Document:

Exhibit 4.3

 

Genworth Life and Annuity Insurance Company

 

Funding Agreement

 

POLICYHOLDER:  Genworth Global Funding
Trust 2008-38, its
successors and permitted assignees

 

POLICY NUMBER: GS-R6054

 

EFFECTIVE DATE: July 17,
2008

 

ISSUE STATE:  Virginia

 

Genworth
Life and Annuity Insurance Company (“GLAIC”) (which term includes its
successors and permitted assignees) and the Policyholder hereby agree to the
terms of this funding agreement (this “Policy”).  This Policy, including the attached
Accumulation Fund Schedule, and any amendments thereto, constitutes the entire
contract between GLAIC and the Policyholder.  
This Policy is delivered in the Issue State and governed by the laws of
that state.

 

In witness whereof, GLAIC
and the Policyholder have agreed to this Policy as of the Effective Date and
caused the same to be in full force and effect.

 

 

	
  /s/ Thomas E. Duffy

  	
   

  	
  /s/Pamela S. Schutz

  
	
  Secretary

  	
  President

  

 

 

Genworth Life and Annuity
Insurance Company

6610 West Broad Street

Richmond, VA  23230

1-800-635-8056

 

 

Table of Contents

 

	
  Section 1 –
  Accumulation Fund – Establishment and Operation

  
	
   

  
	
  Section 2 –
  Payments From the Accumulation Fund

  
	
   

  
	
  Section 3 –
  Termination of Agreement

  
	
   

  
	
  Section 4 –
  General Provisions

  
	
   

  
	
  Section 5 –
  Definitions

  

 

 

SECTION 1 – ACCUMULATION
FUND – ESTABLISHMENT AND OPERATION

 

1.1               POLICY PAYMENTS.  The Policyholder agrees to pay to GLAIC in
the currency specified in the Accumulation Fund Schedule (the “Specified
Currency”), and by wire transfer, the Net Deposit Amount on the Deposit Date.  Regardless of the Effective Date of the
Policy or the Deposit Date specified in the Accumulation Fund Schedule, this
Policy shall become effective only upon the receipt by GLAIC, or its designee,
of the Net Deposit Amount.

 

1.2               ESTABLISHMENT OF THE ACCUMULATION FUND.  Upon the receipt by GLAIC of the Net Deposit
Amount, GLAIC will establish an Accumulation Fund.  The Accumulation Fund is a general account
record that reflects the Fund Balance under this Policy.  GLAIC is neither a trustee nor a fiduciary
with respect to the Accumulation Fund. 
The Net Deposit Amount is allocated to GLAIC’s general account for
investment but all funds received under this Policy will become the exclusive
property of GLAIC without any duty or requirement for segregation or separate
investment.  The Fund Balance is not
affected by the investment results of the assets held in the general account.

 

1.3               INTEREST ON THE ACCUMULATION FUND.  The Guaranteed Rate for the Accumulation Fund
is effective until the Fund Balance is paid in full to the Policyholder.  Interest is credited based upon the
methodology specified in the Accumulation Fund Schedule.

 

1.4               VALUE OF THE ACCUMULATION FUND.  The Fund Balance on any given day equals the Deposit
Amount plus interest, if any, credited thereon at the Guaranteed Rate, less any
payments made under Section 2 of the Policy.

 

SECTION 2 – PAYMENTS
FROM THE ACCUMULATION FUND

 

2.1               PERIODIC PAYMENTS.  GLAIC will pay the Policyholder the amounts
specified in the Accumulation Fund Schedule as Periodic Payouts, including the
Maturity Payout, on the dates specified (subject to Section 4.7).  Such payment amounts are adjusted to reflect
any other payment payable under this Section of the Policy.  The interest factor used in making such
adjustments is the Guaranteed Rate.

 

2.2               OPTIONAL REPAYMENT.  If so indicated in the Accumulation Fund
Schedule, GLAIC shall pay to the Policyholder the amount the Policyholder needs
to redeem or repay any notes or other instruments issued by the Policyholder
and backed by this Policy, pursuant to any limited right of redemption or
repayment contained in such note or instrument. 
GLAIC may require reasonable evidence that the redemption or repayment
request satisfies all the terms and conditions described in the prospectus, prospectus
supplement and/or pricing supplement applicable to such note or other instrument.  Additional restrictions, if any, on the
Policyholder’s reimbursement rights under this Section may be included in
the Accumulation Fund Schedule.

 

1

 

2.3               OPTIONAL REDEMPTION.  If so indicated in
the Accumulation Fund Schedule, GLAIC may elect
to pay the Policyholder all or any part of the Fund Balance on the Call Dates
specified in the Accumulation Fund Schedule. 
Unless otherwise provided in the Accumulation Fund Schedule, GLAIC will
give the Policyholder at least thirty-five (35) calendar days and no more than
seventy-five (75) calendar days notice of its intent to make such pre-payment.  No adjustment will be made to the amount of
such payment, unless such adjustment is specifically provided for in the
Accumulation Fund Schedule.

 

2.4               MATURITY PAYMENTS.  GLAIC shall pay the
Policyholder the Fund Balance on the Maturity Date.

 

2.5               FORM OF PAYMENT.  All payments GLAIC makes
to the Policyholder will be made in the Specified Currency, by wire transfer,
unless otherwise agreed in writing by the parties hereto. Unless otherwise
stated in the Accumulation Fund Schedule, all payments GLAIC makes will be net
of any applicable withholding or deduction for or on account of any present or
future taxes, duties, levies, assessments or other governmental charges of
whatever nature imposed or levied by or on behalf of any governmental authority
having the power to tax.  Unless otherwise
specified in the Accumulation Fund Schedule, such net payments fully satisfy
GLAIC’s obligation to the Policyholder with respect to the full amount due.

 

SECTION 3
– TERMINATION OF AGREEMENT

 

3.1               AUTOMATIC TERMINATION/ACCELERATION.  This Policy terminates
with respect to the Accumulation Fund when the Fund Balance is zero and GLAIC’s
obligations hereunder shall automatically accelerate upon the occurrence of an
Event of Default described in Section 3.3(a).

 

3.2               EARLY TERMINATION/ACCELERATION.  The Policyholder may
accelerate this Policy by giving GLAIC not less than two (2) Business Days’
written notice upon the occurrence of an Event of Default specified in Section 3.3
b., c. or d. below.  GLAIC may accelerate
this Policy, in whole but not in part, by giving the Policyholder not less than
forty-five (45) days’, but no more than seventy-five (75) days’, prior written
notice of the occurrence of a Tax Event as described in Section 3.4,
provided, however that this Policy shall not be terminated until the Fund
Balance has been paid to the Policyholder in full.

 

3.3               EVENTS OF DEFAULT.  An Event of Default occurs if:

 

a.          GLAIC is
dissolved or a resolution is passed or proceeding is instituted for the
winding-up, liquidation or similar arrangement of GLAIC (other than pursuant to
a consolidation, amalgamation or merger);

b.         GLAIC
breaches any material obligation, representation or certification contained
herein, provided that there is no bona fide dispute as to whether such breach
has occurred and that such breach continues for fifteen (15) Business Days
following the Policyholder’s written notice to GLAIC of such breach;

 

2

 

c.   GLAIC fails
to make any required Periodic Payout (other than the Maturity Payout) described
in the Accumulation Fund Schedule or any other payment described in Sections
2.2 or 2.3 of this Policy or any other funding agreement GLAIC issues in
connection with the Program, and such failure continues for seven (7) Business
Days after the due date thereof;

d.   GLAIC fails
to make the Maturity Payout described in the Accumulation Fund Schedule or in any
other funding agreement GLAIC issues in connection with the Program and such
failure is continuing as of the end of the Business Day following the due date
thereof.

 

3.4               TAX EVENT.  A “Tax Event” occurs
if GLAIC has received an opinion of independent legal counsel stating in effect
that there is more than an insubstantial risk that as a result of  any amendment to, or change (including any
announced prospective change) in, the laws (or regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein or any amendment to, or change in, an interpretation or application of
any such laws or regulations by any governmental authority in the United
States, which amendment or change is enacted, promulgated, issued or announced
on or after the Deposit Date, the Policyholder is or will be within ninety (90)
days of the date thereof, (1) subject to an entity level U.S. federal
income tax with respect to interest accrued or received on this Policy or (2) subject
to more than a de minimis amount of taxes, duties or other governmental
charges.

 

Notwithstanding
anything to the contrary in this Section 3, if GLAIC shall comply in all
respects with the requirements of this Section 3, but an event of default
has occurred with respect to the notes backed by the Policy and as a result
payments with respect to the notes have been accelerated, otherwise than by
reason of any default under this Policy by GLAIC, no Event of Default (as defined
above) under this Policy shall be deemed to have occurred, no payments with
respect to this Policy shall be accelerated and GLAIC will remain obligated to
make payments under this Policy as if no Event of Default had occurred with
respect to the notes.

 

SECTION 4
– GENERAL PROVISIONS

 

4.1               PAYMENT UPON TERMINATION.  Unless otherwise
specified in the Accumulation Fund Schedule, GLAIC shall pay the Policyholder
the Fund Balance on the Maturity Date.  Such
payment fully discharges GLAIC’s obligation to the Policyholder under this
Policy.

 

4.2               DISCLAIMER OF RESPONSIBILITY.  GLAIC’s only liability
is as set out in this Policy, including the Accumulation Fund Schedule attached
hereto.  In performing its obligations
under this Policy, GLAIC is not acting as a fiduciary or agent for the
Policyholder or anyone else regardless of whether or not they are directly or
indirectly associated with the Policyholder.

 

4.3               NOTICES.  All agreements, notices, directions, consents,
elections or other communication (“Notices”) required by this Policy must be in
writing, directed to the applicable address designated on the face page.  Any such Notices may be given by facsimile
transmission or other acceptable electronic means.  All Notices are effective when received.

 

3

 

4.4               AMENDMENTS.  This Policy may be
amended only by mutual written agreement between the parties hereto.

 

4.5               CONFLICT.  To the extent that
there is a conflict in terms between the Policy and the Accumulation Fund
Schedule, the Accumulation Fund Schedule will control the conduct of the parties.

 

4.6               TRANSFERABILITY/ASSIGNMENT.  This Policy and the
Accumulation Fund established pursuant to it may solely be sold, assigned,
transferred or pledged in accordance with, and for the purposes contemplated
by, the documents and agreements governing the establishment and operation of
the Program.  GLAIC will maintain a
record of ownership of this Policy on its books and records.

 

4.7               PAYMENTS BY GLAIC.  When this Policy
provides that GLAIC will make a payment to the Policyholder, such payment shall
be made to the Policyholder or to the agent the Policyholder designates.  Unless otherwise specified in the
Accumulation Fund Schedule, if a payment date is not a Business Day, GLAIC will
pay such amount on the next Business Day.

 

4.8     WAIVER BY GLAIC.  At the Policyholder’s request, GLAIC may
waive any terms, conditions or adjustments provided for in this Policy.  Any such waiver is subject to any limitations
GLAIC specifies in making the waiver and does not require GLAIC to grant
similar future waivers to the Policyholder or anyone else.  A failure or delay in exercising a right
under this Policy does not waive GLAIC’s right or ability to assert such right
in the future.

 

4.9               MUTUAL REPRESENTATIONS.  The parties mutually represent and warrant,
each to the other, that:

 

a.          This
Policy is its legal, valid and binding obligation, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditor’s rights, and subject, as to
enforceability, to general principals of equity, regardless of whether
enforcement is sought in proceeding in equity or law;

b.         It
has the power to enter into this Policy and to consummate the transactions
contemplated hereby;

c.          All
information provided in connection with this Policy is, to the best of its
knowledge and belief, true, correct and complete;

d.         The
execution and the delivery of this Policy and the performance of obligations
hereunder do not and will not constitute or result in a default, breach or
violation, of the terms or provisions of its certificate, articles or charter
of incorporation, declaration of trust, by-laws or any agreement, instrument,
mortgage, judgment, injunction or order applicable to it or any of its
property.

 

4

 

4.10        TAX PROVISIONS.  The Policyholder and
each transferee and assignee of this Policy, to the extent required by law,
agree to provide GLAIC with any properly completed tax forms that are needed
for GLAIC to satisfy its tax reporting obligations with respect to amounts held
under this Policy.  This Policy is
intended to be ignored for U.S. federal, state and local income and franchise tax
purposes. To the extent it cannot be ignored, GLAIC and the Policyholder and
each transferee and assignee of this Policy agree to treat this Policy as GLAIC’s
debt obligation for U.S. federal, state and local income and franchise tax
purposes.

 

SECTION 5
– DEFINITIONS

 

5.1     POLICY DEFINITIONS.  The following terms have the meanings
indicated:

 

“Accumulation
Fund” is the accounting record GLAIC will establish under
this Policy as described in Section 1.2.

 

“Accumulation
Fund Schedule” is attached to this Policy and establishes the
terms of the Accumulation Fund.

 

“Business
Day” is any day, other than Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close, or are otherwise
closed, in each Business Day City specified in the Accumulation Fund Schedule.

 

“Call
Date” is the day or days prior to the Stated Maturity Date,
if any, specified in the Accumulation Fund Schedule attached to this Policy, on
which GLAIC may elect to pay the Policyholder all or any part of the Fund
Balance.  If no Call Date is indicated in
an Accumulation Fund Schedule, GLAIC will pay to the Policyholder the Fund
Balance prior to the Stated Maturity Date only to the extent provided in Section 3.2.

 

“Deposit
Amount” is the amount GLAIC credits to the Accumulation Fund
on the Deposit Date as set forth in the Accumulation Fund Schedule.

 

“Deposit
Date” is the date, specified in the Accumulation Fund Schedule,
on which GLAIC receives the Net Deposit Amount.

 

“Event
of Default” has the meaning described in Section 3.3.

 

“Fund
Balance” is the value of the Accumulation Fund, determined
pursuant to Section 1.4.

 

“Guaranteed
Rate” is the interest rate, if any, applied to the
Accumulation Fund, as stated in the Accumulation Fund Schedule.

 

“Indenture”
is that certain indenture agreement, made between the Policyholder and the
Indenture Trustee related to the notes to be supported by this Policy as such
agreement may be amended, supplemented or replaced from time to time.

 

5

 

“Indenture
Trustee” is the party specified as trustee under the
Indenture, or its successor.

 

“Maturity
Date” is the earlier of (i) the Stated Maturity Date and
(ii) each date on which the Fund Balance is payable in full to the
Policyholder pursuant to an Event of Default, Optional Repayment, Optional
Redemption or otherwise.  Unless
otherwise indicated in the Accumulation Fund Schedule, if any of the foregoing
dates is not a Business Day, the Maturity Date is the next following Business
Day.  Interest accrues during such delay
only if specified in the Accumulation Fund Schedule.

 

“Net
Deposit Amount” is the amount GLAIC receives from the
Policyholder on the Deposit Date as set forth in the Accumulation Fund
Schedule.

 

“Program”
is the Genworth Global Funding program, as described in the prospectus relating
thereto, including the applicable prospectus supplement or pricing supplement
or in any amendment thereto.

 

“Stated
Maturity Date” is the date, as set forth on the Accumulation
Fund Schedule, when the Fund Balance is originally due and payable to the
Policyholder.

 

“Tax
Event” has the meaning described in Section 3.4.

 

5.2               OTHER DEFINITIONS.  Other capitalized terms appearing in this
Policy have the meanings indicated on the Policy’s face page or in the
Accumulation Fund Schedule.

 

6

 

GLAIC

Accumulation
Fund Schedule – Fixed Rate

 

Policy
Number: GS-R6054

 

	
  Deposit
  Date:

  	
   

  	
  July 17, 2008 or
  the date the deposit is actually received by GLAIC

  
	
   

  	
   

  	
   

  
	
  Specified
  Currency:

  	
   

  	
  United
  States Dollars

  
	
   

  	
   

  	
   

  
	
  Deposit
  Amount:

  	
   

  	
  $2,915,000.00

  
	
   

  	
   

  	
   

  
	
  Net
  Deposit Amount:

  	
   

  	
  $2,868,360.00

  
	
   

  	
   

  	
   

  
	
  Stated
  Maturity Date:

  	
   

  	
  July 15, 2019

  
	
   

  	
   

  	
   

  
	
  Guaranteed
  Rate:

  	
   

  	
  6.00%

  
	
   

  	
   

  	
   

  
	
  Crediting
  Period:

  	
   

  	
  The
  first Crediting Period shall be a short period commencing on the Deposit Date
  to but excluding January 15, 2009. 
  Each subsequent Crediting Period shall be the semi-annual period
  occurring between the 15th of each January and July thereafter.  The final Crediting Period will be the
  period from and including January 15, 2019, to but excluding July 15,
  2019.

  
	
   

  	
   

  	
   

  
	
  Interest
  Crediting:

  	
   

  	
  Interest is credited
  based upon a 30/360 basis, applied to
  the Fund Balance each day.

  
	
   

  	
   

  	
   

  
	
  Periodic
  Payouts:

  	
   

  	
  On
  the 15th of each January and July,
  GLAIC will pay the Policyholder all accrued and unpaid interest (if such date
  is not a Business Day, the Periodic Payout will be made on the next following
  Business Day, and in such cases the amount of interest shall not be adjusted
  for non-Business Days) (each, an “Interest Payment Date”); provided, however, that
  the final Periodic Payout shall be on the Maturity Date, on which date all
  accrued and unpaid interest will be paid.

  
	
   

  	
   

  	
   

  
	
  Optional
  Repayment:

  	
   

  	
  Optional
  Repayments under Section 2.2 of the Policy may be made solely with
  respect to the “Survivor’s Option” described in Pricing Supplement No. 043
  dated July 7, 2008 to the Prospectus Supplement dated December 9,
  2005 related to the Program.

  

 

 

	
  Call
  Terms:

  	
   

  	
  Under
  Section 2.3 of the Policy, GLAIC may elect to pay the Policyholder all
  of the Fund Balance on July 15, 2011, or as of any date thereafter when
  a Periodic Payout is due (the “Call Dates”).

  
	
   

  	
   

  	
   

  
	
  Maturity
  Payout:

  	
   

  	
  On
  the Maturity Date, GLAIC will pay to the Policyholder the Fund Balance. If
  such date is not a Business Day, the Maturity Payout will be made on the next
  following Business Day; provided, however, that interest shall not accrue beyond the
  Maturity Date.

  
	
   

  	
   

  	
   

  
	
  Business
  Day City(s):

  	
   

  	
  New
  York, New York

  
	
   

  	
   

  	
   

  
	
  Other
  Terms:

  	
   

  	
  None

  

 

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

 

The calculation of the Guaranteed Rate and all
other payment terms of this Policy will be determined in the manner described
in the “Description of the Notes” section in the Prospectus Supplement.

 

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

 

	
  GENWORTH LIFE AND
  ANNUITY

  	
   

  	
  GENWORTH GLOBAL FUNDING
  TRUST 2008-38

  
	
  INSURANCE
  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Pamela C. Asbury

  	
   

  	
  By*:

  	
  /s/ Patricia M. Child

  
	
   

  	
  Pamela C. Asbury

  	
   

  	
   

  	
  Patricia M. Child

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Official Title:

  	
  Vice President

  	
   

  	
  Official Title:  

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date: 

  	
   July 15, 2008

  	
   

  	
  Date:  

  	
  July 15, 2008

  
									

 

 

* It is expressly
understood and agreed that (a) this Policy is executed and delivered by
U.S. Bank National Association (“USB”) not individually or personally, but
solely as Trustee of the Genworth Global Funding Trust 2008-38 in the exercise
of powers and authority conferred and vested in it (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by USB but is made and intended for the purpose of binding only the
Trust, (c) nothing herein contained shall be construed as creating any
liability on USB individually or personally, to perform any covenant either
express or implied contained herein, all such liability, if any being expressly
waived by the parties hereto and by any person claiming by, through or under
the parties hereto and (d) under no circumstances shall USB be personally
liable for the payment of any indebtedness or expenses of the Trust or be
liable for the breach or failure of any obligation, representation, warrant or
covenant made or undertaken by the Trust under this Policy or any other related
documents.

 

*********************Exhibit
10.1

 

 

SENIOR SECURED PRIMING AND SUPERPRIORITY

DEBTOR-IN-POSSESSION CREDIT AGREEMENT

 

DATED AS OF JULY 17, 2008

 

by and among

 

VERTIS, INC.,

as Borrower,

 

THE OTHER PERSONS PARTY HERETO THAT

ARE DESIGNATED AS CREDIT PARTIES,

 

GENERAL ELECTRIC CAPITAL CORPORATION,

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

 

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO,

as Lenders,

 

GE CAPITAL MARKETS, INC.,

as Lead Arranger and Book-Running Manager,

 

and

 

BANK OF AMERICA, N.A.,

as Documentation Agent

 

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.

  	
  AMOUNTS AND TERMS OF LOANS

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  Loans

  	
  2

  
	
  1.2.

  	
  Interest and Applicable Margins

  	
  8

  
	
  1.3.

  	
  Fees

  	
  11

  
	
  1.4.

  	
  Receipt of Payments

  	
  12

  
	
  1.5.

  	
  Prepayments

  	
  13

  
	
  1.6.

  	
  Maturity

  	
  15

  
	
  1.7.

  	
  Loan Accounts

  	
  15

  
	
  1.8.

  	
  Yield Protection

  	
  15

  
	
  1.9.

  	
  Taxes

  	
  16

  
	
  1.10.

  	
  Priming and
  Super Priority Nature of Obligations and Lenders’ Liens

  	
  19

  
	
  1.11.

  	
  Payment of
  Obligations

  	
  19

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  CONDITIONS TO LOANS

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Conditions to Initial Loans

  	
  19

  
	
  2.2.

  	
  Conditions to All Loans

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  22

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Organization, Powers, Capitalization and Good
  Standing

  	
  23

  
	
  3.2.

  	
  Disclosure

  	
  23

  
	
  3.3.

  	
  No Material Adverse Effect

  	
  23

  
	
  3.4.

  	
  No Conflict

  	
  24

  
	
  3.5.

  	
  Financial Statements and Financial Projections

  	
  24

  
	
  3.6.

  	
  Use of Proceeds; Margin Regulations

  	
  24

  
	
  3.7.

  	
  Brokers

  	
  26

  
	
  3.8.

  	
  Compliance with Laws

  	
  26

  
	
  3.9.

  	
  Intellectual Property

  	
  26

  
	
  3.10.

  	
  Investigations, Audits, Etc.

  	
  26

  
	
  3.11.

  	
  Employee Matters

  	
  27

  
	
  3.12.

  	
  Litigation; Adverse Facts

  	
  27

  
	
  3.13.

  	
  Ownership of Property; Liens

  	
  27

  
	
  3.14.

  	
  Environmental Matters

  	
  28

  
	
  3.15.

  	
  ERISA

  	
  29

  
	
  3.16.

  	
  Deposit and Disbursement Accounts

  	
  30

  
	
  3.17.

  	
  Agreements and Other Documents

  	
  30

  
	
  3.18.

  	
  Insurance

  	
  30

  
	
  3.19.

  	
  Taxes and Tax Returns

  	
  30

  
	
  3.20.

  	
  Senior Indebtedness and
  Designated Senior Indebtedness

  	
  31

  
	
  3.21.

  	
  Reorganization Matters

  	
  31

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  AFFIRMATIVE COVENANTS

  	
  32

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Compliance With Laws and Contractual Obligations

  	
  32

  
	
  4.2.

  	
  Insurance

  	
  33

  

 

 

	
  4.3.

  	
  Field Examination; Fixed Asset Appraisal; Lender
  Meeting

  	
  33

  
	
  4.4.

  	
  Organizational Existence

  	
  33

  
	
  4.5.

  	
  Environmental Matters

  	
  34

  
	
  4.6.

  	
  Landlords’ Agreements and Mortgagee Agreements

  	
  35

  
	
  4.7.

  	
  Further Assurances

  	
  35

  
	
  4.8.

  	
  Payment of Taxes

  	
  36

  
	
  4.9.

  	
  Cash Management Systems

  	
  36

  
	
  4.10.

  	
  Covenants Regarding Accounts

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  NEGATIVE COVENANTS

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Indebtedness

  	
  36

  
	
  5.2.

  	
  Liens and Related Matters

  	
  38

  
	
  5.3.

  	
  Investments

  	
  39

  
	
  5.4.

  	
  Contingent Obligations

  	
  40

  
	
  5.5.

  	
  Restricted Payments

  	
  41

  
	
  5.6.

  	
  Restriction on Fundamental Changes

  	
  41

  
	
  5.7.

  	
  Disposal of Assets or Subsidiary Stock

  	
  42

  
	
  5.8.

  	
  Transactions with Affiliates

  	
  42

  
	
  5.9.

  	
  Conduct of Business

  	
  43

  
	
  5.10.

  	
  Changes Relating to Indebtedness

  	
  43

  
	
  5.11.

  	
  Fiscal Year

  	
  44

  
	
  5.12.

  	
  Press Release; Public Offering Materials

  	
  44

  
	
  5.13.

  	
  Subsidiaries

  	
  44

  
	
  5.14.

