Officer, in each case in form and substance satisfactory to
Agent, and Agent shall be satisfied, in its sole discretion, with all of the
foregoing.  Agent shall have further
received a certificate of the Chief Executive Officer and/or the Chief
Financial Officer of Borrower, based on such Pro Forma and Projections, to the
effect that (a) Borrower will be Solvent upon the consummation of the
transactions contemplated herein; (b) the Pro Forma fairly presents the
financial condition of Borrower as of the date thereof after giving effect to
the transactions contemplated by the Loan Documents; (c) the Projections are
based upon estimates and assumptions stated therein, all of which Borrower
believes to be reasonable and fair in light of current conditions and current
facts known to Borrower and, as of the Closing Date, reflect Borrower’s good
faith and reasonable estimates of its future financial performance and of the
other information projected therein for the period set forth therein; and (d)
containing such other statements with respect to the solvency of Borrower and
matters related thereto as Agent shall request.

 

BB.                             Master
Standby Agreement.  A Master
Agreement for Standby Letters of Credit between Borrower and GE Capital.

 

CC.                             Master
Documentary Agreement.  A Master
Agreement for Documentary Letters of Credit between Borrower and GE Capital.

 

DD.                           Other
Documents.  Such other certificates,
documents and agreements respecting any Credit Party as Agent may reasonably
request.

 

 

ANNEX
E (Section 4.1(a))

to

CREDIT AGREEMENT

 

FINANCIAL STATEMENTS AND PROJECTIONS —
REPORTING

 

Borrower shall deliver or cause to be delivered to Agent or to Agent
and Lenders, as indicated, the following:

 

(a)                                  Monthly
Financials.  To Agent and Lenders,
within thirty (30) days after the end of each Fiscal Month, financial
information regarding Holdings, Borrower and its Subsidiaries (and in the case
of Borrower, prepared on a business unit by business unit basis), certified by
the Chief Financial Officer of Holdings and Borrower, consisting of
consolidated and consolidating (i) unaudited balance sheets as of the close of
such Fiscal Month and the related statements of income and cash flows for that
portion of the Fiscal Year ending as of the close of such Fiscal Month; and
(ii) unaudited statements of income and cash flows for such Fiscal Month,
setting forth in comparative form the figures for the corresponding period in
the prior year and the figures contained in the Projections for such Fiscal
Year, all (except for the Projections) prepared in accordance with GAAP
(subject to normal year-end adjustments). 
Such financial information shall be accompanied by (A) a statement
in reasonable detail (each, a “Compliance Certificate”) showing the
calculations used in determining compliance with each of the Financial
Covenants that is tested on a monthly basis and (B) the certification of
the Chief Financial Officer of Holdings and Borrower that (i) such financial
information presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position and results of operations of Holdings,
Borrower and its Subsidiaries, on a consolidated and consolidating basis, in
each case as at the end of such Fiscal Month and for that portion of the Fiscal
Year then ended and (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default shall
have occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.  All such information regarding Borrower shall be presented on a
business unit by business unit basis in a manner consistent with Borrower’s
historic financial statements.

 

(b)                                 Quarterly
Financials.  To Agent and Lenders,
within forty-five (45) days after the end of each Fiscal Quarter, consolidated
and consolidating financial information regarding Holdings, Borrower and its
Subsidiaries, certified by the Chief Financial Officer of Holdings and
Borrower, including (i) unaudited balance sheets as of the close of such Fiscal
Quarter and the related statements of income and cash flow for that portion of
the Fiscal Year ending as of the close of such Fiscal Quarter and (ii)
unaudited statements of income and cash flows for such Fiscal Quarter, in each
case setting forth in comparative form the figures for the corresponding period
in the prior year and the figures contained in the Projections for such Fiscal
Year, all (except for the Projections) prepared in accordance with GAAP
(subject to normal year-end adjustments). 
Such financial information shall be accompanied by (A) a Compliance
Certificate showing the calculations used in determining compliance with each
of the Financial Covenants that is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer of Holdings and Borrower that (i)
such financial information presents fairly in accordance with GAAP (subject to
normal year-end adjustments) the financial position, results of operations and

 

 

statements of cash flows of Borrower and its Subsidiaries, on both a
consolidated and consolidating basis, as at the end of such Fiscal Quarter and
for that portion of the Fiscal Year then ended, (ii) any other information
presented is true, correct and complete in all material respects and that there
was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default.  All such information regarding
Borrower shall be presented on a business unit by business unit basis in a
manner consistent with Borrower’s historic financial statements.  In addition, Borrower shall deliver to Agent
and Lenders, within forty-five (45) days after the end of each Fiscal Quarter,
a management discussion and analysis that includes a comparison to budget for
that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to
the corresponding period in the prior year.

