LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT

Exhibit 4.11

EXECUTION VERSION

 

LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT

dated as of

July 2, 2009,

among

BANK OF AMERICA, N.A.,

as ABL Agent,

U.S. BANK NATIONAL ASSOCIATION,

as Noteholder Collateral Trustee,

SOLO CUP COMPANY

SOLO CUP OPERATING CORPORATION

and

the Subsidiaries of Solo Cup Company named herein

 

 

1

LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT, dated as of July 2, 2009 (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, this “ Agreement ”), among BANK OF AMERICA, N.A., as agent for the ABL Secured Parties referred to herein (in such capacity, and together with its successors in such capacity, the “ Original ABL Agent ”), U.S. BANK NATIONAL ASSOCIATION, as collateral trustee for the Priority Lien Secured Parties and the Subordinated Lien Secured Parties referred to herein (in such capacity, and together with its successors in such capacity, the “ Original Noteholder Collateral Trustee ”), SOLO CUP COMPANY ( “Solo ”), SOLO CUP OPERATING CORPORATION (“ SCOC ” and, together with Solo, the “ Issuers ”) and the subsidiaries of Solo named herein.

Reference is made to (a) the ABL Credit Agreement, and (b) the Indenture governing the Indenture Notes.

In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the ABL Agent (for itself and on behalf of the ABL Secured Parties), the Noteholder Collateral Trustee (for itself and on behalf of the Indenture Priority Lien Secured Parties, the Additional Priority Lien Secured Parties, if any, and the Subordinated Lien Secured Parties, if any), the Issuers and the subsidiaries of the Issuers party hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Construction; Certain Defined Terms . (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, other document, statute or regulation herein shall be construed as referring to such agreement, instrument, other document, statute or regulation as from time to time amended, supplemented or otherwise modified, (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, but shall not be deemed to include the subsidiaries of such Person unless express reference is made to such subsidiaries, (iii) the words “herein,” “hereof and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections and Annexes shall be construed to refer to Articles, Sections and Annexes of this Agreement, (v) unless otherwise expressly qualified herein, the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (vi) the term “or” is not exclusive.

 

1

(b) All terms used in this Agreement that are defined in Article 1, 8 or 9 of the New York UCC (whether capitalized herein or not) and not otherwise defined herein have the meanings assigned to them in Article 1, 8 or 9 of the New York UCC. If a term is defined in Article 9 of the New York UCC and another Article of the UCC, such term shall have the meaning assigned to it in Article 9 of the New York UCC.

(c) Unless otherwise set forth herein, all references herein to the Noteholder Collateral Trustee shall be deemed to refer to the Noteholder Collateral Trustee in its capacity as collateral trustee under the Noteholder Collateral Trust Agreement.

(d) As used in this Agreement, the following terms have the meanings specified below:

“ ABL Agent ” means the Original ABL Agent, and, from and after the date of execution and delivery of an ABL Substitute Facility, the agent, collateral agent, trustee or other representative of the lenders or holders of the indebtedness and other Obligations evidenced thereunder or governed thereby, in each case, together with its successors in such capacity.

“ ABL Credit Agreement ” means the Loan Agreement, dated as of July 2, 2009, among each Borrower named therein, the Administrative Agent, the ABL Agent, the lenders party thereto from time to time and the other agents named therein, as amended, restated, adjusted, waived, renewed, extended, supplemented or otherwise modified from time to time and any credit agreement, loan agreement, note agreement, promissory note, indenture or any other agreement or instrument evidencing or governing the terms of any ABL Substitute Facility.

“ ABL Debt” means the principal amount of indebtedness for borrowed money and letters of credit incurred under the ABL Debt Documents in an aggregate principal amount (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of Solo and its Restricted Subsidiaries thereunder) not to exceed, as of any date of incurrence, the ABL Debt Cap as of such date of incurrence; provided that Banking Product Obligations and Hedging Obligations will not be treated as ABL Debt.

“ ABL Debt Cap ” means as of any date of incurrence of any ABL Debt, an aggregate principal amount not to exceed the greatest of (i) $275,000,000, (ii) the amount of the Borrowing Base as of such date of incurrence, and (iii) the maximum aggregate principal amount of ABL Debt permitted to be incurred under all Secured Documents as of such date; provided that the ABL Debt Cap may be reduced at any time by an amendment to this Agreement executed by the ABL Agent and the Issuers without the consent of the Noteholder Collateral Trustee.

“ ABL Debt Documents ” means the ABL Credit Agreement, the ABL Security Documents, the other “Loan Documents” (as defined in the ABL Credit Agreement) and all other loan documents, notes, guarantees, instruments and agreements governing or evidencing, or executed or delivered in connection with, any ABL Substitute Facility.

 

2

“ ABL Debt Obligations ” means ABL Debt incurred or arising under the ABL Debt Documents and all other “Obligations” as defined in the ABL Credit Agreement (excluding any such Obligations that would constitute ABL Debt), including:

(a) Banking Product Obligations of either of the Issuers or any other Grantor relating to services, provided to either of the Issuers or any other Grantor, that are secured, or intended to be secured, by the ABL Security Documents if the provider of such Banking Product Obligations has agreed to be bound by the terms of this Agreement or its interest in the ABL First Lien Collateral is subject to the terms of this Agreement; and

(b) Hedging Obligations that are secured, or intended to be secured, under the ABL Security Documents if the provider of such Hedging Obligations has agreed to be bound by the terms of this Agreement or its interest in the ABL First Lien Collateral is subject to the terms of this Agreement.