  	
  Deposit Accounts

  	
  44

  
	
  5.15.

  	
  Hazardous Materials

  	
  44

  
	
  5.16.

  	
  ERISA

  	
  44

  
	
  5.17.

  	
  Sale-Leasebacks

  	
  45

  
	
  5.18.

  	
  No Speculative
  Transactions

  	
  45

  
	
  5.19.

  	
  Real Estate
  Purchases

  	
  45

  
	
  5.20.

  	
  Prepayments of Other Indebtedness

  	
  45

  
	
  5.21.

  	
  Reclamation
  Claims

  	
  45

  
	
  5.22.

  	
  Chapter 11
  Claims

  	
  45

  
	
  5.23.

  	
  VDSL

  	
  45

  
	
  5.24.

  	
  Vertis Receivables

  	
  45

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  FINANCIAL COVENANTS/REPORTING

  	
  46

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Financial Covenants

  	
  46

  
	
  6.2.

  	
  Financial Statements and Other Reports

  	
  47

  
	
  6.3.

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

  	
  50

  

 

ii

 

	
  SECTION 7.

  	
  DEFAULT, RIGHTS AND REMEDIES

  	
  51

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Event of Default

  	
  51

  
	
  7.2.

  	
  Suspension or Termination of Commitments

  	
  55

  
	
  7.3.

  	
  Acceleration and other Remedies

  	
  55

  
	
  7.4.

  	
  Performance by Agent

  	
  55

  
	
  7.5.

  	
  Application of Proceeds

  	
  56

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  ASSIGNMENT AND PARTICIPATION

  	
  56

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
  Assignment and Participations

  	
  56

  
	
  8.2.

  	
  Agent

  	
  58

  
	
  8.3.

  	
  Set Off and Sharing of Payments

  	
  64

  
	
  8.4.

  	
  Disbursement of Funds

  	
  64

  
	
  8.5.

  	
  Disbursements of Advances; Payment

  	
  65

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  MISCELLANEOUS

  	
  66

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Indemnities

  	
  66

  
	
  9.2.

  	
  Amendments and Waivers

  	
  67

  
	
  9.3.

  	
  Notices

  	
  68

  
	
  9.4.

  	
  Failure or Indulgence Not Waiver; Remedies
  Cumulative

  	
  69

  
	
  9.5.

  	
  Marshaling; Payments Set Aside

  	
  70

  
	
  9.6.

  	
  Severability

  	
  70

  
	
  9.7.

  	
  Lenders’ Obligations Several; Independent Nature of
  Lenders’ Rights

  	
  70

  
	
  9.8.

  	
  Headings

  	
  70

  
	
  9.9.

  	
  Applicable Law

  	
  70

  
	
  9.10.

  	
  Successors and Assigns

  	
  70

  
	
  9.11.

  	
  No Fiduciary Relationship; Limited Liability

  	
  70

  
	
  9.12.

  	
  Construction

  	
  71

  
	
  9.13.

  	
  Confidentiality

  	
  71

  
	
  9.14.

  	
  CONSENT TO JURISDICTION

  	
  71

  
	
  9.15.

  	
  WAIVER OF JURY TRIAL

  	
  72

  
	
  9.16.

  	
  Survival of Warranties and Certain Agreements

  	
  72

  
	
  9.17.

  	
  Entire Agreement

  	
  72

  
	
  9.18.

  	
  Counterparts; Effectiveness

  	
  72

  
	
  9.19.

  	
  Replacement of Lenders

  	
  72

  
	
  9.20.

  	
  Delivery of Termination Statements and Mortgage
  Releases

  	
  74

  
	
  9.21.

  	
  Subordination of Intercompany Debt

  	
  74

  
	
  9.22.

  	
  Parties Including Trustees; Bankruptcy Court
  Proceedings

  	
  74

  
	
  9.23.

  	
  Pre-Petition Loan Documents

  	
  75

  

 

iii

 

INDEX
OF APPENDICES

 

	
  Annexes

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annex A

  	
   

  	
  -

  	
   

  	
  Definitions

  
	
  Annex B

  	
   

  	
  -

  	
   

  	
  Pro Rata Shares and Commitment Amounts

  
	
  Annex C

  	
   

  	
  -

  	
   

  	
  Closing Checklist

  
	
  Annex D

  	
   

  	
  -

  	
   

  	
  Lenders’ Bank Accounts

  
	
  Annex E

  	
   

  	
  -

  	
   

  	
  Compliance Certificate

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)(i)

  	
   

  	
  -

  	
   

  	
  Revolving Note

  
	
  Exhibit 1.1(a)(ii)

  	
   

  	
  -

  	
   

  	
  Notice of Revolving Credit Advance

  
	
  Exhibit 1.1(b)

  	
   

  	
  -

  	
   

  	
  Swing Line Note

  
	
  Exhibit 1.1(c)

  	
   

  	
  -

  	
   

  	
  Request for Letter of Credit Issuance

  
	
  Exhibit 1.1(e)

  	
   

  	
  -

  	
   

  	
  Term Loan A Note

  
	
  Exhibit 1.1(f)

  	
   

  	
  -

  	
   

  	
  Term Loan B Note

  
	
  Exhibit 1.2(e)

  	
   

  	
  -

  	
   

  	
  Notice of Continuation/Conversion

  
	
  Exhibit 6.2(e)

  	
   

  	
  -

  	
   

  	
  Borrowing Base Certificate

  
	
  Exhibit 8.1

  	
   

  	
  -

  	
   

  	
  Assignment Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 3.1(a)

  	
   

  	
  -

  	
   

  	
  Jurisdictions of Organization and Qualifications

  
	
  Schedule 3.1(b)

  	
   

  	
  -

  	
   

  	
  Capitalization

  
	
  Schedule 3.9

  	
   

  	
  -

  	
   

  	
  Intellectual Property

  
	
  Schedule 3.10

  	
   

  	
  -

  	
   

  	
  Investigations and Audits

  
	
  Schedule 3.11

  	
   

  	
  -

  	
   

  	
  Employee Matters

  
	
  Schedule 3.12

  	
   

  	
  -

  	
   

  	
  Litigation

  
	
  Schedule 3.13

  	
   

  	
  -

  	
   

  	
  Real Estate

  
	
  Schedule 3.14

  	
   

  	
  -

  	
   

  	
  Environmental Matters

  
	
  Schedule 3.15

  	
   

  	
  -

  	
   

  	
  ERISA

  
	
  Schedule 3.16

  	
   

  	
  -

  	
   

  	
  Deposit and Disbursement Accounts

  
	
  Schedule 3.17

  	
   

  	
  -

  	
   

  	
  Agreements and Other Documents

  
	
  Schedule 3.18

  	
   

  	
  -

  	
   

  	
  Insurance

  
	
  Schedule 5.1

  	
   

  	
  -

  	
   

  	
  Existing Indebtedness

  
	
  Schedule 5.2

  	
   

  	
  -

  	
   

  	
  Liens

  
	
  Schedule 5.3

  	
   

  	
  -

  	
   

  	
  Investments

  
	
  Schedule 5.4

  	
   

  	
  -

  	
   

  	
  Contingent Obligations

  
	
  Schedule 5.8

  	
   

  	
  -

  	
   

  	
  Affiliate Transactions

  
	
  Schedule 5.9

  	
   

  	
  -

  	
   

  	
  Business Description

  

 

 

SENIOR SECURED, PRIMING AND SUPERPRIORITY
DEBTOR-IN-POSSESSION CREDIT AGREEMENT

 

This
SENIOR SECURED, PRIMING AND SUPERPRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT
is dated as of July 17, 2008 and entered into by and among Vertis, Inc.,
a Delaware corporation, a debtor and debtor in possession under Chapter 11
of the Bankruptcy Code (as defined below) (“Vertis” or the “Borrower”),
Vertis Holdings, Inc., a Delaware corporation, a debtor and debtor in
possession under Chapter 11 of the Bankruptcy Code (“Holdings”),
certain subsidiaries of Borrower, each a debtor and debtor-in-possession under
Chapter 11 of the Bankruptcy Code, as Guarantors, the other persons
designated as “Credit Parties” (as defined in Annex A hereto), the financial institutions who are
or hereafter become parties to this Agreement as Lenders (the “Lenders”
and each a “Lender”), GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation  (in its individual capacity “GE
Capital”), as Agent and BANK OF AMERICA, N.A., as Documentation Agent.

 

R  E  C  I  T  A
L  S:

 

WHEREAS, on July 15, 2008 (the “Petition
Date”), the Borrower and the Guarantors commenced prepackaged
Chapter 11 Case Nos. 08-11460 through 08-11466, as administratively
consolidated at Chapter 11 Case No. 08-11460 (each a “Prepackaged
Chapter 11 Case” and collectively, the “Prepackaged Chapter 11
Cases”) by filing separate voluntary petitions for reorganization under
chapter 11, 11 U.S.C. 101 et seq. (the “Bankruptcy Code”),
with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”).  The Borrower continues to
operate its businesses and manage its properties as a debtor and debtor in
possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code.

 

WHEREAS, prior to the Petition Date,
certain lenders provided financing to Borrower pursuant to that certain Credit
Agreement, dated as of December 22, 2004 among the Borrower, the other
credit parties signatory thereto, GE Capital, as agent and lender, and the
lenders from time to time signatory thereto (as amended, modified or supplemented
through the Petition Date, the “Pre-Petition Credit Agreement”);

 

WHEREAS, the Borrower has requested that
Lenders provide a senior secured, superpriority revolving and term
debtor-in-possession credit facility to Borrower of $380,000,000 in the aggregate to be used for the purposes set forth in Section 3.6;

 

WHEREAS,
Borrower desires to secure all of its Obligations (as hereinafter defined)
under the Loan Documents (as hereinafter defined) by granting to Agent, for the
benefit of Agent and Lenders, a security interest in and lien upon
substantially all  of their personal and real
property; and

 

WHEREAS,
Holdings, which owns all of the Stock of Vertis, is willing to guaranty all of
the Obligations and to pledge to Agent, for the benefit of Agent and Lenders,
all of the Stock of Vertis and Holdings’ other Subsidiaries (other than
Excluded Foreign Subsidiaries (as hereinafter defined)), and substantially all
of its other personal and real property to secure the Obligations; and

 

 

WHEREAS,
each of Borrower’s Subsidiaries, other than Excluded Foreign Subsidiaries (as
hereinafter defined), is willing to guaranty all of the Obligations of Borrower
and to grant to Agent, for the benefit of Agent and Lenders, a security
interest in and lien upon substantially all of its personal and real property
to secure the Obligations; and

 

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

 

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

 

SECTION 1.

AMOUNTS AND TERMS OF LOANS

 

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

 

(a)                                  Revolving Loans.

 

(i)                                     Each Revolving Lender agrees, severally and not jointly, 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”)
requested by the Borrower hereunder.  The
Pro Rata Share of the Revolving Loan of any Revolving Lender (including,
without duplication, Swing Line Loan) shall not at any time exceed its separate
Revolving Loan Commitment.  Revolving
Credit Advances may be repaid and reborrowed; provided, that the amount of any
Revolving Credit Advance to be made at any time shall not exceed Borrowing Availability.  Borrowing Availability may be further reduced
by Reserves imposed by Agent in its reasonable credit judgment.  The Revolving Loan shall be repaid in full in
cash on the Commitment Termination Date. 
Borrower shall, except as any such Revolving Lender may elect pursuant
to Section 1.7, execute and deliver to each Revolving Lender a note
to evidence the total Revolving Loan Commitment of that Revolving Lender.  Each note shall be in the maximum principal
amount of the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(a)(i) (as
amended, modified, extended, substituted or replaced from time to time, each a “Revolving
Note” and, collectively, the “Revolving Notes”).  Other than pursuant to Section 1.1(a)(ii),
if the aggregate outstanding Revolving Loan exceeds the Borrowing Base as set
forth in the most recently delivered Borrowing Base Certificate or the total
aggregate Revolving Loan Commitment of all Lenders (any such excess amount of
Revolving Loan is herein referred to as an “Overadvance”), Lenders shall
not be obligated to make Revolving Credit Advances, no additional Letters of
Credit shall be issued and, except as provided in Section 1.1(a)(ii) below,
the Revolving Loan must be repaid immediately and/or Letters of Credit cash
collateralized in an amount sufficient to eliminate any Overadvance.  For the avoidance of doubt, at no time shall
the Revolving Loan balance exceed the Maximum Amount and, if at any time the Revolving
Loan balance shall exceed the Maximum Amount, Borrower shall immediately repay
the Revolving Loan in an amount sufficient to eliminate any such excess.  All Overadvances shall constitute Index Rate
Loans and shall bear interest payable upon demand at the Default Rate.  For funding requests for 

 

2

 

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

 

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

 

(iii)                               At Borrower’s option, Borrowing Availability may be increased
by an amount up to $20 million in excess of the Borrowing Base (the “Seasonal
DIP Overadvance Facility”) if Borrower requests, no earlier than July 1,
2008 and no later than July 31, 2008 (the “Seasonal DIP Overadvance
Period”), the ability to use the Seasonal DIP Overadvance Facility; provided,
however, that the Seasonal DIP Overadvance Facility shall be subject to
the following additional terms and conditions: 
(i) at no time shall the outstanding principal balance of the
Revolving Loan (including, without limitation, the Seasonal DIP Overadvance
Facility) exceed $130 million (or the then existing maximum committed or
court-approved amount of the Revolving Loan, whichever is lesser); (ii) requests
for Advances under the Seasonal DIP Overadvance Facility (“Seasonal DIP
Overadvances”) shall be honored only until the end of the Seasonal DIP
Overadvance Period; and (iii) and all outstanding Seasonal DIP
Overadvances (including, without limitation, all interest accrued thereon)
shall be due, payable and paid in full in cash upon, the earlier of (a) the
Commitment Termination Date, or (b) October 15, 2008.  In any event, Agent will retain the right in
its reasonable credit judgment from time to time to establish or modify, with
respect to the Borrowing Base, additional reserves against availability,
including, without limitation, reserves in respect of any adequate protection
payments required under the Interim Order and the Final Order with respect to
interest accrued prior to the commencement of the Prepackaged Chapter 11 Cases,
carve-outs for professionals and standards of eligibility.  If
a Seasonal DIP Overadvance is made, or permitted to remain outstanding,
pursuant to this Section 1.1(a)(iii), then all Revolving Lenders
shall be bound to make, or permit to remain outstanding, such Seasonal DIP
Overadvance based upon their Pro Rata Shares of the Revolving Loan Commitment
in accordance with the terms of this Agreement.

 

3

 

(b)                                 Swing Line
Facility.

 

(i)                                     Subject to the terms and conditions hereof, the Swing Line
Lender hereby agrees to make available at any time and from time to time until
the Commitment Termination Date advances (each, a “Swing Line Advance”).  The provisions of this Section 1.1(b) shall
not relieve Revolving Lenders of their obligations to make Revolving Credit
Advances under Section 1.1(a). 
Except as provided in Section 1.1(a)(ii) above, the
aggregate amount of Swing Line Advances outstanding shall not exceed at any
time the lesser of (A) the Swing Line Commitment and (B) Borrowing
Availability (“Swing Line Availability”).  Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this Section 1.1(b).  Whenever Borrower desires that the Swing Line
Lender make a Swing Line Advance hereunder, Borrower shall give the Swing Line
Lender, not later than 3:30 p.m. (New York time), on the date that a Swing
Line Advance is to be made, written notice or telephonic notice promptly
confirmed in writing of each Swing Line Advance to be made hereunder.  Each such notice shall be irrevocable and
specify (A) the date of borrowing (which shall be a Business Day), and (B) the
aggregate principal amount of the Swing Line Advance to be made pursuant to
such borrowing.  Unless the Swing Line
Lender has received at least one (1) Business Day’s prior written notice
from Requisite Lenders instructing it not to make a Swing Line Advance, the
Swing Line Lender shall, notwithstanding the failure of any condition precedent
set forth in Section 2.2, be entitled to fund that Swing Line
Advance, and to have each Revolving Lender make Revolving Credit Advances in
accordance with Section 1.1(b)(iii) or purchase participating
interests in accordance with Section 1.1(b)(iv).  Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan.  Borrower shall repay
the aggregate outstanding principal amount of the Swing Line Loan upon demand
therefor by Agent. The entire unpaid balance of the Swing Line Loan and all
other noncontingent Obligations (other than as set forth in Section 1.5)
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full.

 

(ii)                                  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(b) (as
amended, modified, extended, substituted or replaced from time to time, the “Swing
Line Note”). The Swing Line Note shall represent the obligation of 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 1.2.

 

(iii)                               The Swing Line Lender, at any time and from time to time in
its sole and absolute discretion but no
less frequently than once weekly, may  on
behalf of Borrower (and Borrower hereby irrevocably authorizes the Swing Line
Lender to so act on its behalf) request each Revolving Lender to make a
Revolving Credit Advance to 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.  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

 

4

 

behalf of
the Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately
available funds on the Business Day next succeeding the date that notice is
given.  The proceeds of those Revolving
Credit Advances shall be immediately paid to the Swing Line Lender and applied
to repay the Refunded Swing Line Loan.

 

(iv)                              Intentionally Omitted.

 

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

 

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

 

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

 

(ii)                                  Reimbursement.  Borrower shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse any L/C Issuer on demand in
immediately available funds for any amounts paid by such L/C Issuer with
respect to a Letter of Credit, including all reimbursement payments, Fees,
Charges, costs and expenses paid by such L/C Issuer.  Borrower hereby authorizes and directs Agent,
at Agent’s option, to debit Borrower’s accounts (by increasing the outstanding
principal balance of the Revolving Credit Advances or Swing Line Advances made
to Borrower, as applicable) in the amount of any payment made by an L/C Issuer
with respect to any Letter of Credit. 
All amounts paid by an L/C Issuer with respect to any Letter of Credit
that are not immediately repaid by Borrower with the proceeds of a Revolving
Credit Advance, Swing Line Advance or otherwise shall bear interest payable on
demand at the interest rate 

 

5

 

applicable
to Revolving Credit Advances that are Index Rate Loans plus, at the election of
Agent or Requisite Lenders, an additional two percent (2.00%) per annum.  Each Revolving Lender agrees to fund its Pro
Rata Share of any Revolving Loan made pursuant to this Section 1.1(c)(ii).  In the event Agent elects not to debit
Borrower’s account and Borrower fails to reimburse the L/C Issuer in full on
the date of any payment in respect of a Letter of Credit, Agent shall promptly
notify each Revolving Lender of the amount of such unreimbursed payment and the
accrued interest thereon and each Revolving Lender, on the next Business Day
prior to 3:00 p.m. (New York time), shall deliver to Agent an amount equal
to its Pro Rata Share thereof in same day funds.  Each Revolving Lender hereby absolutely and
unconditionally agrees to pay to the L/C Issuer upon demand by the L/C Issuer
such Revolving Lender’s Pro Rata Share of each payment made by the L/C Issuer
in respect of a Letter of Credit and not immediately reimbursed by Borrower or
satisfied through a debit of Borrower’s account.  Each Revolving Lender acknowledges and agrees
that its obligations pursuant to this subsection in respect of Letters of
Credit are absolute and unconditional and shall not be affected by any
circumstance whatsoever, including setoff, counterclaim, the occurrence and
continuance of a Default or an Event of Default or any failure by Borrower to
satisfy any of the conditions set forth in Section 2.2.  If any Revolving Lender fails to make
available to the L/C Issuer the amount of such Revolving Lender’s Pro Rata
Share of any payments made by the L/C Issuer in respect of a Letter of Credit
as provided in this Section 1.1(c)(ii), the L/C Issuer shall be
entitled to recover such amount on demand from such Revolving Lender together
with interest at the Index Rate.

 

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

 

(iv)                              Expiration
Dates of Letters of Credit. 
The expiration date of each Letter of Credit shall be on a date that is
not later than ten days prior to the Commitment Termination Date; provided, that a Letter of Credit
may provide for automatic extensions of its expiration date for one (1) or
more successive periods of up to twelve (12) months for each period; provided,
further, that the L/C Issuer has the right to terminate such Letter of Credit
on 

 

6

 

each such expiration date and no renewal term may extend the
term of the Letter of Credit to a date that is later than the thirtieth (30th)
day prior to the date set forth in clause (a) of the definition of the
term Commitment Termination Date. 
Upon direction by Agent or Requisite Lenders, the L/C Issuer shall not
renew any such Letter of Credit at any time during the continuance of an Event
of Default; provided that, in the case of a direction by Agent or Requisite
Lenders, the L/C Issuer receives such directions prior to the date notice of
non-renewal is required to be given by the L/C Issuer and the L/C Issuer has
had a reasonable period of time to act on such notice.

 

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

 

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

 

7

 

(d)                                 Funding
Authorization.  The
proceeds of all Loans made to the Borrower pursuant to this Agreement
subsequent to the Closing Date are to be funded by Agent by wire transfer to
the account designated by Borrower below (the “Disbursement Account”):

 

Bank:  Bank of America, N.A.

ABA
No.:  026-009-593

Bank
Address:  Charlotte, North Carolina

Account
No.:  3750357673

Reference:  Vertis, Inc.

 

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

 

(e)                                  Term Loan A.  Each Term Loan A Lender agrees, severally and
not jointly, to lend to Borrower in one draw, on the Closing Date, its Pro Rata
Share of the aggregate amount of $50,000,000 (the “Term Loan A”).  The principal amount of the Term Loan A shall
be due and payable in full, in cash in one installment, on the Commitment
Termination Date; subject, however, to acceleration upon (or
following) the occurrence of an Event of Default and during its continuation,
or upon earlier termination of this Agreement, as provided for herein.  Amounts borrowed under this Section 1.1(e) and
repaid may not be reborrowed.  The Term
Loan A shall be evidenced by one or more promissory notes substantially in
the form of Exhibit 1.1(e) (as amended, modified, extended,
substituted or replaced from time to time, each a “Term Loan A Note”
and, collectively, the “Term Loan A Notes”), and, except as any such
Lender may elect pursuant to Section 1.7, the Borrower shall execute
and deliver each Term Loan A Note to the applicable Term Loan A Lender.  Each Term Loan A Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Loan A Lender’s
Term Loan Commitment, together with interest thereon.

 

(f)                                    Term Loan B.  Each Term Loan B Lender agrees, severally and
not jointly, to lend to Borrower in one draw, on the Closing Date, its Pro Rata
Share of the aggregate amount of $200,000,000 (the “Term Loan B”).  The principal amount of the Term Loan B shall
be due and payable in full, in cash in one installment, on the Commitment
Termination Date; subject, however, to acceleration upon (or
following) the occurrence of an Event of Default and during its continuation,
or upon earlier termination of this Agreement, as provided for herein.  Amounts borrowed under this Section 1.1(f) and
repaid may not be reborrowed.  The Term
Loan B shall be evidenced by one or more promissory notes substantially in
the form of Exhibit 1.1(f) (as amended, modified, extended, substituted
or replaced from time to time, each a “Term Loan B Note” and,
collectively, the “Term Loan B Notes”), and, except as any such Lender
may elect pursuant to Section 1.7, the Borrower shall execute and
deliver each Term Loan B Note to the applicable Term Loan B Lender.  Each Term Loan B Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Loan B Lender’s
Term Loan Commitment, together with interest thereon.

 

1.2.                              Interest and
Applicable Margins.

 

(a)                                  Borrower shall
pay interest to Agent, for the ratable benefit of Lenders, with respect to the
various Loans (other than Letter of Credit Obligations) made by each Lender 

 

8

 

(or in the case of the Swing Line Loan, for the
benefit of the Swing Line Lender), in arrears on each applicable Interest
Payment Date, at the following rates with respect to (i) Revolving Credit
Advances that are Index Rate Loans, the Index Rate plus the Applicable Revolver
Index Margin per annum, (ii) Revolving Credit Advances that are LIBOR
Loans, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per
annum, (iii) the Swing Line Loan, the Index Rate plus the Applicable
Revolver Index Margin per annum, (iv) the Term Loan A, the Index Rate plus
the Applicable Term Loan A Index Margin per annum, or at the request of
Borrower, the applicable LIBOR Rate plus the Applicable Term Loan A LIBOR
Margin per annum and (v) the Term Loan B, the Index Rate plus the
Applicable Term Loan B Index Margin per annum, or at the request of Borrower,
the applicable LIBOR Rate plus the Applicable Term Loan B LIBOR Margin per
annum.

 

The
Applicable Margins with respect to Revolving Credit Advances and Letter of
Credit Obligations, whether incurred on or after the date hereof, Term Loan A
and Term Loan B are as follows:

 

	
  Applicable
  Revolver Index Margin

  	
   

  	
  1.75

  	
  %

  
	
  Applicable
  Revolver LIBOR Margin

  	
   

  	
  2.75

  	
  %

  
	
  Applicable L/C
  Margin

  	
   

  	
  2.75

  	
  %

  
	
  Applicable Term
  Loan A Index Margin

  	
   

  	
  4.50

  	
  %

  
	
  Applicable Term
  Loan A LIBOR Margin

  	
   

  	
  5.50

  	
  %

  
	
  Applicable Term
  Loan B Index Margin

  	
   

  	
  1.75

  	
  %

  
	
  Applicable Term
  Loan B LIBOR Margin

  	
   

  	
  3.00

  	
  %

  

 

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

 

(c)                                  All
computations of Fees calculated on a per annum basis and interest shall be made
by Agent on the basis of a 360-day year, in each case for the actual number of
days occurring in the period for which such Fees and interest are payable.  The Index Rate is a floating rate determined
for each day.  Each determination by
Agent of an interest rate and Fees hereunder shall be final, binding and
conclusive on Borrower, absent manifest error.