 

(c)                                  Operating
Plan.  To Agent and Lenders, as soon
as available, but not later than thirty (30) days after the end of each Fiscal
Year, an annual operating plan for Borrower, approved by the Board of Directors
of Borrower, for the following Fiscal Year, which (i) includes a statement of
all of the material assumptions on which such plan is based, (ii) includes
monthly balance sheets and a monthly budget for the following year and
(iii) integrates sales, gross profits, operating expenses, operating
profit, cash flow projections and Borrowing Availability projections, all
prepared on the same basis and in similar detail as that on which operating
results are reported (and in the case of cash flow projections, representing
management’s good faith estimates of future financial performance based on historical
performance), and including plans for personnel, Capital Expenditures and
facilities.

 

(d)           Annual Audited
Financials. To Agent and Lenders, within ninety (90) days after the end of
each Fiscal Year, audited Financial Statements for Holdings, Borrower and its
Subsidiaries on a consolidated and (unaudited) consolidating basis, consisting
of balance sheets and statements of income and retained earnings and cash
flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which Financial Statements shall be prepared in
accordance with GAAP and certified without qualification, by an independent
certified public accounting firm of national standing or otherwise acceptable
to Agent.  Such Financial Statements
shall be accompanied by (i) a statement prepared in reasonable detail showing
the calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred with
respect to the Financial Covenants (or specifying those Defaults and Events of
Default that they became aware of), it being understood that such audit
examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (iv) the certification of the Chief Executive Officer or Chief
Financial Officer of Holdings and Borrower that all such Financial Statements
present fairly in accordance with GAAP the financial position, results of
operations and statements of cash flows of Borrower and its Subsidiaries on a
consolidated and consolidating basis, as at the end of such Fiscal Year and for
the period then ended, and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default has occurred and
is continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.  In
addition, such Financial Statements shall be accompanied by unaudited financial
information regarding

 

 

Borrower prepared on a business unit by business unit basis in a manner
consistent with Borrower’s historic financial statements.

 

(e)                                  Management
Letters.  To Agent and Lenders,
within five (5) Business Days after receipt thereof by any Credit Party, copies
of all management letters, exception reports or similar letters or reports, if
any, received by such Credit Party from its independent certified public
accountants.

 

(f)                                    Default
Notices.  To Agent and Lenders, as
soon as practicable, and in any event within five (5) Business Days after an
executive officer of Holdings or Borrower has actual knowledge of the existence
of any Default, Event of Default or other event that has had a Material Adverse
Effect, telephonic or telecopied notice specifying the nature of such Default
or Event of Default or other event, including the anticipated effect thereof,
which notice, if given telephonically, shall be promptly confirmed in writing
on the next Business Day.

 

(g)                                 SEC
Filings and Press Releases.  To
Agent and Lenders, promptly upon their becoming available, copies of:  (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.

 

(h)                                 Senior
Secured Notes, Seller Note, Subordinated Debt and Equity Notices and Reporting.  To Agent and Lenders, as soon as practicable
and in any event within two (2) Business Days, copies of all written notices,
reporting or other written communications given or received by any Credit Party
with respect to the Senior Secured Notes, the Seller Note, any other
Subordinated Debt or any Stock of such Person, and, within two (2) Business
Days after any Credit Party obtains knowledge of any matured or unmatured,
default or event of default with respect to the Senior Secured Notes, the
Seller Note or any other Subordinated Debt, notice of such default or event of
default.

 

(i)                                     Supplemental
Schedules.  To Agent, supplemental
disclosures, if any, required by Section 5.6.

