LOAN AGREEMENT

Exhibit 10.37

EXECUTION VERSION

SOLO CUP COMPANY,

as the Company and as a Borrower and Guarantor

SOLO CUP OPERATING CORPORATION,

and certain Restricted Subsidiaries of the Company,

as Borrowers and Guarantors

 

LOAN AGREEMENT

Dated as of July 2, 2009

$200,000,000

 

CERTAIN FINANCIAL INSTITUTIONS,

as Lenders

and

BANK OF AMERICA, N.A.,

as Agent and Co-Collateral Agent,

and

GENERAL ELECTRIC CAPITAL CORPORATION,

as Co-Syndication Agent and Co-Collateral Agent

and

WELLS FARGO FOOTHILL, LLC,

as Co-Syndication Agent

 

BANC OF AMERICA SECURITIES LLC and

GE CAPITAL MARKETS, INC.,

as Joint Lead Arrangers

 

BANC OF AMERICA SECURITIES LLC

GE CAPITAL MARKETS, INC. and WACHOVIA CAPITAL MARKETS, LLC,

as Joint Bookrunners

EXECUTION VERSION

TABLE OF CONTENTS

 

 

(ii)

LIST OF EXHIBITS AND SCHEDULES

 

 

 

(iii)

 

(iv)

EXECUTION VERSION

LOAN AGREEMENT

THIS LOAN AGREEMENT is dated as of July 2, 2009, among SOLO CUP COMPANY , a Delaware corporation (the “ Company ”), SOLO CUP OPERATING CORPORATION , a Delaware corporation (“ SCOC ” and, together with the Company and each Restricted Subsidiary (other than any Foreign Subsidiary) that is listed on Schedule 1.2, as the same may be amended from time to time pursuant to Section 15.1.1(g), the “ Borrowers ”), the Subsidiary Guarantors (as hereinafter defined), the financial institutions party to this Agreement from time to time as lenders (collectively, “ Lenders ”), BANK OF AMERICA, N.A., a national banking association, as a co-collateral agent (in such capacity, a “ Co-Collateral Agent ”) and as administrative agent for the Lenders (in such capacity and, together with any successor in such capacity, the “ Agent ”), and GENERAL ELECTRIC CAPITAL CORPORATION (“ GE Capital ”), as a co-collateral agent for the Lenders (together with the other Co-Collateral Agent, the “ Collateral Agents ”).

R E C I T A L S :

Borrowers have requested that Lenders provide a credit facility to Borrowers, and Lenders are willing to provide such credit facility on the terms and conditions set forth in this Agreement.

NOW, THEREFORE , for valuable consideration hereby acknowledged, the parties agree as follows:

SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION

1.1. Definitions . As used herein, the following terms have the meanings set forth below:

ABL Collateral : any “ABL First Lien Collateral” as defined in the Intercreditor Agreement as in effect as of the date hereof.

Accounting Change : any change in GAAP or any other change in accounting principles required by the promulgation of any rule, regulation, pronouncement, interpretation or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC or any other regulatory body having jurisdiction.

Accounts Formula Amount : 85% of the Value of Eligible Accounts.

Additional Guarantor : as defined in Section 14.5 .

Affiliate : with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have correlative meanings. Notwithstanding the foregoing, except for purposes of Sections 10.2.16 and 14.7 , Persons controlled by or under common control with a Co-Investor that are engaged solely in businesses unrelated to the business of the Company and its Subsidiaries shall be deemed not to be Affiliates of the Company and its Subsidiaries hereunder.

Agent Indemnitees : Agent, Collateral Agents and their respective officers, directors, employees, Affiliates, agents and attorneys-in-fact.

Agent Professionals : attorneys, accountants, appraisers, auditors, environmental engineers or consultants retained by Agent or any Collateral Agent and, at any time an Event of Default has occurred and is continuing, business valuation experts, turnaround consultants and other professionals and experts retained by Agent or any Collateral Agent, as the case may be.

Agent’s Office : Agent’s address and, as appropriate, account as set forth on Schedule 1.7 , or such other address or account as Agent may from time to time notify to Borrowers and Lenders.

Allocable Amount : as defined in Section 5.11.3 .

Anti-Terrorism Laws : any laws relating to terrorism or money laundering, including the Patriot Act.

Applicable Law : all laws, rules, regulations and governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law, and all provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities.

Applicable Margin : (a) from the Closing Date through the first anniversary of the Closing Date, 3.00% per annum for Base Rate Loans and 4.00% per annum for LIBOR Loans and (b) for each fiscal quarter thereafter, the applicable percentage per annum set forth below determined by reference to Average Excess Availability for the immediately preceding fiscal quarter:

 

Any increase or decrease in the Applicable Margin resulting from a change in the Average Excess Availability shall become effective as of the first calendar day of each fiscal quarter. Average Excess Availability shall be calculated by the Agent based on the Borrowing Base Certificates delivered from time to time pursuant to Section 8.1 and, with respect to Availability Reserve and outstanding Loans and LC Obligations, the Agent’s records. If the Borrowing Base Certificates (including any required financial information in support thereof) of the Borrower are not received by both Collateral Agents by the date required pursuant to Section 8.1 , then the Applicable Margin shall be determined as if the Average Excess Availability for the immediately preceding fiscal quarter is at Level I until such time as such Borrowing Base Certificates and supporting information are received.

Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Margin for any period shall be subject to the provisions of Section 3.4(b) .

Approved Fund : any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in its ordinary course of activities, and is administered or managed by a Lender, an entity that administers or manages a Lender, or an Affiliate of either.

Asset Disposition : a direct or indirect sale, lease, license, transfer or other disposition of Property of an Obligor, including a disposition of Property in connection with a sale-leaseback transaction or synthetic lease.

Assignment and Acceptance : an assignment agreement between a Lender and Eligible Assignee (and, to the extent required by the definition of “Eligible Assignee”, consented to by the Borrower Agent), in substantially the form of Exhibit C or otherwise in form and substance reasonably satisfactory to Agent.

 

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Availability Reserve : the sum (without duplication) of (a) the Inventory Reserve; (b) the Rent and Charges Reserve; (c) the Bank Product Reserve; (d) all accrued Royalties, whether or not then due and payable by a Borrower; (e) the aggregate amount of liabilities secured by Liens upon ABL Collateral that are senior to Agent’s Liens (but imposition of any such reserve shall not waive an Event of Default arising therefrom); (f) the Dilution Reserve; and (g) such additional reserves, in such amounts and with respect to such matters, as either of the Collateral Agents in its Credit Judgment may elect to impose from time to time after consultation with the Borrower Agent. Anything contained herein to the contrary notwithstanding, if either or both of the Collateral Agents determines to establish or increase any Availability Reserve, such Availability Reserve shall be so established or increased, as the case may be.

Average Excess Availability : for any period, the average amount of Excess Availability for each day during such period.

Bank of America : Bank of America, N.A., a national banking association, and its successors and assigns.

Bank of America Indemnitees : Bank of America and its officers, directors, employees, Affiliates, agents and attorneys-in-fact.

Bank Product : any of the following products, services or facilities extended to any Obligor by a Lender or any of its Affiliates: (a) Cash Management Services; (b) Hedging Agreements and products (which for the avoidance of doubt include confirmations) under Hedging Agreements; (c) commercial credit card and merchant card services; and (d) lock-box leases and other banking products or services as may be requested by any Borrower or Restricted Subsidiary, other than Letters of Credit; provided , however , that for any of the foregoing to be included as an “Obligation” for purposes of a distribution under Section 5.6.1, the applicable Secured Party and Obligor must have previously provided written notice to Agent of (i) the existence of such Bank Product, (ii) the maximum dollar amount of obligations arising thereunder to be included as a Bank Product Reserve from time to time, and (iii) the methodology to be used by such parties in determining the Bank Product Debt owing from time to time; provided , further , however , that notwithstanding the foregoing, the Hedging Agreements set forth under Schedule 9.1.23 entered into with Bank of America, N.A. and the products thereunder (including those products transferred, assigned or novated to Bank of America, N.A.) shall constitute Bank Product.

Bank Product Debt : Debt and other obligations of any Obligor relating to Bank Products.

Bank Product Reserve : the aggregate amount of reserves established by the Collateral Agents from time to time in their Credit Judgment in respect of Bank Product Debt; provided that no reserve shall be established for any Bank Product Debt to the extent the obligations of the Obligors with respect to such Bank Product Debt are pre-funded or Cash Collateralized.

Bankruptcy Code : Title 11 of the United States Code.

Bankruptcy Law : the Bankruptcy Code or any similar foreign, federal or state law for the relief of debtors.

Base Rate : for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c) the LIBOR for a 30-day interest period, as determined on such day, plus 1.0%.

Base Rate Loan : any Loan that bears interest based on the Base Rate.

 

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Beneficial Owner : as defined in Rule 13d 3 and Rule 13d 5 under the Securities Exchange Act of 1934, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” or “Beneficially Owned” shall have a corresponding meaning.

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

Borrowed Money : with respect to any Obligor, without duplication, its (a) Debt that (i) arises from the lending of money by any Person to such Obligor, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents or similar instruments, or (iii) was issued or assumed as full or partial payment for Property; (b) Capital Leases; (c) reimbursement obligations with respect to drawn letters of credit; and (d) guaranties of any Debt of the foregoing types owing by another Person; provided that “Borrowed Money” shall not include trade payables and expenses owing in the ordinary course of business and amounts owing under commercial and merchant card service programs to the extent such amounts are directly or indirectly for the payment of trade payables incurred in the ordinary course of business.

Borrower Agent : as defined in Section 4.4 .

Borrowing : a group of Loans of one Type that are made on the same day or are converted into Loans of one Type on the same day.

Borrowing Base : on any date of determination, an amount equal to the sum of the Accounts Formula Amount based on the then most recently delivered Borrowing Base Certificate, plus the Inventory Formula Amount based on the then most recently delivered Borrowing Base Certificate, minus the Availability Reserve in effect on such date; provided that no Availability Reserve not in effect on the Closing Date shall be established, maintained or increased except in the Collateral Agents’ Credit Judgment after consultation with the Borrower Agent.

Borrowing Base Certificate : a certificate, in the form of Exhibit H or otherwise in form and substance reasonably satisfactory to each Collateral Agent, by which Borrowers certify calculation of the Borrowing Base.

Business Day : any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, North Carolina and New York, and if such day relates to a LIBOR Loan, any such day on which dealings in Dollar deposits are conducted between banks in the London interbank Eurodollar market.

Capital Expenditures : all expenditures made by a Borrower or Restricted Subsidiary for the acquisition of any fixed assets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year, which would be required to be capitalized in accordance with GAAP, including the principal portion of Capital Leases; provided that “Capital Expenditures” shall not include, to the extent otherwise included therein, (i) expenditures made to acquire or repair fixed assets to the extent that such expenditures do not exceed the amount of insurance proceeds received in respect of the loss, damage or destruction of the same or similar fixed assets, (ii) non-cash expenditures made to acquire fixed assets in a Like-Kind Exchange to the extent that such expenditures represent the value of fixed assets transferred by such Borrower or Restricted Subsidiary in such Like-Kind Exchange, (iii) expenditures made with (A) the proceeds of Debt, other than the proceeds of the Loans or short-term borrowings, or (B) the proceeds of any issuance of Equity Interests of the Company to a Person other than a Restricted Subsidiary of the Company or (iv) expenditures made in a Permitted Acquisition of assets constituting a line of business or a business division of another Person.

 

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Capital Lease : any lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

Cash Collateral : cash, and any interest or other income earned thereon, that is delivered to Agent to Cash Collateralize any Obligations.

Cash Collateral Account : a demand deposit, money market or other account established by Agent at such financial institution as Agent may select in its discretion, which account shall be subject to Agent’s Liens for the benefit of Secured Parties.

Cash Collateralize : the delivery of cash to Agent, as security for the payment of Obligations, in an amount equal to (a) with respect to LC Obligations, 103% of the aggregate LC Obligations, and (b) with respect to any inchoate, contingent or other Obligations (including Obligations arising under Bank Products), Agent’s good faith estimate of the amount due or to become due, including all fees and other amounts relating to such Obligations. “ Cash Collateralization ” has a correlative meaning.

Cash Dominion Period : (a) the period commencing on the day that Excess Availability is less than the greater of (i) $15,000,000 and (ii) 15% of the lesser of (A) the Borrowing Base and (B) the aggregate amount of Commitments; and (b) continuing until the date when Excess Availability has been equal to or greater than the greater of (i) $15,000,000 and (ii) 15% of the lesser of (A) the Borrowing Base and (B) the aggregate amount of Commitments for 45 consecutive days and (b) any period during which an Event of Default shall have occurred and be continuing.

Cash Equivalents : (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and credit of, the United States government, maturing within 12 months of the date of acquisition; (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within 12 months of the date of acquisition and having a rating of at least A- from S&P or the equivalent thereof from Moody’s; (c) certificates of deposit, time deposits and bankers’ acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by a commercial bank organized under the laws of the United States or any state or district thereof or any OECD country, rated A-1 (or better) by S&P or P-1 (or better) by Moody’s at the time of acquisition, and (unless issued by a Lender) not subject to offset rights; (d) repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a), (b) and (c) entered into with any bank meeting the qualifications specified in clause (c); (e) Dollar denominated floating rate notes and foreign currency denominated floating rate notes, in each case maturing within 12 months of the date of acquisition and having a rating of at least A- from S&P or the equivalent thereof from Moody’s; (f) commercial paper rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and maturing within nine months of the date of acquisition; and (g) shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $1,000,000,000 and has a rating of at least A- from S&P or the equivalent thereof from Moody’s.