 

(d)                                 So long as an
Event of Default has occurred and is continuing under Section 7.1(a) and
without notice of any kind, or so long as any other Event of Default has
occurred and is continuing and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from Agent to
Borrower and without further notice, motion or application to, hearing before,
or order from the Bankruptcy Court, the interest rates applicable to the Loans
and the Letter of Credit and Unused Line Fees shall be increased by two
percentage points (2%) per annum above the rates of interest or the rate of
such Fee otherwise applicable hereunder (“Default Rate”), and all other
outstanding Obligations which are past due shall bear interest at the then
applicable Index Rate applicable to such other Obligations plus the
Default Rate.  Interest, Unused Line Fees
and Letter of Credit Fees at the Default Rate shall accrue from the initial
date of such Event of Default until that Event of Default is cured or 

 

9

 

waived and shall be payable upon demand, but
in any event, shall be payable on the next regularly scheduled payment date set
forth herein for such Obligation.

 

(e)                                  Borrower 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 the LIBOR Breakage
Costs in accordance with Section 1.3(e) if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue
all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan
upon the expiration of the applicable LIBOR Period and the succeeding LIBOR
Period of that continued Loan shall commence on the first day after the last
day of the LIBOR Period of the Loan to be continued.  Any such election must be made by 1:00 p.m.
(New York time) on the 3rd Business Day prior to (1) the date of any
proposed Revolving Credit Advance that 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 1:00 p.m. (New York time) on the 3rd Business Day prior to
the end of the LIBOR Period with respect thereto, that LIBOR Loan shall be
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 fax or overnight courier. 
In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a “Notice of Conversion/Continuation”)
in the form of Exhibit 1.2(e). 
No Loan shall be made, converted into or continued as a LIBOR Loan, if
an Event of Default has occurred and is continuing and Agent or Requisite
Lenders have determined not to make or continue any Loan as a LIBOR Loan as a
result thereof.

 

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

 

10

 

promptly apply such excess as specified in Section 1.5(d) and
thereafter shall refund any excess to Borrower or as such court of competent
jurisdiction may otherwise order.

 

1.3.                              Fees.

 

(a)                                  Fee Letter.  Borrower shall pay to GE Capital,
individually, and GE Capital Markets, Inc. (“GECM”) the Fees
specified in that certain fee letter, dated as of July 8, 2008,  among Borrower, GE Capital and GECM (the “GE Capital Fee
Letter”), at the times specified for payment therein.

 

(b)                                 Unused Line Fee.  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 calendar month prior to the
Commitment Termination Date, commencing with the first calendar month following
the Closing Date and on the Commitment Termination Date, a fee for Borrower’s
non-use of available funds in an amount equal to one-half of one percent
(0.50%)  per annum multiplied by the difference
between (x) the Maximum Amount (as it may be reduced from time to time)
and (y) the average for the period of the daily closing balances of the
Revolving Loan (including, without duplication, Swing Line Loans) outstanding
during the period for which such Fee is due.

 

(c)                                  Letter of
Credit Fee.  Borrower
agrees to pay to Agent for the benefit of Revolving Lenders, as compensation to
such Revolving Lenders for Letter of Credit Obligations incurred hereunder, (i) without
duplication of reasonable, documented, out-of-pocket costs and expenses
otherwise payable to Agent or Lenders hereunder, all costs and expenses
incurred by Agent or any Lender on account of such Letter of Credit
Obligations, and (ii) for each calendar month during which any Letter of
Credit Obligation shall remain outstanding, commencing with the first calendar
month following the Closing Date, a fee (the “Letter of Credit Fee”) in
an amount equal to the Applicable L/C
Margin from time to time in effect multiplied by the maximum amount
available from time to time to be drawn under the applicable Letter of
Credit.  Such fee shall be paid to Agent
for the benefit of the Revolving Lenders in arrears, on the first Business Day
of each calendar 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.

 

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

 

(e)                                  Expenses and
Attorneys’ Fees.  Borrower
agrees to pay all reasonable, documented, out-of-pocket fees, charges, costs
and expenses (including, without duplication, reasonable fees, charges, costs
and expenses of attorneys, auditors, appraisers, consultants and 

 

11

 

advisors, including, without limitation, any
operations consultant and any financial advisor engaged by Agent) incurred by
Agent in connection with any matters contemplated by or arising out of the Loan
Documents, in connection with the examination, review, due diligence
investigation, documentation, negotiation, closing and syndication of the
transactions contemplated herein and in connection with the continued
administration of the Loan Documents including any amendments, modifications,
consents and waivers and including any Field Examinations, Non-Real Estate
Fixed Asset Appraisals and Real Estate Appraisals; provided, however,
that Borrower shall not be required to pay any fees, costs or expenses incurred
by Agent in connection with any Field Examinations, Non-Real Estate Fixed Asset
Appraisals or Real Estate Appraisals conducted within six (6) months
following the Closing Date unless an Event of Default shall have occurred.  Borrower agrees to promptly pay reasonable
documentation charges assessed by Agent for amendments, waivers, consents and
any of the documentation prepared by Agent’s internal legal staff.  Borrower agrees to promptly pay, without
duplication, all reasonable, documented, out-of-pocket fees, charges, costs and
expenses (including fees, charges, costs and expenses of attorneys, auditors,
appraisers, consultants and advisors, including, without limitation, any
operations consultant and any financial advisor engaged by Agent) incurred by
Agent in connection with any (i) amendment, waiver or consent requested by
a Credit Party with respect to the Loan Documents, (ii) Event of Default, (iii) action
to enforce any Loan Document or to collect any payments due from Borrower or
any other Credit Party, or (iv) any of the matters set forth in the
preceding sentence.  All fees, charges,
costs and expenses for which Borrower is responsible under this Section 1.3(e) shall
be deemed part of the Obligations when incurred, payable in accordance with the
final sentence of Section 1.4 and secured by the Collateral.

 

1.4.                              Receipt of
Payments.

 

(a)                                  All payments by
Borrower of the Obligations shall be made without further order of the
Bankruptcy Court (i.e., other than the Interim Order or the Final Order)
and without deduction, defense, setoff or counterclaim and shall be made in
same day funds and delivered to Agent, for the benefit of Agent and Lenders, as
applicable, by wire transfer to the account identified below (the “Collection
Account”) or such other place as Agent may from time to time designate in
writing.

 

ABA
No. 021-001-033

Account
Number 502-79-791

Deutsche
Trust Company Americas

New
York, New York

ACCOUNT
NAME: General Electric Capital Corporation-GSF

Reference:  CFN8891 Vertis, Inc.

 

(b)                                 Borrower shall make each payment under
this Agreement not later than 4:00 p.m. (New York time) on the day
when due in immediately available funds in Dollars to the Collection
Account.  All payments by Borrower of the
Obligations shall be made in Dollars. 
For purposes of computing interest and Fees and determining Borrowing Availability
as of any date, all payments shall be deemed received on the day of receipt of
immediately available funds therefor in the Collection Account prior to 4:00 p.m.
New York time.  Payments received into
the Collection Account after 4:00 p.m. (New York time) on any Business Day
shall be deemed to 

 

12

 

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

 

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

 

1.5.                              Prepayments.

 

(a)                                  Voluntary
Prepayments of Loans.  At any
time, Borrower may prepay the Term Loans, in whole or in part, without premium
or penalty subject to LIBOR Breakage Costs, if applicable, and after the Term
Loans have been repaid in full, Borrower may prepay the Revolving Loan, in
whole or in part, and permanently reduce the Revolving Loan Commitment by a
corresponding amount; provided, that voluntary prepayments are
accompanied by (A) accrued interest on the amount prepaid to the date of
the prepayment and (B) the payment of  LIBOR Breakage
Costs, if applicable.  Prepayments of the
Term Loan shall be applied in accordance with Section 1.5(d).  For the avoidance of doubt, Borrower may
borrow and repay Revolving Credit Advances from time to time in accordance with
the terms and conditions of this Agreement without any corresponding permanent
reduction in the Revolving Loan Commitment.

 

(b)                                 Prepayments
from Asset Dispositions.

 

(i)                                     Subject to clause (iii) below, immediately upon
receipt of any Net Proceeds,
Borrower shall prepay the Loans in an amount equal to 100% of such Net Proceeds.

 

(ii)                                  Notwithstanding anything to the contrary in this Agreement
(but subject to clause (iii) below), payments from (a) insurance
proceeds or (b) condemnation proceeds, in each case, from casualties or
losses to Collateral shall be used to prepay the Loans in accordance with Section 1.5(b)(i).  To the extent such prepayments exceed the
then outstanding principal balance of the Loans, they shall be returned to
Borrower subject to the Interim Order or the Final Order, as applicable.

 

(iii)                               Borrower or its Subsidiaries may reinvest up to $5,000,000 in
the aggregate of Net Proceeds, insurance proceeds and condemnation proceeds in
any Fiscal Year in fixed assets, within ninety (90) days after receipt of such
Net Proceeds, insurance proceeds and condemnation proceeds.  If the period set forth in the immediately
preceding sentence expires without Borrower having reinvested such Net
Proceeds, insurance proceeds and condemnation proceeds (as applicable),
Borrower shall prepay the Loans in an amount equal to any such Net Proceeds,
insurance proceeds and condemnation proceeds (as applicable) not reinvested in
accordance with Section 1.5(d).

 

13

 

(c)                                  Prepayments
from Issuance of Debt and Equity Issuances.  Immediately upon the receipt by Holdings,
Borrower or any of their Subsidiaries of the proceeds of (i) the issuance
of Stock, or (ii) the incurrence of Indebtedness by Holdings, Borrower or
any of its Subsidiaries (other than Indebtedness permitted under Section 5.1),
Borrower shall prepay the Loans in an amount equal to 100% of such proceeds,
net of underwriting discounts and commissions and other reasonable, documented,
out-of-pocket costs associated therewith. 
The payments shall be applied in accordance with Section 1.5(d).

 

(d)                                 Application of
Proceeds.  With
respect to any prepayments of the Term Loans made by Borrower pursuant to Section 1.5(a),
such prepayments shall be applied to the outstanding principal balance of the
Term Loans ratably as to the outstanding principal balance of Term Loan A and
the outstanding principal balance of Term Loan B.  With respect to any prepayments made by
Borrower pursuant to Sections 1.5(b) or (c), such prepayments shall
be applied (in each case, on a pari passu basis, to any liquidated,
non-contingent outstanding balance of the Pre-Petition Lender Expense Claims) (i) with
respect to the proceeds of that portion of the assets at issue that comprise
all or a portion of the Borrowing Base, first, to that portion of the
outstanding principal balance of the Swing Line Advances attributable to those
Swing Line Advances made on account of the applicable assets, which application
shall effect a permanent reduction to the Revolving Loan Commitment, second,
to that portion of the outstanding principal balance of the Revolving Credit
Advances attributable to those Revolving Credit Advances made on account of the
applicable assets, which application shall effect a permanent reduction to the
Revolving Loan Commitment, third, to the outstanding principal balance
of the Term Loans ratably as to the outstanding principal balance of Term Loan
A and the outstanding principal balance of Term Loan B, and fourth, to
cash collateralize Letters of Credit as provided in Section 1.5(e);
(ii) with respect to the proceeds of that portion of the assets at issue
that comprise all or a portion of the Pre-Petition Borrowing Base other than
Accounts (the proceeds of which Accounts shall be subject to the preceding
clause (i)), first, to the outstanding principal balance of Term Loan B,
second, to the outstanding principal balance of Term Loan A, third,
to the outstanding principal balance of the Swing Line Advances, which shall
effect a permanent reduction to the Swing Line Commitment and the Revolving
Loan Commitment, fourth, to the outstanding principal balance of the
Revolving Credit Advances, which shall effect a permanent reduction to the
Revolving Loan Commitment, and  fifth,
to cash collateralize Letters of Credit as provided in Section 1.5(e);
and (iii) with respect to the proceeds of that portion of the assets at
issue that do not comprise all or a portion of the Borrowing Base or the
Pre-Petition Borrowing Base, first, to the outstanding principal balance
of the Term Loans ratably as to the outstanding principal balance of Term Loan
A and the outstanding principal balance of Term Loan B, second, to the
outstanding principal balance of the Swing Line Advances, which shall effect a
permanent reduction to the Swing Line Commitment and the Revolving Loan
Commitment, third, to the outstanding principal balance of the Revolving
Credit Advances, which shall effect a permanent reduction to the Revolving Loan
Commitment, and  fourth, to cash
collateralize Letters of Credit as provided in Section 1.5(e).  Considering each type of Loan being prepaid
separately, any such prepayment shall be applied first to Index Rate Loans of
the type required to be prepaid before application to LIBOR Loans of the type
required to be prepaid, in each case in a manner that minimizes any resulting
LIBOR Breakage Costs.

 

(e)                                  Letter of
Credit Obligations.  In the
event any Letters of Credit are outstanding at the time that the Revolving Loan
Commitment is terminated or Letters of Credit 

 

14

 

are required to be cash collateralized at any
time pursuant to the terms of this Agreement, Borrower shall deposit with Agent
for the benefit of all Revolving Lenders cash in an amount equal to 105% of the
aggregate outstanding Letter of Credit Obligations to be available to Agent to
reimburse payments of drafts drawn under such Letters of Credit and pay any
Fees and expenses related thereto.

 

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

 

1.7.                              Loan Accounts.  Agent shall maintain a loan account (the “Loan
Account”) on its books to record: 
the name and federal employer identification number of each Lender, all
Advances and the Term Loans, 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 as to Borrower 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 forty-five (45) days after the date thereof, each and
every such accounting shall, absent manifest error, be deemed final, binding and
conclusive on Borrower in all respects as to all matters reflected
therein.  Only those items expressly
objected to in such notice shall be deemed to be disputed by 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.

 

1.8.                              Yield
Protection.

 

(a)                                  Capital
Adequacy and Other Adjustments.  In the event that any Lender shall have
determined that the adoption or implementation after the date hereof of any
law, treaty, directive, governmental (or quasi-governmental) rule, regulation,
guideline or order, or any change in (or the interpretation, administration or
application of) any of the same regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful), in each case adopted or 

 

15

 

implemented after the Closing Date, from any
central bank or governmental agency or body having jurisdiction does or shall
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by such Lender or any corporation controlling such
Lender against commitments made by it under this Agreement in connection with
the making or financing of the Revolving Loan and thereby reducing the rate of
return on such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder, then Borrower shall from time to time within fifteen
(15) days after notice and demand from such Lender (together with the
certificate referred to in the next sentence and with a copy to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. 
A certificate as to the amount of such cost and showing the basis of the
computation of such cost submitted by such Lender to Borrower and Agent shall,
absent manifest error, be final, conclusive and binding for all purposes.

 

(b)                                 Increased LIBOR
Funding Costs; Illegality. 
Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law, rule, regulation, treaty or directive
(or any change in the interpretation, administration or application thereof)
shall make it unlawful, or any central bank or other Governmental Authority
shall assert that it is unlawful, for any Lender to agree to make or to make or
to continue to fund or maintain any LIBOR Loan 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 opinion, adversely affecting
it or its LIBOR 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) each such LIBOR Loan shall
automatically be converted into an Index Rate Loan.  If, after the date hereof, the introduction
of, change in or interpretation of any law, rule, regulation, treaty or
directive would impose or increase reserve requirements (other than as taken
into account in the definition of LIBOR Rate and the result of any of the
foregoing is to increase the cost to Agent or any such Lender of issuing any
Letter of Credit or making or continuing any LIBOR Loan hereunder, as the case
may be, or to reduce any amount receivable hereunder, then Borrower shall from
time to time within thirty (30) days after notice and demand from Agent to
Borrower (together with the certificate referred to in the next sentence) pay
to Agent itself or, for the account of (and Agent shall promptly pay over to)
all such affected Lenders, as applicable, additional amounts sufficient to
compensate the Agent and such Lenders for such increased cost or reduced
amount; provided, that such Lender shall not be entitled to any such
amounts to the extent that the event giving rise to such assessment occurred
more than ninety (90) days prior to the date such notice and demand is given to
Borrower; provided, however, that if the event giving rise to
such assessment has a retroactive effect, then such ninety (90) day period
shall be extended to include the period of such retroactive effect.  A certificate as to the amount of such cost
and showing the basis of the computation of such cost submitted by Agent on
behalf of all such affected Lenders to Borrower shall, absent manifest error, be
final, conclusive and binding for all purposes.

 

1.9.                              Taxes.

 

(a)                                  No Deductions.  Any and all payments or reimbursements made
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any and all Charges, present or future, taxes, levies,
imposts, deductions or 

 

16

 

withholdings, and all liabilities with
respect thereto (including any interest, additions to tax or penalties
applicable thereto) of any nature whatsoever imposed by any Governmental
Authority or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding any tax imposed on or
measured by the net income or profits or any franchise or other tax in lieu thereof
(including branch profits or similar taxes) of Agent or Lender by (i) the
jurisdiction under the laws of which such Agent or Lender is organized or any
political subdivision thereof, or (ii) the jurisdiction of such Agent’s or
Lender’s applicable lending office or any political subdivision thereof) and
all interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as “Taxes”).  If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
other Loan Document to any Lender or Agent, (i) the sum payable hereunder
shall be increased as may be necessary so that, after making all required
deductions (including deductions applicable to additional sums payable pursuant
to this Section 1.9), such Lender or Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower
shall timely pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law, and (iv) Borrower shall
furnish to the Agent the original copy of a receipt evidencing payment thereof
within thirty (30) days after such payment is made.

 

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

 

(c)                                  Foreign Lenders.

 

(i)                                     Prior to becoming a Lender under this Agreement and within
fifteen (15) days after a reasonable written request of Borrower or Agent from
time to time thereafter, each such Person or Lender that is not in each case a “United
States person” (as such term is defined in IRC Section 7701(a)(30)) for
U.S. federal income tax purposes (a “Foreign Lender”) shall deliver to
each of the Borrower and Agent two duly completed copies of United States IRS Form W-8BEN,
Form W-8ECI or Form W-8IMY or other applicable or successor form,
certificate or document prescribed by the IRS or substitute therefor as
applicable, certifying such Foreign Lender’s entitlement to receive payments
under this Agreement and under the Notes free of any United States withholding
tax (a “Certificate of Exemption”). 
Each Foreign Lender claiming exemption from U.S. federal withholding tax
under Section 871(h) or Section 881(c) of the IRC with
respect to payments of “portfolio interest” hereby represents and warrants to
Borrower and Agent that, as of the date that it became a Lender, such Foreign
Lender (i) is not a “bank” within the meaning of Section 881(c)(3)(A) of
the IRC, (ii) is not a “10 percent shareholder” of Borrower within
the meaning of Section 871(h)(3)(B) of the IRC, and (iii) is not
a controlled foreign corporation receiving interest from a related person
within the meaning of Section 864(d)(4) of the IRC.  Each Foreign Lender further undertakes to
deliver to each of Borrower and Agent renewals or additional copies of such
Certificates of Exemption on or before the date that such Certificate of
Exemption expires or becomes obsolete as may be 

 

17

 

reasonably
requested by Borrower or Agent, and after the occurrence of any event
requiring a change in the Certificate of Exemption so delivered by it, such
additional forms or amendments thereto reflecting such change.  All Certificates of Exemption, additional forms
or amendments thereto described in the preceding sentence shall certify that
such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation, or
any change in the interpretation or administration thereof by any Governmental
Authority) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form or
amendment with respect to it and such Lender advises the Borrower and the Agent
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.

 

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

 

(d)                                 [Intentionally
Omitted]

 

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

 

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

 

(g)                                 [Intentionally Omitted].

 

18

 

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

 

(i)                                     Evidence of Payments. As soon as practicable after any payment of
Taxes and Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Agent the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably
satisfactory to the Agent. Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax with respect to payments under this
Agreement or any Note pursuant to the law of any relevant jurisdiction or any
treaty shall deliver to Borrower (with a copy to Agent), at the time or times
prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate.

 

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

 

1.10.                        Priming and Super Priority Nature
of Obligations and Lenders’ Liens. The priority of Lenders’ Liens on the Collateral and the
superpriority administrative expense claims of Agent and Lenders shall be set
forth in the Interim Order and the Final Order.

 

1.11.                        Payment
of Obligations. Notwithstanding the provisions of section 362 of the Bankruptcy
Code, and subject to the applicable provisions of the Interim Order or Final
Order, as the case may be, upon the maturity (whether by acceleration or
otherwise) of any of the Obligations, Agent and Lenders shall be entitled to
immediate payment of such Obligations and to enforce the remedies provided for
hereunder or under applicable law, in accordance with provisions of the Interim
Order and the Final Order, as applicable.

 

SECTION 2.

CONDITIONS TO LOANS

 

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

 

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

 

19

 

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

 

(b)                                 Consummation
of Related Transactions. Agent shall have received fully executed
copies of the Related Transactions Documents, each of which shall be in full
force and effect in form and substance reasonably satisfactory to Agent. The
Related Transactions shall have been consummated in accordance with the terms
of the Related Transactions Documents.

 

(c)                                  Acquisition. All documentation relating to the Acquisition
shall have been completed in form and substance reasonably satisfactory to
Agent. All such documentation shall be in form and substance satisfactory to
the Agent (it being understood that the Agent is satisfied with the Merger
Agreement). All conditions precedent to the Acquisition required to have been
met prior to or upon the commencement of the Prepackaged Chapter 11 Cases shall
have been met (or waived with the written consent of Agent).

 

(d)                                 Restructuring. All documentation relating to the
Restructuring, including all bondholder and noteholder and other interested
party consents and approvals, shall have been completed in form and substance
satisfactory to the Agent. All such documentation shall be on terms and
conditions acceptable to the Agent (it being understood that the Restructuring
Agreement and the Ancillary Noteholder Agreements are acceptable to the Agent).
All conditions precedent to the Restructuring required to have been met prior
to or upon the commencement of the Prepackaged Chapter 11 Cases shall have been
met (or waived with the written consent of the Agent).

 

(e)                                  Absence of Litigation. Except as may be stayed by the Prepackaged
Chapter 11 Cases, there shall not exist any action, suit, investigation,
litigation or proceeding pending or threatened in any court or before any
arbitrator or governmental authority that has or could reasonably be expected
to have a material adverse effect on Holdings, Borrower, the Acquired Business,
their respective subsidiaries, taken as a whole, the transactions, this
Agreement or any of the other transactions contemplated hereby.

 

(f)                                    No Material Adverse Effect. Since December 31, 2007, and except
for the filing of the Prepackaged Chapter 11 Cases and as otherwise disclosed,
there have been no events, circumstances, developments or other changes in
facts that would, in the aggregate, have a Material Adverse Effect. “Material
Adverse Effect” means an effect that results in or causes, or could
reasonably be expected to result in or cause, a material adverse change in any
of (a) the condition (financial or otherwise), business, performance,
operations or property of Holdings, Borrower, the Acquired Business and their respective Subsidiaries,
taken as a whole; (b) the ability of Borrower, the Acquired Business or
any Guarantor to perform their respective obligations hereunder or under the
Interim Order; and (c) the validity or enforceability hereof or of the
Interim Order or the rights and remedies of Agent, the Lenders and the other
secured parties hereunder or under the Interim Order.

 

20

 

(g)                                 Receipt of Interim Financial Statements. Agent shall have received and be satisfied
with, to the extent available, interim unaudited monthly financial statements
of Holdings and its subsidiaries, including Borrower, for each month ending after
April 30, 2008.

 

(h)                                 Receipt of Business Plans. Agent shall have
received and be satisfied with (i) a pro forma estimated balance sheet of Holdings  and
its subsidiaries, including Borrower, at the Petition Date after giving effect
to the transactions contemplated by the Restructuring Agreement and the Merger
Agreement, (ii) the Approved Budget (i.e., for the first 13 weeks after
the commencement of the Prepackaged Chapter 11 Cases) and (iii) the
Business Plan.

 

(i)                                     Outstanding Debts and Liens. Agent shall be satisfied that: (i) all
outstanding non-contingent obligations under the A/R Securitization Facility
shall have been repaid in full in cash with proceeds of the initial Loans
hereunder, and the A/R Securitization Facility shall have been terminated; and (ii) all
Pre-Petition Revolving Credit Advances and Pre-Petition Letter of Credit
Obligations shall have been repaid (or, as applicable, cash collateralized) in
full in cash with proceeds of the Term Loan B.

 

(j)                                     Revolving Loan Outstandings and Borrowing Availability. On the date of entry
of the Interim Order in the Prepackaged Chapter 11 Cases and on the Closing
Date, after giving effect to the Related Transactions and the other
transactions contemplated in this Agreement, no more than $50,000,000 will be
outstanding under the Term Loan A, no more than $200,000,000 will be
outstanding under the Term Loan B and no more than $95,000,000 (including
issued Letters of Credit) will be outstanding under the Revolving Loan; and
Borrower shall have Borrowing Availability of at least $1,000,000.

