MASTER EQUIPMENT LEASE AGREEMENT

Exhibit 10.6

C#: 13581[ILLEGIBLE]

L#: 13581[ILLEGIBLE]

Master Equipment Lease Agreement

[LOGO]

THIS MASTER EQUIPMENT LEASE AGREEMENT dated as of June 25, 2003 (“Master Lease”) is made by and between KEY EQUIPMENT FINANCE, a Division of Key Corporate Capital Inc., having an address at 68 South Pearl Street, Albany, NY 12207 (“Lessor”), and BLUE RIDGE PAPER PRODUCTS INC. with its chief executive offices located at 41 Main Street, Canton, NC 28718 (“Lessor”).

1.             Lease. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, Equipment, subject to and upon the terms set forth herein and in any Equipment Schedule executed in connection herewith (each, a “Schedule”).  Each Schedule shall constitute a separate and enforceable [ILLEGIBLE] incorporating of the terms of this Master Lease (each Schedule, together with this Master Lease as it relates to such Schedule, is referred to herein as a “Lease”).  If any term of a Schedule conflicts or is inconsistent with any term of this Master Lease, the terms of such Schedule shall govern.

2.             Definitions.   Unless the context otherwise requires, as used in the Lease, the following terms shall have the respective meanings indicated below and shall be equally applicable to both the singular and the plural forms thereof:

“ Equipment ” means each item of property designated on a Schedule that will be leased by Lessee pursuant to the Lease, together with all replacement parts, additions and accessories incorporated therein or affixed thereto.  Where rights to receive license fees for Software and charges for Services supplied or to be supplied to Lessee are included in the amount financed by Lessor under the Lease, references to leasing, purchases, ownership and administration of “Equipment” under the Lease shall be broadly interpreted to include such Financed Fees.

“ Fair Market Rental Value ” or “ Fair Market Sale Value ” means the value of Equipment for lease or sale.  In place and in continued use, which would be obtained in an arm’s length transaction between an informed and willing retail lessor or seller (under no compulsion to lease or sell) and an informed and willing retail [ILLEGIBLE] or buyer (under no compulsion to lease or purchase), assuming that Equipment is in the condition specified by Sections 10 and 11 hereof, as determined by the parties or, if the parties cannot agree, by an American Society of Appraisers certified appraiser selected by Lessor and paid for by Lessee.

“ Financed Fees ” means the Software license, usage, or other fees and the charges for Services, if any, specified on a Schedule.

“ Guarantor ” means any guarantor of Lessor’s obligations hereunder.

“ Initial Term Expiration Date ” shall have the meaning specified in the applicable Schedule.

“ Lease Documents ” means this Master Lease, a Schedule and all other documents relating to or provided in connection with a Lease, prepared by Lessor, and now or hereafter executed in connection herewith or therewith, as the same may be modified, amended, extended or replaced.

“ License Agreement ” means the software license agreement(s) between Lessee and Licensor relating to Software.

“ Licensor ” means the Supplier(s) of Software, solely in its (their) capacity as licensor of such Software.

“ Purchase Agreement ” means any purchase agreement or other contract between a Supplier and Lessee for the acquisition of Equipment to be leased or financed under a Lease.

“ Rent ” means the periodic payments due for the leasing of Equipment as set forth on the related Schedule and, where the cont??t hereof requires, all such additional amounts as may, from time to time, be payable under a Lease.  The term “Rent” shall include interim rent, if any, as described in Section 5 hereof.

“ Rent Commencement Date ” means, with respect to Equipment, the date on which (a) Lessor receives an executed Certificate of Acceptance for Equipment from Lessee or (b) Lessor disburses funds for the purchase of Equipment, as determined by Lessor in its sole discretion.

“ Rent Payment Date ” shall have the meaning specified in the applicable Schedule.

“ Services ” means all training, installation, transportation, handling, maintenance, custom programming, integration, technical consulting and support services relating to Equipment and specified on a Schedule.

“ Software ” means the software and all related documentation, corrections, updates and revisions used in connection with Equipment financed under a Schedule.

“ Stipulated Loss Value ” shall have the meaning specified in the applicable Schedule.

“ Supplier ” means the manufacturer or the vendor of the Equipment.

“ Term ” means the Initial Term or any Renewal Term, each as defined in Section 6 hereof, and any Extended Lease Term or interim Term, as defined in the applicable Schedule.