Cash Management Services : any services provided from time to time by any Lender or any of its Affiliates to any Borrower or Restricted Subsidiary 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, depository, information reporting, lockbox and stop payment services.

CERCLA : the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq .).

 

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“ CFC ”: a Person that is a controlled foreign corporation under Section 957 of the Code.

Change in Law : the occurrence, after the date hereof, of (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority; or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

Change of Control : an event or series of events by which:

(a) prior to a Qualified IPO, the Principal Shareholders and the Co-Investors shall together cease to own and control legally and beneficially, either directly or indirectly, equity securities in the Company representing 51% or more of the combined voting power of all of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking into account (i) all such equity securities that any Principal Shareholder or any Co-Investor has the right to acquire (whether or not such right is exercisable immediately or only after the passage of time) and (ii) any and all securities that are convertible into such equity securities); or

(b) after a Qualified IPO, (i) the Principal Shareholders and the Co-Investors shall together cease to own and control legally and beneficially, either directly or indirectly, equity securities in the Company representing 30% or more of the combined voting power of all of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking into account (A) all such equity securities that any Principal Shareholder or any Co-Investor has the right to acquire (whether or not such right is exercisable immediately or only after the passage of time) and (B) any and all securities that are convertible into such equity securities); or (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), other than one or more of the Principal Shareholders and the Co-Investors, shall own, directly or indirectly, more than the Principal Shareholders and the Co-Investors together shall own, on a fully diluted basis, of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company.

(c) during any period of 12 consecutive months commencing on the Closing Date, a majority of the members of the board of directors or other equivalent governing body of the Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

(d) any Person or two or more Persons acting in concert shall have acquired, by contract or otherwise, the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Company, or control over the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right) representing 50% or more of the combined voting power of such securities; or

 

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(e) the Company shall cease, directly or indirectly, to own and control legally and beneficially all of the Equity Interests in SCOC; or

(f) any “Change of Control” (or any similar term) as set forth in the Existing Senior Subordinated Notes Indenture, the Existing Senior Secured Notes Indenture or in any other agreement evidencing Debt for borrowed money in an amount in excess of the Threshold Amount shall have occurred.

Claims : all liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind (including remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses) at any time (including after Full Payment of the Obligations, resignation or replacement of Agent, or replacement of any Lender) incurred by or asserted against any Indemnitee in any way relating to (a) any Loans, Letters of Credit, Loan Documents, or the use thereof or transactions relating thereto, (b) any action taken or omitted to be taken by any Indemnitee in connection with any Loan Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral, (d) exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform or observe any terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration or other proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a party thereto; provided that with respect to any Indemnitee, “Claims” shall not include liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind to the extent that such liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses are determined by a court of competent jurisdiction by final judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

Closing Date : as defined in Section 6.1 .

Co-Investors : collectively, (a) Vestar Capital Partners IV, L.P., a Delaware limited partnership, (b) Vestar Cup Investment, LLC, a Delaware limited liability company, (c) Vestar Cup Investment II, LLC, a Delaware limited liability company, (d) any investment fund under common control or management with any of the Persons referred to in the immediately preceding clauses (a), (b) and (c), (e) any controlling stockholder, general partner or controlling member of any of the Persons referred to in the immediately preceding clauses (a), (b) and (c) and (f) any trust, corporation, limited liability company or other entity, the beneficiaries, stockholders, members, general partners or Persons who are Beneficial Owners of an 80% or more interest of which consist of any of the Persons referred to in the immediately preceding clauses (a), (b), (c), (d) and (e).

Code : the Internal Revenue Code of 1986.

Collateral : all Property described in any Security Documents as security for any Obligations, and all other Property that now or hereafter secures (or is intended to secure) any Obligations.

Commitment : for any Lender, its obligation to make Loans and to participate in LC Obligations up to the maximum principal amount shown on Schedule 1.1 , or as hereafter determined pursuant to each Assignment and Acceptance to which it is a party, or as increased pursuant to a Commitment Increase. “ Commitments ” means the aggregate amount of such commitments of all Lenders.

Commitment Increase : as defined in Section 2.3.1 .

Commitment Increase Lender : as defined in Section 2.3.1 .

 

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Commitment Termination Date : the earliest to occur of (a) the Revolver Termination Date; (b) the date on which Borrowers terminate the Commitments pursuant to Section 2.1.4 ; or (c) the date on which the Commitments are terminated pursuant to Section 11.2 .

Compliance Certificate : a certificate, in substantially the form of Exhibit I or otherwise in form and substance reasonably satisfactory to Agent and covering the same matters as set forth in Exhibit I.

Consolidated Interest Charges : for any period, for the Company and its Restricted Subsidiaries on a consolidated basis, all interest expenses of the Company and its Restricted Subsidiaries calculated in accordance with GAAP, including (a) all interest expense, premium payments, debt discount, fees, charges and related expenses of the Company and its Restricted Subsidiaries in connection with borrowed money or in connection with the deferred purchase price of property acquired or services rendered, in each case to the extent treated as interest expense in accordance with GAAP, (b) the portion of rent expense of the Company and its Restricted Subsidiaries with respect to such period under Capital Leases that is treated as interest expense in accordance with GAAP and (c) the net amount, if any, owing by the Company and its Restricted Subsidiaries under Hedging Agreements (including amortization of discounts and excluding any termination payments), excluding , to the extent otherwise included in the interest expenses of the Company and its Restricted Subsidiaries as calculated above, any fees, expenses or charges relating to the preparation, negotiation and delivery of, and the closing of the financing transactions contemplated by, the Loan Documents and the Existing Senior Secured Notes.

Consolidated Net Income : for any period, for the Company and its Restricted Subsidiaries on a consolidated basis, the net income of the Company and its Restricted Subsidiaries (excluding extraordinary gains and extraordinary losses) for that period.

Contingent Obligation : any obligation of a Person arising from a guaranty, indemnity or other assurance of payment or performance of any Debt (“ primary obligations ”) of another obligor (“ primary obligor ”) in any manner, whether directly or indirectly, including any obligation of such Person under (a) any guaranty (whether secured or unsecured, and including the provision of security for the payment or performance of the primary obligations) or (b) any arrangement (i) to purchase any primary obligation or security therefor, (ii) to supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure working capital, equity capital, net worth or solvency of the primary obligor, or (iv) to purchase Property or services for the purpose of assuring the ability of the primary obligor to perform a primary obligation. The amount of any Contingent Obligation shall be deemed to be the stated or determinable amount of the primary obligation (or, if less, the maximum amount for which such Person may be liable under the instrument evidencing the Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto.

Credit Judgment : the judgment of either or both of the Collateral Agents exercised in good faith and in accordance with their regular business practices and policies (as in effect from time to time) applicable to asset based loans and taking into account market conditions, based upon their consideration of any factor that they believe (a) could adversely affect the value of Collateral (including any Applicable Law that may inhibit collection of an Account), the enforceability or priority of Agent’s Liens, or the amount that Agent and Lenders could receive in liquidation of any Collateral; (b) could cause or could reasonably be expected to result in any Borrowing Base Certificate, collateral report or related financial information delivered by any Obligor being incomplete, inaccurate or misleading in any material respect; (c) materially increases the likelihood of any Insolvency Proceeding involving an Obligor; or (d) creates or could reasonably be expected to result in a Default or Event of Default. In exercising such judgment, each Collateral Agent may consider any factor that it believes increases or could reasonably be expected to increase the credit risk of lending to Borrowers on the security of the Collateral.

CWA : the Clean Water Act (33 U.S.C. §§ 1251 et seq .).

 

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Debt : as applied to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services, (e) all Debt of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on Property owned or acquired by such Person, whether or not the Debt secured thereby has been assumed, (f) all Contingent Obligations of such Person of Debt of others, (g) all obligations under any Capital Leases of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party or guarantor in respect of letters of credit or in respect of letters of guaranty issued by a bank or any other financial institution, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances or any Hedging Agreement, (j) all obligations under any liquidated earn-out but only after such obligation is required to be included on the balance sheet of such Person in accordance with GAAP and only if not paid when due and (k) all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Equity Interests; provided that, notwithstanding any clause of this definition above, “Debt” shall not include trade payables and expenses owing in the ordinary course of business and amounts owing under commercial and merchant card service programs to the extent such amounts are directly or indirectly for the payment of trade payables incurred in the ordinary course of business. The Debt of any Person shall include the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt provide that such Person is not liable therefor.

Default : an event or condition that, with the lapse of time or giving of notice, would constitute an Event of Default.

Default Rate : for any Obligation that is not paid when due (including, to the extent permitted by law, interest not paid when due), 2% plus the interest rate otherwise applicable thereto. In the case of any Obligation that does not otherwise bear interest at a specified rate, the Default Rate shall mean the Default Rate applicable to Base Rate Loans.

Defaulting Lender : any Lender that (a) fails to make any payment or provide funds to Agent or any Borrower as required hereunder or fails otherwise to perform its obligations under any Loan Document, and such failure is not cured within one Business Day, or (b) is the subject of any Insolvency Proceeding.

Deposit Account Control Agreements : the Deposit Account control agreements to be executed by each institution maintaining a Deposit Account for an Obligor, in favor of Agent, for the benefit of Secured Parties.

Dilution Percent : the percent, determined for Borrowers’ most recently ended period of twelve fiscal months after any completed field examination or audit, equal to (a) bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive items with respect to Accounts, divided by (b) gross sales.

Dilution Reserve : a reserve in amounts established by either or both of the Collateral Agents from time to time in their Credit Judgment to reflect that the Dilution Percent is greater than five percent (5%) based on field examination.

Disqualified Equity Interests : any Equity Interest which, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable, pursuant to a sinking fund obligations or otherwise, (b) is redeemable at the option of the holder thereof, in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) contains any repurchase obligation which may

 

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come into effect, or is or becomes convertible into or exchangeable for Debt or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the six-month anniversary of the Revolver Termination Date. Notwithstanding the preceding sentence, any Equity Interest that would constitute Disqualified Equity Interest solely because the holders thereof have the right to require the issuers to repurchase such Equity Interest upon the occurrence of a change of control or an asset sale (other than an asset sale of any ABL Collateral) shall not constitute Disqualified Equity Interest if the terms of such Equity Interest provide that the issuers may not repurchase or redeem any such Equity Interest pursuant to such provisions unless such repurchase or redemption complies with Section 10.2.4 . The term “Disqualified Equity Interest” shall also include any options, warrants or other rights that are convertible into Disqualified Equity Interest or that are redeemable at the option of the holder, or required to be redeemed, prior to the date that is six months after the Revolver Termination Date.

Distribution : any declaration or payment of a distribution, interest or dividend on any Equity Interest; or any purchase, redemption, or other acquisition or retirement for value of any Equity Interest.

Dollars : lawful money of the United States.

Dominion Account : a special account established by a Borrower at Bank of America or another bank reasonably acceptable to Agent, over which Agent has exclusive control during a Cash Dominion Period for withdrawal purposes.

EBITDA : for any period, for the Company and its Restricted Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for federal, state, local and foreign income taxes payable by the Borrower and its Restricted Subsidiaries for such period, (iii) the amount of depreciation and amortization expense for such period, (iv) all non-cash impairment charges (to the extent not captured in amortization) for such period, (v) all underfunded pension expenses to the extent constituting non-cash charges for such period, (vi) other non-recurring expenses of the Company and its Restricted Subsidiaries which do not represent a cash item in such period or any future period, (vii) non-cash expenses resulting from the grant of stock and stock options and other compensation to management personnel of the Company and its Restricted Subsidiaries pursuant to a written plan or agreement or the treatment of such options under variable plan accounting, (viii) all non-cash expenses attributable to minority interests in Restricted Subsidiaries, (ix) all other non-cash charges, (x) non-cash losses from foreign currency translations, (xi) fees, expenses or charges relating to the preparation, negotiation and delivery of, and the closing of the financing transactions contemplated by, the Loan Documents and the Existing Senior Secured Notes, and (xii) expenses in respect of restructuring, closing or relocating of plants and offices in an aggregate amount not to exceed $15,000,000 in any rolling 12-month period; and minus (b) (i) non-cash gains from foreign currency translations to the extent included in calculating such Consolidated Net Income for such period and (ii) all non-cash items increasing Consolidated Net Income for such period; provided that EBITDA shall exclude the income of (A) any Person in which any other Person (other than the Company or a wholly-owned Restricted Subsidiary of the Company) has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or a wholly-owned Restricted Subsidiary of the Company by such Person during such period and (B) any Person the ability of which to make Distributions is restricted by any Restrictive Agreement described in Section 10.2.14(e) , except to the extent of the amount of dividends or other distributions actually paid to the Company (or to a wholly-owned Restricted Subsidiary not subject to any such Restrictive Agreement) by such Person during such period. “EBITDA” shall be calculated on a pro forma basis to give effect to any Permitted Acquisition or any Permitted Asset Disposition of the Equity Interests in any Person or any business unit, line of business or business division of any Person consummated at any time on or after the first day of the most recently ended period of twelve fiscal months as if such Permitted Acquisition or Permitted Asset Disposition had been effected on the first day of such period; provided that, in the case of any such Permitted Acquisition of any Person or business effected on or after the Closing Date,

 

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Agent shall be furnished with audited financial statements, or if audited financial statements are not available, other financial statements reasonably acceptable to Agent, of such Person or business (or if the acquisition is of a business unit, line of business or division of a larger business, the audited financial statements, or if audited financial statements are not available, other financial statements reasonably acceptable to Agent, of such larger business, so long as the individual activities of the acquired business are clearly reflected in such financial statements, together with a certificate from a financial officer of the Company certifying that the Company has reviewed the historical financial statements of the business unit, line of business or division and that to the best knowledge of the Company they reflect proper divisional accounting in relation to the larger business), reasonably satisfactory to Agent in all respects, confirming such historical results.