 

(k)                                  Interim
Order. Entry by the Bankruptcy Court of the Interim Order, by no later
than 5 days after the Petition Date in form and substance satisfactory to
Lenders, among other things, (x) approving the transactions contemplated
hereby, (y) granting a first priority perfected security interest in the
Collateral subject only to the Carve-Out, the Pari Passu Replacement Liens and
the Non-Primed Liens, and (z) modifying the automatic stay to permit the
creation and perfection of Lenders’ Liens and, subject to the conditions set
forth in the Interim Order, vacating the automatic stay to permit enforcement
of Lenders’ default-related rights and remedies under this agreement, the other
Loan Documents and applicable law.

 

(l)                                     Bankruptcy Court Orders. The entry of all orders described or
referred to herein shall have been upon proper notice as may be required by the
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and any
applicable bankruptcy rules.

 

(m)                               Plan
Confirmation Deadline. No
later than July 18, 2008, the Borrower shall have obtained from the
Bankruptcy Court an order, in form and substance acceptable to Agent,
scheduling the hearing to consider confirmation of the Plan of Reorganization
to take place no later than the deadline for the confirmation of the Plan of
Reorganization set forth in Section 8.04(d) of the Restructuring
Agreement (as such deadline may be and actually is extended pursuant to the
terms and conditions thereof) (the “Confirmation Deadline”).

 

21

 

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

 

(a)                                  any representation or warranty by any Credit
Party contained herein or in any other Loan Document is untrue or incorrect in
any material respect (without duplication of any materiality qualifier
contained therein) as of such date, except to the extent that such
representation or warranty expressly relates to an earlier date, and Agent or
Requisite Lenders have determined not to make such Advance or incur such Letter
of Credit Obligation as a result of the fact that such warranty or
representation is untrue or incorrect;

 

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

 

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

 

(d)                                 the
Advance requested would cause the aggregate outstanding amount of the Loans
and/or Letter of Credit Obligations to exceed the amount then authorized by the
Interim Order or the Final Order, as the case may be, or any order modifying,
reversing, staying or vacating either such order shall have been entered; or

 

(e)                                  (i) the
Interim Order or the Final Order, as the case may be, shall have been vacated,
stayed, reversed, modified or amended without Lenders’ consent or shall
otherwise not be in full force and effect, or (ii) an appeal of either
such order shall have been timely filed and such order is subject to a stay
pending appeal.

 

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.

 

SECTION 3.

REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders to enter into the Loan Documents, to make
Loans and to issue or cause to be issued Letters of Credit, Borrower and the
other Credit Parties executing this Agreement, jointly and severally, represent,
warrant and covenant to Agent and each Lender that the following statements are
and remain true, correct and complete until the Termination Date with respect
to all Credit Parties:

 

22

 

3.1.                              Organization, Powers, Capitalization and Good
Standing.

 

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

 

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

 

(c)                                  Binding Obligation. Subject to the entry of the Interim Order
(or the Final Order, as applicable), this Agreement is, and the other Related
Transactions Documents when executed and delivered will be, the legally valid
and binding obligations of the applicable parties thereto, each enforceable
against each of such parties, as applicable, in accordance with their
respective terms, except as may be limited by the effects of general principles
of equity.

 

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

 

3.3.                              No Material Adverse Effect. Since December 31, 2007, there have
been no events or changes in facts or circumstances affecting any Credit Party
or any of its Subsidiaries 

 

23

 

which have had or would
reasonably be expected within the next twelve (12) months to have a Material
Adverse Effect other than the commencement of the Prepackaged Chapter 11 Cases.

 

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

 

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

 

(a)                                  The consolidated balance sheets at December 31,
2007 and the related statement of income of Holdings and its Subsidiaries, for
the Fiscal Year then ended, audited by Deloitte & Touche LLP.

 

(b)                                 The consolidated balance sheet at April 30,
2008 and the related statement of income of Holdings and its Subsidiaries for
the four (4) months then ended.

 

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

 

3.6.                              Use of Proceeds; Margin Regulations.

 

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

 

(b)                                 (i)                                     Borrower shall use the proceeds of Term Loan
A available upon entry of the Interim Order and a portion of the proceeds from
the Revolving Credit Advances to finance the A/R Purchase; provided, however,
that all indemnification obligations of Borrower and Guarantors under the A/R
Securitization Facility shall survive and Borrower shall agree to assume all
indemnification obligations owed under the A/R Securitization Facility by
Vertis 

 

24

 

Receivables, in each case in
form and substance acceptable to the Securitization Provider (the “Surviving
A/R Obligations”); and, provided, further, that, the  A/R Obligations Pre-Petition Lien shall
survive and continue to encumber the Purchased Facility Assets.

 

(ii)                                  Borrower shall use the proceeds of
Term Loan A first made available upon the entry of the Final Order to repay a
portion of the then outstanding Revolving Credit Advances equal to the amount
of such proceeds (without any corresponding reduction to the Revolving Loan
Commitments).

 

(iii)                               Borrower shall use the necessary
proceeds of Revolving Credit Advances necessary to pay Surviving A/R
Obligations (whether incurred prior or subsequent to the Petition Date and at
the time and in the manner due under the A/R Securitization Facility).

 

(iv)                              Borrower shall use the proceeds of
Term Loan B, upon the entry of the Interim Order, (A) to pay (or, as
applicable, cash collateralize) in full in cash the outstanding balance of the
Pre-Petition Revolving Credit Advances, (B) to provide cash collateral for
the Pre-Petition Letters of Credit in an amount equal to 102% of the face
amount of such Pre-Petition Letters of Credit, and (C) to the extent that
there are available any proceeds of the Term Loan B following the satisfaction
of the obligations described in the preceding clauses (A) and (B), to
repay a portion of the then outstanding Revolving Credit Advances equal to the
amount of such remaining proceeds (without any corresponding reduction to the
Revolving Loan Commitments). The cash collateral described in clause (B) of
the preceding sentence shall be used to reimburse the issuer of any
Pre-Petition Letters of Credit for any amounts that such issuer is required to
pay in the event that any Pre-Petition Letters of Credit are drawn and for any
related fees and expenses of such issuer. Upon the expiration or termination of
each Pre-Petition Letter of Credit, any related remaining cash collateral in
respect of such Pre-Petition Letter of Credit shall be used to repay a portion
of the then outstanding Revolving Credit Advances equal to the amount of such
remaining proceeds (without any corresponding reduction to the Revolving Loan
Commitments).

 

(v)                                 Borrower shall use the necessary
proceeds of Revolving Credit Advances necessary to pay Pre-Petition Agreement
Expenses at the time and in the manner due under the Pre-Petition Loan
Documents.

 

(vi)                              Borrower may also use the proceeds of Revolving Credit
Advances to (A) make adequate protection payments set forth in the Interim
Order and the Final Order and adequate protection interest payments at the
non-default contractual rate in respect of the term loan under the Pre-Petition
Credit Agreement and such other adequate protection payments of other
pre-petition debt as are acceptable to Agent; (B) pay administrative
expenses for goods and services (including capital expenditures) in the
ordinary course of business (other than fees and expenses of professional
persons) and to the extent set forth on the Approved Budget; (C) pay
amounts owing to Agent and Lenders hereunder; (D) prior to an Event of
Default, pay (x) professional fees and expenses in accordance with Section 5.05
of the Restructuring Agreement and (y) ordinary course indenture trustee
fees and expenses pursuant to the existing terms of the indentures governing
the Vertis 2003 Senior Notes, the Vertis Senior Notes and/or the Vertis Senior
Subordinated Notes; and (E) prior to an Event of Default, pay fees and
expenses of professionals retained by Borrower or the Committee (if any), to
the extent set forth in the 

 

25

 

Approved
Budget and subject to such exceptions and other agreements as may be agreed to
by Agent and Lenders, to the extent such professional fees and expenses are
approved by final order of the Bankruptcy Court; provided, however, that Borrower and Guarantors
shall consult with Agent as to the form of any interim compensation procedures
order that they submit to the Bankruptcy Court and that, in any event, any such
order shall preserve Agent’s right to review and object to any monthly, interim
or final request for the payment of fees or reimbursement of expenses submitted
to the Bankruptcy Court; provided, however, that Borrower and Guarantors shall
be prohibited from making any payment under the Interim Order or the Final
Order (whether on account of adequate protection, reimbursement of professional
or indenture trustee fees and expenses or otherwise) until the Pre-Petition
Revolving Credit Advances have been repaid in full in cash and the Pre-Petition
Letter of Credit Obligations have been repaid or cash collateralized in full in
cash.

 

(c)                                  None of the Credit Parties is required to
register as an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940.

 

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

 

3.8.                              Compliance with Laws. Each Credit Party represents and warrants
that it (i) is in compliance and each of its Subsidiaries is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
any Governmental Authority (including, without limitation, Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001, and the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, Public Law 107-56) and the obligations,
covenants and conditions contained in all Contractual Obligations other than
those laws, rules, regulations, orders and provisions of such Contractual
Obligations the noncompliance with which would not be reasonably expected to
have, either individually or in the aggregate, a Material Adverse Effect, and (ii) maintains
and each of its Subsidiaries maintains all licenses, qualifications and permits
referred to above.

 

3.9.                              Intellectual Property. As of the Closing Date, each of the Credit
Parties and its Subsidiaries owns, is licensed to use or otherwise has the
right to use, all material Intellectual Property used in or necessary for the
conduct of its business as currently conducted that is material to the
condition (financial or other), business or operations of such Credit Party and
its Subsidiaries, if any, and all such material Intellectual Property is
identified on Schedule 3.9. As of the Closing Date, except as disclosed
in Schedule 3.9, the use of such Intellectual Property by the Credit
Parties and their Subsidiaries and the conduct of their businesses does not and
has not been alleged by any Person to infringe on the rights of any Person.

 

3.10.                        Investigations, Audits, Etc. As of the Closing Date, except as set forth
on Schedule 3.10, no Credit Party or any of their Subsidiaries is the
subject of any review or audit by the IRS or any governmental investigation
concerning the violation or possible violation of any law that would reasonably
be expected to result in any Material Adverse Effect.

 

26

 

3.11.                        Employee Matters. As of the Closing Date, except as set forth
on Schedule 3.11, (a) no Credit Party or Subsidiary of a Credit
Party nor any of their respective employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election
is pending with respect to the employees of any Credit Party or any of their
Subsidiaries and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of any Credit Party
or any of their Subsidiaries, (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the best knowledge of any Credit
Party after due inquiry, threatened between any Credit Party or any of their
Subsidiaries and its respective employees, other than employee grievances
arising in the ordinary course of business which could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect and (d) hours worked by and payment made to employees of each
Credit Party and each of their Subsidiaries comply with the Fair Labor
Standards Act, to the extent applicable, and each other federal, state,
provincial, local or foreign law applicable to such matters. Except as set forth
on Schedule 3.11, no Borrower nor any of their Subsidiaries are party to
an employment contract with any executive officer.

 

3.12.                        Litigation; Adverse Facts. Except as set forth on Schedule 3.12,
there are no judgments outstanding against any Credit Party or any of its
Subsidiaries or affecting any property of any Credit Party or any of its
Subsidiaries as of the Closing Date, nor is there any Litigation pending, or to
the best knowledge of any Credit Party threatened, against any Credit Party or
any of its Subsidiaries that would reasonably be expected to result in any
Material Adverse Effect.

 

3.13.                        Ownership of Property; Liens. As of the Closing Date, the real estate (“Real
Estate”) listed in Schedule 3.13 constitutes all of the material
real property owned, leased or subleased by any Credit Party or any of its
Subsidiaries. As of the Closing Date, each of the Credit Parties and each of
its Subsidiaries owns good and marketable fee simple title to all of its owned
Real Estate, and has a valid leasehold interest in all of its leased Real
Estate, all as described on Schedule 3.13, and copies of all such leases
or a summary of terms thereof reasonably satisfactory to Agent have been
provided or made available to Agent except, in each case, for such failures as
would not reasonably be expected to result in any Material Adverse Effect. Schedule
3.13 further describes any Real Estate with respect to which any Credit
Party or any of its Subsidiaries is a lessor, sublessor or assignor as of the
Closing Date. As of the Closing Date, each of the Credit Parties and each of
its Subsidiaries has good title to, or valid leasehold interests in, all of its
personal property and assets except, in each case, for such failures as would
not reasonably be expected to result in any Material Adverse Effect. As of the
Closing Date, none of the properties and assets of any Credit Party or any of
its Subsidiaries are subject to any Liens other than Permitted Encumbrances. As
of the Closing Date, Schedule 3.13 also describes any purchase options,
rights of first refusal or other similar material contractual rights pertaining
to any Real Estate. As of the Closing Date, no portion of any Credit Party’s or
any of its Subsidiaries’ Real Estate has suffered any damage by fire or other
casualty loss that would reasonably be expected to result in any Material
Adverse Effect or that has not heretofore been repaired and restored in all
material respects to its original condition or otherwise remedied. As of the
Closing Date, all material permits required to have been issued or appropriate
to enable the Real Estate to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are in full force and effect, except for permits 

 

27

 

which the failure to possess
would not reasonably be expected to result in any Material Adverse Effect.

 

3.14.                        Environmental Matters.

 

(a)                                  Except as set forth in Schedule 3.14,
as of the Closing Date: (i) the Real Estate is free of contamination from
any Hazardous Material except for such contamination that could not reasonably
be expected to materially adversely impact the value or marketability of such
Real Estate and that could not reasonably be expected to result in
Environmental Liabilities of the Credit Parties or their Subsidiaries in excess
of $250,000 in the aggregate; (ii) no Credit Party and no Subsidiary of a
Credit Party has caused or suffered to occur any Release of Hazardous Materials
on, at, in, under, above, to, from or about any of their Real Estate where such
Release could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect; (iii) the Credit Parties and their
Subsidiaries are and have been in compliance with all Environmental Laws,
except for such noncompliance that could not reasonably be expected to result
in Environmental Liabilities of the Credit Parties or their Subsidiaries in
excess of $250,000 in the aggregate; (iv) the Credit Parties and their
Subsidiaries have obtained, and are in compliance with, all Environmental
Permits required by Environmental Laws for the operations of their respective
businesses as presently conducted or as proposed to be conducted, except where
the failure to so obtain or comply with such Environmental Permits could not
reasonably be expected to result in Environmental Liabilities of the Credit
Parties or their Subsidiaries in excess of $250,000 in the aggregate, and all
such Environmental Permits are valid, uncontested and in good standing; (v) no
Credit Party and no Subsidiary of a Credit Party is involved in operations or
knows of any facts, circumstances or conditions, including any Releases of
Hazardous Materials, that are likely to result in any Environmental Liabilities
of such Credit Party or Subsidiary which could reasonably be expected to be in
excess of $250,000 in the aggregate, and no Credit Party or Subsidiary of a
Credit Party has permitted any current or former tenant or occupant of the Real
Estate to engage in any such operations; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material that seeks damages, penalties, fines, costs or expenses in
excess of  $250,000  in the aggregate or injunctive relief against, or that
alleges criminal misconduct by any Credit Party or any Subsidiary of a Credit
Party; (vii) no notice has been received by any Credit Party or any
Subsidiary of a Credit Party identifying any of them as a “potentially responsible
party” or requesting information under CERCLA or analogous state or foreign law
statutes or regulations, and to the knowledge of the Credit Parties, there are
no facts, circumstances or conditions that may result in any of the Credit
Parties or their Subsidiaries being identified as a “potentially responsible
party” under CERCLA or analogous state or foreign law statutes or regulations
that could reasonably be expected to result in Environmental Liabilities in
excess of $250,000; and (viii) the Credit Parties have provided to Agent
copies of all existing environmental reports, reviews and audits and all
written information pertaining to actual or potential Environmental Liabilities
that could reasonably be expected to result in Environmental Liabilities in
excess of $250,000, in each case in possession of the Credit Parties relating
to any of the Credit Parties or their Subsidiaries.

 

(b)                                 Each Credit Party hereby acknowledges and
agrees that Agent (i) is not now, and has not ever been, in control of any
of the Real Estate or affairs of such Credit Party or its Subsidiaries, and (ii) does
not, through the provisions of the Loan Documents or otherwise, 

 

28

 

influence any Credit Party’s
or its Subsidiaries’ conduct with respect to the ownership, operation or
management of any of their Real Estate or compliance with Environmental Laws or
Environmental Permits.

 

3.15.                        ERISA.

 

(a)                                  Schedule 3.15 lists all Plans and separately identifies
all Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and
Welfare Plans, including all Retiree Welfare Plans. As of the Closing Date,
copies of all such listed Plans other than Multiemployer Plans as defined in
ERISA Section 3(37)(A), together with a copy of the latest form IRS/DOL
5500-series for each such Plan (other than such Multiemployer Plans) have been
provided or made available to Agent. Except with respect to Multiemployer
Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401
of the IRC, and the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501 of the IRC, and nothing has
occurred that would cause the loss of such qualification or tax-exempt status. Each
Plan is in material compliance with the applicable provisions of ERISA and the
IRC, including the timely filing of all reports required under the IRC or ERISA.
Neither any Credit Party nor ERISA Affiliate has failed to make any
contribution or pay any amount due as required by either Section 412 of
the IRC or Section 302 of ERISA or the terms of any such Plan. Neither any
Credit Party nor ERISA Affiliate has engaged in a “prohibited transaction,” as
defined in Section 406 of ERISA and Section 4975 of the IRC, in
connection with any Plan, that would subject any Credit Party to a material tax
on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975
of the IRC.

 

(b)                                 As of the Closing Date, except as set forth
in Schedule 3.15: (i) no Title IV Plan has any 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 Borrower,
threatened claims (other than claims for benefits in the normal course),
sanctions, actions or lawsuits, asserted or instituted against any Plan or any
Person as fiduciary or sponsor of any Plan that would reasonably be expected to
result in liabilities to the Credit Parties and their ERISA Affiliates in
excess of $500,000; (iv) no Credit Party or ERISA Affiliate has incurred
or reasonably expects to incur any liability in excess of $500,000 as a result
of a complete or partial withdrawal from a Multiemployer Plan; (v) within
the last five years no Title IV Plan of any Credit Party or ERISA Affiliate has
been terminated, whether or not in a “standard termination” as that term is
used in Section 404(b)(1) of ERISA, nor has any Title IV Plan of any
Credit Party or ERISA Affiliate (determined at any time within the past five
years) with Unfunded Pension Liabilities been transferred outside of the “controlled
group” (within the meaning of Section 4001(a)(14) of ERISA) of any Credit
Party or ERISA Affiliate; (vi) except in the case of any ESOP, Stock of
all Credit Parties and their ERISA Affiliates makes up, in the aggregate, no
more than 10% of fair market value of the assets of any Plan measured on the
basis of fair market value as of the latest valuation date of any Plan; and (vii) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the S&P or an
equivalent rating by another nationally recognized rating agency.

 

(c)                                  Except as would not reasonably be expected to
have a Material Adverse Effect, each Foreign Pension Plan is in compliance and
in good standing (to the extent such 

 

29

 

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

 

3.16.                        Deposit and Disbursement Accounts. Schedule 3.16 lists all banks and
other financial institutions at which any Credit Party maintains deposit or
other accounts as of the Closing Date, including any Disbursement Accounts,
other than accounts that have an average daily balance for the immediately
preceding 30-day period of less than $500,000 in the aggregate for all such
accounts and such Schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number therefor.

 

3.17.                        Agreements and Other Documents. On or prior to the Closing Date, each
Credit Party has provided or made available to Agent or its counsel, on behalf
of Lenders, accurate and complete copies (or summaries) of all of the following
agreements or documents to which it is subject and each of which is listed in Schedule
3.17:  supply agreements and purchase
agreements not terminable by such Credit Party within sixty (60) days following
written notice issued by such Credit Party and involving transactions in excess
of $1,000,000 per annum; leases of Equipment having a remaining term of one
year or longer and requiring aggregate rental and other payments in excess of
$500,000 per annum; licenses and permits held by the Credit Parties, the
absence of which would reasonably be expected to have a Material Adverse
Effect; instruments and documents evidencing any material Indebtedness or
material Guaranteed Indebtedness of such Credit Party and any Lien granted by
such Credit Party with respect thereto; and instruments and agreements
evidencing the issuance of any equity securities, warrants, rights or options
to purchase equity securities of such Credit Party.

 

3.18.                        Insurance. Each Credit Party represents and warrants
that it and each of its Subsidiaries currently maintains in good repair,
working order and condition all material properties, if any, as set forth in Section 4.2
and maintains all insurance described in such Section. Schedule 3.18
lists all insurance policies maintained, as of the Closing Date, for current
occurrences by each Credit Party.

 

3.19.                        Taxes and Tax Returns.

 

(a)                                  As of the Closing Date, (i) all Tax
Returns required to be filed by the Credit Parties have been timely and
properly filed and (ii) all taxes that are due (other than taxes being or
about to be contested in good faith by appropriate proceedings and for which
adequate reserves have been provided for in accordance with GAAP) have been
paid, except where the 

 

30

 

failure to file Tax Returns
or pay Taxes would not have a Material Adverse Effect. No Governmental
Authority has asserted any claim for taxes, or to any Credit Party’s knowledge,
has threatened to assert any claim for taxes that would, if not paid by a
Credit Party, have a Material Adverse Effect. All taxes required by law to be
withheld or collected and remitted (including, without limitation, income tax,
unemployment insurance and workmen’s compensation premiums) with respect to the
Credit Parties have been withheld or collected and paid to the appropriate
Governmental Authorities (or are properly being held for such payment), except
for amounts the nonpayment of which would not be reasonably likely to have a
Material Adverse Effect.

 

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

 

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

 

3.20.                        Senior Indebtedness
and Designated Senior Indebtedness. This Agreement, the credit facilities
created hereunder and all present and future Obligations constitute the “Senior
Credit Facility,” “Senior Indebtedness,” “Secured Indebtedness,” “Subsidiary Guarantor
Senior Indebtedness” and “Designated Senior Indebtedness,” as applicable, under
and as such terms are defined in the 2003 Senior Secured Debt Documents, the
2002 Senior Debt Documents, the Mezzanine Debt Documents, the February 2003
Senior Subordinated Debt Documents, the Senior Subordinated Debt Documents and
any other Subordinated Debt documents. Without limiting the foregoing, all
present and future Obligations are hereby designated as “Senior Indebtedness”
and “Designated Senior Indebtedness” in each case as such terms are used in the
2003 Senior Secured Debt Documents, the 2002 Senior Debt Documents, the
Mezzanine Debt Documents, the February 2003 Senior Subordinated Debt
Documents, the Senior Subordinated Debt Documents and any other Subordinated
Debt documents.

 

3.21.                        Reorganization
Matters.

 

(a)                                  The Prepackaged Chapter 11 Cases were
commenced on the Petition Date in accordance with applicable law and proper
notice thereof and the proper notice for (x) the motion seeking approval
of the Loan Documents and the Interim Order and Final Order, (y) the
hearing for the approval of the Interim Order, and (z) the hearing for the
approval of the Final Order will be given. Borrower shall give, on a timely
basis as specified in the Interim Order or the Final Order, as applicable, all
notices required to be given to all parties specified in the Interim Order or
Final Order, as applicable.

 

(b)                                 After the
entry of the Interim Order, and pursuant to and to the extent permitted in the
Interim Order and the Final Order, the Obligations will constitute allowed
administrative expense claims in the Prepackaged Chapter 11 Cases having priority over all 

 

31

 

administrative
expense claims and unsecured claims against the Borrower now existing or
hereafter arising, of any kind whatsoever, including, without limitation, all
administrative expense claims of the kind specified in sections 105, 326, 330,
331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1114 or any other provision
of the Bankruptcy Code or otherwise, as provided under section 364(c)(l) of
the Bankruptcy Code, subject, as to priority only, to the Carve-Out.

 

(c)                                  After the
entry of the Interim Order and pursuant to and to the extent provided in the
Interim Order and the Final Order, the Obligations will be secured by a valid
and perfected first priority Lien on all of the Collateral, subject, as to
priority only, to the Carve-Out, the Pari Passu Replacement Liens and the
Non-Primed Liens.

 

(d)                                 The Interim Order (with respect to
the period prior to entry of the Final Order) or the Final Order (with respect
to the period on and after entry of the Final Order), as the case may be, is in
full force and effect has not been reversed, stayed, modified or amended without
the Agent’s and Lenders’ consent.

 

SECTION 4.