3.             Ordering Equipment.   Lessee hereby assigns to Lessor all of Lessee’s rights, but none of its obligations, under any Purchase Agreement related to a Lease.  Lessor may (a) accept such assignment from Lessee of Lessee’s rights, but none of Lessee’s obligations, under any such Purchase Agreement and/or (b) issue a purchase order for the Equipment to the Supplier, Lessee shall arrange for delivery of Equipment.  If Equipment is subject to an existing Purchase Agreement between Lessee and the Supplier, and Equipment has been delivered to Lessee as of the date of the Schedule applicable thereto, Lessee warrants that it has advised Lessor of the delivery date(s) of such Equipment Lessee hereby authorizes Lessor to complete each Schedule with the serial numbers and other identification data of Equipment associated therewith as such data is received by Lessor.

4.             Delivery and Acceptance.   Upon delivery to and acceptance by Lessee of any Equipment, Lessee shall execute and deliver to Lessor a Certificate of Acceptance in form acceptable to Lessor (“Certificate of Acceptance”).  LESSOR SHALL HAVE NO OBLIGATION TO ADVANCE ANY FUNDS HEREUNDER UNLESS AND UNTIL LESSOR RECEIVES A CERTIFICATE OF ACCEPTANCE FOR SUCH EQUIPMENT EXECUTED BY LESSEE.

5.             Rent Delinquent Payments. (a) Lessee shall pay Rent commencing on the Rent Commencement Date, and, unless otherwise set forth on the applicable Schedule, on the same day of each payment period thereafter for the balance of the Term Rent shall be due whether or not Lessee has received any notice that it is due, and all Rent shall be paid to Lessor at its address set forth on the Schedule, or as otherwise directed by Lessor in writing.

(b)  If Lessee fails to pay any Rent or other sums under the Lease on or before the date when the same becomes due, Lessee shall pay to Lessor (in addition to and not in lieu of other rights of Lessor) a late charge equal to the lessor of five percent of such delinquent amount or the maximum permitted by law.  Such late charge shall be payable by Lessee upon demand by Lessor and shall be deemed Rent hereunder.  Lessee acknowledges and agrees that the late charge (i) does not constitute interest, (ii) is an estimate of the costs Lessor will incur as a result of the late payment and (iii) is reasonable in amount.

6.             Term; Survival.   With respect to any Equipment, unless otherwise specified on a Schedule, the initial term of the Lease (the “Initial Term”) shall commence on the earlier of (a) the date risk of loss is transferred from the Supplier to Lessee or Lessor or (b) the date on which such Equipment is delivered to Lessee and, unless earlier terminated as provided herein, shall expire on the Initial Term Expiration Date.  Any renewal term of the Lease (individually, a “Renewal Term”) shall commence immediately upon the expiration of the Initial Term or any prior Renewal Term, as the case may be, and, unless earlier terminated as provided herein, shall expire on the last day of the period for which the final payment of Rent is due.  All obligations of Lessee hereunder shall survive the expiration, cancellation or other termination of the Term of each Lease.

7.             Location; Inspection; Labels.   Equipment shall be delivered to the location specified in the Schedule and shall not be removed therefrom without Lessor’s prior written consent.  Lessor shall have the right to enter upon the premises where the Equipment is located and inspect the Equipment at any reasonable time.  At Lessor’s request, Lessee shall (a) [ILLEGIBLE] permanent labels in a prominent place on Equipment stating Lessor’s interest in the Equipment, (b) keep such labels in good repair and condition and (c) provide Lessor with an inventory listing of all labeled Equipment within thirty days of such request.

8.             Non-Cancelable Lease.   THE LEASE IS A NET LEASE.  LESSEE’S OBLIGATION TO PAY RENT AND PERFORM ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY RIGHT OF SET OFF, COUNTERCLAIM, DEDUCTION, DEFENSE OR OTHER RIGHT LESSEE MAY HAVE AGAINST THE SUPPLIER, LESSOR OR ANY OTHER PARTY PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL PRECLUDE LESSEE FROM ASSERTING ANY SUCH CLAIMS IN A SEPARATE CAUSE OF ACTION.  LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES REPRESENTATIVE OR OTHER AGENT OF THE SUPPLIER IS AN AGENT OF LESSOR OR IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THE LEASE, AND NO SUCH WAIVER OR ALTERATION SHALL VARY THE TERMS OF THE LEASE, LESSOR IS NEITHER A SUPPLIER NOR A LICENSOR, AND LESSOR IS NOT RESPONSIBLE FOR REPAIRS, SERVICE OR DEFECTS IN EQUIPMENT, LESSEE AGREES NOT TO ASSERT AGAINST LESSOR ANY CLAIMS OR

Form No.: 94-100MELA.403a

1

INDICATIVE TERMS & CONDITIONS

(This is no t a commitment)

Agreed and Accepted this 25 day of June, 2003

Blue Ridge Paper Products, Inc.