Eligible Account : an Account owing to a Borrower that arises in the ordinary course of business from the sale of goods or services, is payable in Dollars and is not required to be treated as ineligible in accordance with the following sentence. No Account shall be an Eligible Account if (a) it is unpaid for more than 60 days after the original due date, or more than 90 days after the original invoice date; (b) 50% or more of the Accounts owing by the Account Debtor are not Eligible Accounts under the foregoing clause; (c) when aggregated with other Accounts owing by the Account Debtor, it exceeds 20% of the aggregate Eligible Accounts (or such higher percentage as Agent may establish for the Account Debtor from time to time); (d) (i) it does not arise out of a completed, bona fide sale and delivery of goods in the ordinary course of business, substantially in accordance with any purchase order, contract or other document relating thereto, or is not a valid, binding and enforceable obligation of the applicable Account Debtor, (ii) it is not for a sum certain, maturing as stated in the invoice covering such sale or a copy of which invoice has not been furnished or is not available to Collateral Agents on request, (iii) to the knowledge of any Obligor, any purchase order, agreement, document or Applicable Law restricts assignment of the Account to Agent, (iv) the applicable Borrower is not the sole payee or remittance party thereof shown on the invoice, (v) the applicable Borrower has knowledge that (A) there are facts or circumstances that are reasonably likely to impair the enforceability or collectibility of such Account, (B) the Account Debtor did not have the capacity to contract when the Account arose, or does not continue to meet the Borrower’s customary credit standards, or has failed, or suspended or ceased doing business, or (C) there are proceedings or actions threatened or pending against any Account Debtor that could reasonably be expected to have a material adverse effect on the Account Debtor’s financial condition, or (vi) any extension, compromise, settlement, modification, credit, deduction or return has been made or authorized with respect to the Account, except discounts or allowances granted in the ordinary course of business for prompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to Collateral Agents hereunder; (e) it is owing by a creditor or supplier or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but whether or not owing by a creditor or supplier, ineligibility shall be limited to the amount thereof); (f) an Insolvency Proceeding has been commenced by or against the Account Debtor, or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, or to the knowledge of any Obligor, is not Solvent, or the Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process, provided that in the case of any Account Debtor that is a debtor in a case under the Bankruptcy Code or other Bankruptcy Law, post-petition Accounts that are not ineligible pursuant to another clause in this definition may be treated as Eligible Accounts if each Collateral Agent in its discretion so agrees; (g) the Account is invoiced to a location outside the United States or Canada or, unless each Collateral Agent otherwise consents, the Account Debtor is organized or has its principal offices or assets outside the United States or Canada; (h) it is owing by a Government Authority, unless (A) the Account Debtor is the United States or any department, agency or instrumentality thereof and (B) the Account has been assigned to Agent in compliance with the Assignment of Claims Act; (i) it is not subject to a duly perfected, first priority Lien in favor of Agent, or is subject to any other Lien (other than a Permitted Lien described in Section 10.2.2(c), (d), (f), (g), (k), (o), (s)  or (u)  that is junior in priority to the Agent’s Lien to secure the Obligations); (j) the goods giving rise to it have not been delivered to and accepted by the Account Debtor, the services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent a

 

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final sale; (k) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (l) its payment has been extended beyond 90 days from the original invoice date, the Account Debtor has made a partial payment, or it arises from a sale on a cash-on-delivery basis; (m) it arises from a sale to an Affiliate, from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or from a sale to a Person for personal, family or household purposes; provided that if each Collateral Agent agrees to do so, Collateral Agents may include as Eligible Accounts any Account owing from a consignee to a Borrower (as consignor) arising from the sale of consigned Inventory by such consignee; (n) it represents a progress billing or retainage; or (o) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof. In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 90 days old will be excluded.

Eligible Assignee : a Person that is (a) a Lender, U.S.-based Affiliate of a Lender or Approved Fund; (b) any other financial institution approved by Agent and Borrower Agent (which approval by Agent and Borrower Agent shall not be unreasonably withheld or delayed, and in the case of Borrower Agent shall be deemed given if no objection is made within two Business Days after notice of the proposed assignment), that is organized under the laws of the United States or any state or district thereof, has total assets in excess of $5 billion, extends asset-based lending facilities in its ordinary course of business and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of the Code or any other Applicable Law; and (c) during any Event of Default, any Person approved by Agent (which approval shall not be unreasonably withheld, conditioned or delayed); provided that unless a Default under, or an Event of Default under, Section 11.1(a) or (i)  or (solely with respect to a default under the Existing Senior Secured Notes or Existing Senior Secured Notes Indenture) (g)  shall have occurred and be continuing, Eligible Assignees shall not include CLOs, hedge funds and other alternative investment vehicles.

Eligible In-Transit Inventory : Inventory owned by a Borrower that would be Eligible Inventory if it were not subject to a Document and in transit from a foreign location to a location of the Borrower within the United States, and that is not required to be treated as ineligible in accordance with the following sentence. No Inventory shall be Eligible In-Transit Inventory unless it (a) is subject to a negotiable Document showing Agent (or, with the consent of Agent, the applicable Borrower) as consignee, which Document is in the possession of Agent or such other Person as Collateral Agents shall approve; (b) is fully insured in a manner reasonably satisfactory to each Collateral Agent; (c) has been identified to the applicable sales contract and title has passed to the Borrower; (d) is not sold by a vendor that has a right to reclaim, divert shipment of, repossess, stop delivery, claim any reservation of title or otherwise assert Lien rights against the Inventory, or with respect to whom any Borrower is in default of any obligations; (e) is subject to purchase orders and other sale documentation reasonably satisfactory to each Collateral Agent; (f) is shipped by a common carrier that is not affiliated with the vendor; and (g) is being handled by a customs broker, freight-forwarder or other handler that has delivered a Lien Waiver.

Eligible Inventory : Inventory owned by a Borrower that is not required to be treated as ineligible in accordance with the following sentence. Unless both Collateral Agents otherwise agree, no Inventory shall be Eligible Inventory unless it (a) is finished goods or raw materials, and not work-in-process, packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or downpayment; (c) is in new and saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets in all material respects all standards imposed by any Governmental Authority, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein relating to Inventory; (g) is subject to Agent’s duly perfected, first priority Lien, and no other Lien (other than a Permitted Lien described in Section 10.2.2(c), (d), (f), (g), (k), (o)  or (s)  that is junior in priority to the Agent’s Lien to secure the Obligations); (h) is within the continental United States or Canada (other than the Province of Quebec), is not in transit except

 

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between locations of Borrowers or is in transit from a foreign location and is Eligible In-Transit Inventory, and unless both Collateral Agents otherwise agree, is not consigned to any Person ; (i) except for Inventory that is in transit from a foreign location and is Eligible In-Transit Inventory, is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License that requires the consent of any Person before the Borrower or Guarantor may dispose of such Inventory or any other arrangement that restricts such Borrower’s or Agent’s right to dispose of such Inventory, unless Collateral Agents have received an appropriate Lien Waiver; provided that a requirement that the Borrower, Guarantor or Agent pay customary royalty or similar payments on a sale shall not be deemed a restriction for purposes of this clause; (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established (unless such requirements are waived by both Collateral Agents); and (l) is reflected in the details of a current perpetual inventory report.

Enforcement Action : any action to enforce any Obligations or Loan Documents or to realize upon any Collateral (whether by judicial action, self-help, notification of Account Debtors, exercise of setoff or recoupment, or otherwise).

Environmental Laws : all Applicable Laws (including permits), relating to pollution or protection of human health or the environment, including CERCLA, RCRA and CWA.

Environmental Notice : a written notice from any Governmental Authority or other Person of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint, summons, citation, order, claim, demand or request for correction, remediation or otherwise.

Environmental Release : a release as defined in CERCLA or under any other Environmental Law.

Equity Interest : capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person.

ERISA : the Employee Retirement Income Security Act of 1974.

ERISA Affiliate : any trade or business (whether or not incorporated) under common control with an Obligor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

ERISA Event : (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Obligor or ERISA Affiliate from a Pension 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) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) any Obligor or ERISA Affiliate fails to meet any funding obligations with respect to any Pension Plan or Multiemployer Plan, or requests a minimum funding waiver; (f) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate.

Event of Default : as defined in Section 11 .

 

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Excess Availability : (a) the lesser of the Borrowing Base and the aggregate amount of Commitments minus (b) the principal balance of all Loans and LC Obligations.

Excluded Assets : 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;

(c) any property or asset to the extent that the grant of a Lien under the Security Documents (as defined in the Intercreditor Agreement) 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 (as defined in the Intercreditor Agreement), immediately and automatically, at such time as such consequences will no longer result;

(d) any lease, license, contract, property right or agreement to which any Obligor 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 (as defined in the Intercreditor Agreement) 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 UCC (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 (as defined in the Intercreditor Agreement), 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 deposit 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 constituting 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 (as defined in the Intercreditor Agreement), in each case to the extent permitted under the Loan Documents, the Existing Senior Secured Notes Indenture and all other Secured Documents (as defined in the Intercreditor Agreement);

(g) assets or property subject to purchase money liens or capital leases permitted to be incurred under the Loan Documents, the Existing Senior Secured Notes Indenture and all other Secured Documents (as defined in the Intercreditor Agreement), 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 Obligations or other Secured Debt Obligations (as defined in the Intercreditor Agreement);

(h) all securities of any of the “affiliates” (as the terms “securities” and “affiliates” are used in Rule 3-16 of Regulation S-X under the Securities Act) of the Company or SCOC;

 

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

(j) the Excluded Real Property.

Excluded Real Property : (a) 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

(b) 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.

Excluded Tax : with respect to Agent, any Lender, Issuing Bank or any other recipient of a payment to be made by or on account of any Obligation, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or as a result of any connection between Agent or a Lender and any jurisdiction (other than a connection that would not have arisen but for and solely as a result of Agent or Lender having executed the Loan Documents or exercised its rights thereunder) or, in the case of any Lender, in which its applicable Lending Office is located; (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which Borrower Agent is located; and (c) any United States withholding tax that is (i) in effect under laws in force at the time such Person becomes a party to a Loan Document (or designates a new Lending Office) or otherwise acquires an interest hereunder, or (ii) attributable to such Person’s failure or inability (other than as a result of a Change in Law) to comply with Section 5.10 , except to the extent that such Person (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from Borrowers with respect to such withholding tax.

Existing Canadian Credit Agreement : the Credit Agreement dated September 24, 2004 between Solo Cup Canada Inc. and GE Canada Finance Holding Company.

Existing Senior Secured Notes : (a) the Senior Secured Notes due November 1, 2013 issued pursuant to the Existing Senior Secured Notes Indenture and (b) any exchange notes issued in exchange for such Senior Secured Notes pursuant to an Exchange Offer Registration Statement filed with the SEC, which exchange notes are identical in all respects to such Senior Secured Notes, except that such exchange notes will not contain specified transfer restrictions and will be registered under the Securities Act.

Existing Senior Secured Notes Indenture : the Indenture dated as of July 2, 2009 among the Company, SCOS, the other guarantors named therein and U.S. Bank national Association, as trustee.

Existing Senior Subordinated Notes : the 8.5% Senior Subordinated Notes due February 15, 2014 issued pursuant to the Existing Senior Secured Notes Indenture.

Existing Senior Subordinated Notes Indenture : the Indenture dated as of February 27, 2004 among the Company, certain guarantors named therein and U.S. Bank National Association, as trustee.

Extraordinary Expenses : all costs, expenses or advances that Agent, a Collateral Agent or Lender may incur during a Default or Event of Default, or during the pendency of an Insolvency Proceeding of an Obligor, including those relating to (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against Agent, any Collateral Agent, any Lender, any Obligor, any representative of creditors of an Obligor or any other Person) in

 

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any way relating to any Collateral (including the validity, perfection, priority or avoidability of Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender liability or other Claims; (c) the exercise, protection or enforcement of any rights or remedies of Agent, any Collateral Agent or any Lender in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations; and (g) Protective Advances. Such costs, expenses and advances include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’ fees and commissions, auctioneers’ fees and commissions, accountants’ fees, environmental study fees, wages and salaries paid to employees of any Obligor or independent contractors in liquidating any Collateral, and travel expenses.

Federal Funds Rate : (a) the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on the applicable Business Day (or on the preceding Business Day, if the applicable day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if no such rate is published on the next Business Day, the average rate (rounded up, if necessary, to the nearest 1/8 of 1%) charged to Bank of America on the applicable day on such transactions, as determined by Agent.

Fee Letter : the fee letter agreement dated as of June 19, 2009 among Bank of America, Banc of America Securities LLC, GE Capital, GE Capital Markets, Inc., Wachovia Capital Markets, LLC, Wells Fargo Foothill, LLC, Goldman Sachs Lending Partners LLC and the Company.

Fiscal Quarter : each period of thirteen weeks (or fourteen weeks for the last Fiscal Quarter of any Fiscal Year consisting of a 53-week period), commencing on the first day of a Fiscal Year.

Fiscal Year : the fiscal year of Company and its Restricted Subsidiaries for accounting and tax purposes, consisting of the 52-week or 53-week period ending on the last Sunday in December of each year.