“ ABL Facility Collateral ” means all assets and properties subject to Liens created by the ABL Security Documents to secure the ABL Debt Obligations.

“ ABL First Lien Collateral ” means all present and future right, title and interest of the Issuers and the other Grantors in and to the following, whether now owned or hereafter acquired, existing or arising, and wherever located:

(a) accounts and payment intangibles, including tax refunds, but excluding payment intangibles that constitute identifiable proceeds of Noteholder First Lien Collateral;

(b) inventory and indebtedness owed to Solo or any of its Subsidiaries that arises from cash advances to enable the obligor thereof to acquire inventory;

(c) deposit accounts, commodity accounts, securities accounts and lock-boxes, including all money and certificated securities, uncertificated securities (other than as each may relate to Capital Stock of the Issuers or the other Grantors), securities entitlements and investment property credited thereto or deposited therein (including all cash, marketable securities and other funds held in or on deposit in any deposit account, commodity account or securities account), instruments, including intercompany notes, chattel paper and all cash and cash equivalents, including cash and cash equivalents securing reimbursement obligations in respect of letters of credit or other ABL Debt Obligations;

(d) general intangibles pertaining to the other items of property included within clauses (a), (b), (c), (e) and (f) of this definition;

 

3

(e) books and records, supporting obligations, documents and related letters of credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to any of the foregoing; and

(f) all substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of all or any of the foregoing;

except to the extent that any item of property included in clauses (a) through (f) constitutes an Excluded Asset; provided that in no case shall ABL First Lien Collateral include any identifiable cash proceeds from a sale, lease, conveyance or other disposition of any Noteholder First Lien Collateral that has been deposited in the Collateral Proceeds Account in accordance with the terms of the Indenture, until such time as such cash proceeds are released therefrom in accordance with the terms of the Indenture; provided, further , that in the case of any Grantor that is organized under the laws of any part of the United Kingdom, the description of items of property referred to in clauses (a) through (f) above shall be subject to adjustment to reflect the classification of assets used under the laws of the applicable part of the United Kingdom and to reflect the categories of assets that are subject to the Security Documents governing such Grantors.

“ ABL Liens ” means Liens on the ABL Facility Collateral created under the ABL Security Documents to secure the ABL Debt Obligations (including Liens on such Collateral under the security documents associated with any ABL Substitute Facility).

“ ABL Secured Parties ” means, at any time, the ABL Agent, the Administrative Agent, each lender or issuing bank under the ABL Credit Agreement, each holder, provider or obligee of any Hedging Obligations and Banking Product Obligations that is a lender under the ABL Credit Agreement or an Affiliate (as defined herein or in the ABL Credit Agreement) thereof and is a secured party (or a party entitled to the benefits of the security) under any ABL Debt Document, the beneficiaries of each indemnification obligation undertaken by any Grantor under any ABL Debt Document, each other Person that provides letters of credit, guarantees or other credit support related thereto under any ABL Debt Document and each other holder of, or obligee in respect of, any ABL Debt Obligations (including pursuant to an ABL Substitute Facility), in each case to the extent designated as a secured party (or a party entitled to the benefits of the security) under any ABL Debt Document outstanding at such time.

“ ABL Security Documents ” means the ABL Credit Agreement (insofar as the same grants a Lien on the Collateral), each agreement listed in part A of Exhibit C hereto, and any other security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, control agreements, guarantees, notes or any other documents or instruments now existing or entered into after the date hereof that create Liens on any assets or properties of any Grantor or any of its subsidiaries to secure any ABL Debt Obligations (including any such agreements, assignments, mortgages, deeds of trust and other documents or instruments associated with any ABL Substitute Facility).

 

4

“ ABL Substitute Facility ” means any facility with respect to which the requirements contained in Section 2.10(a) of this Agreement have been satisfied and that Replaces the ABL Credit Agreement then in existence. For the avoidance of doubt, no ABL Substitute Facility shall be required to be a revolving or asset-based loan facility and may be a facility evidenced or governed by a credit agreement, loan agreement, note agreement, promissory note, indenture or any other agreement or instrument; provided that any ABL Lien securing such ABL Substitute Facility shall be subject to the terms of this Agreement for all purposes (including the lien priorities as set forth herein as of the date hereof).

“ Additional Priority Lien Debt Documents ” means the Additional Priority Lien Debt Facility and the Additional Priority Lien Security Documents.

“ Additional Priority Lien Security Documents ” means the Additional Priority Lien Debt Facility (insofar as the same grants a Lien on the Collateral) and all collateral trust agreements, security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, control agreements, guarantees, notes and any other documents or instruments now existing or entered into after the date hereof that create Liens on any assets or properties of any Grantor or any of its subsidiaries to secure any Obligations of the Grantors owed thereunder to any Additional Priority Lien Secured Parties.

“ Additional Priority Lien Debt Facility ” means one or more debt facilities, commercial paper facilities or indentures for which the requirements of Section 2.10(b) of this Agreement have been satisfied, in each case with banks, other lenders or trustees, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit, notes or other borrowings, in each case, as amended, restated, modified, renewed, refunded, restated, restructured, increased, supplemented, replaced or refinanced in whole or in part from time to time in accordance with each applicable Secured Document; provided that neither the ABL Credit Agreement nor any ABL Substitute Facility shall constitute an Additional Priority Lien Debt Facility at any time.