DEFENSES LESSEE MAY HAVE WITH RESPECT TO EQUIPMENT, AND UNDERSTANDS THAT IT MAY ASSERT SUCH CLAIMS AGAINST SUPPLIE? OR LICENSOR.

9.             Use; Alterations.   (a) Lessee shall use Equipment lawfully and only in the manner for which it was designed and intended and so as to subject it [ILLEGIBLE] to ordinary wear and tear, Lessee shall comply with all applicable laws, Lessee shall immediately notify Lessor, in writing, upon becoming aware of any [ILLEGIBLE] ?? threatened investigation, claim or action by any governmental authority that could adversely affect Equipment, Lessor or the Lease.  Lessee, at its own expense? shall make such alterations, additions or modifications (each, a “Required Alteration”) to Equipment as may be required from time to time to meet the requirements of applicable law or a governmental body. All such Required Alterations shall immediately, and without further act, be deemed to [ILLEGIBLE] “Equipment” and be fully subject to the Lease as if originally leased hereunder. Except as otherwise permitted herein, Lessee shall not make any alterations ?? Equipment without Lessor’s prior written consent.

(b) Lessee, at its own expense, may from time to time add or install upgrades or attachments (each an “Upgrade”) to Equipment during the Term provided, that such Upgrades (i) are readily removable without causing material damage to Equipment, (ii) do not materially adversely affect the Fair Market Sale Value, the Fair Market Rental Value, residual value, productive capacity, utility or remaining useful life of Equipment and (iii) do not cause Equipment to become “limited use property” within the meaning of Revenue Procedure 2001-28, 2001-19 I.R.B. 1158 (or such other successor tax provision), as of the date ?? installation of such Upgrade. Any such Upgrades shall remain the property of Lessee.  Upon the expiration or earlier cancellation of the Lease, Lessee may, at its option, remove any such Upgrades and, upon such removal, shall restore Equipment to the condition required hereunder.

(c) If any Equipment covered under any Lease becomes attached or affixed to, or used in connection with, Equipment covered under another Le???? hereunder (a “Related Lease”), Lessee agrees that, if Lessee elects to exercise a purchase or renewal option under any such Lease, or if Lessee elects to return Equipment under any such Lease, then Lessor, in its sole discretion, may require that all Equipment leased under all Related Leases be similarly disposed of.

10.          Repairs and Maintenance. Lessee, at Lessee’s cost and expense, shall (a) keep Equipment in good repair, good operating condition, appearance and working order in compliance with the manufacturer’s recommendations and Lessee’s standard practices (but in no event less than industry practices), (b) take all actions necessary to ensure that the Equipment will be eligible, at the expiration of the Initial Term and any Renewal Term, for a standard, full service maintenance contract with the manufacturer, (c) property service all components of Equipment following the manufacturer’s written operating and servicing procedures, (d) enter into and keep in full force and effect during the Term a maintenance agreement covering the Equipment with the manufacturer, or a manufacturer-approved maintenance organization, to maintain, service and repair such Equipment, as otherwise required herein (but an alternate source of maintenance may be used by Lessee with Lessor’s prior written consent), (e) upon Lessor’s request furnish Lessor with an executed copy of any such maintenance agreement, and (f) replace any part of the Equipment that becomes unfit or unavailable for use from any cause (whether or not such replacement is covered by a maintenance agreement) with a replacement part that, in Lessor’s sole opinion, is of the same manufacture, value, remaining useful life and utility as the replaced part immediately preceding the replacement, assuming that such replaced part was in the condition required by this Lease. Replacement parts shall be free and clear of all liens, constitute Equipment and be fully subject to this Lease as if originally leased hereunder.