Fixed Charge Coverage Ratio : at any time, the ratio, determined on a consolidated basis for the Company and its Restricted Subsidiaries for the most recently ended period of twelve fiscal months, of (a) EBITDA for such period minus Capital Expenditures made and cash taxes paid, in each case during such period, to (b) Fixed Charges for such period.

Fixed Charges : for any period, the sum of (a) Consolidated Interest Charges to the extent paid in cash during such period (net of cash interest income), plus (b) scheduled principal payments made in cash on Borrowed Money during such period, plus (c) Distributions made in cash during such period.

FLSA : the Fair Labor Standards Act of 1938.

Foreign Lender : any Lender, Issuing Bank, Agent or Collateral Agent that is organized under the laws of a jurisdiction other than the laws of the United States, or any state or district thereof.

Foreign Plan : any employee benefit plan or arrangement (a) maintained or contributed to by any Obligor or Restricted Subsidiary that is not subject to the laws of the United States; or (b) mandated by a government other than the United States for employees of any Obligor or Restricted Subsidiary.

Foreign Subsidiary : a Subsidiary that is (a) listed on Schedule 1.4 or (b) a CFC.

Full Payment : with respect to any Obligations (excluding unasserted contingent obligations but including contingent reimbursement obligations in respect of Letters of Credit), (a) the full cash payment thereof, including any interest, fees and other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding); and (b) if such Obligations are LC

 

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Obligations, Cash Collateralization thereof (or delivery of a standby letter of credit acceptable to Agent in its discretion, in the amount of required Cash Collateral). No Loans shall be deemed to have been paid in full until all Commitments related to such Loans have expired or been terminated.

GAAP : generally accepted accounting principles in effect in the United States from time to time.

Governmental Approvals : all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and required reports to, all Governmental Authorities.

Governmental Authority : any federal, state, municipal, foreign or other governmental department, agency, commission, board, bureau, court, tribunal, instrumentality, political subdivision, or other entity or officer exercising executive, legislative, judicial, regulatory or administrative functions for or pertaining to any government or court, in each case whether associated with the United States, a state, district or territory thereof, or a foreign entity or government.

Guaranteed Obligations : as defined in Section 14.1 .

Guarantor Payment : as defined in Section 5.11.3 .

Guarantors : the Company and the Subsidiary Guarantors.

Guaranty : the guaranty set forth in Section 14 , the guaranty executed by Solo Cup Owings Mills Holdings in favor of Agent and each other guaranty agreement executed by a Guarantor in favor of Agent.

Guaranty Supplement : as defined in Section 14.5 .

Hedging Agreement : one or more of the following agreements to which the Company or any of its Restricted Subsidiaries is a party:

(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.

Holdings : Solo Cup Investment Corporation, a Delaware corporation.

Incremental Amendment : as defined in Section 2.3.1 .

Indemnified Taxes : Taxes other than Excluded Taxes.

Indemnitees : Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and Bank of America Indemnitees.

Insolvency Proceeding : any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors; or (d) any UK Insolvency Proceeding.

 

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Intellectual Property : all intellectual Property of a Person, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, confidential and proprietary information, including know-how and trade secrets, software and databases, and all rights therein, all embodiments or fixations thereof and all applications and/or registrations or other rights to use any of the foregoing.

Intellectual Property Security Agreement : the Security Agreement dated as of the date hereof in substantially the form of Exhibit F or otherwise in form and substance reasonably satisfactory to Agent.

Intellectual Property Claim : any claim or assertion (whether in writing or by suit) that a Borrower’s or Restricted Subsidiary’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other Property violates another Person’s Intellectual Property.

Intercreditor Agreement : as defined in Section 12.15 .

Interest Payment Date : (a) as to any LIBOR Loan, the last day of each Interest Period applicable to such Loan; provided that if any Interest Period for a LIBOR Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December.

Interest Period : as defined in Section 3.1.3 .

Inventory : as defined in the UCC, including all goods intended for sale, lease, display or demonstration; all work in process; and all raw materials, and other materials and supplies of any kind that are or could be used in connection with the manufacture, printing, packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or consumed in a Borrower’s business (but excluding Equipment).

Inventory Formula Amount : the lower of (a) 65% of the Value of Eligible Inventory and (b) 85% of the NOLV Percentage of the Value of Eligible Inventory.

Inventory Reserve : reserves established by the Collateral Agents in their Credit Judgment after consultation with the Borrower Agent to reflect factors that the Collateral Agents believe could reasonably be expected to negatively impact the Value of Inventory.

Investment : any acquisition of all or substantially all assets of a Person; any acquisition of record or beneficial ownership of any Equity Interests of a Person; or any advance or capital contribution to or other investment in a Person.

IP Security Agreement Supplement : as defined in the Security Agreement.

IRS : the United States Internal Revenue Service.

Issuing Bank : each of (a) Bank of America or an Affiliate of Bank of America and (b) Wells Fargo Foothill, LLC or an Affiliate thereof, in each case as issuer of a Letter of Credit hereunder.

Issuing Bank Indemnitees : each Issuing Bank and its officers, directors, employees, Affiliates, agents and attorneys-in-fact.

Joint Lead Arrangers : Banc of America Securities LLC and GE Capital Markets, Inc. in their capacities as Joint Lead Arrangers.

 

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LC Application : an application by Borrower Agent to any Issuing Bank for issuance of a Letter of Credit, in form and substance satisfactory to such Issuing Bank.

LC Conditions : the following conditions necessary for issuance of a Letter of Credit: (a) each of the conditions set forth in Section 6 ; (b) after giving effect to such issuance, Excess Availability exceeds zero, total LC Obligations do not exceed the Letter of Credit Subline and no Overadvance exists; (c) the expiration date of such Letter of Credit is (i) no more than 365 days from issuance, in the case of standby Letters of Credit, (ii) no more than 120 days from issuance, in the case of documentary Letters of Credit, and (iii) unless otherwise agreed by the applicable Issuing Bank in its sole discretion (and subject to such additional conditions as may be required by such Issuing Bank in connection therewith), at least 20 Business Days prior to the Revolver Termination Date; (d) the Letter of Credit and payments thereunder are denominated in Dollars; and (e) the form of the proposed Letter of Credit is satisfactory to Agent and the applicable Issuing Bank in their discretion.

LC Documents : all documents, instruments and agreements (including LC Requests and LC Applications) delivered by Borrowers or any other Person to any Issuing Bank or Agent in connection with issuance, amendment or renewal of, or payment under, any Letter of Credit.

LC Obligations : the sum (without duplication) of (a) all amounts owing by Borrowers for any drawings under Letters of Credit; (b) the stated amount of all outstanding Letters of Credit; and (c) all fees and other amounts owing with respect to Letters of Credit.

LC Request : a request for issuance of a Letter of Credit, to be provided by Borrower Agent to an Issuing Bank, in form reasonably satisfactory to Agent and such Issuing Bank.

Lender Indemnitees : Lenders and their officers, directors, employees, Affiliates, agents, members and attorneys-in-fact.

Lenders : as defined in the preamble to this Agreement, including Agent in its capacity as a provider of Swingline Loans and any other Person who hereafter becomes a “Lender” pursuant to an Assignment and Acceptance.

Lending Office : the office designated as such by the applicable Lender at the time it becomes party to this Agreement or thereafter by notice to Agent and Borrower Agent.

Letter of Credit : any standby or documentary letter of credit issued by any Issuing Bank for the account of a Borrower, or any indemnity, guarantee, exposure transmittal memorandum or similar form of credit support issued by Agent or any Issuing Bank for the benefit of a Borrower. Notwithstanding anything to the contrary contained herein, effective as of the Closing Date, the letters of credit issued under the credit agreement dated as of February 27, 2004 among the Company, Holdings, Bank of America, as administrative agent, and the other lenders and agents party thereto, as set forth on Schedule 1.5, shall be deemed to be Letters of Credit issued hereunder for all purposes and shall be maintained under and governed by the terms and conditions of this Agreement.

Letter of Credit Subline : $40,000,000.

LIBOR : for any Interest Period with respect to a LIBOR Loan, the per annum rate of interest determined by Agent at approximately 11:00 a.m. (London time) two Business Days prior to commencement of such Interest Period, for a term comparable to such Interest Period, equal to (a) the British Bankers Association LIBOR Rate (“ BBA LIBOR ”), as published by Reuters (or other commercially available source designated by Agent); or (b) if BBA LIBOR is not available for any reason, the interest rate at which Dollar deposits in the approximate amount of the LIBOR Loan would be offered by Bank of America’s London branch to major

 

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banks in the London interbank Eurodollar market; provided that in the case of any Interest Period of 30 days or 60 days, LIBOR shall be the higher foregoing rate for terms of (x) 30 days or 60 days, as applicable and (y) 90 days; provided further that if the Board of Governors imposes a Reserve Percentage with respect to LIBOR deposits, then LIBOR shall be the foregoing rate, divided by 1 minus the Reserve Percentage.

LIBOR Loan : a Loan that bears interest based on LIBOR.

License : any agreement to which an Obligor is a party and under which an Obligor is authorized to use Intellectual Property in connection with any manufacture, marketing, distribution or disposition of Collateral, any use of Property or any other conduct of its business.

Licensor : any Person from whom an Obligor obtains the right to use any Intellectual Property.

Lien : with respect to any Property, (a) any mortgage, deed of trust, deed to secure debt, lien, pledge, encumbrance, charge, hypothecation or security interest in or on such Property securing an obligation owed to, or claim by, a Person, any leasehold or other interest in such Property and any option or other right to acquire any interest therein, and any easement, right-of-way or other encumbrance on title to Real Property, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such Property.

Lien Waiver : an agreement, in substantially the form of Exhibit J or otherwise in form and substance reasonably satisfactory to Agent, by which (a) for any Collateral located on leased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and agrees to permit Agent to enter upon the premises and remove the Collateral or to use the premises to store or dispose of the Collateral during certain time periods as may be agreed upon by Agent and such lessor; (b) for any Collateral held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the Collateral, agrees to hold any Documents in its possession relating to the Collateral as agent for Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver the Collateral to Agent upon request; and (d) for any Collateral subject to a Licensor’s Intellectual Property rights, the Licensor grants to Agent the right, vis-à-vis such Licensor, to enforce Agent’s Liens with respect to the Collateral, including the right to dispose of it with the benefit of the Intellectual Property, whether or not a default exists under any applicable License.

Like-Kind Exchange : if gain or loss would not be recognized under Section 1031 of the Code, any exchange of Property (other than Accounts, Inventory, cash and cash equivalents) for like Property.

Loan : a loan made pursuant to Section 2.1 , and any Swingline Loan, Overadvance Loan or Protective Advance.

Loan Account : the loan account established by each Lender on its books pursuant to Section 5.8 .

Loan Documents : this Agreement, Other Agreements and Security Documents.

Loan Year : each 12 month period commencing on the Closing Date and on each anniversary of the Closing Date.

Margin Stock : as defined in Regulation U of the Board of Governors.

Material Adverse Effect : the effect of any event or circumstance that, taken alone or in conjunction with other events or circumstances, (a) has or could be reasonably expected to have a material adverse effect on the business, operations, Properties,

 

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liabilities or financial condition of the Obligors taken as a whole, on the value of the Collateral taken as a whole, on the enforceability of any Loan Documents, or on the validity or priority of Agent’s Liens on any material portion of the ABL Collateral; (b) impairs the ability of the Obligors, taken as a whole, to perform any payment obligations or other material obligations under the Loan Documents; or (c) otherwise impairs the ability of Agent or any Lender to enforce or collect any Obligations or to realize upon any material portion of the ABL Collateral; provided that for purposes of representations and warranties made as of the Closing Date, “Material Adverse Effect” shall not include any state of facts, event, change or effect caused by events, changes or developments arising from changes in GAAP or from any changes in the market in which the Borrowers operate which do not disproportionately affect any of the Borrowers; provided further that the limitations on remedies in the Intercreditor Agreement shall be deemed not to impair any rights of Agent or any Lender for purposes of this definition.

Material Contract : any agreement or arrangement to which a Borrower or Restricted Subsidiary is party (other than the Loan Documents) for which breach, termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect.

Moody’s : Moody’s Investors Service, Inc., and its successors.

Mortgage : each mortgage, deed of trust or deed to secure debt pursuant to which an Obligor grants to Agent, for the benefit of Secured Parties, Liens (subject to the Liens securing the Existing Senior Secured Notes and the Intercreditor Agreement) upon the Mortgaged Property owned by such Obligor, as security for the Obligations, and which shall be substantially in the form of Exhibit L or otherwise in form and substance reasonably satisfactory to Agent and shall also include such provisions as shall be necessary to conform such document to, or as are customary under, applicable local law.

Mortgaged Property : each parcel of Real Property owned in fee by an Obligor and either described on Schedule 1.6 or required to be mortgaged to Agent, for the benefit of Secured Parties, pursuant to Section 7.1.2 .

Multiemployer Plan : any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

Net Proceeds : with respect to an Asset Disposition, proceeds (including, when received, any deferred or escrowed payments) received by a Borrower or Restricted Subsidiary in cash from such disposition, net of (a) reasonable costs and expenses actually incurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by a Permitted Lien senior to Agent’s Liens on Collateral sold; (c) all taxes paid (or reasonably and in good faith estimated to be payable), including any withholding taxes imposed on the repatriation of proceeds; and (d) reserves for indemnities and any other contingent liabilities, until such reserves are no longer needed.