AFFIRMATIVE COVENANTS

 

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

 

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

 

32

 

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

 

4.3.                              Field Examination; Fixed Asset Appraisal;
Lender Meeting. Each Credit
Party shall permit any authorized representatives of Agent to conduct a field
examination of any of the properties of such Credit Party and its Subsidiaries,
including its and their financial and accounting records, and to make copies
and take extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and certified public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested (a “Field Examination”).Representatives of each Lender will be
permitted to accompany representatives of Agent during each Field Examination
at such Lender’s expense. In addition to the foregoing, each Credit Party shall
permit any authorized representatives of Agent to conduct Fixed Asset Appraisals
subject to and upon the terms and conditions set forth in Section 6.2(g) hereof.
In addition to the foregoing, each Credit Party will participate and will cause
key management personnel of each Credit Party and its Subsidiaries to
participate in a meeting with Agent and Lenders at least once during each year,
which meeting shall be held at a mutually agreeable location and time. Notwithstanding
the foregoing, the Credit Parties shall not be required to permit Agent to
conduct any Field Examinations or Fixed Asset Appraisals within six (6) months
following the Closing Date unless an Event of Default shall have occurred.

 

4.4.                              Organizational Existence. Except as occasioned by the Prepackaged
Chapter 11 Cases, and as otherwise permitted by Section 5.6, each Credit
Party will and will cause its 

 

33

 

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

 

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

 

34

 

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.

 

4.6.                              Landlords’ Agreements and Mortgagee
Agreements. As reasonably
requested by Agent and to the extent not otherwise addressed to Agent’s
reasonable satisfaction in the Interim Order or the Final Order, as applicable,
or in existing contractual arrangements, each Credit Party shall use reasonable
efforts to obtain a landlord’s agreement, mortgagee agreement or bailee letter,
as applicable, from the lessor of each leased property, mortgagee of owned
property or bailee with respect to any warehouse, processor or converter
facility or other location where Collateral is stored or located (other than
locations (i) outside the U.S. or (ii) containing Collateral in an
aggregate amount not to exceed $1,500,000 for each individual location or for
all such locations not to exceed $2,500,000 in the aggregate), which agreement
or letter shall contain a waiver or subordination of all Liens or claims that
the landlord, mortgagee or bailee may assert against the Collateral at that
location, and shall otherwise be reasonably satisfactory in form and substance
to Agent. With respect to such locations or warehouse space leased, owned or
where Collateral is stored or located as of the Closing Date and thereafter, if
Agent has not received a landlord or mortgagee agreement or bailee letter or
(if there is no existing contractual arrangement with respect to providing
collateral access) entry of the Final Order providing for collateral access as
of the Closing Date (or, if later, as of the date such location is acquired,
leased or Collateral stored or located), the Eligible Inventory at that
location shall, in Agent’s reasonable discretion, be subject to such Reserves
as may be established by Agent in its reasonable credit judgment.

 

4.7.                              Further Assurances.

 

(a)                                  Each Credit Party shall, from time to time,
execute such guaranties, financing statements, documents, security agreements
and reports as Agent or Requisite Lenders at any time may reasonably request to
evidence, perfect or otherwise implement the guaranties and security for
repayment of the Obligations contemplated by the Loan Documents.

 

(b)                                 In the event any Credit Party acquires a fee
ownership interest in real property after the Closing Date, such Credit Party
shall, upon request of Agent, deliver to Agent a fully executed mortgage or
deed of trust over such real property in form and substance satisfactory to
Agent, together with such title insurance policies, surveys, appraisals,
evidence of insurance, legal opinions, environmental assessments and other
documents and certificates as shall be reasonably required by Agent.

 

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

 

35

 

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

 

4.9.                              Cash Management Systems. Borrower shall, and shall cause each other
Credit Party to, enter into Control Agreements providing for full cash dominion
with respect to each U.S. deposit account maintained by Borrower or any
Subsidiary of Borrower as of or after the Closing Date (other than (a) any
payroll account so long as such payroll account either (i) is a zero
balance account or (ii) does not contain any amounts in excess of payroll
due and payable within four (4) Business Days, (b) accounts funded
solely to pay sales and use tax, and any such funds are so used within two (2) Business
Days, (c) accounts which individually and in the aggregate at all times
have a balance of less than $150,000 and (d) accounts in the name of
Borrower or any other Credit Party that hold cash of its customers in a
fiduciary capacity). Each such deposit account control agreement shall be in
form and substance reasonably satisfactory to Agent.

 

4.10.                        Covenants Regarding Accounts. In the ordinary course of its
business, each Credit Party processes its Accounts in a manner such that each
payment received by such Credit Party in respect of an Account is allocated to
a specifically identified invoice, which invoice corresponds to a particular
Account owing to such Credit Party.

 

SECTION 5.

NEGATIVE COVENANTS

 

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

 

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

 

(a)                                  Indebtedness described on Schedule 5.1;

 

(b)                                 the Obligations, the Surviving A/R
Obligations, the Adequate Protection Obligations, the Pre-Petition Term Loans
and the 2003 Senior Secured Notes Adequate Protection Obligations;

 

(c)                                  intercompany Indebtedness arising from loans
made in the ordinary course of business by any Credit Party (other than
Holdings) (i) to any other Credit Party (other than Holdings) or (ii) to
any other Subsidiary in an amount not to exceed $500,000 in aggregate principal
amount at any time outstanding; provided, that, upon the request
of Agent at any time, such Indebtedness shall be evidenced by unsecured
promissory notes (each, an “Intercompany 

 

36

 

Note”), the sole originally executed counterparts
of which shall be pledged and delivered to Agent, for the benefit of Agent and
Lenders, as security for the Obligations;

 

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

 

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

 

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

 

(g)                                 the Mezzanine Debt of Holdings issued
pursuant to the Mezzanine Debt Documents or other mezzanine debt of Holdings
issued on terms and conditions substantially similar to those set forth in the
Mezzanine Debt Documents in an amount not to exceed $147,500,000 in aggregate principal amount at any time outstanding
(as (x) increased as a result of the issuance of any additional Mezzanine
Debt to pay-in-kind any regularly accruing interest on then outstanding
Mezzanine Debt in accordance with the terms of the Mezzanine Debt Documents
(including interest, which, but for the occurrence of a Default or Event of
Default, would be payable in cash) and (y) reduced by any repayments of
principal thereof);

 

(h)                                 Indebtedness not to exceed $10,000,000 in an
aggregate principal amount at any time outstanding secured by purchase money
Liens or incurred with respect to Capital Leases;

 

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

 

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

 

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

 

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

 

(m)                               Obligations of any Subsidiary of Holdings incurred
with respect to performance bonds and/or fidelity bonds required to be
furnished by such Subsidiary in connection with contracts entered into by such
Subsidiary in the ordinary course of its business, so long as the aggregate
amount of outstanding obligations at any time pursuant to this clause (m) does
not exceed $1,000,000;

 

37

 

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

 

(o)                                 any other unsecured Indebtedness of the Credit
Parties not to exceed $1,000,000 in an aggregate principal amount at any time
outstanding.

 

Notwithstanding
the foregoing, no Indebtedness (other than the Pre-Petition Lender Expense
Claims and Indebtedness permitted under Section 5.1(h)) permitted under
Section 5.1 shall be permitted to have an administrative expense claim
status under the Bankruptcy Code senior to or pari passu with the superpriority
administrative expense claims of Agent and the Lenders as set forth herein and
in the Interim Order and Final Order.

 

5.2.                              Liens and Related Matters.

 

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

 

(i)                                     Liens
placed after the Petition Date and in accordance with the Bankruptcy Code upon
assets used in the ordinary course of business of Holdings or any of its
Subsidiaries at the time of acquisition thereof by Holdings or any such
Subsidiary or within 90 days thereafter to secure Indebtedness incurred to pay
all or a portion of the purchase price thereof, provided that (x) the
aggregate outstanding principal amount of all Indebtedness secured by Liens
permitted by this clause (i) shall not at any time exceed the amount
permitted by Section 5.1(h), and (y) in all events, the Lien
encumbering the assets so acquired does not encumber any other asset of
Holdings or such Subsidiary;

 

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

 

(iii)                               the
Pre-Petition Lender Replacement Liens, the Securitization Provider Replacement
Lien, the 2003 Senior Secured Notes Replacement Lien and the Non-Primed Liens.

 

The
prohibition provided for in this Section 5.2 specifically includes,
without limitation, any effort by Borrower, any Committee, or any other
party-in-interest in any Prepackaged
Chapter 11 Case to prime or create pari passu to any claims, Liens or
interests of Agent and Lenders any 

 

38

 

Lien
(other than for the Carve-Out, the Non-Primed Liens and the Pari Passu
Replacement Liens) irrespective of whether such claims, Liens or interests may
be “adequately protected”.

 

(b)                                 No Negative Pledges. The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly enter into or
assume any agreement (other than the Loan Documents) prohibiting the creation
or assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired and other than (i) provisions restricting subletting or
assignment under any lease governing a leasehold interest or lease of personal
property; (ii) restrictions with respect to a Subsidiary imposed pursuant
to any agreement which has been entered into for the sale of disposition of all
or substantially all of the equity interests or assets of such Subsidiary, so
long as such sale or disposition of all or substantially all of the equity
interests or assets of such Subsidiary is permitted under this Agreement; and (iii) restrictions
on assignments or sublicensing of licensed Intellectual Property.

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Credit Parties and their Subsidiaries may
make loans and advances to employees, officers and directors, to the extent
permissible by law, for moving, entertainment, 

 

39

 

travel and other similar
expenses in the ordinary course of business consistent with past practices;

 

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

 

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

 

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

 

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

 

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

 

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

 

(l)                                     Investments representing non-cash
consideration received in accordance with Section 5.7.

 

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

 

(a)                                  Letter of Credit Obligations and the
Pre-Petition Lender Expense Claims;

 

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

 

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

 

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

 

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

 

40

 

(f)                                    those incurred in the ordinary course of
business with respect to surety bonds, performance and return-of-money bonds
and other similar obligations not exceeding at any time outstanding $1,000,000
in aggregate liability;

 

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

 

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

 

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

 

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

 

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

 

In addition, and as otherwise approved by the Agent
and provided in the Approved Budget, Borrower shall not make any payment on
account of, purchase, defease, redeem, prepay, decrease or otherwise acquire or
retire for value any Pre-Petition Indebtedness other than, prior to the
occurrence and during the continuance of an Event of Default, payment of (a) Pre-Petition
employee wages, benefits and related employee taxes, (b) Pre-Petition
sales, use and real property taxes, (c) Pre-Petition amounts due in respect
of insurance financings, (d) amounts approved in accordance with other “first
day” orders satisfactory to Agent, and (e) cure amounts satisfactory to
agent under assumed leases and executory contracts).

 

5.6.                              Restriction on Fundamental Changes. Except as otherwise permitted by Section 4.4,
the Credit Parties shall not and shall not cause or permit their Subsidiaries
to directly or indirectly:  (a) amend,
modify or waive any term or provision of its organizational documents,
including its articles of incorporation, certificates of designations
pertaining to preferred stock, by-laws, partnership agreement or operating
agreement in any manner adverse to the Agent or Lenders unless required by law;
(b) enter into any transaction of merger or consolidation except, upon not
less than five (5) Business Days prior written notice to Agent (x) any
wholly-owned Subsidiary of Borrower may be merged with or into Borrower
(provided that Borrower is the 

 

41

 

surviving entity) or (y) with
the written consent of Agent (such consent not to be unreasonably withheld or
delayed), any wholly-owned Subsidiary of Borrower may be merged with or into
any other wholly-owned Subsidiary of Borrower (provided, that in the
case of any such merger of a Domestic Subsidiary with a Foreign Subsidiary, the
Domestic Subsidiary is the surviving entity); (c) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); or (d) acquire
by purchase or otherwise all or any substantial part of the Stock, business or
assets of any other Person.

 

5.7.                              Disposal of Assets or Subsidiary Stock. The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly convey, sell,
lease, sublease, transfer or otherwise dispose of, or grant any Person an
option to acquire, in one transaction or a series of related transactions, any
of its property, business or assets, whether now owned or hereafter acquired,
except for (a) sales of inventory in good faith to customers for fair
value in the ordinary course of business; and dispositions of obsolete
equipment not used or useful in the business; (b) sales, leases or other
disposals of any assets in the ordinary course of business which, in the
reasonable judgment of management, are (i) obsolete or worn out or (ii) are
otherwise no longer used or useful in the conduct of such Credit Party’s
business; (c) Borrower and its Subsidiaries may, in the ordinary course of
business, license, as licensor or licensee, patents, trademarks, copyrights and
know-how to or from third Persons or one another, so long as any such license
by Borrower or any of its Subsidiaries in its capacity as licensor is permitted
to be assigned pursuant to the relevant Security Agreement and does not otherwise
prohibit the granting of a Lien by Borrower or any of their respective
Subsidiaries pursuant to such Security Agreement in the intellectual property
covered by such license; (d) Asset Dispositions by Borrower and its
Subsidiaries (excluding sales of Accounts and Stock of any of Holdings’
Subsidiaries) if all of the following conditions are met:  (i) the aggregate fair market value of
assets sold or otherwise disposed of in any Fiscal Year does not exceed
$5,000,000 in the aggregate; (ii) the consideration received is at least
equal to the fair market value of such assets; (iii) 90% of the
consideration received is cash; (iv) the non-cash portion of the
consideration received shall be evidenced by a promissory note, which
promissory note shall be in form and substance reasonably satisfactory to Agent
and shall be pledged and delivered to Agent as additional collateral security
for the Obligations; (v) the Net Proceeds of such Asset Disposition are
applied as required by Section 1.5(b)(i); provided, that the Net
Proceeds of any Asset Disposition may be used to acquire assets in compliance
with Section 1.5(b); (vi) after giving effect to the Asset
Disposition and the repayment of Indebtedness with the proceeds thereof,
Borrower is in compliance on a pro forma basis with the covenants set forth in Section 6
recomputed for the most recently ended quarter for which information is
available; and (vii) no Default or Event of Default then exists or would
result from such Asset Disposition; and (e) the sale, transfer or other
disposition of any assets of (i) any Excluded Foreign Subsidiary to any
other Excluded Foreign Subsidiary; and (ii) any Credit Party (other than
the Borrower) to any other Credit Party.

 

5.8.                              Transactions with Affiliates. The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly enter into or
permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any management, consulting,
investment banking, advisory or other similar services) with any Affiliate or
with any director, officer or employee of any Credit Party, except (a) as
set forth on Schedule 5.8, (b) transactions in the ordinary course
of and pursuant to the reasonable requirements of the business of any such
Credit Party or any of its Subsidiaries and upon fair and 

 

42

 

reasonable terms which are
fully disclosed to Agent and are no less favorable to any such Credit Party or
any of its Subsidiaries than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate, (c) payment of
reasonable compensation to officers and employees for services actually
rendered to any such Credit Party or any of its Subsidiaries; (d) loans to
employees permitted in Section 5.3, (e) Restricted Payments
permitted in Section 5.5 and the agreements pursuant to which such
Restricted Payments are required to be made, (f) reimbursement of employee
travel and lodging costs incurred in the ordinary course of business, (g) the
guaranty of the Obligations by Credit Parties, (h) employment agreements,
equity incentive agreements and other employee and management arrangements in
the ordinary course of business which are fully disclosed to the Agent, (i) dividends
may be paid to the extent provided in Section 5.5, (j) Investments
may be made to the extent permitted by Section 5.3, (k) the
transactions entered into between Holdings and its Subsidiaries, or between
such Subsidiaries, shall be permitted to the extent expressly permitted by Section 5.6
and 5.7, (l) Borrower and any of its Subsidiaries may pay fees
(including management, acquisition and other consulting fees) to Vertis or any
Domestic Subsidiary that is a Guarantor, (m) any compensation paid to
third-party independent outside directors, (m) intercompany Indebtedness
permitted (and only to the extent permitted) pursuant to Section 5.1(c) and
(l); (n) the Mezzanine Debt permitted (and only to the extent
permitted) pursuant to Section 5.1(g); and (o) Investments
permitted (and only to the extent permitted) pursuant to Section 5.3(b),
(c), (d), (f), and (i).

 

5.9.                              Conduct of Business. Holdings shall not engage in any business
activity other than its ownership of the Stock of its Subsidiaries and its
performance of the Related Transaction Documents; provided, that
Holdings may engage in those activities that (i) are incidental to (x) the
maintenance of its corporate existence in compliance with applicable law, (y) legal,
tax and accounting matters in connection with any of the foregoing activities
and (z) the entering into, and performance of its obligations under, this
Agreement and the other Loan Documents to which it is a party and (ii) are
otherwise expressly permitted by this Agreement and the other Loan Documents. The
Credit Parties shall not and shall not cause or permit their Subsidiaries to
directly or indirectly engage in any business other than businesses of the type
described on Schedule 5.9.

 

5.10.                        Changes Relating to Indebtedness. The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly change or amend
the terms of any of its indebtedness permitted by Section 5.1(d),
(e),  (f),  (g) or  (h), including, without limitation, the Mezzanine
Debt, the Senior Subordinated Debt, the
February 2003 Senior Subordinated Debt, the 2002 Senior Debt and the 2003
Senior Secured Debt (or any indenture or other agreement, instrument or
document in connection therewith), including, without limitation, any of the
Subordinated Notes, if the effect of such amendment is to: (a) increase
the interest rate on such Indebtedness; (b) accelerate the dates upon
which payments of principal or interest are due; (c) increase the
principal amount of such Indebtedness; (d) change any event of default or
add or make more restrictive any covenant with respect to such Indebtedness; (e) change
the redemption or prepayment provisions of such Indebtedness; (f) change
the subordination provisions thereof, if any (or the subordination terms of any
guaranty thereof); (g) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner
adverse to any Credit Party or Lenders; or (h) increase the portion of
interest payable in cash with respect to any 

 

43

 

Indebtedness for which
interest is payable by the issuance of payment-in-kind notes or is permitted to
accrue without the consent of the Required Lenders.

 

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

 

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

 

5.13.                        Subsidiaries. The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly establish, create
or acquire any new Subsidiary.

 

5.14.                        Deposit Accounts. The Credit Parties shall not and shall not
cause or permit their Subsidiaries to establish any new deposit accounts,
unless, subject to the provisions of Section 4.9, Agent and the
bank at which the account is to be opened enter into a Control Agreement
regarding such deposit account pursuant to which such bank acknowledges the
security interest of Agent in such deposit account, agrees to comply with
instructions originated by Agent directing disposition of the funds in the deposit
account without further consent from such Credit Party or Subsidiary, and
agrees to subordinate and limit any security interest the bank may have in the
deposit account and waive all rights of set-off with respect thereto (other
than for customary fees and expenses) on terms satisfactory to Agent.

 

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

 

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

 

44

 

5.17.                        Sale-Leasebacks. The Credit Parties shall not and shall not
cause or permit any of their Subsidiaries to engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets.

 

5.18.                        No
Speculative Transactions. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it provided any such transaction is
consistent with Credit Parties’ hedging policies existing as of the Closing
Date, and provided, further, no Credit Party shall change any of
its hedging policies existing as of the Closing Date.

 

5.19.                        Real
Estate Purchases. No Credit Party shall purchase any fee simple ownership interests
in Real Estate with an aggregate purchase price in excess of $1,000,000 for all
such interests.

 

5.20.                        Prepayments of Other Indebtedness. Except pursuant to a confirmed
reorganization plan and except as specifically permitted hereunder, Borrower
shall not, without the express prior written consent of Agent and Requisite
Lenders or pursuant to an order of the Bankruptcy Court after notice and
hearing, make any payment or transfer with respect to any Lien or Indebtedness
incurred or arising prior to the filing of the Prepackaged Chapter 11 Case that is subject to the automatic stay
provisions of the Bankruptcy Code whether by way of “adequate protection” under
the Bankruptcy Code or otherwise.

 

5.21.                        Reclamation
Claims. No Credit Party shall enter into any agreement to return any of
its Inventory to any of its creditors for application against any Pre-Petition
Indebtedness, Pre-Petition trade payables or other Pre-Petition claims under Section 546(g) of
the Bankruptcy Code or allow any creditor to take any setoff or recoupment
against any of its Pre-Petition Indebtedness, Pre-Petition trade payables or
other Pre-Petition claims based upon any such return pursuant to Section 553(b)(l) of
the Bankruptcy Code or otherwise if, after giving effect to any such agreement,
setoff or recoupment, the aggregate amount of Pre-Petition Indebtedness,
Pre-Petition trade payables and other Pre-Petition claims subject to all such
agreements, setoffs and recoupments since the Petition Date would exceed
$1,000,000.

 

5.22.                        Chapter 11
Claims. No Credit Party shall incur, create, assume, suffer to exist or
permit any other superpriority administrative claim which is pari passu with or
senior to the claims of Agent and Lenders against Borrower, except as set forth
in the Interim Order or Final Order, as applicable.

 

5.23.                        VDSL. The Credit Parties shall not cause or permit VDSL to own any assets
other than immaterial assets, if any, having a value not in excess of $10,000.

 

5.24.                        Vertis Receivables. The Credit Parties shall not, after giving
effect to the A/R Purchase and the application of the proceeds thereof by
Vertis Receivables to repay all of its obligations (other than the Surviving
A/R Obligations) under the A/R Securitization Facility, cause or permit Vertis
Receivables to own any assets. In the event that Vertis Receivables comes to
own any assets in violation of the preceding sentence, the Credit Parties shall
immediately cause all such assets to be transferred and conveyed to Borrower.

 

45

 

SECTION 6.

FINANCIAL COVENANTS/REPORTING

 

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

 

6.1.                              Financial Covenants.

 

(a)                                  Minimum
Fixed Charge Coverage Ratio. 
Borrower and its Subsidiaries shall have on a consolidated basis at the
end of each Fiscal Month set forth below, a Fixed Charge Coverage Ratio for the
12-month period then ended of not less than the following:

 

	
  Fiscal Month Ending

  	
   

  	
  Fixed Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  July 31, 2008

  	
   

  	
  0.33 to 1.0

  
	
  August 31, 2008

  	
   

  	
  0.26 to 1.0

  
	
  September 30, 2008

  	
   

  	
  0.24 to 1.0

  
	
  October 31, 2008

  	
   

  	
  0.23 to 1.0

  

 

(b)                                 Maximum
Revolving Loan Amount. 
Borrower shall not, at any time, permit the outstanding amount of the
Revolving Loan to be more than 135% of the amount of the outstanding Revolving
Loan set forth in the Approved Budget for such time.

 

(c)                                  Budget
Compliance.

 

(i)                                     Subject to the terms and conditions set forth below, the
proceeds of Loans made under this Agreement shall be used by the Borrower
solely for the purposes and up to the amounts set forth in the Approved Budget
for the applicable line item during the applicable seven-day period.

 

(ii)                                  For
each period beginning on July 18, 2008 and ending on the last day of each
seven-day period set forth in the Approved Budget, the (A) aggregate
cumulative cash inflows of the Borrower shall be at least 67% of the aggregate
cumulative amount and (B) aggregate cumulative expenditures by the
Borrower shall not exceed 126.5% of the aggregate cumulative amount; provided,
however, that, notwithstanding the foregoing, with respect to
restructuring professional fees and expenses, the aggregate cumulative
expenditures by the Borrower for restructuring professional fees and expenses
shall not exceed 100% of the aggregate cumulative amount, in each case,
budgeted for such cumulative time period pursuant to the Approved Budget.

 

(iii)                               In
addition, the Borrower’s expenditures under any line item for any seven-day
period may include the sum of the budgeted amount for such line item for such seven-day
period plus any excess of the cumulative amounts budgeted for such line item for
the 

 

46

 

immediately
preceding three seven-day periods (or if shorter, the Post-Petition period
ending on the last day of the immediately preceding seven-day period) over the
cumulative amount of Borrower’s actual expenditures under such line item for
such prior time period.

 

(iv)                              To
the extent any additional line item is added to the Approved Budget in
accordance with the provisions of the Interim Order or the Final Order, such
line items shall be subject to such variance provisions as Agent may determine
in Agent’s sole discretion.

 

(v)                                 Except
as expressly set forth above, no unused portion of any line item in the
Approved Budget may be carried forward or carried backward to the same or any
other line item for any prior or subsequent seven-day period in the Approved
Budget.

 

(vi)                              Agent
and Lenders (A) may assume that the Borrower will comply with the Approved
Budget, (B) shall have no duty to monitor such compliance and (C) other
than with respect to the Carve-Out, shall not be obligated to pay (directly or
indirectly from the Collateral) any unpaid expenses incurred or authorized to
be incurred pursuant to any Approved Budget. 
The line items in the Approved Budget for payment of interest, expenses
and other amounts to Agent and Lenders are estimates only, and the Borrower
remains obligated to pay any and all Obligations in accordance with the terms
of the Loan Documents, the Interim Order and the Final Order.  Nothing in any Approved Budget (including any
estimates of a loan balance in excess of Borrowing Base restrictions) shall
constitute an amendment or other modification of this Agreement or any of the
Borrowing Base restrictions or other lending limits set forth therein.