 

(j)                                     Litigation.  To Agent and Lenders in writing, promptly
upon learning thereof, notice of any Litigation commenced or threatened against
any Credit Party that (i) seeks damages in excess of $500,000, (ii) seeks
injunctive relief, (iii) is asserted or instituted against any Plan, its
fiduciaries or its assets or against any Credit Party or ERISA Affiliate in
connection with any Plan, (iv) alleges criminal misconduct by any Credit Party,
(v) alleges the violation of any law regarding, or seeks remedies in connection
with, any Environmental Liabilities; (vi) involves the Senior Secured Notes,
the Seller Note or any other Related Transactions Documents; or (vii) involves
any product recall.

 

(k)                                  Insurance
Notices.  To Agent, disclosure of
losses or casualties required by Section 5.4.

 

 

(l)                                     Lease
Default Notices.  To Agent, (i)
within two (2) Business Days after receipt thereof, copies of any and all
default notices received under or with respect to any leased location or public
warehouse where Collateral is located, (ii) monthly within three (3) Business
Days after payment thereof, evidence of payment of lease or rental payments as
to each leased or rented location for which a landlord or bailee waiver has not
been obtained and (iii) such other notices or documents as Agent may reasonably
request.

 

(m)                               Hedging
Agreements.  To Agent within two (2)
Business Days after entering into such agreement or amendment, copies of all
interest rate, commodity or currency hedging agreements or amendments thereto.

 

(n)                                 ERISA
Events and ERISA Reports.  To Agent
and Lenders, (i) within five (5) Business Days after any Credit Party or
any ERISA Affiliate knows or has reason to know that any material ERISA Event
has occurred, a statement of the Chief Executive Officer or Chief Financial
Officer of Holdings and Borrower describing such ERISA Event and the action, if
any, that such Credit Party or such ERISA Affiliate has taken and proposes to
take with respect thereto and (ii) within five (5) Business Days after the date
any records, documents or other information must be furnished to the PBGC with
respect to any Plan pursuant to Section 4010 of ERISA, a copy of such
records, documents and information;

 

(o)                                 Plan
Terminations. To Agent and Lenders, within five (5) Business Days after
receipt thereof by any Credit Party or any ERISA Affiliate, copies of each
notice from the PBGC stating its intention to terminate any Plan or to have a
trustee appointed to administer any Plan or correspondence from the PBGC
indicating it is considering termination of any Plan;

 

(p)                                 Actuarial
Reports.  To Agent and Lenders,
promptly upon receipt thereof by any Credit Party or any ERISA Affiliate, a
copy of the annual actuarial valuation report for each Plan (other than
Multiemployer Plans)  the funded current
liability percentage (as defined in Section 302(d)(8)(B) of ERISA) of
which is less than 90%;

 

(q)                                 Plan
Annual Reports.  To Agent and
Lenders, within five (5) Business Days after the filing thereof with the
Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each Plan
(other than Multiemployer Plans);

 

(r)                                    Multiemployer
Plan Notices. To Agent and Lenders, within five (5) Business Days after
receipt thereof by any Credit Party or any ERISA Affiliate from the sponsor of
a Multiemployer Plan, copies of each notice concerning, or other correspondence
with respect to, (i) the imposition of withdrawal liability by any such
Multiemployer Plan or (ii) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan; and

 

(s)                                  Year-to-Date
Revenue Trends.  To Agent and
Lenders, at the same time as Borrower shall deliver the monthly financial
statements required by paragraph (a) of this Annex E, unaudited balance sheets,
statements of income and statements of cash flows for the year-to-date period
as of the end of such months, setting forth in detail tons sold and revenue per
ton and setting forth in comparative form the figures for the corresponding
year-to-date period from the

 

 

prior Fiscal Year and the figures for the corresponding year-to-date
period contained in the Projections for such Fiscal Year.

 

(t)                                    Backlog
on Paper Machines.  To Agent and
Lenders, at the same time as Borrower shall deliver the monthly financial
statements required by paragraph (a) of this Annex E, a report detailing the
backlog on each paper machine.

 

(u)                                 Cash
Flow Projections.  If Borrowing
Availability is less than $5,000,000, to Agent and Lenders, at least one (1)
Business Day prior to the beginning of each week, a forecast of Borrower’s
projected cash flows, outstanding balance of the Revolving Loan and Net
Borrowing Availability for such week and for the succeeding 12-week period.

 

(v)                                 Other
Documents.  To Agent and Lenders,
such other financial and other information respecting any Credit Party’s
business or financial condition as Agent or any Lender shall, from time to
time, reasonably request.