NOLV Percentage : the net orderly liquidation value of Inventory, expressed as a percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent appraisal of Borrowers’ Inventory performed by an appraiser and on terms satisfactory to Collateral Agents.

Note : a promissory note to be executed by Borrowers in favor of a Lender in the form of Exhibit A , which shall be in the amount of such Lender’s Commitment and shall evidence the Loans made by such Lender, or any other promissory note executed by a Borrower to evidence any Obligations.

Notice of Borrowing : a Notice of Borrowing to be provided by Borrower Agent to request a Borrowing of Loans, in the form of Exhibit N or otherwise in form reasonably satisfactory to Agent.

 

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Notice of Conversion/Continuation : a Notice of Conversion/Continuation to be provided by Borrower Agent to request a conversion or continuation of any Loans as LIBOR Loans, in the form of Exhibit O or otherwise in form reasonably satisfactory to Agent.

Obligations : all (a) principal of and premium, if any, on the Loans, (b) LC Obligations and other obligations of Obligors with respect to Letters of Credit, (c) interest, expenses, fees and other sums payable by Obligors under Loan Documents, (d) obligations of Obligors under any indemnity for Claims, (e) Extraordinary Expenses, (f) Bank Product Debt, and (g) other Debts, obligations and liabilities of any kind owing by Obligors pursuant to the Loan Documents, whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or several.

Obligor : each Borrower and each Guarantor.

Organic Documents : with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement, certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation or operation of such Person.

OSHA : the Occupational Safety and Hazard Act of 1970.

Other Agreement : each Note, LC Document, Fee Letter, Lien Waiver, Intercreditor Agreement, Borrowing Base Certificate, Compliance Certificate or other instrument or agreement (other than this Agreement or the Security Documents) now or hereafter delivered or required to be executed and delivered by an Obligor to Agent, a Collateral Agent or a Lender in connection with any transactions relating hereto; provided that “Other Agreement” shall not include any agreement relating to Bank Product Debt or any Hedging Agreement except the deposit account control agreements and securities account control agreements required by Section 8 and except that “Other Agreement” shall include agreements relating to Bank Products solely when such term or the term “Loan Document” or “Loan Documents” is used in the Guaranty and any Security Document.

Other Taxes : all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document, excluding however, such Taxes imposed as a result of an assignment, grant of a participation or other transfer.

Overadvance : as defined in Section 2.1.5 .

Overadvance Loan : a Base Rate Loan made when an Overadvance exists or is caused by the funding thereof.

Participant : as defined in Section 13.2 .

Patriot Act : the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

Payment Item : each check, draft or other item of payment payable to a Borrower, including those constituting proceeds of any Collateral.

PBGC : the Pension Benefit Guaranty Corporation.

 

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Pension Plan : any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA Affiliate or to which the Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the preceding five plan years.

Permitted Acquisitions : the purchase or other acquisition of all (other than qualifying shares required by law to be issued to directors in the case of Persons organized in foreign jurisdictions) of the Equity Interests in any Person that, upon the consummation thereof, will be wholly (other than with respect to qualifying shares required by law to be issued to directors in the case of Persons organized in foreign jurisdictions) owned directly by the Company or one or more of its wholly-owned Restricted Subsidiaries (including, without limitation, as a result of a merger or consolidation) and the purchase or other acquisition by the Company or one or more of its wholly-owned Restricted Subsidiaries of (x) all or substantially all of the property and assets of any Person or (y) assets constituting a business unit, line of business or division of any Person; provided that, with respect to each purchase or other acquisition made pursuant hereto:

(a) the Obligors and any such newly created or acquired Restricted Subsidiary shall comply with the requirements of Section 7.1.2 ;

(b) the lines of business of the Person to be (or the property and assets of which are to be) so purchased or otherwise acquired shall be substantially the same lines of business as one or more of the principal businesses of the Company and its Restricted Subsidiaries or any similar, related, ancillary or complementary businesses or reasonable extensions or expansions thereof, or businesses that provide services and/or supply products in connection with a line of business in which any of the Borrowers or any of their Restricted Subsidiaries is engaged;

(c) such purchase or other acquisition shall not result in a Material Adverse Effect (as determined in good faith by the board of directors (or the persons performing similar functions) of the Company, if the board of directors is otherwise approving such transaction, or, in each other case, by the chief executive or financial officer of the Company);

(d) either: (i) immediately after giving effect to any Investment made in such purchase or acquisition, (A) on a pro forma basis, the Fixed Charge Coverage Ratio at such time shall be at least 1.0 to 1.0, and (B) each of the pro forma Average Excess Availability for the 30 day period prior to any such Investment and the projected pro forma Average Excess Availability as determined in good faith by the Company (as certified by a Senior Officer of the Company) for the 30 day period following any such Investment shall be at least 20% of the lesser of (I) the Borrowing Base and (II) the aggregate amount of Commitments; or (ii) immediately after giving effect to any Investment made in such purchase or acquisition, each of the pro forma Average Excess Availability for the 30 day period prior to any such Investment and the projected pro forma Average Excess Availability as determined in good faith by the Company (as certified by a Senior Officer of the Company) for the 30 day period following any such Investment shall be at least 40% of the lesser of (I) the Borrowing Base and (II) the aggregate amount of Commitments;

(e) such purchase or other acquisition is consensual;

(f) immediately before and immediately after giving effect to any such purchase or other acquisition, no Default or Event of Default shall have occurred and be continuing;

(g) the Company shall have delivered to the Agent, on behalf of the Lenders, at least five Business Days prior to the date on which any such purchase or other acquisition is to be consummated, a certificate of a Senior Officer, in form and substance reasonably satisfactory to the Agent, certifying that all of the requirements set forth above have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition; and

 

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(h) none of the Accounts or Inventory so purchased or otherwise acquired shall be included in the calculation of the Borrowing Base until Collateral Agents have conducted satisfactory appraisals, field audits and examinations, the Person owning such Accounts or Inventory shall have become a Borrower and all requirements otherwise applicable under this Agreement to such inclusion shall have been satisfied.

Permitted Asset Disposition : (a) a Permitted Ordinary Accounts/Inventory Disposition or (b) an Asset Disposition that is (i) a sale, lease, sublease, license, sublicense, transfer or other disposition (individually and collectively for purposes of this definition, a “ Disposition ”) of Equipment or other Property (other than ABL Collateral) (A) in the ordinary course of business or (B) to any Foreign Subsidiary, Unrestricted Subsidiary or joint venture for fair market value on an arm’s-length basis during any Fiscal Year, the consideration for which consists of at least 90% cash or Cash Equivalents and, when combined with the consideration received in respect of the other sales, transfers or other dispositions under this clause (i)(B) during such Fiscal Year, does not exceed $10,000,000; (ii) a Disposition of Investments received by the Company or any Restricted Subsidiary of the Company in connection with (A) the bankruptcy or reorganization of suppliers or customers of the Company or such Restricted Subsidiary or (B) in settlement of delinquent obligations of, or other disputes with, customers and suppliers of the Company or such Restricted Subsidiary arising in the ordinary course of business; (iii) a Disposition of Equipment or other Property (other than ABL Collateral) that is obsolete, damaged, worn out, unmerchantable, surplus or otherwise unsalable or unsuitable for use in the ordinary course of business; (iv) a termination of a lease, sublease, license or sublicense of real or personal Property that is not reasonably necessary for the ordinary course of business of the Company and its Restricted Subsidiaries and the termination of which could not reasonably be expected to have a Material Adverse Effect; (v) a lease, sublease, license or sublicense of real or personal Property (other than ABL Collateral) in the ordinary course of business, provided that if any such Property constitutes Collateral, such lease, sublease, license or sublicense is subordinate to the Liens thereon created under the Security Documents; (vi) the granting or other imposition of a Permitted Lien on real or personal Property; (vii) a Disposition of Property by an Obligor to another Obligor; (viii) a Disposition of Property by a Restricted Subsidiary that is not an Obligor to another Restricted Subsidiary; (ix) any issuance of Equity Interests by an Obligor to another Obligor or the issuance of common Equity Interests by the Company to Holdings or pursuant to a Qualified IPO; (x) a sale, transfer or other disposition of cash or Cash Equivalents; (xi) any sale of Equity Interests in, or Debt or other securities of, a joint venture, Unrestricted Subsidiary or Foreign Subsidiary for not less than the fair market value thereof; (xii) the surrender or waiver of contract rights or settlement, release or surrender of a contract, tort or other litigation claim in the ordinary course of business; (xiii) a Disposition of any Excluded Real Property for not less than the fair market value thereof, and any Disposition of Real Property listed on Schedule 1.8 for not less than the fair market value thereof, in each case the consideration for which consists of at least 75% cash or Cash Equivalents; (xiv) a sale-leaseback transaction consummated for fair value as determined at the time of consummation in good faith by such Obligor, the consideration received in respect of the sale of the property subject to such transaction consists of 100% cash or Cash Equivalents and, when combined with the consideration received in respect of the sale of the property subject to other sale-leaseback transactions permitted under this clause (xiv), does not exceed $25,000,000; (xv) a surrender, nonrenewal or cancellation of insurance policies in the ordinary course of business; (xvi) so long as no Default under Section 11.1(a) or (i)  and no Event of Default exists before or after giving effect thereto, any Asset Disposition of Property (other than ABL Collateral) during any Fiscal Year, the consideration received therefor consists of at least 75% cash or Cash Equivalents and, when combined with the consideration received for other Asset Dispositions of Property (other than ABL Collateral) made during such Fiscal Year under this clause (xvi), does not exceed the greater of $20,000,000 and 5% of Consolidated Net Tangible Assets (as defined in the Existing Senior Secured Notes Indenture as in effect as of the date of this Agreement) of the Company and its Restricted Subsidiaries as of the last date of the immediately preceding Fiscal Year; (xvii) any other Asset Disposition (other than

 

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a direct or indirect sale, transfer or other disposition of ABL Collateral) the consideration received therefor consists of at least 75% cash or Cash Equivalents, provided that (A) no Default or Event of Default exists before or after giving effect to such Asset Disposition and (B) after giving effect thereto, on a pro forma basis, the Fixed Charge Coverage Ratio at such time shall be at least 1.25 to 1.0 and the Excess Availability at such time shall be at least 30% of the lesser of (1) the Borrowing Base and (2) the aggregate amount of Commitments; or (xviii) approved in writing by Agent and Required Lenders.

For purposes of clauses (b)(i)(B), (b)(xiii), (b)(xiv), (b)(xvi) and (b)(xvii) above in this definition, the amount of any Debt owed by the Company or any Restricted Subsidiary to any Person (other than the Company or any Restricted Subsidiary) that is assumed by the transferee of any such assets (other than the Company or any Restricted Subsidiary) in consideration of any such Disposition shall be deemed to be cash.

Permitted Contingent Obligations : Contingent Obligations (a) arising from endorsements of Payment Items for collection or deposit in the ordinary course of business; (b) arising from Hedging Agreements permitted under Section 10.2.15 ; (c) existing on the Closing Date, and any extension or renewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (d) incurred in the ordinary course of business with respect to surety, appeal or performance bonds, or other similar obligations; (e) arising from customary indemnification obligations in favor of purchasers in connection with sales, leases, licenses, transfers and other dispositions of Property permitted hereunder; (f) arising under the Loan Documents; (g) in respect of a guaranty, indemnity or other assurance of payment or performance of any Debt permitted under Section 10.2.1 of any Obligor by a Borrower or any Restricted Subsidiary; (h) the primary obligor in respect of which is a Foreign Subsidiary or an Unrestricted Subsidiary in which the Company or any of its Restricted Subsidiaries has made an Investment, in an aggregate amount not to exceed $25,000,000 at any one time outstanding; (i) arising out of Permitted Acquisitions and consisting of obligations of any Borrower or any Restricted Subsidiary under provisions relating to indemnification, adjustment of purchase price with respect thereto based on changes in working capital and earn-outs based on the income generated by the assets acquired in any such Permitted Acquisition after the consummation thereof; or (j) in an aggregate amount of $10,000,000 or less at any time.

Permitted Lien : as defined in Section 10.2.2 .

Permitted Ordinary Accounts/Inventory Disposition : an Asset Disposition that is (a) a sale of Inventory in the ordinary course of business; (b) a sale, lease, license, transfer or other disposition of Inventory that is obsolete, damaged, worn out, unmerchantable or otherwise unsalable in the ordinary course of business; (c) settlements, compromises, deductions or discounts of Accounts granted in the ordinary course of business; or (d) a sale, conveyance or other transfer of Accounts and related assets, or fractional undivided interests therein, by a Foreign Subsidiary other than an Obligor in connection with factoring or other receivables financing transactions entered into by such Foreign Subsidiary.

Permitted Purchase Money Debt : Purchase Money Debt of Borrowers and Restricted Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate outstanding principal amount does not exceed $50,000,000 at any time.

Person : any individual, corporation, limited liability company, partnership, joint venture, joint stock company, land trust, business trust, unincorporated organization, Governmental Authority or other entity.

Plan : any employee benefit plan (as such term is defined in Section 3(3) of ERISA) maintained by an Obligor or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

 

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Post-Petition Interest : as defined in Section 14.6(b) .

Prepayment Provisions : with respect to any Debt, any provision relating to any obligation of the obligor of such Debt to prepay, redeem, purchase, defease or offer to purchase, redeem, purchase or defease such Debt, or to otherwise satisfy prior to the scheduled maturity of such Debt in any manner.