“ Additional Priority Lien Debt Obligations ” means, with respect to any Grantor, any obligations of such Grantor owed to any Additional Priority Lien Secured Party (or any of its Affiliates) in respect of the Additional Priority Lien Debt Documents.

“ Additional Priority Lien Secured Parties ” means, at any time, the Noteholder Collateral Trustee, the trustee, agent or other representative of the holders of any Series of Priority Lien Debt who maintains the transfer register for such Series of Priority Lien Debt, the beneficiaries of each indemnification obligation undertaken by any Grantor under any Additional Priority Lien Debt Document and each other holder of, or obligee in respect of, any holder or lender pursuant to any Series of Priority Lien Debt outstanding at such time; provided that the Indenture Priority Lien Secured Parties shall not be deemed Additional Priority Lien Secured Parties.

 

5

“ Additional Secured Debt ” has the meaning assigned to that term in Section 2.10(b).

“ Administrative Agent ” means Bank of America, N.A., in its capacity as Administrative Agent under the ABL Credit Agreement, and its successors in such capacity, and any agent, trustee or other representative representing holders or lenders under any ABL Substitute Facility.

“ Affiliate ” of any specified Person means (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (b) any executive officer or director of such specified Person. For purposes of this definition, “ control ,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms “ controlling ,” “ controlled by ” and “ under common control with ” shall have correlative meanings.

“ Appointing Collateral Agent ” has the meaning assigned to that term in Section 2.14(a).

“ Approved Administrator ” means a qualified insolvency practitioner employed by one of PricewaterhouseCoopers, Ernst & Young, KPMG or Deloitte (or any amalgamation of the same or their successors) or such other independent public accountants of international standing as is agreed between the Representatives.

“ Banking Product Obligations ” means, with respect to any Grantor, any obligations of such Grantor owed to any Person in respect of treasury management services (including, without limitation, services in connection with operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depositary, information reporting, lock-box and stop payment services), commercial credit card and merchant card services, stored valued card services, other cash management services, or lock-box leases and other banking products or services related to any of the foregoing.

“ Bankruptcy Code ” means Title 11 of the United States Code.

“ Board of Directors ” means (a) with respect to a corporation, the board of directors of the corporation; (b) with respect to a partnership, the board of directors of the general partner of the partnership; and (c) with respect to any other Person, the board or committee of such Person serving a similar function.

“ Borrower ” means, collectively, each of Solo, SCOC and the domestic subsidiaries of Solo that are borrowers under the ABL Credit Agreement.

 

6

“ Borrowing Base ” means, as of any date, an amount equal to:

(a) 85% of the face amount of all accounts receivable owned by Solo and its Restricted Subsidiaries as of the end of the most recent month preceding such date for which internal financial statements are available that were not more than 180 days past due; plus

(b) 65% of the book value of all inventory owned by Solo and its Restricted Subsidiaries as of the end of the most recent fiscal month preceding such date for which internal financial statements are available.

“ Capital Stock ” means (a) in the case of a corporation, corporate stock, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited), and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“ Class ” means (a) in the case of Subordinated Lien Debt, every Series of Subordinated Lien Debt, taken together, and (b) in the case of Priority Lien Debt, every Series of Priority Lien Debt, taken together.

“ Collateral ” means all of the assets and property of any Grantor, whether real, personal or mixed, constituting the ABL Facility Collateral and the Noteholder Collateral.

“ Collateral Proceeds Account ” means one or more deposit accounts or securities accounts established or maintained by any Issuer or the Noteholder Collateral Trustee or its agent for the sole purpose of holding the proceeds of any sale or other disposition of any Noteholder First Lien Collateral that are required to be held in trust in such account or accounts pursuant to the terms of the Indenture as in effect on the date hereof (or as modified from time to time to the extent such modifications, taken as a whole, are not materially adverse to the ABL Secured Parties) or pursuant to the documentation governing any other Priority Lien Document that contains comparable provisions that are not materially adverse to the ABL Secured Parties.

“ Discharge of Senior Secured Debt Obligations ” means, with respect to any particular Senior Secured Obligations, the occurrence of all of the following:

(a) termination or expiration of all commitments to extend credit that would constitute such Senior Secured Obligations;

(b) payment in full in cash of the principal of and interest and premium (if any) on all such Senior Secured Obligations (other than any undrawn letters of credit);

(c) discharge or cash collateralization (at the lower of (i) 105% of the aggregate undrawn amount, and (ii) the percentage of the aggregate undrawn amount required for release of liens under the terms of the applicable Senior Documents) of all outstanding letters of credit constituting such Senior Secured Obligations; and

 

7

(d) payment in full in cash of all other such Senior Secured Obligations that are outstanding and unpaid at the time the principal of and interest and premium on all such Senior Secured Obligations are paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or demand for payment has been made at such time); provided that the Discharge of Senior Secured Debt Obligations shall not be deemed to have occurred in connection with a Replacement as contemplated by Section 2.10(a).