 

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

 

(a)                                  Monthly Financials.  As
soon as available and in any event within thirty-five (35) days after the end
of each Fiscal Month (or forty-five (45) days for the last Fiscal Month of
Borrower’s Fiscal Year), Borrower will deliver or make available (1) the
consolidated (accompanied by mutually acceptable supplemental non-consolidated
information customarily prepared by management) balance sheet of Holdings and its Subsidiaries, as at
the end of such month, and the related consolidated (accompanied by mutually
acceptable supplemental non-consolidated information customarily prepared by
management) statements of income, stockholders’ equity and cash flow for such
Fiscal Month and for the period from the beginning of the then current Fiscal
Year of Holdings to the end of such Fiscal Month, and (2) a report setting
forth in comparative form the corresponding figures for the corresponding
periods of the previous Fiscal Year and the corresponding figures from the
Business Plan and the most recent Approved Budget delivered pursuant to Section 6.2(h).

 

47

 

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

 

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

 

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

 

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

 

(f)                                    Management Report. 
Together with each delivery of Financial Statements of Borrower pursuant
to Sections 6.2(a) and (b), Borrower will deliver a management
report (1) describing the operations and financial condition of Holdings
and its Subsidiaries for the Fiscal Month then ended and the portion of the
current Fiscal Year then elapsed (or for the Fiscal Year then ended in the case
of year-end financials) and (2) discussing the reasons for any significant
variations.  The information above shall
be presented in reasonable detail and shall be certified by the chief financial
officer of Borrower to the
effect that such information fairly presents the results of operations and
financial condition of Holdings and its Subsidiaries as at the dates and for
the periods indicated.

 

48

 

(g)                                 Non-Real Estate Fixed Asset Appraisal and
Real Estate Appraisal.  Upon the election of Agent, Agent may conduct
appraisals and audits and obtain appraisal reports in form and substance and
from appraisers reasonably satisfactory to Agent (which may be, or be
affiliated with, a Lender) with respect to the fixed assets (excluding real
estate) of the Borrower and the other Credit Parties (the “Non-Real Estate
Fixed Asset Appraisal”).  Upon the
election of Agent, Agent may conduct appraisals and obtain appraisal reports in
form and substance and from appraisers reasonably satisfactory to Agent (which
may be, or be affiliated with, a Lender) with respect to the owned real estate
of the Borrower and the other Credit Parties (the “Real Estate Appraisal”).  Notwithstanding the foregoing, Agent may not
conduct any Non-Real Estate Fixed Asset Appraisals or Real Estate Appraisals
within six (6) months following the Closing Date unless an Event of
Default shall have occurred.

 

(h)                                 Budget; Budget Variance Report.  As
soon as available and in any event no later than seven (7) days following
the last day of each month, Borrower will deliver an updated Approved Budget
for the succeeding 13-week period. 
Within four (4) days following the end of each week, Borrower shall
also deliver a variance report, in form and substance reasonably satisfactory
to Agent, for the preceding week and on a cumulative basis from the Petition
Date to the report date comparing actual cash receipts and disbursements to
amounts projected in the Approved Budget.

 

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

 

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

 

(k)                                  Litigation.  Promptly upon any officer of
any Credit Party obtaining knowledge of (1) the institution of any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation,
tax audit or arbitration now pending or, to the best knowledge of such Credit
Party after due inquiry, threatened against or affecting any Credit Party or
any of its Subsidiaries or any property of any Credit Party or any of its
Subsidiaries, other than filings in 

 

49

 

the Prepackaged Chapter 11 Cases (“Litigation”)
not previously disclosed by Borrower to Agent or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting any Credit Party or any
property of any Credit Party which, in each case, could reasonably be expected
to have a Material Adverse Effect, Borrower will promptly give notice thereof
to Agent and provide such other information as may be reasonably available to
them to enable Agent and its counsel to evaluate such matter.

 

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

 

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

 

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

 

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

 

(p)                                 Bank Account Balances.  To
Agent, within fifteen (15) Business Days after the end of each Fiscal Month, a
report in form and substance reasonably satisfactory to Agent with respect to
the bank account balances of Borrower and each other Credit Party.

 

6.3.                              Accounting Terms; Utilization of GAAP for
Purposes of Calculations Under Agreement.  For purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to such terms in conformity with GAAP.  Financial statements and other information
furnished to Agent pursuant to Section 6.2 or any other section
(unless specifically indicated otherwise) shall be prepared in accordance with
GAAP as in effect at the 

 

50

 

time of such preparation; provided
that no Accounting Change shall affect financial covenants, standards or terms
in this Agreement unless approved by Borrower, Agent and Lenders; provided
further that Borrower shall prepare a reconciliation to the Financial
Statements required to be delivered hereunder that show the differences between
the Financial Statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting
such Accounting Changes).

 

SECTION 7.

DEFAULT, RIGHTS AND REMEDIES

 

7.1.                              Event of Default.  Except
for defaults occasioned by the filing of the Prepackaged Chapter 11 Cases and defaults resulting from obligations
with respect to which the Bankruptcy Code prohibits any Credit Party from
complying or permits any Credit Party not to comply, the occurrence of any one
or more of the following events (regardless of the reason therefor) shall
constitute an “Event of Default” hereunder:

 

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

 

(b)                                 Default in Other Agreements.  (1) Any
Credit Party or any of its Subsidiaries fails to pay when due or within any
applicable grace period any principal or interest on Post-Petition Indebtedness
(other than the Loans) or any Post-Petition Contingent Obligations, (2) breach
or default of any Credit Party or any of its Subsidiaries, or the occurrence of
any condition or event, with respect to any Post-Petition Indebtedness (other
than the Loans) or any Post-Petition Contingent Obligations, in each case if
the effect of such breach, default or occurrence is to cause or to permit the
holder or holders then to cause, Post-Petition Indebtedness and/or
Post-Petition Contingent Obligations having an aggregate principal amount in
excess of $1,000,000 to become or be declared due prior to their stated
maturity, or (3) the (i) termination (whether in accordance with its
terms or otherwise) of, or any default or material breach (which default or
material breach is not cured by the deadline (if any) under, as applicable, the
Restructuring Agreement, the Merger Agreement and/or any Ancillary Noteholder
Agreements  or (ii) modification or amendment
of the Restructuring Agreement, the Merger Agreement and/or any Ancillary
Noteholder Agreements without the prior written consent of Agent and Requisite
Lenders; or

 

(c)                                  Breach of Certain Provisions. 
Failure of any Credit Party to perform or comply with any term or
condition contained in (1) the GE Capital Fee Letter, (2) Section 6.2
which failure continues for more than five (5) Business Days after the
date specified for performance or compliance with such term or condition, (3) that
portion of Section 4.2 relating to the Credit Parties’ obligation
to maintain insurance, or (4) Section 4.3, Section 5
or Section 6.1; or

 

51

 

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

 

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

 

(f)                                    Judgment and Attachments.  Any
money judgment, writ or warrant of attachment, or similar process (other than
those described elsewhere in this Section 7.1) involving an amount in
the aggregate at any time in excess of $2,500,000 (to the extent not adequately
covered by insurance provided by a reputable and solvent insurance company) is
entered or filed against one or more of the Credit Parties or any of their
respective assets and remains undischarged, unvacated, unbonded or unstayed for
a period of thirty (30) days or in any event later than five (5) Business
Days prior to the date of any proposed sale thereunder; or

 

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

 

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

 

(i)                                     Subordination/ Intercreditor Provisions. The failure of any Credit Party to comply
with the terms of any subordination or intercreditor agreement or any
subordination provisions of any note or other document running to the benefit
of Agent or Lenders, including, without limitation, in connection with the
Subordinated Debt, the Mezzanine Debt, the 2002 Senior Debt or the 2003 Senior
Secured Debt; or

 

(j)                                     Consultant and Financial Advisor.  The
failure of the Credit Parties to continue to engage (i) a consultant
acceptable to Agent (it being understood that Alvarez & Marsal and FTI
Consulting are acceptable to Agent) to provide operational advice, perform cash
flow modeling and otherwise provide advisory services pursuant to such terms of
engagement (including such other duties and responsibilities) as are acceptable
to Agent) and (ii) a financial advisor acceptable to Agent (it being
understood that Lazard Freres & Co. LLC and/or their Affiliates are
acceptable to Agent) on terms and conditions and with respect to duties and
responsibilities acceptable to Agent); or

 

(k)                                  Prepackaged Chapter 11 Case.  The
occurrence of any of the following in any Prepackaged Chapter 11 Case:

 

52

 

(i)                                     the bringing of a motion, taking of any action or the filing
of any plan of reorganization or disclosure statement attendant thereto, in
each case, by Borrower or any Guarantor in any Prepackaged Chapter 11 Case, or the entry of any order
by the Bankruptcy Court in any Prepackaged Chapter 11 Case: (w) to obtain additional
financing under Section 364(c) or (d) of the Bankruptcy Code not
otherwise permitted pursuant to this Agreement; (x) to grant any Lien
other than Permitted Encumbrances upon or affecting any Collateral; (y) except
as provided in the Interim or Final Order, as the case may be, to use cash
collateral of Agent under Section 363(c) of the Bankruptcy Code
without the prior written consent of the Agent and the Requisite Lenders; or (z) that
(in the case of Borrower or any Guarantor) requests or seeks authority for or
that (in the case of an order entered by the Bankruptcy Court on account of a
request by Borrower or any Guarantor) approves or provides authority to take
any other action or actions adverse to the Agent and the Lenders or their
rights and remedies hereunder or their interest in the Collateral;

 

(ii)                                  the filing of any plan of reorganization or disclosure statement
attendant thereto, or any direct or indirect amendment to such plan or
disclosure statement, by Borrower or any Guarantor to which the Agent and the
Requisite Lenders do not consent or otherwise agree to the treatment of their
claims or the loss by Borrower or any Guarantor of the exclusive right to file
and solicit acceptances of a plan of reorganization;

 

(iii)                               the entry of an order in any of the Prepackaged Chapter 11 Cases confirming a plan or plans
of reorganization that does not contain a provision for termination of the
Commitments and repayment in full in cash of all of the Obligations under this
Agreement on or before the effective date of such plan or plans;

 

(iv)                              the entry of an order amending, supplementing, staying,
vacating or otherwise modifying the Loan Documents or the Interim Order or the
Final Order without the written consent of Agent;

 

(v)                                 the Final Order is not entered within thirty (30) days (or
such other period as Agent and Lenders may agree to in writing) following the
entry of the Interim Order;

 

(vi)                              the payment of, or application by Borrower or any Guarantor
for authority to pay, any pre-petition claim without the Agent’s and Requisite
Lenders’ prior written consent other than as provided in any “first day order”
in form and substance acceptable to Agent and as set forth in the Approved
Budget or unless otherwise permitted under this Agreement;

 

(vii)                           the appointment of an interim or permanent trustee in any Prepackaged Chapter 11 Case or the appointment of a
receiver or an examiner under section 1104 of the Bankruptcy Code in any Prepackaged Chapter 11 Case with expanded powers
(beyond those set forth in sections 1106(a)(3) and 1106(a)(4) of the
Bankruptcy Code) to operate or manage the financial affairs, the business, or reorganization
of Borrower or with the power to conduct an investigation of (or compel
discovery from) Agent or Lenders or against agent or lenders under the
Pre-Petition Credit Agreement; or the sale without the Agent’s and Requisite
Lenders’ consent, of all or substantially all of Borrower’s assets either
through a sale under section 363 of the Bankruptcy Code, through a confirmed
plan of reorganization in the 

 

53

 

Prepackaged Chapter 11 Cases, or otherwise that does
not provide for payment in full in cash of the Obligations and termination of
the Commitments;

 

(viii)                        the dismissal of any Prepackaged Chapter 11 Case, or the conversion of any Prepackaged Chapter 11 Case from one under
chapter 11 to one under chapter 7 of the Bankruptcy Code or Borrower
or any Guarantor shall file a motion or other pleading seeking the dismissal of
any Prepackaged Chapter 11 Case under section 1112 of the Bankruptcy
Code or otherwise;

 

(ix)                                the entry of an order by the Court granting relief from or
modifying the automatic stay of section 362 of the Bankruptcy Code (x) to
allow any creditor to execute upon or enforce a Lien on any Collateral, or (y) with
respect to any Lien of or the granting of any Lien on any Collateral to any state
or local environmental or regulatory agency or authority, which in either case
would have a Material Adverse Effect;

 

(x)                                   the entry of an order in any Prepackaged Chapter 11 Case avoiding or requiring
repayment of any portion of the payments made on account of the Obligations
owing under this Agreement or the other Loan Documents;

 

(xi)                                the failure of Borrower to perform any of its obligations
under the Interim Order or the Final Order or any violation of any of the terms
of the Interim Order or the Final Order;

 

(xii)                             the challenge by Borrower or any Guarantor to the validity,
extent, perfection or priority of any liens granted under the Pre-Petition
Credit Agreement;

 

(xiii)                          the remittance, use or application of the proceeds of
Collateral other than in accordance with cash management procedures and
agreements acceptable to Agent;

 

(xiv)                         the use of cash collateral of the Prior Agent and Prior
Lenders or the A/R Securitization Provider for any purpose other than to pay
expenditures set forth in the Approved Budget; or

 

(xv)                            the entry of an order in any of the Prepackaged Chapter 11 Cases granting any other super
priority administrative claim or Lien (other than the Pari Passu Replacement
Liens) equal or superior to that granted to Agent, on behalf of itself and
Lenders without the consent in writing of Agent and Requisite Lenders; or

 

(xvi)                         the
failure of Borrower and Guarantors, no later than August 19, 2008, to have
obtained an order (the “Exit Facility Order”), in form and substance
reasonably acceptable to Agent, (I) authorizing Borrower’s and Guarantors’
performance of their pre-closing obligations and undertakings under the
commitment letter and the fee letter, each dated as of the date of the
Commitment Letter, pertaining to the exit financing facility (the “Exit
Financing Facility”) to be provided by GE Capital and arranged by GECM
(respectively, the “Exit Commitment Letter” and the “Exit Fee Letter”,
and, collectively, the “Exit Commitment Documentation”); and (II) providing
that the rights of the commitment parties under the Exit Commitment
Documentation to payment of all costs, fees and expenses and to indemnification
under the Exit Commitment Documentation shall be entitled to priority as
administrative expense 

 

54

 

claims
under section 503(b)(1) of the Bankruptcy Code whether or not the Exit
Credit Facility closes; or

 

(xvii)                      the
failure of the Borrower and Guarantors, no later than the deadline set forth in
the Restructuring Agreement (as such deadline may be and actually is extended
pursuant to the terms and conditions thereof), to have obtained from the
Bankruptcy Court an order (the “Confirmation Order”), in form and
substance acceptable to Agent, confirming the Plan of Reorganization and
approving the consummation of the transactions on the effective date of the
Plan (the “Effective Date”).  As
of the Effective Date, the Confirmation Order shall not be subject to a stay or
injunction (or similar prohibition) in effect with respect thereto.  The Effective Date shall occur no later than
the deadline for the effective date of the Plan of Reorganization set forth in
the Section 8.04(e) of the Restructuring Agreement (as such deadline
may be and actually is extended pursuant to the terms and conditions thereof)
and shall be conditioned, in any event, upon, inter alia, payment in full in
cash of all obligations hereunder.

 

7.2.                              Suspension or Termination of Commitments.  Upon
the occurrence of any Default or Event of Default, Agent may, and at the
request of Requisite Lenders Agent shall, notwithstanding the provisions of
section 362 of the Bankruptcy Code, without any application, motion or notice
to, hearing before, or order from, the Bankruptcy Court, without notice or
demand, immediately suspend or terminate all or any portion of Lenders’
obligations to make additional Advances or issue or cause to be issued Letters
of Credit under the Revolving Loan Commitment; provided that, in the
case of a Default, if the subject condition or event is waived by Requisite
Lenders or cured within any applicable grace or cure period, the Revolving Loan
Commitment shall be reinstated.

 

7.3.                              Acceleration and other Remedies.  If any
Event of Default has occurred and is continuing, Agent may (and at the written
request of the Requisite Lenders shall), subject to and in accordance with the
terms of the Interim Order or the Final Order, as applicable, the terms and
conditions of the Interim Order or the Final Order, as applicable, in
accordance with the terms of the Interim Order or the Final Order: (i) terminate
the Commitments 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 Section 1.5(e), in accordance with the terms of
the Interim Order or the Final Order; or (iv) exercise any rights and
remedies provided to Agent under the Loan Documents, the Interim Order or the
Final Order or at law or equity.

 

7.4.                              Performance by Agent.  If
any Credit Party shall fail to perform any covenant, duty or agreement contained
in any of the Loan Documents, Agent may perform or attempt to perform such
covenant, duty or agreement on behalf of such Credit Party after the expiration
of any cure or grace periods set forth herein. 
In such event, such Credit Party shall, at the request of Agent,
promptly pay any amount reasonably expended by Agent in such performance or
attempted performance to Agent, together with interest thereon at the highest
rate of interest in effect upon the occurrence of an Event of Default as
specified in Section 1.2(d) from the date of such expenditure
until paid.  Notwithstanding the
foregoing, it is expressly agreed that Agent

 

55

 

shall not have any liability or
responsibility for the performance of any obligation of any Credit Party under
this Agreement or any other Loan Document.

 

7.5.                              Application of Proceeds. 
Notwithstanding anything to the contrary contained in this Agreement,
upon the occurrence and during the continuance of an Event of Default, Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times thereafter received by Agent from or on behalf of
Borrower, and Agent shall have the continuing and exclusive right to apply and
to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default.  Notwithstanding anything to the contrary
contained in this Agreement (including, without limitation, Section 1.1
and Section 1.5 hereof), all payments (including the proceeds of
any Asset Disposition or other sale of, or other realization upon, all or any
part of the Collateral) received after acceleration of the Obligations shall be
applied (in each case, on a pari passu basis, to any liquidated, non-contingent
outstanding balance of the Pre-Petition Lender Expense Claims) as follows: first,
to all costs and expenses incurred by or owing to Agent and any Lender with
respect to this Agreement, the other Loan Documents or the Collateral; second,
to accrued and unpaid Fees with respect to the Loans; third, to the
outstanding balance (including principal and interest) of the Revolving Loan,
which shall effect a permanent reduction to the Revolving Loan Commitment; fourth,
to cash collateralize Letters of Credit as provided in Section 1.5(e);
fifth, ratably to the outstanding balance (including principal and
interest) of the Term Loans; and sixth, to any other Obligations owing
to Agent or any Lender under the Loan Documents or any Interest Rate Agreement.  Any balance remaining shall be delivered to
Borrower subject to the Interim Order or the Final Order, as applicable.

 

SECTION 8.

ASSIGNMENT AND PARTICIPATION

 

8.1.                              Assignment and Participations.

 

(a)                                  Subject to the terms of this Section 8.1,
any Lender may make an assignment to a Qualified Assignee of, or sale of
participations in, at any time or times, the Loan Documents, Loans, Letter of
Credit Obligations and any Commitment or any portion thereof or interest
therein, including any Lender’s rights, title, interests, remedies, powers or
duties thereunder.  Any assignment by a
Lender shall:  (i) require the
consent of Agent (which consent shall not be unreasonably withheld, conditioned
or delayed with respect to a Qualified Assignee) and the execution of an
assignment agreement (an “Assignment Agreement” substantially in the
form attached hereto as Exhibit 8.1 and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Agent); (ii) be
conditioned on such assignee Lender representing to the assigning Lender and
Agent that it is purchasing the applicable Loans to be assigned to it for its
own account, for investment purposes and not with a view to the distribution
thereof; (iii) except with respect to any assignment by a Lender to an
Affiliate of such Lender, after giving effect to any such partial assignment,
the assignee Lender shall have Commitments in an amount at least equal to
$5,000,000 and the assigning Lender shall have retained Commitments in an
amount at least equal to $5,000,000; (iv) require a payment to Agent of an
assignment fee of $3,500 (for which Borrower shall have no liability), (v) with
respect to any partial assignment, be made as an assignment of a proportionate
part of all the assigning Lender’s rights and Obligations under this Agreement
with respect to the Loan or Commitment assigned and (vi) so long as no Event of

 

56

 

Default has
occurred and is continuing, require the consent of Borrower, which shall not be
unreasonably withheld or delayed.  Notwithstanding the above,
Agent may in its sole and absolute discretion permit any assignment by a Lender
to a Person or Persons that are not Qualified Assignees, subject to Borrower’s
consent rights as set forth above.  In
the case of an assignment by a Lender that has become effective under this Section 8.1,
(i) the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as all other Lenders hereunder and (ii) the
assigning Lender shall be relieved of its obligations hereunder with respect to
its Commitments or assigned portion thereof and the Loans, Letter of Credit
Obligations and other interests assigned by it from and after the effective
date of such assignment.  Borrower hereby
acknowledges and agree 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 8.1(a),
(i) 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, (ii) any Lender that is an investment fund may assign the
Obligations held by it and such Lender’s rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor or pledge such Obligations and rights to a trustee for the benefit of
its investors and (iii) any Lender may assign the Obligations to an
Affiliate of such Lender or to a Person that is a Lender prior to the date of
such assignment.

 

(b)                                 (i) Any participation by a Lender of all
or any part of its Commitments shall be made with the understanding that all
amounts payable by 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 (x) any reduction in the
principal amount of, or interest rate or Fees payable with respect to, any Loan
in which such holder participates, (y) any extension of the scheduled
amortization of the principal amount of any Loan in which such holder
participates or the final maturity date thereof, and (z) any release of
all or substantially all of the Collateral (other than in accordance with the
terms of this Agreement, the Collateral Documents or the other Loan
Documents).  Solely for purposes of Sections
1.8, 1.9, 8.3 and 9.1, Borrower acknowledges and agree 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
no Borrower or any other Credit Party shall have any obligation or duty to any
participant.  Neither Agent nor any
Lender (other than the Lender selling a participation) shall have any duty to
any participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.

 

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

 

57

 

(iii) Where a Lender proposes to grant a participation
to a Person who is a Qualifying Lender, that Person must provide evidence of
its status as a Qualifying Lender to the reasonable satisfaction of the Lender
and the Agent.

 

Except as expressly provided in this Section 8.1,
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.

 

(c)                                  Each Credit Party shall assist each Lender
permitted to sell assignments or participations under this Section 8.1
as required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as shall be requested
and the prompt preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants, all on a timetable reasonably established by Agent in its sole
discretion.  Each Credit Party executing
this Agreement shall certify the correctness, completeness and accuracy of all
descriptions of the Credit Parties and their respective affairs contained in
any selling materials provided by it and all other information provided by it
and included in such materials, except that any Financial Projections delivered
by Borrower shall only be certified by Borrower as having been prepared by
Borrower in compliance with the representations contained in Section 3.5.  Agent shall maintain, on behalf of Borrower,
in its offices located at New York, New York a “register” for recording the
name, address, commitment and Loans owing to each Lender.  The entries in such register shall be
conclusive evidence of the amounts due and owing to each Lender in the absence
of manifest error.  Borrower, Agent and
each Lender may treat each Person whose name is recorded in such register
pursuant to the terms hereof as a Lender for all purposes of this
Agreement.  The register described herein
shall be available for inspection by Borrower and any Lender, at any reasonable
time upon reasonable prior notice.

 

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

 

8.2.                              Agent.

 

(a)                                  Appointment.  Each Lender hereby designates
and appoints GE Capital as its Agent under this Agreement and the other Loan
Documents, and each Lender hereby irrevocably authorizes Agent to execute and
deliver the Collateral Documents and to take such action or to refrain from
taking such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental
thereto.  Agent is authorized and
empowered to amend, modify, or waive any provisions of this Agreement or the
other Loan Documents on behalf of Lenders subject to the requirement that
certain of Lenders’ consent be obtained in certain instances as provided in
this Section 8.2 and Section 9.2.  The provisions of this Section 8.2
are solely for the benefit of Agent and Lenders and neither Borrower nor any
other Credit Party shall have any rights as a third party beneficiary of any of
the provisions

 

58

 

hereof. 
In performing its functions and duties under this Agreement, Agent shall
act solely as agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust with or
for Borrower or any other Credit Party. 
Agent may perform any of its duties hereunder, or under the Loan
Documents, by or through its agents or employees.

 

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

 

(c)                                  Rights, Exculpation, Etc. 
Neither Agent nor any of its officers, directors, employees or agents
shall be liable to any Lender for any action taken or omitted by them hereunder
or under any of the Loan Documents, or in connection herewith or therewith,
except that Agent shall be liable to the extent of its own gross negligence or
willful misconduct as determined by a final non-appealable order by a court of
competent jurisdiction.  Agent shall not
be liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error the sole recourse of any Lender to whom payment was
due but not made, shall be to recover from other Lenders any payment in excess
of the amount to which they are determined to be entitled (and such other
Lenders hereby agree to return to such Lender any such erroneous payments
received by them).  In no event shall
Agent be liable for punitive, special, consequential, incidental, exemplary or
other similar damages. In performing its functions and duties hereunder, Agent
shall exercise the same care which it would in dealing with loans for its own
account, but neither Agent nor any of its agents or representatives shall be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Credit Party.  Agent
shall not be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any of the Loan Documents or the financial condition of any Credit Party, or
the existence or possible existence of any Default or Event of Default.  Agent may at any time request instructions
from Requisite Lenders, Supermajority Lenders or all affected Lenders with respect
to any actions or approvals which by the terms of this Agreement or of any of
the Loan Documents Agent is permitted or required to take or to grant.  If such instructions are promptly requested,
Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any

 

59

 

approval under any of the Loan Documents
until it shall have received such instructions from the Requisite Lenders,
Supermajority Lenders or such other portion of the Lenders as shall be
prescribed by this Agreement.  Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against Agent as a result of Agent acting or refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders, Supermajority Lenders or all affected
Lenders, as applicable; and, notwithstanding the instructions of Requisite
Lenders, Supermajority Lenders or all affected Lenders, as applicable, Agent
shall have no obligation to take any action if it believes, in good faith, that
such action is deemed to be illegal by Agent or exposes Agent to any liability
for which it has not received satisfactory indemnification in accordance with Section 8.2(e).