Prime Rate : the rate of interest announced by Bank of America from time to time as its prime rate. Such rate is set by Bank of America on the basis of various factors, including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

Principal Shareholders : (a) each of John F. Hulseman or Robert L. Hulseman, and (b) with respect to each of the foregoing, (i) his spouse, (ii) his descendants and any member of his immediate family, including in each case stepchildren and family members by adoption, (iii) his heirs at law and his estate and the beneficiaries thereof, (iv) any charitable foundation created by John F. Hulseman or Robert L. Hulseman, as applicable, and (v) any trust, corporation, limited liability company, partnership or other entity, the beneficiaries, stockholders, members, general partners, owners or Persons Beneficially Owning a majority of the interests of which consist of John F. Hulseman or Robert L. Hulseman, as applicable, and/or one or more of the Persons referred to in the immediately preceding clauses (i) through (iv); provided that any Person in the immediately preceding clauses (i) through (v) shall only be deemed to be a Principal Shareholder to the extent that such Person’s equity securities of the Company entitled to vote were received from John F. Hulseman, Robert L. Hulseman or any Person referred to in the immediately preceding clauses (i), (ii) or (iii).

Pro Rata : with respect to any Lender, a percentage (carried out to the ninth decimal place) determined (a) while Commitments are outstanding, by dividing the amount of such Lender’s Commitment by the aggregate amount of all Commitments; and (b) at any other time, by dividing the amount of such Lender’s Loans and LC Obligations by the aggregate amount of all outstanding Loans and LC Obligations.

Properly Contested : with respect to any obligation of a Borrower or any Restricted Subsidiary, (a) the obligation is subject to a bona fide dispute regarding amount or such Borrower’s or Restricted Subsidiary’s liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any assets of such Borrower or Restricted Subsidiary; (e) no Lien is imposed on assets of such Borrower or Restricted Subsidiary, unless bonded and stayed to the satisfaction of Agent; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.

Property : any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

Protective Advances : as defined in Section 2.1.6 .

Purchase Money Debt : (a) Debt (other than the Obligations) for payment of any of the purchase price of Property (other than Accounts and Inventory); (b) Debt (other than the Obligations) incurred within 90 days before or after acquisition of any Property (other than Accounts and Inventory), for the purpose of financing any of the purchase price thereof (including by way of reimbursing the Company or any of its Restricted Subsidiaries for the payment of the applicable purchase price or any portion thereof and refinancing any Debt incurred at or about the time of acquisition or delivery of such Property or refinancing any pre-delivery deposits); and (c) to the extent not covered above, obligations under Capital Leases entered into in connection with the acquisition of Property.

 

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Purchase Money Lien : a Lien that secures Purchase Money Debt, encumbering only the Property acquired with such Debt or the purchase price of which is financed by such Debt. “Purchase Money Lien” shall include the interest of a lessor under a Capital Lease that constitutes Purchase Money Debt.

Qualified IPO : the issuance by Holdings or the Company of its common stock in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act.

RCRA : the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

Real Property : all right, title and interest of a Borrower or Restricted Subsidiary (whether as owner or lessee) in any Property that constitutes real property (including land and any buildings, structures, parking areas or other improvements thereon).

Refinancing Conditions : the following conditions for Refinancing Debt: (a) it is in an aggregate principal amount that does not exceed the principal amount of the Debt being extended, renewed or refinanced plus all accrued and unpaid interest, fees, premiums, make-whole amounts due in connection with the refinancing of the Debt being refinanced and all fees and expenses payable in connection with such refinancing; (b) in the case of Refinancing Debt refinancing the Existing Senior Secured Notes, the Existing Senior Subordinated Notes or any Subordinated Debt (or refinancing any Refinancing Debt in respect thereof), it has a final maturity no sooner than and a weighted average life no less than the Debt being extended, renewed or refinanced, and the interest rate thereon is reasonably acceptable to Agent; (c) it is subordinated to the Obligations at least to the same extent as the Debt being extended, renewed or refinanced; (d) in the case of Refinancing Debt refinancing the Existing Senior Secured Notes, the Existing Senior Subordinated Notes or any Subordinated Debt (or refinancing any Refinancing Debt in respect thereof), the representations, covenants, defaults and Prepayment Provisions applicable to it are, taken as a whole, no less favorable in any material respect to Borrowers than those applicable to the Debt being extended, renewed or refinanced; (e) the Refinancing Debt shall not be secured by a Lien on any Property except to the extent that there is a Lien on such Property securing the Debt being extended, renewed or refinanced; (f) no Person that was not an obligor with respect to the Debt being extended, renewed or refinanced (other than a successor of such obligor) shall be an obligor with respect to the Refinancing Debt; (g) upon giving effect to it, no Default or Event of Default exists; and (h) in the case of any Refinancing Debt refinancing the Existing Senior Secured Notes (or refinancing any Refinancing Debt in respect thereof) that is secured by any of the Collateral, the holders of such Refinancing Debt shall have entered into documentation reasonably satisfactory to Agent agreeing to be bound by the Intercreditor Agreement and to have the same rights and obligations thereunder as holders of the Existing Senior Secured Notes.

Refinancing Debt : Borrowed Money that satisfies each of the Refinancing Conditions and is the result of an extension, renewal or refinancing of Debt permitted under Section 10.2.1(b), (c) , (d) or (e)  or any Refinancing Debt in respect thereof.

Reimbursement Date : as defined in Section 2.2.2 .

Related Mortgaged Property Deliveries : with respect to each Mortgaged Property, the following: (a) a fully paid mortgagee title policy (or marked-up and signed title insurance commitment having the effect of such title insurance policy) (including such endorsements as are set forth on Schedule 1.9 or as otherwise reasonably requested by the Agent and are customary for a transaction of this nature, in each case if available in the applicable jurisdiction) issued by the Title Company and insuring the Lien of such Mortgage as a valid mortgage Lien on such Mortgaged Property in favor of Agent in an amount equal to not less than 110% of the

 

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fair market value of the Mortgaged Property (as such fair market value is set forth on Schedule 1.10 or, in the case of Mortgages delivered pursuant to Section 7.1.2 , reasonably agreed to by Agent based on available valuation evidence provided by the applicable Obligor) (each, a “ Title Policy ”); (b) either (i) a current as-built survey of such Mortgaged Property in accordance with the most recent minimum standard details for a land survey jointly adopted by ALTA/ACSM and which shall be certified by a surveyor or engineer licensed to perform surveys in the jurisdiction in which the Mortgaged Property is located and shall otherwise be in a form reasonably acceptable to Agent, (ii) an existing survey of the Mortgaged Property satisfying the ALTA/ACSM standards described in clause (i), together with an executed affidavit of no-change with respect thereto or (iii) an aerial survey, ExpressMap or equivalent photographic depiction of the Mortgaged Property which is reasonably acceptable to Agent, provided that the foregoing clauses (i), (ii) and (iii) shall be acceptable only if the same is sufficient for the Title Company to remove all standard survey exceptions and to add a “land same as survey” endorsement or similar endorsement with respect to any item provided in clause (iii) from the Title Policy relating to the applicable Mortgaged Property; (c) a completed Federal Emergency Management Agency standard Flood Hazard Determination with respect to such Mortgaged Property and, if any portion of the Mortgaged Property is located within a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), evidence of flood insurance with respect to such Mortgaged Property in an amount required under, and in compliance with, the National Flood Insurance Program (as set forth in the Flood Disaster Protection Act of 1973); (d)(i) a customary written opinion of local counsel to the Obligors in the applicable jurisdiction in which such Mortgaged Property is located (such counsel to be reasonably acceptable to Agent), in form and substance reasonably satisfactory to Agent, with respect to the enforceability of the applicable Mortgage in such jurisdiction and such other matters as Agent may reasonably request and (ii) in the case of Mortgages delivered pursuant to Section 7.1.2 , a customary written opinion of counsel to the applicable Obligor with respect to existence, due authorization and execution and other customary matters in the applicable jurisdiction in which such Obligor is organized; and (e) with respect to any Mortgaged Property located in a jurisdiction where a zoning endorsement is not available to the Title Policy, a zoning confirmation letter from the municipality in which such Mortgaged Property is located or a report from Planning & Zoning Resources Inc. or a similar provider as reasonably approved by Agent, in each case, reasonably acceptable to Agent in form and substance.

Rent and Charges Reserve : the aggregate of (a) all past due rent and other amounts owing by an Obligor to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any Collateral; and (b) a reserve equal to not more than three months rent and other charges that could be payable to any such Person; provided that the Collateral Agents may not establish, maintain or increase any Rent Charges Reserve (i) if the applicable landlord, warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral has executed a Lien Waiver, or (ii) without prior consultation with the Borrower Agent.

Report : as defined in Section 12.2.3 .

Reportable Event : any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

Required Lenders : Lenders (subject to Section 4.2 ) having (a) Commitments in excess of 50% of the aggregate Commitments; and (b) if the Commitments have terminated, Loans in excess of 50% of all outstanding Loans.

Reserve Percentage : the reserve percentage (expressed as a decimal, rounded up to the nearest 1/8th of 1%) applicable to member banks under regulations issued from time to time by the Board of Governors for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”).

 

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Restricted Debt : any Debt permitted under Section 10.2.1(p) , (q)  or (r) .

Restricted Investment : any Investment by a Borrower or Restricted Subsidiary, other than:

(a) Investments existing on the Closing Date and set forth on Schedule 10.2.5 and any modification, replacement, renewal or extension thereof; provided that the amount of the original Investment is not increased except by the terms of such Investment or as otherwise permitted by this definition;

(b) Cash Equivalents;

(c) loans, advances, deposits and pre-delivery payments permitted under Section 10.2.7 ;

(d) (i) Investments in joint ventures, Unrestricted Subsidiaries or Foreign Subsidiaries in an aggregate amount not to exceed $25,000,000 at any one time outstanding, (ii) Investments in purchasing consortiums in an aggregate amount not to exceed $3,000,000 at any one time outstanding, and (iii) Investments constituting Permitted Acquisitions (including Investments in merger vehicles formed to consummate any Permitted Acquisition);

(e) Investments of any Obligor in any other Obligor;

(f) Investments received by the Company or any Restricted Subsidiary of the Company in connection with (i) the bankruptcy or reorganization of suppliers or customers of the Company or such Restricted Subsidiary, (ii) in settlement of delinquent obligations of, or other disputes with, customers and suppliers of the Company or such Restricted Subsidiary arising in the ordinary course of business or (iii) any non-cash consideration received from a Permitted Asset Disposition;

(g) Investments consisting of intercompany Debt (i) of any Person existing at the time such Person becomes a Restricted Subsidiary or is merged or consolidated into the Company or any of its Restricted Subsidiaries and not created in contemplation of such event or (ii) owed by a Restricted Subsidiary of the Company that is not a Subsidiary Guarantor to another Restricted Subsidiary of the Company that is not a Subsidiary Guarantor;

(h) with respect to any Foreign Subsidiary, (i) certificates of deposit of, bankers acceptances of, time deposits with or equivalents of demand deposit accounts which are maintained with, any commercial bank having combined capital and surplus of not less than $500,000,000 (or the dollar equivalent thereof), which is organized and existing under the laws of the country in which such Subsidiary maintains its chief executive office or principal place of business or is organized, and (ii) readily marketable obligations issued or directly and fully guaranteed or insured by the government or any agency or instrumentality of any member nation of the European Union whose legal tender is the Euro or British Pounds Sterling and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any such Subsidiary organized in such jurisdiction, maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s or a comparable rating from an internationally recognized rating agency; provided that the full faith and credit of any such member nation of the European Union is pledged in support thereof;

(i) Hedging Agreements set forth on Schedule 9.1.23 or otherwise permitted under Section 10.2.15 ;

 

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(j) customary Investments by any Foreign Subsidiary in connection with factoring or other receivables financing transactions entered into by such Foreign Subsidiary;

(k) Investments consisting of the non-exclusive licensing of Intellectual Property pursuant to joint marketing arrangements with other Persons in the ordinary course of business;

(l) other Investments not exceeding $10,000,000 in the aggregate in any fiscal year of the Company; and

(m) any other Investments so long as (i) no Default or Event of Default exists before or after giving effect thereto and (ii) after giving effect thereto, on a pro forma basis, the Fixed Charge Coverage Ratio at such time shall be at least 1.25 to 1.0 and the Excess Availability at such time shall be at least 25% of the lesser of (1) the Borrowing Base and (2) the aggregate amount of Commitments.

Restricted Subsidiary : any Subsidiary of the Company other than an Unrestricted Subsidiary.

Restrictive Agreement : an agreement (other than a Loan Document and as in effect as of the date hereof, the Existing Senior Secured Notes Indenture, the Existing Senior Subordinated Notes Indenture, the Existing Canadian Credit Agreement and the Stockholders’ Agreement) that conditions or restricts the right of any Borrower, Restricted Subsidiary or other Obligor to incur or repay Borrowed Money, to grant Liens on any assets, to declare or make Distributions, to modify, extend or renew any agreement evidencing Borrowed Money, or to repay any intercompany Debt, which conditions or restrictions are, taken as a whole, more restrictive than the restrictions in place on the Closing Date under the Loan Documents, the Existing Senior Secured Notes Indenture, the Existing Senior Subordinated Notes Indenture, the Existing Canadian Credit Agreement and the Stockholders’ Agreement.

Revolver Termination Date : July 2, 2013.

Royalties : all royalties, fees, expense reimbursement and other amounts payable by a Borrower under a License.

S&P : Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

SCC Holding Management Agreement : the Management Agreement, dated as of February 27, 2004, among the Company, Holdings and SCC Holding Company LLC.