11.          Return of Equipment.   Except as otherwise provided in a Schedule, upon the expiration or earlier termination or cancellation of each Lease, Lessee, at its sole expense, shall de-install, assemble, pack properly and in accordance with the manufacturer’s instructions (under the supervision of persons acceptable to Lessor), including labeling of all components and hardware, and return to Lessor all, but not less than all, Equipment by delivering the Equipment to and unloading it at such location or with such carrier as Lessor shall specify, Lessee agrees that (a) Equipment, when returned, shall be in the condition required by the Lease, and (b) upon Lessor’s request, Lessee will obtain from the manufacturer (or other maintenance service provider previously approved by Lessor or manufacturer) a certificate stating that such Equipment qualifies for full maintenance service at the standard rules and terms then in effect.  If, in the opinion of Lessor, any Equipment fails to meet the standards set forth above.  Lessee agrees to pay, on demand, all costs and expenses incurred in connection with the repairing and restoring of such Equipment so as to meet such standards. If Lessee fails to return any Equipment as required hereunder, then all of Lessee’s obligations under the Lease (including, without limitation, Lessee’s obligation to pay Rent for the Equipment at the rental then applicable under the Lease) shall continue in full force and effect until such Equipment shall have been returned in the condition required under the Lease.

12.          Sublease and Assignment.   (a) LESSEE SHALL NOT, WITHOUT LESSOR’S PRIOR WRITTEN CONSENT, (i) SELL, ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THE LEASE, EQUIPMENT OR ANY INTEREST THEREIN, (ii) RENT, SUBLET OR LEND EQUIPMENT TO ANYONE OTHER THAN LESSEE OR LESSEE’S AFFILIATES OR (iii) PERMIT EQUIPMENT TO BE USED BY ANYONE OTHER THAN THEIR RESPECTIVE QUALIFIED EMPLOYEES.

(b) Lessor, at any time with or without notice to Lessee, may sell, transfer, assign and/or grant a security interest in all or any part of Lessor’s interest in each Lease or any Equipment (each, a “Lessor Transfer”). Any purchaser, transferee, assignee or secured party of Lessor (each a “Lessor Assignee”) shall have and may exercise all of Lessor’s rights hereunder with respect to the items to which any such Lessor Transfer relates, and Lessee shall not assert against any Lessor Assignee any claim that Lessee may have against Lessor provided, Lessee may assert any such claim in a separate action against Lessor.  Upon written notice of a Lessor Transfer, Lessee shall promptly acknowledge in writing its obligations under the applicable Lease, shall comply with the written directions or demands of any Lessor Assignee and shall make all payments due under the applicable Schedule as directed in writing by the Lessor Assignee. Following such Lessor Transfer, the term “Lessor” shall be deemed to include or refer to each Lessor Assignee. Lessee will provide reasonable assistance to Lessor to complete any transaction contemplated by this subsection (b).

(c) Subject to the restriction on assignment contained in subsection (a), the Lease Documents shall inure to the benefit of, and are binding upon, the successors and assigns of the parties thereto including, without limitation, each person who becomes bound thereto as a “new debtor” as set forth in the Uniform Commercial Code (“UCC”).

13.          Risk of Loss; Damage to Equipment. (a) Lessee shall bear the entire risk of loss (including without limitation, theft, destruction, disappearance of or damage to Equipment from any cause whatsoever), whether or not insured against, during the Term of each Lease and until Equipment is returned to Lessor in accordance with Section 11 hereof. No such loss shall relieve Lessee of the obligation to pay Rent or of any other obligation under the related Lease.

(b) If any Equipment is lost, stolen or damaged beyond repair, or [ILLEGIBLE], seized or the use and/or title thereof requisitioned to someone other than Lessee (any such event being a “Total Loss”), Lessee shall immediately notify Lessor of such event. On the next Rent Payment Date following the occurrence of the Total Loss, at Lessor’s option, Lessee shall either (i) replace Equipment with equipment that, in Lessor’s sole opinion, is of the same manufacture, value, remaining useful life and utility as the replaced Equipment immediately preceding the replacement, assuming such replaced Equipment was in the condition required by the Lease or (ii) pay to Lessor the sum of (A) all Rent due and owing under the Lease with respect to such Equipment (at the time of such payment) plus (B) the Stipulated Loss Value for the Equipment as of that Rent Payment Date. If Lessor elects to allow replacement of Equipment as set forth in subsection (i) above, Lessee shall cause the Supplier of such replacement equipment to deliver to Lessor a bill of sale for such equipment free and clear of all liens and encumbrances, and such replacement equipment shall become Equipment subject to the applicable Lease.  Upon Lessor’s receipt of the bill of sale or the amounts specified in subsection (?) above.  Lessee shall be entitled to Lessor’s interest in the replaced Equipment, in its then condition and location, “as is” and “where is,” without any warranties, express or implied.

14.          Insurance.   (a) Lessee shall, at all times during the Term of each Lease and at Lessee’s own cost and expense, maintain (i) insurance against all risks of physical los