 

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

 

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

 

(f)                                    GE Capital (or any successor Agent)
Individually.  With respect to its Commitments hereunder, GE
Capital (or any successor Agent) shall have and may exercise the same rights
and powers hereunder and is subject to the same obligations and liabilities as
and to the extent set forth herein for any other Lender.  The terms “Lenders,” “Requisite Lenders”, “Supermajority
Lenders” or any similar terms shall, unless the context clearly otherwise
indicates, include GE Capital (or any successor Agent) in its individual
capacity as a Lender or one of the Requisite Lenders or Supermajority
Lenders.  GE Capital (or any successor
Agent), either directly or through strategic affiliations, may lend money to,
acquire equity or other

 

60

 

ownership interests in, provide advisory
services to and generally engage in any kind of banking, trust or other
business with any Credit Party as if it were not acting as Agent pursuant
hereto and without any duty to account therefor to Lenders.  GE Capital (or any successor Agent), either
directly or through strategic affiliations, may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

 

(g)                                 Successor Agent.

 

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

 

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

 

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

 

(h)                                 Collateral Matters.

 

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

 

(ii)                                  Confirmation
of Authority; Execution of Releases.  Without in any manner limiting Agent’s
authority to act without any specific or further authorization or consent by
Lenders (as set forth in Section 8.2(h)(i)), each Lender agrees to
confirm in writing, upon

 

61

 

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

 

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

 

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

 

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

 

62

 

Lenders in accordance with Section 7.  Unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable or in the best interests of Lenders.

 

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

 

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

 

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

 

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

 

63

 

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

 

8.3.                              Set Off and Sharing of Payments. 
Subject to Section 8.2(k) and the terms of the Interim
Order or the Final Order, as applicable, in addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, during the continuance of any Event of Default, each Lender is hereby
authorized by Borrower at any time or from time to time, to set off and to
appropriate and to apply any and all (A) balances held by such Lender at
any of its offices for the account of Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to Borrower or its
Subsidiaries), and (B) other property at any time held or owing by such
Lender to or for the credit or for the account of Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of
Agent.  Any Lender exercising a right to
set off shall purchase for cash (and the other Lenders shall sell) interests in
each of such other Lender’s Pro Rata Share of the Obligations as would be
necessary to cause all Lenders to share the amount so set off with each other
Lender entitled to share in the amount so set off in accordance with their
respective Pro Rata Shares.  Subject to
the terms of the Interim Order or the Final Order, as applicable, Borrower
agrees, to the fullest extent permitted by law, that any Lender may exercise its right to set off with respect to
amounts in excess of its Pro Rata Share of the Obligations and upon doing so
shall deliver such amount so set off to the Agent for the benefit of all
Lenders entitled to share in the amount so set off in accordance with their Pro
Rata Shares.

 

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

 

64

 

8.5.                              Disbursements of Advances; Payment.

 

(a)                                  Advances; Payments.

 

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

 

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

 

(b)                                 Availability of Lender’s Pro Rata Share. 
Agent may assume that each Revolving Lender will make its Pro Rata Share
of each Revolving Credit Advance 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 8.5(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require Agent to
advance funds on behalf of any Revolving Lender or to relieve any Revolving
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that 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.

 

65

 

(c)                                  Return of Payments.

 

(i)                                     If Agent
pays an amount to a Lender under this Agreement in the belief or expectation
that a related payment has been or will be received by Agent from 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.

 

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

 

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

 

SECTION 9.

MISCELLANEOUS

 

9.1.                              Indemnities.  Borrower agrees, jointly and
severally, to indemnify, pay, and hold Agent, each Lender, each L/C Issuer and
their respective Affiliates, officers, directors, employees, agents, and
attorneys (the “Indemnitees”) harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs and expenses (including all reasonable fees and expenses
of counsel to such Indemnitees) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Indemnitee as a result of such
Indemnitees being a party to this Agreement or the transactions consummated
pursuant to this Agreement or otherwise relating to any of the Related
Transactions; provided, that Borrower shall have no obligation to an
Indemnitee hereunder with respect to liabilities to the extent resulting from
the gross negligence or willful misconduct of that Indemnitee as determined by
a court of competent jurisdiction.  If
and to the extent that the foregoing undertaking may be unenforceable for any
reason, Borrower agrees to make the maximum contribution to the payment and
satisfaction thereof which is permissible under applicable law.

 

66

 

9.2.                              Amendments and Waivers.

 

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

 

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

 

67

 

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

 

Notices shall be addressed
as follows:

 

	
  If to Borrower:

  	
   

  	
  Vertis, Inc.

  
	
   

  	
   

  	
  250 West Pratt Street

  
	
   

  	
   

  	
  Baltimore, MD 21201

  
	
   

  	
   

  	
  ATTN: Treasurer

  
	
   

  	
   

  	
  Fax: (410) 454-0887

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Weil, Gotshal & Manges LLP

  
	
   

  	
   

  	
  767 Fifth Avenue

  
	
   

  	
   

  	
  New York, NY 10153

  
	
   

  	
   

  	
  Attn: Warren T.
  Buhle, Esq.

  
	
   

  	
   

  	
  Fax: (212) 310-8007

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vertis, Inc.

  
	
   

  	
   

  	
  9775
  Walnut Street

  
	
   

  	
   

  	
  Suite D1

  
	
   

  	
   

  	
  Boulder,
  CO 80301

  
	
   

  	
   

  	
  Attn:
  John Howard, Jr., Esq.

  
	
   

  	
   

  	
  Chief
  Legal Officer and Secretary

  
	
   

  	
   

  	
  Fax:
  (410) 454-8460

  
	
   

  	
   

  	
   

  
	
  If to Agent or GE Capital:

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  125 Summer Street

  
	
   

  	
   

  	
  Suite 1230

  
	
   

  	
   

  	
  Boston, Massachusetts 02110

  
	
   

  	
   

  	
  ATTN: Vertis, Inc., Account Officer

  
	
   

  	
   

  	
  Fax:
  (617) 607-9174

  

 

68

 

	
  With a
  copy to:

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  201 Merritt 7

  
	
   

  	
   

  	
  P.O. Box 5201

  
	
   

  	
   

  	
  Norwalk, Connecticut 06851

  
	
   

  	
   

  	
  ATTN: General Counsel

  
	
   

  	
   

  	
  Global Sponsor Finance

  
	
   

  	
   

  	
  Fax: (203) 956-4216

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN: Corporate Counsel

  
	
   

  	
   

  	
  Global Sponsor Finance

  
	
   

  	
   

  	
  Fax:
  (312) 441-6876

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Winston &
  Strawn LLP

  
	
   

  	
   

  	
  200
  Park Avenue

  
	
   

  	
   

  	
  New
  York, NY 10166

  
	
   

  	
   

  	
  Attn:
  William D. Brewer, Esq.

  
	
   

  	
   

  	
  Fax:
  (212) 294-4700

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Winston &
  Strawn LLP

  
	
   

  	
   

  	
  35
  West Wacker Drive

  
	
   

  	
   

  	
  Chicago,
  IL 60601

  
	
   

  	
   

  	
  Attn:
  Brian I. Swett, Esq.

  
	
   

  	
   

  	
  Fax:
  (312) 558-5700

  
	
   

  	
   

  	
   

  
	
  If to a Lender:

  	
   

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

  

 

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

 

69

 

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

 

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

 

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

 

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

 

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

 

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

 

9.11.                       No Fiduciary Relationship; Limited Liability.  No
provision in the Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty owing to any Credit Party by Agent
or any Lender.  Borrower and each other
Credit Party agree that neither Agent nor any Lender shall have liability to
Borrower or any other Credit Party (whether sounding in tort, contract or
otherwise) for losses suffered by Borrower or any other Credit Party in
connection with, arising out of, or in any way related to the transactions
contemplated and the relationship established by the Loan Documents, or any
act, omission or event occurring in connection therewith, unless and to the
extent that it is determined that such

 

70

 

losses resulted from the gross negligence or willful misconduct of the party
from which recovery is sought as determined by a final non-appealable order by
a court of competent jurisdiction. 
Neither Agent nor any Lender shall have any liability with respect to,
and Borrower and each other Credit Party hereby waive, release and agree not to
sue for, any special, indirect or consequential damages suffered by Borrower
and any other Credit Party in connection with, arising out of, or in any way
related to the Loan Documents or the transactions contemplated thereby.

 

9.12.                       Construction. 
Agent, each Lender, Borrower and each other Credit Party acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review the Loan Documents with its legal
counsel and that the Loan Documents shall be construed as if jointly drafted by
Agent, each Lender, Borrower and each other Credit Party.

 

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

 

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

 

71

 

9.15.                       WAIVER OF JURY TRIAL. 
BORROWER, CREDIT PARTIES, AGENT AND EACH LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  BORROWER, CREDIT PARTIES, AGENT AND EACH
LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. 
BORROWER, CREDIT PARTIES, AGENT AND EACH LENDER WARRANT AND REPRESENT
THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

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

 

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

 

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

 

9.19.                       Replacement of Lenders.

 

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

 

72

 

(i)                                     Borrower
may obtain, at Borrower’s expense, a replacement Lender (“Replacement Lender”)
for such Affected Lender, which Replacement Lender shall be reasonably
satisfactory to Agent.  In the event
Borrower obtains a Replacement Lender that will purchase all outstanding
Obligations owed to such Affected Lender and assume its Commitments hereunder
within ninety (90) days following notice of Borrower’s intention to do so, the
Affected Lender shall sell and assign all of its rights and delegate all of its
obligations under this Agreement to such Replacement Lender in accordance with
the provisions of Section 8.1, provided that Borrower has
reimbursed such Affected Lender for any administrative fee payable pursuant to Section 8.1
and, in any case where such replacement occurs as the result of a demand for
payment pursuant to Section 1.8 or 1.9, paid all amounts
required to be paid to such Affected Lender pursuant to Section 1.8
or 1.9 through the date of such sale and assignment; or

 

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

 

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

 

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

 

73

 

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

 

9.21.                       Subordination of
Intercompany Debt.

 

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

 

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

 

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

 

9.22.                       Parties Including Trustees; Bankruptcy Court
Proceedings.  This Agreement, the other Loan Documents,
and all Liens and other rights and privileges created hereby or pursuant hereto
or to any other Loan Document shall be binding upon each Credit Party, the
estate of each Borrower, and any trustee, other estate representative or any
successor in interest of Borrower in any Prepackaged Chapter 11 Case or
any subsequent case commenced under chapter 7 of the Bankruptcy Code, and
shall not be subject to Section 365 of the Bankruptcy Code.  This Agreement and the other Loan Documents
shall be binding upon, and inure to the benefit of, the successors of Agent and
Lenders and their respective assigns, transferees and endorsees.  The

 

74

 

Liens created by this Agreement and
the other Loan Documents shall be and remain valid and perfected in the event
of the substantive consolidation or conversion of any Prepackaged
Chapter 11 Case or any other bankruptcy case of any Credit Party to a case
under chapter 7 of the Bankruptcy Code or in the event of dismissal of any
Prepackaged Chapter 11 Case or the release of any Collateral from the
jurisdiction of the Bankruptcy Court for any reason, without the necessity that
Agent file financing statements or otherwise perfect its Liens under applicable
law.  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.

 

9.23.                       Pre-Petition Loan Documents.  Borrower
and each other Credit Party hereby agrees that (i) this Agreement is
separate and distinct from the Pre-Petition Credit Agreement and (ii) the
Pre-Petition Credit Agreement is in full force and effect.  Borrower and each other Credit Party further
agrees that by entering into this Agreement, Lenders do not waive any Default
or Event of Default under the Pre-Petition Loan Documents or any of their
liens, claims, priorities, rights and remedies thereunder.

 

[Signature Pages Follow]

 

75

 

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

 

 

	
   

  	
  VERTIS, INC.,

  
	
   

  	
  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:
  

  	
  Chief
  Legal Officer

  
					

 

 

	
   

  	
  CREDIT PARTIES:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENTERON GROUP LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WEBCRAFT, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
						

 

 

	
   

  	
  WEBCRAFT CHEMICALS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  USA DIRECT, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VERTIS MAILING, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
						

 

 

	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION,

  
	
   

  	
  as
  Agent, an L/C Issuer and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alan Garson

  
	
   

  	
   

  	
  Alan
  Garson

  
	
   

  	
   

  	
  Its
  Duly Authorized Signatory

  

 

 

	
   

  	
  BANK
  OF AMERICA, N.A.,

  
	
   

  	
  as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert Anchundia

  
	
   

  	
  Name:

  	
  Robert
  Anchundia

  
	
   

  	
  Title:

  	
  Vice
  President

  
					

 

 

ANNEX
A

to

CREDIT AGREEMENT

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

Acquired Business means ACG Holdings, Inc. and its subsidiaries.

 

Acquisition means Borrower’s merger with the Acquired Business
through Borrower’s acquisition of all of Acquired Business’s issued and
outstanding capital stock.

 

Adequate
Protection Obligations
shall have the meaning ascribed to such term in the Interim Order or the Final
Order, as applicable.

 

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

 

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

 

 

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

 

Agreement means this Senior Secured, Priming and
Superpriority Debtor-In-Possession Credit Agreement (including all schedules,
subschedules, annexes and exhibits hereto), as the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

Ancillary
Noteholders Agreements means other
agreements with certain holders of Holdings’ Mezzanine Notes arising from the
Mezzanine Note and Warrant Purchase Agreement, dated as of December 7, 1999,
as amended, entered into by Borrower and/or one or more of Borrower’s
affiliates in connection with the Restructuring Agreement.

 

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

 

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

 

Applicable
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 1.2(a).

 

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

 

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

 

Applicable
Term Loan A 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 Term Loan A, as determined by
reference to Section 1.2(a).

 

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

 

 

Applicable
Term Loan B 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 Term Loan B, as determined by
reference to Section 1.2(a).

 

Approved Budget means
the aggregate, without duplication, of all items approved by Agent in its sole
discretion that are set forth in the budget attached to the Interim Order, as
modified or supplemented from time to time by additional budgets to which
Borrower and Agent mutually agree.

 

A/R Obligations Pre-Petition Lien means
the Lien existing as of the Petition Date of the A/R Securitization Provider to
secure its claim for the Surviving A/R Obligations encumbering the Purchased
Facility Assets.

 

A/R
Purchase means the
purchase by Borrower, fully and in cash, upon the entry of the Interim Order,
of the Purchased Facility Assets from Vertis Receivables under the condition
that Vertis Receivables use the proceeds thereof to pay finally, fully and in
cash, all obligations (other than the Surviving A/R Obligations) of Vertis
Receivables under the A/R Securitization Facility, such that the Purchased
Facility Assets shall be, on account of such final and full payment in cash,
free and clear of any and all Liens, claims, encumbrances and/or interests
(other than the Surviving A/R Obligations), and shall become the property of
the Borrower.

 

A/R
Securitization Facility
means the Receivables Funding and Administration Agreement, dated as of November 25,
2005, by and among Vertis Receivables, as borrower, the financial institutions
signatory thereto from time to time as lenders, and the A/R Securitization
Provider, as trustee, as amended, supplemented or modified to the date hereof.

 

A/R
Securitization Provider
means General Electric Capital Corporation, as a lender, swing line lender and
as administrative agent under the A/R Securitization Facility, together with
all successors, assigns and pledgees.

 

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

 

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

 

Bankruptcy
Code shall have the
meaning assigned to it in the recitals to this Agreement.

 

Bankruptcy Court shall
have the meaning assigned to it in the recitals to the Agreement.

 

Bankruptcy Rules shall
mean the Federal Rules of Bankruptcy Procedure, as the same may from time
to time be in effect and applicable to the Prepackaged Chapter 11 Case.

 

Borrower has the meaning ascribed to it in the
preamble to the Agreement.

 

 

Borrower
Pledge Agreement
means the Pledge Agreement of even date herewith executed by the Borrower in
favor of Agent, on behalf of itself and Lenders, pledging all Stock of its
Subsidiaries, other than Excluded Foreign Subsidiaries, and all Intercompany
Notes owing to or held by it.

 

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

 

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

 

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

 

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

 

Business
Plan means Borrower’s
business plan which shall include a financial forecast and Borrowing Base
utilization and Borrowing Availability forecast on a monthly basis through October 31,
2009, prepared by Borrower’s management.

 

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.

 

Carve-Out shall
have the meaning assigned to it in the Interim Order or the Final Order, as
applicable.

 

Cash
Equivalents
means:  (i) marketable securities (A) issued
or directly and unconditionally guaranteed as to interest and principal by the
United States government or (B) issued by any agency or instrumentality of
the United States government the obligations of which are backed by the full
faith and credit of the United States, in each case maturing not more than (1) year
after acquisition thereof; (ii) marketable direct obligations issued by
any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof, in each case maturing not
more than one year after acquisition thereof and having, at the time of
acquisition, a rating of at least A-1 from S&P or at least P-1 from Moody’s;
(iii) commercial paper maturing no more than one year from the date of
acquisition and, at the time of acquisition, having a rating of at least A-1 or
the equivalent thereof from S&P or at least P-1 or the equivalent thereof
from Moody’s; (iv) time deposits and certificates of deposit or bankers’
acceptances issued or accepted by any Lender or by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia that is at least (A) “adequately capitalized”
(as defined in the regulations of its primary Federal banking regulator) and (B) has
Tier 1 capital (as defined in such regulations) of not less 

 

 

than
$250,000,000, in each case maturing within one year after issuance or acceptance
thereof; and (v) shares of any money market mutual or similar funds that (A) has
substantially all of its assets invested continuously in the types of
investments referred to in clauses (i) through (iv) above, (B) has
net assets of not less than $500,000,000 and (C) has the highest rating
obtainable from either S&P or Moody’s.

 

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

 

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

 

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

 

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

 

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

 

Closing
Date means July 17,
2008.

 

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 Collateral
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to a
security interest or Lien in favor of Agent, on behalf of itself and Lenders,
to secure the Obligations or any portion thereof, including, without
limitation, subject to entry of the Final Order, avoidance actions of the
Borrower or any Guarantor under Chapter 5 of the Bankruptcy Code.

 

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

 

Collection
Account has the
meaning ascribed to it in Section 1.4(a).

 

Commitment Termination Date means
the earliest of (a) the Scheduled Commitment Termination Date, (b) the
date of termination of Lenders’ obligations to make Advances and to incur
Letter of Credit Obligations or permit existing Loans to remain outstanding
pursuant to Section 7.3, (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 Section 1.5(e), and
the permanent reduction of all Commitments to zero dollars ($0), (d) five (5) days
following the Petition Date if the Interim Order has not been entered by the
Bankruptcy Court by such date, (e) the date upon which the Interim Order
expires, unless the Final Order shall have been entered and become effective by
such date, and (f) the close of business on the first Business Day after
the entry of the Final Order, if by that time Borrower has not paid Agent the
fees required under the GE Capital Fee Letter, unless Agent agrees otherwise.

 

Commitments means (a) as to any Lender, the
aggregate of such Lender’s Revolving Loan Commitment, Term Loan A Commitment
and Term Loan B Commitment, each as set forth on Annex B to the Agreement or in
the most recent Assignment Agreement executed by such Lender and (b) as to
all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments, Term
Loan A Commitments and Term Loan B Commitments, which aggregate commitment
shall be Three Hundred Eighty Million Dollars ($380,000,000) as of the Closing
Date, as such Commitments may be reduced, amortized or adjusted from time to
time in accordance with this Agreement.

 

Committees shall
mean collectively, the official committee of unsecured creditors and any other
official committee formed, appointed, or approved in any Prepackaged
Chapter 11 Case and each of such Committees shall be referred to herein as
a Committee.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

Copyrights means all of the following now owned or
hereafter adopted or acquired by any Credit Party: (a) all copyrights and
General Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in 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 other
Person satisfying each of the following conditions: (i) which executes
this Agreement as a “Credit Party”, (ii) which executes a Guaranty, (iii) which
grants a Lien on all or substantially all of its assets to secure payment of
the Obligations and (iv) all of the Stock of which is pledged to Agent for
the benefit of itself and Lenders.

 

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

 

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

 

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

 

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

 

Disclosure
Schedules means the
Schedules prepared by Borrower and denominated in the index to the Agreement.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Section 4069
or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan
under Section 4041A of ERISA or the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) the
loss of a Qualified Plan’s qualification or tax exempt status; or (j) the
termination of a Plan described in Section 4064 of ERISA, in each case of
clauses (a) through (j), that individually or in the aggregate could
reasonably be expected to result in liabilities to the Credit Parties and their
ERISA Affiliates in excess of $500,000.

 

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

 

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

 

Evercore means Evercore Capital Partners L.P.

 

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

 

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

 

Excluded
Foreign Subsidiary
means any Foreign Subsidiary of Borrower (a) for which the failure to
include such subsidiary as “Excluded Foreign Subsidiary” hereunder would result
in materially adverse tax consequences to Borrower, the Guarantors and their
Subsidiaries (including such Foreign Subsidiary), taken as a whole, and (b) that
has not guarantied or pledged any of its assets or suffered a pledge of more
than 66% of its stock, with substantially similar tax consequences, to secure,
directly or indirectly, any Indebtedness (other than the Obligations) of
Borrower or any Guarantor (excluding such Foreign Subsidiary).

 

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

 

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

 

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

 

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

 

February 2003
Senior Subordinated Notes Indenture shall mean the Indenture, dated as of February 28, 2003 among
Vertis and the February 2003 Senior Subordinated Notes Indenture Trustee,
as in effect on the Closing Date and as the same may be amended, modified 

 

 

and/or
supplemented from time to time in accordance with the terms thereof and of the
Agreement.

 

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

 

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

 

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

 

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

 

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

 

Final Order means,
collectively, the order of the Bankruptcy Court entered in the Prepackaged
Chapter 11 Case after a final hearing under Bankruptcy Rule 4001(c)(2) or
such other procedures as approved by the Bankruptcy Court which order shall be
satisfactory in form and substance to Agent, and which order is in effect and
not stayed, together with all extensions, modifications and amendments thereto,
in form and substance satisfactory to Agent, which, among other matters but not
by way of limitation, authorizes the Borrower to obtain credit, incur (or
guaranty) Indebtedness, and grant Liens under this Agreement and the other Loan
Documents, as the case may be, provides for the super priority of Agent’s
claims and authorizes the use of cash collateral.

 

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

 

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

 

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

 

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

 

 

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

 

Fixed
Asset Appraisal means
a Non-Real Estate Fixed Asset Appraisal or a Real Estate Appraisal as the case
may be and as each of such terms is defined in Section 6.2(g).

 

Fixed
Charge Coverage Ratio
has the meaning ascribed to it in Section 6.1(a) of Schedule 1
to Annex E.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of such Credit Party or any computer bureau or service company from
time to time acting for such Credit Party.

 

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

 

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

 

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

 

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

 

Guarantors means Holdings, each Subsidiary of Borrower
(other than Excluded Foreign Subsidiaries and Vertis Receivables), and each
other Person, if any, that executes a guaranty or other similar agreement in
favor of Agent, for itself and the ratable benefit of Lenders, in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.

 

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

 

 

any fraction or by-product thereof, asbestos, polychlorinated biphenyls
(PCB’s), or any radioactive substance.

 

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

 

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

 

Holdings Pledge Agreement means the Pledge
Agreement of even date herewith executed by Holdings in favor of Agent, on
behalf of itself and Lenders, pledging all Stock of its Subsidiaries (other
than the Excluded Foreign
Subsidiaries).

 

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

 

Indemnitees has the meaning ascribed to it in Section 9.1.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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 the case of any LIBOR Period greater than one month in
duration, interest shall be payable at one month intervals and on the last day
of such LIBOR Period; and provided  further that, in addition to
the foregoing, each of (x) the date upon which all of the Commitments have
been terminated and the Loans have been paid in full and (y) the
Commitment Termination Date shall be deemed to be an “Interest Payment Date”
with respect to any interest that has then accrued under the Agreement.

 

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

 

Interim Order means,
collectively, the order of the Bankruptcy Court entered in the Prepackaged
Chapter 11 Case after an interim hearing (assuming satisfaction of the
standards prescribed in Section 364 of the Bankruptcy Code and Bankruptcy Rule 4001
and other applicable law), together with all extension, modifications, and
amendments thereto, in form and substance satisfactory to Agent, which, among
other matters but not by way of limitation, authorizes, on an interim basis,
Borrower to execute and perform under the terms of this Agreement and the other
Loan Documents.

 

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

 

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

 

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

 

 

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

 

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

 

IRS means the United States Internal Revenue
Service.