SEC : the United States Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

Secured Parties : Agent, each Collateral Agent, each Issuing Bank, Lenders and providers of Bank Products.

Securities Act : Securities Act of 1933.

Security Agreement : the Security Agreement dated as of the date hereof in substantially the form of Exhibit E.

Security Agreement Supplement : as defined in the Security Agreement.

Security Documents : the Security Agreement, each Security Agreement Supplement, the Intellectual Property Security Agreement, each IP Security Agreement Supplement, the UK Debenture, each Guaranty, each Guaranty Supplement, the Mortgages, the Deposit Account Control Agreements and all other documents, instruments and agreements now or hereafter securing (or given with the intent to secure) any Obligations.

 

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Senior Officer : the chairman of the board, president, chief executive officer or chief financial officer of a Borrower or, if the context requires, an Obligor or, in the case of a UK Obligor, a director.

Settlement Report : a report delivered by Agent to Lenders summarizing the Loans and participations in LC Obligations outstanding as of a given settlement date, allocated to Lenders on a Pro Rata basis in accordance with their Commitments.

Solvent : as to any Person, such Person (a) unless it is a UK Obligor, (i) owns Property whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (ii) owns Property whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (iii) is able to pay all of its debts as they mature; (iv) is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital; (v) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code; and (vi) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates; or (b) if it is a UK Obligor, is UK Solvent. “ Fair salable value ” means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.

Stockholders’ Agreement : the Stockholders’ Agreement, dated as of February 27, 2004, as amended as of the date of the indenture, among the Parent, Vestar Capital Partners IV, L.P., a Delaware limited partnership, Vestar Cup Investment, LLC, a Delaware limited liability company, Vestar Cup Investment II, LLC, a Delaware limited liability company, members of management of the Parent that own shares of Common Stock, par value $.01 per share, of the Parent and SCC Holding.

Subordinated Debt : Debt incurred by a Borrower that is expressly subordinate and junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Agent; provided that the subordination terms under the Existing Senior Subordinated Notes Indenture shall be deemed satisfactory to Agent.

Subordinated Obligations : as defined in Section 14.6 .

Subsidiary of any Person : any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries. Unless otherwise specified, all reference herein to a “ Subsidiary ” or “ Subsidiaries ” shall refer to a Subsidiary or Subsidiaries of the Company.

Subsidiary Guarantors : the Restricted Subsidiaries of the Company listed on Schedule 1.3 and each other Restricted Subsidiary of the Company that shall be required to execute and deliver or become party to a Guaranty pursuant to Section 7.1.2 .

 

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Supermajority Lenders : Lenders (subject to Section 4.2 ) having (a) Commitments in excess of 80% of the aggregate Commitments; and (b) if the Commitments have terminated, Loans in excess of 80% of all outstanding Loans.

Surviving Debt : Debt of each Obligor and its Restricted Subsidiaries under the Existing Canadian Credit Agreement, the Existing Senior Secured Notes and the Existing Senior Subordinated Notes and other Debt of each Obligor and its Restricted Subsidiaries outstanding immediately before and after giving effect to the initial extension of credit hereunder.

Swingline Loan : any Borrowing of Base Rate Loans funded with Agent’s funds, until such Borrowing is settled among Lenders or repaid by Borrowers.

Taxes : all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding and mortgage recording taxes), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

Testing Period : the period (a) commencing on the day that Excess Availability is less than the greater of (i) 15% of the lesser of (A) the Borrowing Base and (B) the aggregate amount of Commitments and (ii) $15,000,000; and (b) continuing until the date when Excess Availability has been equal to or greater than the greater of (i) 15% of the lesser of (A) the Borrowing Base and (B) the aggregate amount of Commitments and (ii) $15,000,000 for 45 consecutive days.

Threshold Amount : $12,500,000.

Title Company : First American Title Insurance Company (and its affiliated title insurance companies) or such other nationally recognized title insurance or abstract company as shall be selected by Borrowers and approved by Agent (such approval not to be unreasonably withheld).

Title Policy : as defined in the definition of Related Mortgaged Property Deliveries.

Transferee : any actual or potential Eligible Assignee, Participant or other Person acquiring an interest in any Obligations.

Transition Agreement : the Transition Agreement, dated December 14, 2006, among Vestar Capital Partners IV, L.P., Vestar Cup Investment, LLC, Vestar Cup Investment II, LLC, SCC Holding Company LLC, Holdings and the Company.

Type : any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same interest option and, in the case of LIBOR Loans, the same Interest Period.

UCC : the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

UK Debenture : the debenture between the UK Obligors and the Agent in substantially the form of Exhibit P or otherwise in form and substance reasonably satisfactory to Agent.

UK Insolvency Proceeding : any corporate action (excluding meetings of the board of directors but not, for the avoidance of doubt, any resolution passed thereat) or legal proceedings or other procedure taken or commenced in relation to (a) the bankruptcy, suspension of payments, moratorium of any indebtedness, winding up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any UK Obligor or (b) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, judicial custodian, trustee in bankruptcy or other similar officers in respect of a UK Obligor or any of its assets or a composition, compromise, assignment or arrangement with any creditor or class of creditors of any UK Obligor in each case relating to financial distress.

 

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UK Obligors : Solo Cup (UK) Limited, Insulpak Holdings Limited, Solo Cup Europe Limited and any other Obligor that is incorporated under the laws of any part of the United Kingdom.

UK Solvent : in relation to any UK Obligor, that UK Obligor is able to pay its debts as they fall due and is not deemed to be unable to pay its debts within the meaning of Section 123 of the UK Insolvency Act 1986 (provided that for these purposes the figure of £750 in sub-paragraph 1(a) thereof shall be deemed to have been replaced by the Threshold Amount).

Unfunded Pension Liability : the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

Unrestricted Subsidiary : any Subsidiary of the Company that is acquired or created after the Closing Date and designated by the Company as an Unrestricted Subsidiary hereunder by written notice to Agent; provided that the Company shall only be permitted to so designate a new Unrestricted Subsidiary after the Closing Date and so long as:

(a) no Default or Event of Default has occurred and is continuing or would result therefrom,

(b) immediately after giving effect to such designation, the Company and the Restricted Subsidiaries shall be in compliance, on a pro forma basis, with the covenant set forth in Section 10.3.1 , whether or not a Testing Period shall then apply,

(c) any Contingent Obligation incurred by the Company or any Restricted Subsidiary in respect of any Debt of the Subsidiary being so designated will be deemed to be an incurrence of Debt by Solo or such Restricted Subsidiary (or both, if applicable) at the time of such designation, and such incurrence of Debt would be permitted under Section 10.2.1 ,

(d) (i) the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary being so designated (including any Contingent Obligation incurred by the Company or any Restricted Subsidiary in respect of any Debt of such Subsidiary) will be deemed to be an Investment made as of the time of such designation, (ii) such Investment would be permitted under Section 10.2.5 and (iii) such Subsidiary does not own any Equity Interests or Debt of, or hold any Liens on any property of, the Company or any Restricted Subsidiary,

(e) the Subsidiary being so designated (i) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company, (ii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (A) to subscribe for additional Equity Interests or (B) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and (iii) has not incurred any Contingent Obligation in respect of or otherwise directly or indirectly provided credit support for any Debt of the Company or any of its Restricted Subsidiaries, except to the extent such Contingent Obligation or credit support would be released upon such designation and

(f) the Company shall have provided Agent with a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and a certificate of a Senior Officer of the Company certifying that such designation complied with the preceding conditions, and containing the calculations and information required by the preceding clause (ii) above.

 

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If, at any time, any Unrestricted Subsidiary would fail to meet any of the preceding requirements described in clause (e) above, it shall thereafter cease to be an Unrestricted Subsidiary and any Debt, Investments or Liens on the property of such Subsidiary shall be deemed to be incurred or made by a Restricted Subsidiary of the Company as of such date and, if such Debt, Investments or Liens are not permitted to be incurred or made as of such date under this Agreement, an Event of Default shall exist.

The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that:

(1) such designation shall be deemed to be an incurrence of Debt by a Restricted Subsidiary of the Company of any outstanding Debt of such Unrestricted Subsidiary and such designation shall only be permitted if such Debt is permitted under Section 10.2.1 calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period;

(2) all outstanding Investments owned by such Unrestricted Subsidiary will be deemed to be made as of the time of such designation and such Investments shall only be permitted if such Investments would be permitted under Section 10.2.5 ;

(3) all Liens upon property or assets of such Unrestricted Subsidiary existing at the time of such designation would be permitted under Section 10.2.2 ;

(4) no Default or Event of Default would be in existence following such designation;

(5) immediately after giving effect to such designation, the Company and the Restricted Subsidiaries shall be in compliance, on a pro forma basis, with the covenant set forth in Section 10.3.1 , whether or not a Testing Period shall then apply (and the Company shall have delivered to Agent a certificate setting forth in reasonable detail the calculations demonstrating such compliance),

(6) all representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such designation (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date, and

(7) the Company shall have delivered to Agent a certificate of a Senior Officer of the Company certifying that such designation complied with the requirements of preceding clauses (1) through (6) above, and containing the calculations and information required by the preceding clause (5) above.

Upstream Payment : a Distribution by a Restricted Subsidiary of a Borrower to such Borrower.

Value : (a) for Inventory, its value determined on the basis of the lower of cost or market, calculated on a first-in, first-out basis, and excluding any portion of cost attributable to intercompany profit among Borrowers and their Affiliates; and (b) for an Account, its face amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or Taxes (including sales, excise or other taxes) that have been or could be claimed by the Account Debtor or any other Person.

Vestar Management Agreement : the Management Agreement, dated as of February 27, 2004, among Holdings, the Company and Vestar Capital Partners.

1.2. Accounting Terms . Under the Loan Documents (except as otherwise specified herein), all accounting terms shall be interpreted, all accounting determinations shall be made, and all financial

 

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statements shall be prepared, in accordance with GAAP applied on a basis consistent with the most recent audited financial statements of Borrowers delivered to Agent before the Closing Date and using the same inventory valuation method as used in such financial statements, except for any change required or permitted by GAAP if Borrowers’ certified public accountants concur in such change and the change is disclosed to Agent. Notwithstanding the prior sentence, if at any time any Accounting Change would affect the computation of the Fixed Charge Coverage Ratio (or any other calculation herein), and the Borrowers, any Collateral Agent or the Required Lenders shall so request, Agent, the Lenders and the Borrowers shall negotiate in good faith to amend such definition (or calculation) to preserve the original intent thereof in light of such Accounting Change (subject to the approval of the Required Lenders); provided that, until so amended, (i) such definition (or calculation) shall continue to be computed in the manner computed prior to such Accounting Change and (ii) the Borrowers shall provide to Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such definition (or other calculation) made before and after giving effect to such Accounting Change. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of any Obligor or any Restricted Subsidiary at “fair value”, as defined therein.

1.3. Uniform Commercial Code . As used herein, the following terms are defined in accordance with the UCC in effect in the State of New York from time to time: “Account”, “Account Debtor,” “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,” “Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.”

1.4. Certain Matters of Construction . The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the computation of periods of time from a specified date to a later specified date, “from” means “from and including,” and “to” and “until” each mean “to but excluding.” The terms “including” and “include” shall mean “including, without limitation” and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision. Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document. All references to (a) laws or statutes include all related rules, regulations, interpretations, amendments and successor provisions; (b) any document, instrument or agreement include, unless otherwise specified herein, any amendments, waivers and other modifications, extensions or renewals (to the extent permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e) any Person include successors and assigns; (f) time of day mean time of day at Agent’s notice address under Section 15.3.1 ; or (g) discretion of Agent, any Collateral Agent, any Issuing Bank or any Lender mean the sole and absolute discretion of such Person. All calculations of Value, fundings of Loans, issuances of Letters of Credit and payments of Obligations shall be in Dollars and, unless the context otherwise requires, all determinations (including calculations of Borrowing Base, Excess Availability and financial covenants) made from time to time under the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing Base and Excess Availability calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to each Collateral Agent (and not necessarily calculated in accordance with GAAP). Borrowers shall have the burden of establishing any alleged negligence, misconduct or lack of good faith by Agent, any Collateral Agent, any Issuing Bank or any Lender under any Loan Documents. No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision. Whenever the phrase “to the best of Borrowers’ knowledge” or words of similar import are used in any Loan Documents, it means actual knowledge of a

 

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Senior Officer. Whenever any payment, certificate, notice or other delivery shall be stated to be due on a day other than a Business Day, the due date for such payment or delivery shall be extended to the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided , however , that if such extension would cause payment of interest on or principal of any LIBOR Loan to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day.

1.5. Designated Senior Debt . This Agreement is a refinancing of the credit agreement dated as of February 27, 2004 among the Company, Holdings, Bank of America, as administrative agent, and the other lenders and agents party thereto, and the Obligations constitute “Designated Senior Debt” and “Senior Debt” under the Existing Senior Subordinated Notes Indenture (and the same or any similar term under any Refinancing Debt in respect thereof).

SECTION 2. CREDIT FACILITIES

2.1. Commitment .

2.1.1. Loans . Each Lender agrees, severally on a Pro Rata basis up to its Commitment, on the terms set forth herein, to make Loans (i) on the Closing Date, to the Company and SCOC in an aggregate amount not to exceed the amount required to satisfy the conditions specified in Section 6.1 , and (ii) from time to time on and after the Closing Date to the Commitment Termination Date, to the Borrowers other than the Company. The Loans may be repaid and reborrowed as provided herein. In no event shall Lenders have any obligation to honor a request for a Loan if the unpaid balance of Loans outstanding at such time (including the requested Loan) plus LC Obligations would exceed the lesser of the Borrowing Base and the aggregate amount of Commitments.