“ Equally and Ratably ” means, in reference to sharing of Liens or proceeds thereof as between holders of any Priority Lien Obligations or Subordinated Lien Obligations within the same Class, that such Liens or proceeds:

(a) will be allocated and distributed first to the Noteholder Collateral Trustee or Secured Debt Representative, as the case may be, for each outstanding Series of Secured Debt within that Class, for the account of the holders of such Series of Secured Debt, ratably in proportion to the principal of, and interest and premium (if any) and Special Interest (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made on such letters of credit) on, each outstanding Series of Secured Debt within that Class when the allocation or distribution is made, and thereafter; and

(b) will be allocated and distributed (if any remain after payment in full of all of the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made on such letters of credit), on all outstanding Priority Lien Obligations or Subordinated Lien Obligations within that Class) to the Noteholder Collateral Trustee or Secured Debt Representative, as the case may be, for each outstanding Series of Secured Debt within that Class, for the account of the holders of any remaining Priority Lien Obligations or Subordinated Lien Obligations, as the case may be, within that Class, ratably in proportion to the aggregate unpaid amount of such remaining Priority Lien Obligations or Subordinated Lien Obligations within that Class due and demanded (with written notice to the Noteholder Collateral Trustee or the Secured Debt Representative, as the case may be) prior to the date such distribution is made.

“ Event of Default ” means an “Event of Default” under and as defined in the ABL Credit Agreement, the Indenture, any Additional Priority Lien Debt Documents or any Subordinated Lien Documents, as the context may require.

“ Excluded Assets ” means each of the following:

(a) all interests in real property other than fee interests and other interests appurtenant thereto;

(b) fee interests in real property if the greater of the cost or the book value of such fee interest is less than $1,000,000;

 

8

(c) any property or asset to the extent that the grant of a Lien under the Security Documents in such property or asset is prohibited by applicable law or requires any consent of any governmental authority not obtained pursuant to applicable law; provided that such property or asset will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and will cease to be an Excluded Asset and will become subject to the Lien granted under the Security Documents, immediately and automatically, at such time as such consequences will no longer result;

(d) any lease, license, contract, property right or agreement to which either of the Issuers or any Grantor is a party or any of its rights or interests thereunder only to the extent and only for so long as the grant of a Lien under the Security Documents will constitute or result in a breach, termination or default under or requires any consent not obtained under any such lease, license, contract, agreement or property right (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); provided that such lease, license, contract, property right or agreement will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and will cease to be an Excluded Asset and will become subject to the Lien granted under the Security Documents, immediately and automatically, at such time as such consequences will no longer result;

(e) any motor vehicles, vessels and aircraft, or other property subject to a certificate of title statute of any jurisdiction;

(f) cash or cash equivalents (or deposits or securities accounts that solely contain such cash or cash equivalents) (i) securing reimbursement obligations under letters of credit or surety bonds (other than, in the case of ABL Collateral, reimbursement obligations in respect of letters of credit securing or constituting ABL Debt Obligations), (ii) solely consisting of earnest money deposits made or received in connection with any disposition of property or assets or in connection with any investment or (iii) securing Hedging Obligations, in each case to the extent permitted under all Secured Documents;

(g) assets or property subject to purchase money liens or capital leases permitted to be incurred under all Secured Documents, to the extent a Lien on such assets or property is not permitted, under the terms of the documents governing such purchase money liens, purchase money indebtedness or capital leases, to be created to secure any Secured Debt Obligations;

(h) all “securities” of any of the Issuers’ “affiliates” (as the terms “securities” and “affiliates” are used in Rule 3-16 of Regulation S-X under the Securities Act of 1933, as amended);

 

9

(i) Capital Stock in any joint venture with a third party that is not an Affiliate, to the extent a pledge of such Capital Stock is prohibited by the documents governing such joint venture;

(j) the real property located at 1951 Highway 304, Belen, New Mexico, the real property located at 177 Florence Street, Leominster, Massachusetts, and the real property located at 1900 S. Clark Road, Havre de Grace, Maryland, in each case, including all fixtures and improvements located thereon; and

(k) the real property located at 3333 East 87th Street, Chicago, Illinois (formerly known as the USX South Works site), including all fixtures and improvements located thereon.

“ Grantor ” means the Issuers and each subsidiary of the Issuers that shall have granted any Lien in favor of the ABL Agent and the Noteholder Collateral Trustee on any of its assets or properties to secure any of the Secured Debt Obligations.

“ Hedging Obligations ” means, with respect to any Grantor, any obligations of such Grantor under:

(a) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping interest rate risk;

(b) commodity swap agreements, commodity option agreements, forward contracts and other agreements or arrangements designed for the purpose of fixing, hedging or swapping commodity price risk; and

(c) foreign exchange contracts, currency swap agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping foreign currency exchange rate risk.

“ Holders of Priority Lien Debt ” means (a) the Holders under and as defined in the Indenture, (b) the holders or lenders pursuant to any Series of Priority Lien Debt and (c) the holders or lenders of any indebtedness under any Noteholder Substitute Facility.

“ Indenture ” means the Indenture, dated as of July 2, 2009, among the Issuers, the Grantors party thereto from time to time, the Noteholder Collateral Trustee and the Trustee, as amended, restated, adjusted, waived, renewed, extended, supplemented or otherwise modified from time to time (including any supplements executed in connection with the issuance of any Series of Priority Lien Debt under the Indenture), and any credit agreement, loan agreement, note agreement, promissory note, indenture or any other agreement or instrument evidencing or governing the terms of any Noteholder Substitute Facility.