 

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

 

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

 

Lenders means GE Capital, the Revolving Lenders, the
Term Lenders, and, if any such Lender shall decide to assign all or any portion
of the Obligations pursuant to and in accordance with the terms of this
Agreement, the term “Lenders” shall include any assignee of such Lender.

 

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

 

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

 

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

 

LIBOR
Breakage Costs means
an amount equal to the amount of any losses, expenses, liabilities (including,
without limitation, any loss (including interest paid) and lost opportunity
cost (consisting of the present value of the difference between the LIBOR Rate
in effect for the Interest Period and any lower LIBOR Rate in effect at the
time of prepayment for the remainder of that Interest Period) in connection
with the re-employment of such funds) that any Lender may sustain as a result
of (i) any default by Borrower in making any borrowing of, conversion into
or continuation of any LIBOR Loan following Borrower’s delivery to Agent of any
LIBOR Loan request in respect thereof or (ii) any payment of a LIBOR Loan
on any day that is not the last day of the LIBOR Period applicable thereto
(regardless of the source of such prepayment and whether voluntary, by
acceleration or otherwise). For purposes of calculating amounts payable to a
Lender under Section 1.3(e), each Lender shall be deemed to have
actually 

 

 

funded its relevant LIBOR Loan through the purchase of a deposit
bearing interest at LIBOR in an amount equal to the amount of that LIBOR Loan
and having a maturity and repricing characteristics comparable to the relevant
LIBOR Period; provided, however, that each Lender may fund each
of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under Section 1.3(d).

 

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

 

LIBOR
Loans means an
Advance or Term 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 1.2(e); provided, that the foregoing
provision relating to LIBOR Periods is subject to the following:

 

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

 

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

 

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

 

(d)           Borrower 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 7 separate LIBOR Loans in existence at any
one time.

 

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

 

(a)           the offered rate for deposits in
United States Dollars for the applicable LIBOR Period that appears on Reuters
Screen LIBOR 01 Page 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;

 

provided,
that, at no time shall the LIBOR Rate with respect to the Term Loan A and the
Revolving Loan be deemed to be less than 3.00%.

 

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

 

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

 

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

 

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

 

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

 

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

 

Loans means the Revolving Loan, the Term Loans,
and the Swing Line Loan.

 

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, other than the filing of the Prepackaged Chapter 11 Cases on (a) the
business, assets, operations or financial or other condition of (i) Borrower
or (ii) the Credit Parties considered 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, (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, the lesser of (i) an amount equal to the
Revolving Loan Commitment of all Lenders as of that date, and (ii) prior
to the entry of the Final Order, the maximum amount of Revolving Loans and
Letter of Credit Obligations permitted by the Interim Order.

 

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

 

Merger
Agreement means that certain Agreement and Plan of Merger dated as of May 22, 2008
among Borrower, Holdings, Victory Merger Sub, LLC and ACG Holdings, Inc.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

Non-Primed Liens shall
have the meaning assigned to it in the Interim Order or the Final Order, as
applicable.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Pari
Passu Replacement Liens
means the Pre-Petition Agent/Revolver Replacement Lien and the Securitization
Provider Replacement Lien.

 

 

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

 

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

 

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

 

PBGC means the Pension Benefit Guaranty
Corporation.

 

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

 

Permitted
Encumbrances means
the following encumbrances: (a) Liens for taxes, assessments or
governmental charges or levies not yet due and payable or Liens for taxes,
assessments or governmental charges or levies being contested in good faith and
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, excluding federal income tax Liens and Liens in favor of
the PBGC under ERISA or to the extent that Borrower does not take action
(including, without limitation, by way of motion or application to the
Bankruptcy Court) to pay, and are permitted under the Bankruptcy Code to not
pay, such charges; (b) Liens in respect of property or assets of the
Borrower or any of its Subsidiaries imposed by law which were incurred in the
ordinary course of business consistent with past practices and which have not
arisen to secure Indebtedness for borrowed money, such as carriers’,
materialmen’s, warehousemen’s and mechanics’ Liens, statutory and common law
landlord’s Liens, and other similar Liens arising in the ordinary course of
business consistent with past practices; (c) Liens created by or pursuant
to the Interim Order, the Final Order, this Agreement, the Collateral Documents
or the other Loan Documents, including, without limitation, the Securities
Agreement; (d) Liens in existence on the Closing Date which are listed,
and the property subject thereto described, on Schedule 5.2, without
giving effect to any extensions or renewals thereof; (e) Liens arising
from judgments, decrees, awards or attachments in circumstances not
constituting an Event of Default, provided that the amount of cash and
property (determined on a fair market value basis) deposited or delivered to
secure the respective judgment or decree or subject to attachment shall not
exceed $1,000,000 in the aggregate at any time; (f) Liens (other than any
Lien imposed by ERISA) (1) incurred or deposits made in the ordinary
course of business in connection with general insurance maintained by the
Borrower and its Subsidiaries, (2) incurred or deposits made in the
ordinary course of business of the Borrower and its Subsidiaries in connection
with workers’ compensation, unemployment insurance and other types of social
security, (3) to secure the performance by the Borrower and its
Subsidiaries of tenders, statutory obligations (other than excise taxes),
surety, stay, customs and appeal bonds, statutory bonds, bids, leases,
government contracts, trade contracts, performance and return of money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money) to the extent incurred in the ordinary course of business, or (4) to
secure the performance by the Borrower and its Subsidiaries of leases of Real
Property, to the extent incurred or made in the ordinary course of business
consistent with past practices; 

 

 

(g) licenses, sublicenses, leases or subleases granted to third
Persons in the ordinary course of business not interfering in any material
respect with the business of the Borrower or any of its Subsidiaries; (h) easements,
rights-of-way, restrictions, minor defects or irregularities in title,
encroachments and other similar charges or encumbrances, in each case not
securing Indebtedness and not interfering in any material respect with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries; (i) Liens
arising from precautionary UCC financing statements regarding operating leases;
(j) Liens created pursuant to or in connection with leases or Capital
Leases permitted pursuant to this Agreement, provided that (1) such
Liens only serve to secure the payment of rent or Indebtedness arising under
such leases or Capital Leases and (2) the Liens encumbering the assets
leased or purported to be leased under such leases or Capital Leases do not
encumber any other assets of the Borrower or any of its Subsidiaries (other
than letters of credit, payment undertaking agreements, guaranteed investment
contracts, deposits of cash or Cash Equivalents and other credit support arrangements,
in each case having an aggregate value not exceeding the fair market value of
the assets leased or purported to be leased under such leases or Capital Leases
(each of such values determined at the time when the lease agreement relating
to the relevant lease or Capital Lease is signed and delivered)); (k) (1) those
liens, encumbrances, hypothecs and other matters affecting title to any Real
Property and found reasonably acceptable by the Agent or insured against by
title insurance, (2) as to any particular Real Property at any time, such
easements, encroachments, covenants, rights of way, minor defects,
irregularities or encumbrances on title which could not reasonably be expected
to materially impair such Real Property for the purpose for which it is held by
the mortgagor or grantor thereof, or the lien or hypothec held by the Agent, (3) zoning
and other municipal ordinances which are not violated in any material respect
by the existing improvements or the present use made by the mortgagor or grantor
thereof of the premises, (4) general real estate taxes and assessments not
yet delinquent, (5) any Lien that would be disclosed on a true, correct
and complete survey of the Real Property that does not materially affect the
use or enjoyment of the Real Property as it is currently being used, and (6) such
other similar items as the Agent may consent to (such consent not to be
unreasonably withheld); (l) Liens arising pursuant to purchase money
mortgages or security interests securing Indebtedness representing the purchase
price (or financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Closing Date, provided that (1) any
such Liens attach only to the assets so purchased, upgrades thereon and, if the
asset so purchased is an upgrade, the original asset itself (and such other
assets financed by the same financing source), (2) the Indebtedness (other
than Indebtedness incurred from the same financing source to purchase other
assets and excluding Indebtedness representing obligations to pay installation
and delivery charges for the property so purchased) secured by any such Lien
does not exceed 100% of the lesser of the fair market value or the purchase
price of the property being purchased at the time of the incurrence of such
Indebtedness and (3) the Indebtedness secured thereby is permitted to be
incurred pursuant to this Agreement; (m) Liens arising out of consignment
or similar arrangements for the sale of goods entered into by the Borrower or
any of its Subsidiaries in the ordinary course of business; (n) Liens
created pursuant to or in connection with the 2003 Senior Secured Debt
Documents; and (o) Liens securing Indebtedness or leases that refinance,
refund, extend, renew and/or replace Indebtedness or leases secured by Liens
described in clauses (a) through (n) above.

 

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).

 

 

Petition Date shall
have the meaning assigned to it in the recitals to this Agreement.

 

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.

 

Plan
of Reorganization
means the Joint Prepackaged Plan of Reorganization filed by Borrower and
Guarantors in the Prepackaged Chapter 11 Cases in substantially the form
solicited pursuant to the Disclosure Statement relating to the Joint
Prepackaged Plan of Reorganization of Vertis Holdings, Inc., et al. under chapter 11 of the Bankruptcy Code and the Joint
Prepackaged Plan of Reorganization of ACG Holdings, Inc.

 

Pledge
Agreements means the
Holdings Pledge Agreement, the Borrower Pledge Agreement, and any other pledge
agreement entered into after the Closing Date by any Credit Party.

 

Post-Petition means
the time period beginning immediately upon the filing of the Prepackaged
Chapter 11 Cases.

 

Post-Petition Indebtedness means
any or all Indebtedness of the Borrower incurred after the filing of the
Prepackaged Chapter 11 Cases.

 

Prepackaged Chapter 11 Case and Prepackaged
Chapter 11 Cases shall have the respective meanings assigned to them
in the recitals to the Agreement.

 

Pre-Petition means
the time period ending immediately prior to the filing of the Prepackaged
Chapter 11 Cases.

 

Pre-Petition Agent/Revolver Replacement
Lien shall have the meaning ascribed to such term in the Interim Order
or the Final Order, as applicable.

 

Pre-Petition Agreement Expenses means
unpaid fees, costs and expenses incurred by the Prior Agent under the
Pre-Petition Loan Documents (whether incurred prior or subsequent to the Petition
Date) and the indemnification rights or claims that the Prior Agent has or may
have under the Pre-Petition Loan Documents (whether incurred prior or
subsequent to the Petition Date).

 

Pre-Petition Accounts Receivable Borrowing
Base Amount means the amount of the “Net Residual Interest” (as such term is
defined in the Pre-Petition Credit Agreement) computed as of the Closing Date
before giving effect to the consummation of the A/R Purchase.

 

Pre-Petition Borrowing Base means
the “Borrowing Base” as such term is defined in the Pre-Petition Credit
Agreement.

 

Pre-Petition Credit Agreement shall
have the meaning assigned to it in the recitals to this Agreement.

 

 

Pre-Petition Indebtedness means
all Indebtedness of the Borrower outstanding on the Petition Date immediately
prior to the filing of the Prepackaged Chapter 11 Cases other than
Indebtedness under the Pre-Petition Credit Agreement.

 

Pre-Petition Lender Expense Claims means
the Pre-Petition Agreement Expenses and the Surviving A/R Obligations.

 

Pre-Petition Lender Replacement Liens means
the Pre-Petition Agent/Revolver Replacement Lien and the Pre-Petition Term
Replacement Lien.

 

Pre-Petition Letter of
Credit Obligations means, without duplication, all
obligations, whether direct or indirect, contingent or otherwise, due or not
due, in connection with the issuance of Pre-Petition Letters of Credit.

 

Pre-Petition Letters of
Credit means the letters of credit issued and outstanding on
the Closing Date under the Pre-Petition Credit Agreement.

 

Pre-Petition Loan Documents shall
have the meaning assigned to the term “Loan Documents” in the Pre-Petition
Credit Agreement.

 

Pre-Petition Revolving Credit Advances shall
mean the aggregate “Revolving Credit Advances” (as such term is defined in the
Pre-Petition Credit Agreement) outstanding on the Petition Date.

 

Pre-Petition Term Loans shall
mean the “Term Loans” (as such term is defined in the Pre-Petition Credit
Agreement) outstanding on the date hereof.

 

Pre-Petition Term Replacement Lien shall
have the meaning assigned to it in the Interim Order or the Final Order, as
applicable.

 

Prior Agent shall
mean the agent under the Pre-Petition Credit Agreement and other Pre-Petition
Loan Documents, including, without limitation, in its capacity, as “Collateral
Agent” under the “Existing Security Agreement” as such term is defined in the
Pre-Petition Credit Agreement.

 

Prior Lenders shall
mean the lenders under the Pre-Petition Credit Agreement.

 

Prior Lender Obligations means
all obligations of any Credit Party and any of their Subsidiaries to the Prior
Lenders pursuant to the Pre-Petition Credit Agreement, and all instruments and
documents executed pursuant thereto or in connection therewith.

 

Pro
Rata Share means with
respect to all matters relating to any Lender (a) with respect to the
Revolving Loan, the percentage obtained by dividing (i) the Revolving Loan
Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments
of all Lenders, (b) with respect to the Term Loan A, the percentage
obtained by dividing (i) the Term Loan A Commitment of that Lender by (ii) the
aggregate Term Loan A Commitments of all Lenders, (c) with respect to the
Term Loan B, the percentage obtained by dividing (i) the Term Loan B
Commitment of that Lender by (ii) the aggregate Term Loan B Commitments of
all Lenders, (d) with respect to all Loans, the percentage obtained by
dividing (i) the aggregate Commitments of that Lender by (ii) the
aggregate Commitments of all Lenders, and (e) with respect to all Loans 

 

 

on and after the Commitment Termination Date, the percentage obtained
by dividing (i) the aggregate outstanding principal balance of the Loans
held by that Lender, by (ii) the outstanding principal balance of the
Loans held by all Lenders, as any such percentages may be adjusted by
assignments pursuant to Section 8.1.

 

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

 

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

 

Purchased
Facility Assets means
all of the accounts receivable and all other assets owned as of the Petition
Date by Vertis Receivables.

 

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

 

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

 

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

 

Real
Estate has the
meaning ascribed to it in Section 3.13.

 

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 A/R
Purchase, the payment of all Fees, costs and expenses associated with all of
the foregoing and the execution and delivery of all of the Related Transactions
Documents.

 

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

 

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

 

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

 

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

 

Reserves means (a) a reserve or reserves in
the full amount of the Carve-Out as established by Agent on the Closing Date and
thereafter modified, as and to the extent, Agent determines to do so, (b) a
reserve in an amount equal to the difference (if positive) between (i) the
then outstanding principal balance of the Term Loan B minus (ii) the “Borrowing
Base” (as defined in the Pre-Petition Credit Agreement and as computed as set
forth on Schedule 1 to Exhibit 6.2(e) thereto, except that the
portion of such Borrowing Base comprised of the “Net Residual Interest
Available” shall be equal at all times to the Pre-Petition Accounts Receivable
Borrowing Base Amount) and (c) such other reserves against Eligible
Accounts or Borrowing Availability of Borrower that Agent may, in its
reasonable credit judgment, establish from time to time, including, without
limitation, a reserve for any adequate protection payments with respect to
interest accrued prior to the commencement of the Prepackaged Chapter 11 Cases
as set forth in the Interim Order or the Final Order.  Without limiting the generality of the
foregoing, Reserves established to ensure the payment of accrued interest
expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent’s
credit judgment.

 

Restricted
Payment means, with
respect to any Credit Party (a) the declaration or payment of any dividend
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets in respect of Stock; (b) any payment on
account of the purchase, redemption, defeasance, sinking fund or other
retirement of such Credit Party’s Stock or any other payment or distribution
made in respect thereof, either directly or indirectly; (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any Subordinated Debt; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase
or sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other
transfer of 

 

 

funds or other property to any Stockholder of such Credit Party other
than payment of compensation in the ordinary course of business to Stockholders
who are employees of such Credit Party; and (g) any payment of management
fees (or other fees of a similar nature), out-of-pocket expenses in connection
therewith and indemnities payable in connection with any management services,
consulting or like agreement by such Credit Party to any Stockholder of such
Credit Party or its Affiliates.

 

Restructuring means refinancing and restructuring the Borrower’s
senior secured indebtedness and its other secured and unsecured indebtedness.

 

Restructuring
Agreement means that certain Restructuring and
Lock-Up Agreement dated as of May 22, 2008 among, inter  alia,
Borrower, various of Borrower’s affiliates, the Acquired Business, certain
creditors of the Acquired Business, certain holders of the 2003 Senior Secured
Notes, certain holders of the 2002 Senior Notes, and certain holders of the February 2003
Senior Subordinated Notes.

 

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

 

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

 

Revolving
Lenders means those
Lenders having a Revolving Loan Commitment.

 

Revolving
Loan means, at any
time, the sum of (i) the aggregate amount of Revolving Credit Advances
outstanding to Borrower plus (ii) Swing Line Advances plus (iii) 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 Lender, the commitment of such Lender to make its Pro Rata
Share of Revolving Credit Advances or incur its Pro Rata Share of Letter of
Credit Obligations (including, in the case of the Swing Line Lender, its
commitment to make Swing Line Advances as a portion of its Revolving Loan
Commitment) as set forth on Annex B or in the most recent Assignment Agreement,
if any, executed by such Lender and (b) as to all Lenders, the aggregate
commitment of all Lenders to make the Revolving Credit Advances (including, in
the case of the Swing Line Lender, Swing Line Advances) or incur Letter of
Credit Obligations, which aggregate commitment shall be One Hundred Thirty
Million Dollars ($130,000,000) as of the Closing Date, as such amount may be
adjusted, if at all, from time to time in accordance with the Agreement.

 

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

 

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

 

 

Scheduled Commitment Termination Date means
the earlier of: (a) the date that is ninety (90) days after the filing of
the Prepackaged Chapter 11 Cases; or (b) the effective date of a plan
confirmed in the Prepackaged Chapter 11 Cases.

 

Securitization
Provider Replacement Lien means the lien granted under the Interim Order and the Final Order to
secure the repayment of the Surviving A/R Obligations.

 

Security
Agreement means the
Security Agreement of even date herewith executed by each Credit Party in favor
of Agent, on behalf of itself and Lenders, as the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

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

 

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

 

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

 

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.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

Surviving
A/R Obligations has
the meaning ascribed to it in Section 3.6(b).

 

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

 

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

 

Swing
Line Commitment means
the commitment of the Swing Line Lender to make Swing Line Advances as set
forth on Annex B to the Agreement, which commitment constitutes a
subfacility of the Revolving Loan Commitment of the Swing Line Lender and which
commitment on the Closing Date is $25,000,000.

 

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(b).

 

Tax
Returns means all
reports, returns, information returns, claims for refund, elections, estimated
Tax filings or payments, requests for extension, documents, statements,
declarations and certifications and other information required to be filed with
respect to Taxes, including attachments thereto and amendments thereof.

 

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

 

Tax
Sharing Agreement
means that certain Amended and Restated Tax Sharing Agreement, dated as of February 4,
2000, by and among the Credit Parties, certain other 

 

 

Subsidiaries of Holdings and the other parties named therein provided,
that, the provisions of Section 5.1(l) of the Agreement
shall be satisfied.

 

Term
Lenders means those
Lenders having a Term Loan Commitment.

 

Term
Loans means
collectively the Term Loan A and Term Loan B

 

Term
Loan A has the
meaning ascribed to it in Section 1.1(e).

 

Term
Loan B has the
meaning ascribed to it in Section 1.1(f).

 

Term
Loan A Commitment
means: (x) (a) as to any Term Loan A Lender, the commitment of such
Lender to make its Pro Rata Share of the Term Loan as set forth on Annex B
or in the most recent Assignment Agreement, if any, executed by such Lender and
(b) as to all Term Loan A Lenders, the aggregate commitment of all Lenders
to make (A) the Term Loan A, which aggregate commitment shall be Fifty
Million Dollars ($50,000,000) on the Closing Date, and (y) after the Term
Loans have been funded by the Term Loan A Lenders, (a) as to any Term Loan
A Lender, the Pro Rata Share of the outstanding principal amount of the Term
Loan owing to such Lender and (b) as to all Term Loan A Lenders, the
aggregate outstanding principal amount of the Term Loan A, which shall be Fifty
Million Dollars ($50,000,000) on the Closing Date, as such amount may be
reduced, if at all, from time to time in accordance with the Agreement.

 

Term
Loan B Commitment
means: (x) (a) as to any Term Loan B Lender, the commitment of such
Lender to make its Pro Rata Share of the Term Loan B as set forth on Annex B
or in the most recent Assignment Agreement, if any, executed by such Lender and
(b) as to all Term Loan B Lenders, the aggregate commitment of all Lenders
to make (A) the Term Loan B, which aggregate commitment shall be Two
Hundred Million Dollars ($200,000,000) on the Closing Date and (y) after
the Term Loans have been funded by the Term Loan B Lenders, (a) as to any
Term Loan B Lender, the Pro Rata Share of the outstanding principal amount of
the Term Loan owing to such Lender and (b) as to all Term Loan B Lenders,
the aggregate outstanding principal amount of the Term Loan B, which shall be
Two Hundred Million Dollars ($200,000,000), as such amount may be reduced, if
at all, from time to time in accordance with the Agreement.

 

Term
Loan A Lenders means
those Lenders having a Term Loan A Commitment.

 

Term
Loan B Lenders means
those Lenders having a Term Loan B Commitment.

 

Term
Notes has the meaning
ascribed to it in Section 1.1(f).

 

Termination
Date means the date on
which (a) the Loans have been repaid in full in cash, (b) all other
Obligations under the Agreement and the other Loan Documents have been
completely discharged or, in the case of covenants, the obligations to perform
such covenants have been terminated (other than contingent indemnification
obligations as to which no unsatisfied claim has been asserted), (c) all
Letter of Credit Obligations have been cash collateralized in the amount set
forth in Section 1.5(e), cancelled or, with the consent of Agent in
each instance, backed by standby letters of credit acceptable to Agent, (d) all
Commitments have been terminated and (e) Agent and Lenders have been
released by Credit Parties of all claims against Agent and Lenders.

 

 

THL shall mean Thomas H. Lee Partners L.P., a
Delaware limited partnership.

 

THL
Affiliates means THL
and any person that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, THL.

 

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

 

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

 

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

 

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

 

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

 

2002
Senior Debt means the
Indebtedness of Vertis evidenced by the 2002 Senior Notes.

 

2002
Senior Debt Documents
shall mean the 2002 Senior Notes, the 2002 Senior Notes Indenture and the other
documents and instruments executed and delivered with respect to the 2002
Senior Notes or the 2002 Senior Notes Indenture, in each case as in effect on
the Closing Date and as the same may be amended, modified and/or supplemented
from time to time in accordance with the terms thereof and of this Agreement.

 

2002
Senior Notes shall
mean those certain 10 7/8% Senior Notes due 2009 issued by Vertis under the
2002 Senior Debt Documents.

 

2002
Senior Notes Indenture
shall mean the Indenture, dated as of June 24, 2002 among Vertis and the
2002 Senior Notes Indenture Trustee, as in effect on the Closing Date and as
the same may be amended, modified and/or supplemented from time to time in
accordance with the terms thereof and of this Agreement.

 

2002
Senior Notes Indenture Trustee shall mean the trustee under the 2002 Senior Notes Indenture.

 

 

2003
Senior Secured Debt
means the Indebtedness of Vertis evidenced by the 2003 Senior Secured Notes.

 

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

 

2003
Senior Secured Notes
shall mean Vertis’ 9-3/4% 2003 Senior Secured Notes due April 1, 2009
issued pursuant to the 2003 Senior Secured Notes Indenture.

 

2003 Senior Secured Notes
Adequate Protection Obligations means the claims of the holders of
the 2003 Senior Secured Notes for (a) any
diminution in the value of their interests in the Collateral; and (b) prior
to an Event of Default, interest payments at the non-default contractual rate
under the 2003 Senior Secured Notes at such times and in such amounts as set
forth in the Interim Order and the Final Order.

 

2003 Senior Secured Notes
Indenture shall mean
the Indenture, dated as of June 6, 2003, among Vertis and the 2003 Senior
Secured Notes Indenture Trustee, as in effect on the Closing Date and as the
same may be amended, modified and/or supplemented from time to time in
accordance with the terms thereof and of this Agreement.

 

2003 Senior Secured Notes
Indenture Trustee
shall mean the trustee under the 2003 Senior Secured Notes Indenture.

 

2003
Senior Secured Notes Replacement Lien means
the lien granted in the Interim Order and the Final Order to secure the
repayment of the 2003 Senior Secured Notes Adequate Protection Obligations.

 

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

 

VDSL means Vertis Digital Services Limited, a
company incorporated under the laws of England and Wales and registered under
number 3526757.

 

Vertis means Vertis, Inc., a Delaware
corporation.

 

Vertis
Receivables means
Vertis Receivables II, LLC, a Delaware limited liability company.

 

VPS
Business means Vertis
Print Solutions in Chicago, Illinois, which handles accounts related to certain
short-run direct mail print activities.

 

 

Welfare
Plan means a Plan
described in Section 3(l) of ERISA.

 

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

 

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

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