 

 

ANNEX
F (Section 4.1(b))

to

CREDIT AGREEMENT

 

COLLATERAL REPORTS

 

Borrower shall deliver or cause to be delivered the following:

 

(a)                                  To
Agent, upon its request, and in any event no less frequently than fifteen (15)
days after the end of each Fiscal Month (together with a copy of all or any
part of the following reports requested by any Lender in writing after the
Closing Date), each of the following reports, each of which shall be prepared
by Borrower as of the last day of the immediately preceding Fiscal Month:

 

(i)                                     a
Borrowing Base Certificate with respect to Borrower, accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion, including the detail required by Section 4(f)
of the Security Agreement;

 

(ii)                                  with
respect to Borrower, a summary of Inventory by location and type with a
supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion; and

 

(iii)                               with
respect to Borrower, a monthly trial balance showing Accounts outstanding aged
from invoice date as follows:  1 to 30
days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion.

 

(b)                                 To
Agent, upon the earlier of (i) a weekly basis and (ii) any request for an
Advance, collateral reports with respect to Borrower, including all additions
and reductions (cash and non-cash) with respect to Accounts of Borrower, in
each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion.

 

(c)                                  To
Agent, at the time of delivery of each of the monthly Financial Statements
delivered pursuant to Annex E, a reconciliation of the Accounts trial
balance and month-end Inventory reports of Borrower to Borrower’s general
ledger and monthly Financial Statements delivered pursuant to such Annex E,
in each case accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion.

 

(d)                                 To
Agent, at the time of delivery of each of the quarterly Financial Statements
delivered pursuant to Annex E, (i) a listing of government contracts of
Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a
list of any applications for the registration of any Patent, Trademark or
Copyright filed by any Credit Party with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
which any Credit Party has filed in the prior Fiscal Quarter.

 

 

(e)                                  Borrower,
at its own expense, shall deliver to Agent the results of each physical
verification, if any, which Borrower or any of its Subsidiaries, if any, may
have made, or caused any other Person to have made on their behalf, of all or
any portion of their Inventory (and, if a Default or an Event of Default has
occurred and is continuing, Borrower shall, upon the request of Agent, conduct,
and deliver the results of, such physical verifications as Agent may require).

 

(f)                                    Borrower,
at its own expense, shall deliver to Agent such appraisals of its Inventory as
Agent may request, such appraisals to be conducted by an appraiser, and in form
and substance, satisfactory to Agent; provided, that, not more than one
Inventory appraisal per year shall be performed at Borrower’s expense, absent a
Default or an Event of Default.

 

(g)                                 Such
other reports, statements and reconciliations with respect to the Borrowing
Base or Collateral of any or all Credit Parties as Agent shall from time to
time request in its reasonable discretion.

 

 

ANNEX
G (Section 6.10)

to

CREDIT AGREEMENT

 

FINANCIAL COVENANTS

 

Borrower shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

 

(a)                                  Minimum
Borrowing Availability.  Borrower
shall maintain Borrowing Availability of not less than $5,000,000 at all times.

 

(b)                                 Minimum
Fixed Charge Coverage Ratio.  If
Borrowing Availability falls below $15,000,000, then, for the most recently
ended Fiscal Quarter and for each Fiscal Quarter thereafter, Borrower and its
Subsidiaries shall have on a consolidated basis at the end of each such Fiscal
Quarter, a Fixed Charge Coverage Ratio for the 12-month period then ended (of
not less than 1.10 to 1.00.

 

Unless otherwise specifically provided herein, any accounting term used
in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed in accordance with GAAP consistently applied.  That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing.  If
any “Accounting Changes” (as defined below) occur and such changes result in a
change in the calculation of the financial covenants, standards or terms used
in the Agreement or any other Loan Document, then Borrower, Agent and Lenders
agree to enter into negotiations in order to amend such provisions of the
Agreement so as to equitably reflect such Accounting Changes with the desired
result that the criteria for evaluating Borrower’s and its Subsidiaries’
financial condition shall be the same after such Accounting Changes as if such
Accounting Changes had not been made; provided, however, that the
agreement of Requisite Lenders to any required amendments of such provisions
shall be sufficient to bind all Lenders. 
“Accounting Changes” means (i) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (ii) changes in accounting principles concurred in by Borrower’s
certified public accountants; (iii) purchase accounting adjustments under
A.P.B. 16 or 17 and EITF 88-16, and the application of the accounting
principles set forth in FASB 109, including the establishment of reserves
pursuant thereto and any subsequent reversal (in whole or in part) of such
reserves; and (iv) the reversal of any reserves established as a result of
purchase accounting adjustments.  All
such adjustments resulting from expenditures made subsequent to the Closing
Date (including capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period.  If Agent, Borrower and Requisite Lenders
agree upon the required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained in the Agreement or in any other
Loan Document shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change.  If Agent, Borrower
and Requisite Lenders