 

10

“ Indenture Noteholder Security Documents ” means the Indenture (insofar as the same grants a Lien on the Collateral), the Noteholder Collateral Trust Agreement, each agreement listed in Part B of Exhibit C hereto and any other security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, control agreements, guarantees, notes or any other documents or instruments now existing or entered into after the date hereof that create Liens on any assets or properties of any Grantor or any of its subsidiaries to secure any Priority Lien Obligations (including any such agreements, assignments, mortgages, deeds of trust and other documents or instruments associated with any Noteholder Substitute Facility).

“ Indenture Notes ” means the 10.5% Senior Secured Notes due 2013 issued under the Indenture, and any other senior secured notes issued thereunder.

“ Indenture Priority Lien Documents ” means the Indenture, the Indenture Noteholder Security Documents and all other loan documents, notes, guarantees, instruments and agreements governing or evidencing any Noteholder Substitute Facility.

“ Indenture Priority Lien Obligations ” means, with respect to any Grantor, any obligations of such Grantor owed to any Indenture Priority Lien Secured Party (or any of its Affiliates) in respect of the Indenture Priority Lien Documents.

“ Indenture Priority Lien Secured Parties ” means, at any time, the Trustee, the Noteholder Collateral Trustee, the trustees, agents and other representatives of the holders of the Indenture Notes (including any holders of notes pursuant to supplements executed in connection with the issuance of Series of Priority Lien Debt under the Indenture) who maintains the transfer register for such Indenture Notes or such Series of Priority Lien Debt, the beneficiaries of each indemnification obligation undertaken by any Grantor under any Indenture Priority Lien Document and each other holder of, or obligee in respect of, any holder or lender pursuant to any Indenture Priority Lien Document outstanding at such time; provided that the Additional Priority Lien Secured Parties shall not be deemed Indenture Priority Lien Secured Parties.

“ Insolvency or Liquidation Proceeding ” means:

(a) any case commenced by or against Solo, SCOC or any other Grantor under the Bankruptcy Code or any similar federal or state law for the relief of debtors, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of Solo, SCOC or any other Grantor, any receivership or assignment for the benefit of creditors relating to Solo, SCOC or any other Grantor or any similar case or proceeding relative to Solo, SCOC or any other Grantor or its creditors, as such, in each case whether or not voluntary;

(b) any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to Solo, SCOC or any other Grantor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency, in each case to the extent not permitted under the Senior Documents;

(c) any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian or other insolvency official with similar powers with respect to Solo, SCOC or any other Grantor or any of its assets; or

 

11

(d) any other proceeding of any type or nature in which substantially all claims of creditors of Solo, SCOC or any other Grantor are determined and any payment or distribution is or may be made on account of such claims.

“ Intercreditor Agreement Joinder ” means an agreement substantially in the form of Exhibit A.

“ Issuers ” has the meaning assigned to such term in the preamble hereto.

“ Junior Documents ” means (a) in respect of the Noteholder First Lien Collateral, the ABL Debt Documents and (b) in respect of the ABL First Lien Collateral, the Priority Lien Documents and the Subordinated Lien Documents.

“ Junior Liens ” means (a) in respect of the ABL First Lien Collateral, the Priority Liens and the Subordinated Liens on such Collateral, and (b) in respect of the Noteholder First Lien Collateral, the ABL Liens. The Subordinated Liens shall be subordinate and junior in all respect to all Liens granted under the Priority Lien Documents in respect of the Noteholder First Lien Collateral to secure the Priority Lien Obligations on the terms set forth in the Noteholder Collateral Trust Agreement. For the avoidance of doubt, the Subordinated Liens shall also be subordinate and junior in all respect to the ABL Liens.

“ Junior Representative ” means (a) with respect to the Noteholder First Lien Collateral, the ABL Agent and (b) with respect to the ABL First Lien Collateral, the Noteholder Collateral Trustee.

“ Junior Secured Obligations ” means (a) with respect to the Priority Lien Obligations (to the extent such Obligations are secured, or intended to be secured, by the Noteholder First Lien Collateral), the ABL Debt Obligations and (b) with respect to ABL Debt Obligations (to the extent such Obligations are secured, or intended to be secured, by the ABL First Lien Collateral), the Priority Lien Obligations and the Subordinated Lien Obligations.

“ Junior Secured Obligations Collateral ” means the Collateral in respect of which the Junior Representative (on behalf of itself and the Junior Secured Obligations Secured Parties) holds a Junior Lien.

“ Junior Secured Obligations Secured Parties ” means (a) with respect to the Noteholder First Lien Collateral, the ABL Secured Parties and (b) with respect to the ABL First Lien Collateral, the Priority Lien Secured Parties and the Subordinated Lien Secured Parties.

“ Junior Secured Obligations Security Documents ” means (a) with respect to the ABL First Lien Collateral, the Priority Lien Security Documents and the Subordinated Lien Documents, and (b) with respect to the Noteholder First Lien Collateral, the ABL Security Documents.

 

12

“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any agreement to give a security interest therein and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes of any jurisdiction).

“ Lien Sharing and Priority Confirmation Joinder ” means an agreement substantially in the form of Exhibit B.

“ New York UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“ Noteholder Collateral ” means all assets and properties subject to Liens created by the Indenture Noteholder Security Documents to secure the Indenture Priority Lien Obligations.

“ Noteholder Collateral Trust Agreement ” means the Collateral Trust Agreement, dated as of July 2, 2009, among the Issuers, the subsidiaries of the Issuers from time to time party thereto, the Trustee, the other Secured Debt Representatives from time to time party thereto and the Noteholder Collateral Trustee, as amended, restated, adjusted, waived, renewed, extended, supplemented or otherwise modified from time to time, in accordance with each applicable Secured Document.

“ Noteholder Collateral Trustee ” means the Original Noteholder Collateral Trustee, and, from and after the date of execution and delivery of an Noteholder Substitute Facility, the agent, collateral agent, trustee or other representative of the lenders or other holders of the indebtedness and other obligations evidence thereunder or governed thereby, in each case, together with its successors in such capacity.

“ Noteholder First Lien Collateral ” means all present and future right, title and interest of the Issuers and the other Grantors, whether now owned or hereafter acquired, existing or arising, and wherever located, in all of the assets and property of any Grantor, whether real, personal or mixed (other than in the Excluded Assets and the ABL First Lien Collateral), including, without limitation, all: (a) equipment; (b) Real Estate Assets; (c) intellectual property; (d) all general intangibles that do not constitute ABL First Lien Collateral; (e) documents of title related to equipment; (f) records, supporting obligations and related letters of credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and (g) substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing.

 

13

“ Noteholder Substitute Facility ” means any facility with respect to which the requirements contained in Section 2.10(a) of this Agreement have been satisfied and that is permitted to be incurred pursuant to the ABL Debt Documents, the proceeds of which are used to, among other things, Replace the Indenture and/or any Additional Priority Lien Debt Facility then in existence. For the avoidance of doubt, no Noteholder Substitute Facility shall be required to be evidenced by notes or other instruments and may be a facility evidenced or governed by a credit agreement, loan agreement, note agreement, promissory note, indenture or any other agreement or instrument; provided that any such Noteholder Substitute Facility shall be subject to the terms of this Agreement for all purposes (including the lien priority as set forth herein as of the date hereof) as the other Liens securing the Priority Lien Obligations are subject to under this Agreement.

“ Obligations ” means any principal, interest, penalties, fees, expenses, indemnifications, reimbursements, damages and other liabilities (including all interest, Special Interest, fees and expenses accruing after the commencement of any Insolvency or Liquidation Proceeding, even if such interest, fees and expenses are not enforceable, allowable or allowed as a claim in such proceeding) under any Secured Documents, and, to the extent applicable, to include Banking Product Obligations and Hedging Obligations.

“ Officer ” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Senior Vice President, any Vice President or any Assistant Vice President of such Person.

“ Officers’ Certificate ” means a certificate signed on behalf of applicable Issuer by at least two Officers of such Issuer, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of such Issuer.

“ Original ABL Agent ” has the meaning assigned to that term in the preamble hereto.

“ Original Noteholder Collateral Trustee ” has the meaning assigned to that term in the preamble hereto.

“ Original Trustee ” means U.S. Bank National Association, in its capacity as trustee under the Indenture, and together with its successors in such capacity.

“ Person ” means any individual, sole proprietorship, partnership, limited liability company, joint venture, joint-stock company, trust, unincorporated organization, association, corporation, government or any agency or political subdivision thereof or any other entity.

“ Priority Lien ” means a Lien granted by the Priority Lien Documents to the Noteholder Collateral Trustee at any time upon any property of the Issuers or any other Grantor to secure Priority Lien Obligations.

 

14

“ Priority Lien Debt ” means the Indenture Notes, all additional notes, loans or other indebtedness issued or incurred under any Additional Priority Lien Debt Documents and with respect to which the requirements of Section 2.10(b) have been satisfied, and all notes, loans or other indebtedness issued or incurred under any Noteholder Substitute Facility.

“ Priority Lien Documents ” means the Indenture Priority Lien Documents and the Additional Priority Lien Debt Documents.

“ Priority Lien Obligations ” means Priority Lien Debt and all other Obligations in respect thereof.

“ Priority Lien Secured Parties ” means the Indenture Priority Lien Secured Parties and the Additional Priority Lien Secured Parties.

“ Priority Lien Security Documents ” means the Indenture Noteholder Security Documents and the Additional Priority Lien Security Documents.

“ Real Estate Asset ” means, at any time of determination, any fee interest then owned by the Issuers or any Grantor in any real property.

“ Registration Rights Agreement ” means the Registration Rights Agreement, dated as of the date hereof, among the Issuers, the Grantors, Goldman, Sachs & Co., Banc of America Securities LLC and Wachovia Capital Markets LLC.