 

 

cannot agree upon the required amendments within thirty (30) days
following the date of implementation of any Accounting Change, then all
Financial Statements delivered and all calculations of financial covenants and
other standards and terms in accordance with the Agreement and the other Loan
Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change.  For
purposes of Section 8.1, a breach of a Financial Covenant contained
in this Annex G shall be deemed to have occurred as of any date of
determination by Agent or as of the last day of any specified measurement
period, regardless of when the Financial Statements reflecting such breach are
delivered to Agent.

 

 

ANNEX H (Section 1.1(d))

to

CREDIT AGREEMENT

 

LENDERS’ WIRE TRANSFER INFORMATION

 

	
  Name:

  	
   

  	
  General Electric Capital Corporation

  
	
  Bank:

  	
   

  	
  DeutscheBank Trust Company Americas

  
	
   

  	
   

  	
  New York, New York

  
	
  ABA #:

  	
   

  	
  021001033

  
	
  Account #:

  	
   

  	
  50232854

  
	
  Account Name:

  	
   

  	
  GECC/CAF Depository

  
	
  Reference:

  	
   

  	
  CFC 4204

  

 

 

ANNEX
I (Section 11.10)

to

CREDIT AGREEMENT

 

NOTICE ADDRESSES

 

	
  (A)

  	
   

  	
  If to Agent or GE Capital, at:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  800 Connecticut Avenue, Two North

  
	
   

  	
   

  	
  Norwalk, CT  06854

  
	
   

  	
   

  	
  Attention: Blue Ridge Account Manager

  
	
   

  	
   

  	
  Telecopier No.:  (203)
  852-3640

  
	
   

  	
   

  	
  Telephone No.:  (203) 852-3625

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Winston & Strawn

  
	
   

  	
   

  	
  200 Park Avenue

  
	
   

  	
   

  	
  New York, NY 10166-4193

  
	
   

  	
   

  	
  Attention: William D. Brewer

  
	
   

  	
   

  	
  Telecopier No.: (212) 294-6793

  
	
   

  	
   

  	
  Telephone No.:  (212) 294-4700

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  201 High Ridge Road

  
	
   

  	
   

  	
  Stamford, Connecticut 06927-5100

  
	
   

  	
   

  	
  Attention:  Corporate
  Counsel-Commercial Finance

  
	
   

  	
   

  	
  Telecopier No.:  (203)
  316-7889

  
	
   

  	
   

  	
  Telephone No.:  (203) 316-7552

  
	
   

  	
   

  	
   

  
	
  (B)

  	
   

  	
  If to Borrower, at:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Blue Ridge Paper Products Inc.

  
	
   

  	
   

  	
  41 Main Street

  
	
   

  	
   

  	
  Canton, NC  28716

  
	
   

  	
   

  	
  Attention: Chief Financial Officer

  
	
   

  	
   

  	
  Telecopier No.: (828) 646-6101

  
	
   

  	
   

  	
  Telephone No.: (828) 454-0805

  

 

 

	
   

  	
   

  	
  With copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Proskauer Rose LLP

  
	
   

  	
   

  	
  1585 Broadway

  
	
   

  	
   

  	
  New York, NY 10036-8299

  
	
   

  	
   

  	
  Attention: Julie M. Allen

  
	
   

  	
   

  	
  Telecopier No.:  (212)
  969-2900

  
	
   

  	
   

  	
  Telephone No.:  (212) 969-3096

  

 

 

ANNEX J (from Annex A - Commitments definition)

to

CREDIT AGREEMENT

 

Lender(s):

 

GENERAL ELECTRIC CAPITAL CORPORATION

 

	
  Revolving Loan Commitment

  (including a Swing Line Commitment of $5,000,000):

  	
   

  	
  $

  	
  45,000,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}]]