“ Replaces ” means, (a) in respect of any agreement with reference to the ABL Credit Agreement or the ABL Debt Obligations or any ABL Substitute Facility, that such agreement refunds, refinances or replaces the ABL Credit Agreement or such ABL Substitute Facility in whole (in a transaction that is in compliance with Section 2.10(a)) and that all commitments thereunder are terminated, or, to the extent permitted by the terms of the ABL Credit Agreement or such ABL Substitute Facility, in part, and (b) in respect of any indebtedness with reference to the Priority Lien Documents or the Priority Lien Obligations or any Noteholder Substitute Facility, that such indebtedness refunds, refinances or replaces the Priority Lien Documents or such Noteholder Substitute Facility in whole (in a transaction that is in compliance with Section 2.10(a)) and that all commitments thereunder are terminated, or, to the extent permitted by the terms of the Priority Lien Documents or such Noteholder Substitute Facility, in part. “ Replace, ” “ Replaced ” and “ Replacement ” shall have correlative meanings.

“ Representative ” means (a) in the case of any Priority Lien Obligations and Subordinated Lien Obligations, the Noteholder Collateral Trustee, and (b) in the case of any ABL Debt Obligations, the ABL Agent.

“ Restricted Subsidiary ” of a Person means any subsidiary of the referent Person that is not an Unrestricted Subsidiary.

“ SCOC ” has the meaning assigned to that term in the preamble hereto.

 

15

“ Secured Debt Obligations ” means, the Priority Lien Obligations (including the Obligations incurred under each Series of Priority Lien Debt), the ABL Debt Obligations and the Subordinated Lien Obligations (including the Obligations incurred under each Series of Subordinated Lien Debt).

“ Secured Debt Representative ” means (a) in the case of the Indenture Notes, Noteholder Collateral Trustee, and (b) in the case of any other Series of Secured Debt, the trustee, agent or representative of the holders of such Series of Secured Debt who maintains the transfer register for such Series of Secured Debt and is appointed as a representative of such Series of Secured Debt (for purposes related to the administration of the security documents) pursuant to the indenture, credit agreement or other agreement governing such Series of Secured Debt.

“ Secured Parties ” means the Priority Lien Secured Parties, the ABL Secured Parties and the Subordinated Lien Secured Parties.

“ Secured Documents ” means the Priority Lien Documents, the ABL Debt Documents and the Subordinated Lien Documents.

“ Security Documents ” means the Indenture Noteholder Security Documents, the ABL Security Documents, the Additional Priority Lien Security Documents and Subordinated Lien Documents.

“ Senior Documents ” means (a) in respect of the Noteholder First Lien Collateral, the Priority Lien Documents, and (b) in respect of the ABL First Lien Collateral, the ABL Debt Documents.

“ Senior Liens ” means (a) in respect of the ABL First Lien Collateral, the ABL Liens on such Collateral, and (b) in respect of the Noteholder First Lien Collateral, the Priority Liens on such Collateral. The Subordinated Liens shall be subordinate and junior in all respect to all Liens granted on the Collateral in respect of the ABL Debt Obligations and the Priority Lien Obligations.

“ Senior Representative ” means (a) with respect to the Noteholder First Lien Collateral, the Noteholder Collateral Trustee, and (b) with respect to the ABL First Lien Collateral, the ABL Agent. The Noteholder Collateral Trustee, on behalf of the Subordinated Lien Secured Parties, shall at no time constitute a Senior Representative.

“ Senior Secured Obligations ” means (a) with respect to the ABL Debt Obligations (to the extent such obligations are secured, or are intended to be secured, by the Noteholder First Lien Collateral), the Priority Lien Obligations, and (b) with respect to Priority Lien Obligations and the Subordinated Lien Obligations (in each case, to the extent such obligations are secured, or are intended to be secured, by the ABL First Lien Collateral), the ABL Debt Obligations.

“ Senior Secured Obligations Collateral ” means the Collateral in respect of which the Senior Representative (on behalf of itself and the applicable Senior Secured Obligations Secured Parties) holds a Senior Lien.

 

16

“ Senior Secured Obligations Secured Parties ” means (a) with respect to the Noteholder First Lien Collateral, the Priority Lien Secured Parties, and (b) with respect to the ABL First Lien Collateral, the ABL Secured Parties. Neither the Noteholder Collateral Trustee, on behalf of the Subordinated Lien Secured Parties, nor the Subordinated Lien Secured Parties shall, at any time, constitute Senior Secured Obligations Secured Parties.

“ Senior Secured Obligations Security Documents ” means (a) with respect to the ABL First Lien Collateral, the ABL Security Documents, and (b) with respect to the Noteholder First Lien Collateral, the Indenture Noteholder Security Documents and the Additional Priority Lien Security Documents.

“ Series of Priority Lien Debt ” means, severally, the Indenture Notes and any additional notes, any Additional Priority Lien Debt Facility and other indebtedness that constitutes Priority Lien Debt.

“ Series of Secured Debt ” means each Series of Subordinated Lien Debt and each Series of Priority Lien Debt.

“ Series of Subordinated Lien Debt ” means, severally, each issue or series of Subordinated Lien Debt for which a single transfer register is maintained.

“ Solo ” has the meaning assigned to that term in the preamble hereto.

“ Special Interest ” means all special interest then owing pursuant to the Registration Rights Agreement.

“ Subordinated Lien ” means a Lien granted by a Security Document to the Noteholder Collateral Trustee, at any time, on a junior and subordinated basis, upon any Collateral of either of the Issuers or any other Grantor to secure Subordinated Lien Obligations.

“ Subordinated Lien Debt ” means any indebtedness (including letters of credit and reimbursement obligations with respect thereto) of any Issuer or any other Grantor that is secured on a subordinated basis to the Priority Lien Debt and any indebtedness under the ABL Credit Agreement by a Subordinated Lien that was permitted to be incurred and so secured under each applicable Secured Document and with respect to which the requirements of Section 2.10(b) have been satisfied.

“ Subordinated Lien Documents ” means, collectively, any indenture, credit agreement or other agreement governing each Series of Subordinated Lien Debt and the security documents and other agreements related thereto (other than any security documents that do not secure Subordinated Lien Obligations).

“ Subordinated Lien Obligations ” means Subordinated Lien Debt and all other Obligations in respect thereof.

 

17

“ Subordinated Lien Secured Parties ” means, at any time, the trustee, agent or representative of the holders of Series of Subordinated Lien Debt who maintains the transfer register for such Series of Subordinated Lien Debt, the beneficiaries of each indemnification obligation undertaken by any Grantor under any Subordinated Lien Document and each other holder of, or obligee in respect of, any holder or lender pursuant to any Series of Subordinated Lien Debt outstanding at such time.

“ subsidiary ” means, with respect to any specified Person (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other subsidiaries of that Person (or a combination thereof); and (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a subsidiary of such Person or (ii) the only general partners of which are such Person or one or more subsidiaries of such Person (or any combination thereof).

“ TIA ” means the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date hereof.

“ Trustee ” means the Original Trustee, and, from and after the date of execution and delivery of the Noteholder Substitute Facility, the agent, collateral agent, trustee or other representative of the lenders or other holders of the indebtedness and other obligations evidenced thereunder or governed thereby, together with its successors in such capacity.

“ UK Grantors ” means, collectively, Solo Cup (UK) Limited, a company incorporated under the laws of England and Wales with a registered number 04003596, Insulpak Holdings Limited, a company incorporated under the laws of England and Wales with a registered number 03813634, and Solo Cup Europe Limited, a company incorporated under the laws of England and Wales with a registered number 00979390.

“ Unrestricted Subsidiary ” means any subsidiary of Solo (other than SCOC or any successor to SCOC) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of Solo’s Board of Directors in compliance with all applicable Secured Debt Documents and any subsidiary of such subsidiary.

ARTICLE II

Subordination of Junior Liens; Certain Agreements

SECTION 2.01. Subordination of Junior Liens . (a) The grant of the ABL Liens pursuant to the ABL Security Documents, the grant of the Priority Liens pursuant to the Indenture Noteholder Security Documents and the Additional Priority Lien Security Documents and the grant of the Subordinated Liens pursuant to the Subordinated Lien Documents create three separate and distinct Liens on the Collateral.

 

18

(b) All Junior Liens in respect of any Collateral are expressly subordinated and made junior in right, priority, operation and effect to any and all Senior Liens in respect of such Collateral (and all Subordinated Liens in respect of any Collateral are expressly subordinated and made junior in right, priority, operation and effect to any and all ABL Liens and Liens of the Holders of Priority Lien Debt in respect of such Collateral), notwithstanding anything contained in this Agreement, the Priority Lien Documents, the ABL Debt Documents, the Subordinated Lien Documents or any other agreement or instrument or operation of law to the contrary, and irrespective of the time, order or method of creation, attachment or perfection of such Junior Liens and Senior Liens (and Subordinated Liens) or any failure, defect or deficiency or alleged failure, defect or deficiency in any of the foregoing.

(c) It is acknowledged that, subject, in the case of ABL Debt, to the ABL Debt Cap, (i) the aggregate amount of the Senior Secured Obligations may be increased from time to time pursuant to the terms of the Senior Documents, (ii) a portion of the Senior Secured Obligations consists or may consist of indebtedness that is revolving in nature, and the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and (iii) the Senior Secured Obligations may be increased, extended, renewed, replaced, restated, supplemented, restructured, repaid, refunded, refinanced or otherwise amended or modified from time to time, all without affecting the subordination of the Junior Liens hereunder or the provisions of this Agreement defining the relative rights of the ABL Secured Parties, the Priority Lien Secured Parties and the Subordinated Lien Secured Parties. The lien priorities provided for herein shall not be altered or otherwise affected by any amendment, modification, supplement, extension, increase, renewal, restatement or Replacement of either the Junior Secured Obligations (or any part thereof) or the Senior Secured Obligations (or any part thereof), by the release of any Collateral or of any guarantees for any Senior Secured Obligations or by any action that any Representative or Secured Party may take or fail to take in respect of any Collateral.

SECTION 2.02. No Action With Respect to Junior Secured Obligations Collateral Subject to Senior Liens . Subject to Section 2.04, 2.13 and 2.14, no Junior Representative or other Junior Secured Obligations Secured Party shall commence or instruct any Junior Representative to commence any judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of, exercise any right, remedy or power with respect to, or otherwise take any action to enforce its interest in or realize upon, or take any other action available to it in respect of, any Junior Secured Obligations Collateral under any Junior Secured Obligations Security Document, applicable law or otherwise until the associated Discharge of Senior Secured Debt Obligations, it being agreed that only the Senior Representative, acting in accordance with the applicable Senior Secured Obligations Security Documents, shall be entitled to take any such actions or exercise any such remedies prior to the associated Discharge of Senior Secured Debt Obligations. Notwithstanding the foregoing, any Junior Representative may, subject to Section 2.05, take all such actions as i