2.1.2. Notes . Subject to Section 5.8 , the Loans made by each Lender and interest accruing thereon shall be evidenced by the records of Agent and such Lender. At the request of any Lender, Borrowers shall deliver a Note to such Lender.

2.1.3. Use of Proceeds . The proceeds of Loans shall be used by Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction expenses associated with the closing of this credit facility and the Existing Senior Secured Notes; (c) to pay Obligations in accordance with this Agreement; and (d) for working capital and other lawful corporate purposes of Borrowers including, without limitation, acquisitions and debt repurchases permitted under this Agreement.

2.1.4. Voluntary Reduction or Termination of Commitments.

(a) The Commitments shall terminate on the Revolver Termination Date, unless sooner terminated in accordance with this Agreement. Upon at least 10 days prior written notice to Agent at any time, Borrowers may, at their option, terminate the Commitments and this credit facility. Any notice of termination given by Borrowers shall be irrevocable; provided that such notice may be contingent on the occurrence of a refinancing of this Agreement and may be revoked or the termination date deferred if the refinancing does not occur. Unless the termination is revoked or deferred in accordance with the proviso to the previous sentence, on the termination date, Borrowers shall make Full Payment of all Obligations.

(b) Borrowers may permanently reduce the Commitments, on a Pro Rata basis for each Lender, upon at least 10 days prior written notice to Agent, which notice shall specify the amount of the reduction and shall be irrevocable once given; provided that such notice may be contingent on the incurrence of Debt permitted under Section 10.2.1 and may be revoked or deferred if such Debt is not incurred. Each reduction shall be in a minimum amount of $10,000,000, or an increment of $1,000,000 in excess thereof.

 

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2.1.5. Overadvances . If the aggregate Loans exceed the amount that equals (x) the lesser of the Borrowing Base and the aggregate amount of Commitments, minus (y) the LC Obligations (such excess Loans, “ Overadvance ”) at any time, the excess amount shall be payable by Borrowers on demand (unless such excess amount is caused by an increase in Availability Reserve or the funding of an Overadvance Loan, in which case such excess amount shall be payable by Borrowers within five Business Days of the occurrence of such excess amount or, in the case of the funding of an Overadvance Loan, by the earlier of (i) 30 days after the funding of such Overadvance Loan and (ii) one Business Day after demand by Agent) (it being understood that no Loan (other than Overadvance Loan made pursuant to the immediately succeeding sentence and Protective Advances) shall be made and no Letter of Credit shall be issued at any time an Overdance is outstanding) by Agent, but all such Loans shall nevertheless constitute Obligations secured by the Collateral and entitled to all benefits of the Loan Documents. Unless its authority has been revoked in writing by Required Lenders, Agent may require Lenders to honor requests for Overadvance Loans and to forbear from requiring Borrowers to cure an Overadvance, (a) when no other Event of Default is known to Agent, as long as (i) the Overadvance does not continue for more than 30 consecutive days (and no Overadvance may exist until at least five consecutive days thereafter before further Overadvance Loans are required), and (ii) the aggregate outstanding amount of Overadvance and Protective Advances is not known by Agent to exceed $15,000,000 at any time; and (b) regardless of whether an Event of Default exists, if Agent discovers an Overadvance not previously known by it to exist, as long as from the date of such discovery the Overadvance (i) is not increased by more than $5,000,000, and (ii) does not continue for more than 30 consecutive days. In no event shall Overadvance Loans be required that would cause the outstanding Loans and LC Obligations to exceed the aggregate Commitments. Any sufferance of an Overadvance shall not constitute a waiver by Agent or Lenders of the Event of Default caused thereby unless and except to the extent such Overadvance is caused by the funding of an Overadvance Loan. In no event shall any Borrower or other Obligor be deemed a beneficiary of this Section nor authorized to enforce any of its terms.

2.1.6. Protective Advances . Agent shall be authorized, in its discretion, at any time that an Event of Default has occurred and is continuing, and without regard to whether any conditions in Section 6 are satisfied, to make Base Rate Loans (“ Protective Advances ”) (a) of up to an aggregate amount of $15,000,000 outstanding at any time ( provided that the sum of all Loans, LC Obligations and Protective Advances do not exceed the aggregate Commitments), if Agent deems such Loans necessary or desirable to preserve or protect Collateral, or to enhance the collectibility or repayment of Obligations; or (b) to pay any other amounts chargeable to Obligors under any Loan Documents, including costs, fees and expenses. Each Lender shall participate in each Protective Advance on a Pro Rata basis. Required Lenders may at any time revoke Agent’s authority to make further Protective Advances by written notice to Agent. Absent such revocation, Agent’s determination that funding of a Protective Advance is appropriate shall be conclusive, provided, that the aggregate outstanding amount of Protective Advances and Overadvance shall not, at any one time, exceed $15,000,000.

2.2. Letter of Credit Facility .

2.2.1. Issuance of Letters of Credit . Each Issuing Bank agrees to issue Letters of Credit from time to time until 7 days prior to the Revolver Termination Date (or until the Commitment Termination Date, if earlier), on the terms set forth herein, including the following:

(a) Each Borrower acknowledges that each Issuing Bank’s willingness to issue any Letter of Credit is conditioned upon such Issuing Bank’s receipt of a LC Application with respect to the requested Letter of Credit, as well as such other instruments and agreements as such Issuing Bank may customarily require for issuance of a letter of credit of similar type and amount. No Issuing Bank shall have any obligation to issue any Letter of Credit unless (i) such Issuing Bank receives a LC Request and LC Application at least three Business Days prior to the requested date of issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting Lender exists, such Lender or Borrowers have entered into arrangements satisfactory to Agent and such Issuing Bank to eliminate any funding risk associated with the Defaulting Lender. If any Issuing Bank receives written notice from a Lender at least five Business

 

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Days before issuance of a Letter of Credit that any LC Condition has not been satisfied, such Issuing Bank shall have no obligation to issue the requested Letter of Credit (or any other) until such notice is withdrawn in writing by that Lender or until Required Lenders have waived such condition in accordance with this Agreement. Prior to receipt of any such notice, no Issuing Bank shall be deemed to have knowledge of any failure of LC Conditions.

(b) Letters of Credit may be requested by a Borrower only (i) to support obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business; or (ii) for other purposes as Agent and the applicable Issuing Bank may approve from time to time in writing. The renewal or extension of any Letter of Credit shall be treated as the issuance of a new Letter of Credit, except that delivery of a new LC Application shall be required at the discretion of the applicable Issuing Bank.

(c) Borrowers assume all risks of the acts, omissions or misuses of any Letter of Credit by the beneficiary. In connection with issuance of any Letter of Credit, none of Agent, any Issuing Bank or any Lender shall be responsible for the existence, character, quality, quantity, condition, packing, value or delivery of any goods purported to be represented by any Documents; any differences or variation in the character, quality, quantity, condition, packing, value or delivery of any goods from that expressed in any Documents; the form, validity, sufficiency, accuracy, genuineness or legal effect of any Documents or of any endorsements thereon; the time, place, manner or order in which shipment of goods is made; partial or incomplete shipment of, or failure to ship, any goods referred to in a Letter of Credit or Documents; any deviation from instructions, delay, default or fraud by any shipper or other Person in connection with any goods, shipment or delivery; any breach of contract between a shipper or vendor and a Borrower; errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or otherwise; errors in interpretation of technical terms; the misapplication by a beneficiary of any Letter of Credit or the proceeds thereof; or any consequences arising from causes beyond the control of any Issuing Bank, Agent or any Lender, including any act or omission of a Governmental Authority. The rights and remedies of any Issuing Bank under the Loan Documents shall be cumulative. Each Issuing Bank shall be fully subrogated to the rights and remedies of each beneficiary whose claims against Borrowers are discharged with proceeds of any Letter of Credit.

(d) In connection with its administration of and enforcement of rights or remedies under any Letters of Credit or LC Documents, each Issuing Bank shall be entitled to act, and shall be fully protected in acting, upon any certification, documentation or communication in whatever form believed by such Issuing Bank, in good faith, to be genuine and correct and to have been signed, sent or made by a proper Person. Each Issuing Bank may consult with and employ legal counsel, accountants and other experts to advise it concerning its obligations, rights and remedies, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon, any advice given by such experts. Each Issuing Bank may employ agents and attorneys-in-fact in connection with any matter relating to Letters of Credit or LC Documents, and shall not be liable for the negligence or misconduct of agents and attorneys-in-fact selected with reasonable care.

2.2.2. Reimbursement; Participations .

(a) If any Issuing Bank honors any request for payment under a Letter of Credit, Borrowers shall pay to such Issuing Bank, on the same day (“ Reimbursement Date ”), the amount paid by such Issuing Bank under such Letter of Credit, together with interest at the interest rate for Base Rate Loans from the Reimbursement Date until payment by Borrowers. The obligation of Borrowers to reimburse any Issuing Bank for any payment made under a Letter of Credit shall be absolute, unconditional, irrevocable, and joint and several, and shall be paid without regard to any lack of validity or enforceability of any Letter of Credit or the existence of any claim, setoff, defense or other right that Borrowers may have at any time against the beneficiary. Whether or not Borrower Agent submits a

 

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Notice of Borrowing, Borrowers shall be deemed to have requested a Borrowing of Base Rate Loans in an amount necessary to pay all amounts due any Issuing Bank on any Reimbursement Date and each Lender agrees to fund its Pro Rata share of such Borrowing whether or not the Commitments have terminated, an Overadvance exists or is created thereby, or the conditions in Section 6 are satisfied.

(b) Upon issuance of a Letter of Credit, each Lender shall be deemed to have irrevocably and unconditionally purchased from the Issuing Bank that issued such Letter of Credit, without recourse or warranty, an undivided Pro Rata interest and participation in all LC Obligations relating to the Letter of Credit. If any Issuing Bank makes any payment under a Letter of Credit and Borrowers do not reimburse such payment on the Reimbursement Date, Agent shall promptly notify Lenders and each Lender shall promptly (within one Business Day) and unconditionally pay to Agent, for the benefit of such Issuing Bank, the Lender’s Pro Rata share of such payment. Upon request by a Lender, such Issuing Bank shall furnish copies of any Letters of Credit and LC Documents in its possession at such time.

(c) The obligation of each Lender to make payments to Agent for the account of any Issuing Bank in connection with such Issuing Bank’s payment under a Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, setoff, qualification or exception whatsoever, and shall be made in accordance with this Agreement under all circumstances, irrespective of any lack of validity or unenforceability of any Loan Documents; any draft, certificate or other document presented under a Letter of Credit having been determined to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or the existence of any setoff or defense that any Obligor may have with respect to any Obligations. No Issuing Bank assumes any responsibility for any failure or delay in performance or any breach by any Borrower or other Person of any obligations under any LC Documents. No Issuing Bank makes to Lenders any express or implied warranty, representation or guaranty with respect to the Collateral, LC Documents or any Obligor. No Issuing Bank shall be responsible to any Lender for any recitals, statements, information, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of any LC Documents; the validity, genuineness, enforceability, collectibility, value or sufficiency of any Collateral or the perfection of any Lien therein; or the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Obligor.

(d) No Issuing Bank Indemnitee shall be liable to any Lender or other Person for any action taken or omitted to be taken in connection with any LC Documents except as a result of its gross negligence or willful misconduct. No Issuing Bank shall have any liability to any Lender if such Issuing Bank refrains from any action under any Letter of Credit or LC Documents until it receives written instructions from Required Lenders.

2.2.3. Cash Collateral . If any LC Obligations, whether or not then due or payable, shall for any reason be outstanding at any time (a) that an Event of Default exists, (b) that Excess Availability is less than zero (unless such shortfall shall have been cured by the repayment of Loans), (c) after the Commitment Termination Date, or (d) within 5 Business Days prior to the Revolver Termination Date, then Borrowers shall, at the applicable Issuing Bank’s or Agent’s request, Cash Collateralize the stated amount of all outstanding Letters of Credit issued by such Issuing Bank and pay to such Issuing Bank the amount of all other LC Obligations owing to such Issuing Bank. Borrowers shall, on demand by any applicable Issuing Bank or Agent from time to time, Cash Collateralize the LC Obligations of any Defaulting Lender. If Borrowers fail to provide any Cash Collateral as required hereunder, Lenders may (and shall upon direction of Agent) advance, as Loans, the amount of the Cash Collateral required (whether or not the Commitments have terminated, an Overadvance exists or the conditions in Section 6 are satisfied).

2.3. Increases in Commitments .

 

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2.3.1. Commitment Increase .

(a) The Borrower Agent may at any time or from time to time after the Closing Date, by notice to the Agent (whereupon the Agent shall promptly deliver a copy to each of the Lenders), request one or more increases in the amount of the Commitments (each such increase, a “ Commitment Increase ”); provided that upon the effectiveness of any Incremental Amendment referred to below, no Default or Event of Default shall exist and each Commitment Increase shall be in an aggregate principal amount that is not less than $25,000,000 ( provided that such amount may be less than $25,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence). Notwithstanding anything to the contrary herein, the aggregate amount of the Commitment Increases shall not exceed $100,000,000. Each notice from the Borrower pursuant to this Section 2.3.1 shall set forth the requested amount of the relevant Commitment Increases. Commitment Increases may be provided by any existing Lender (it being understood that no existing Lender will have an obligation to provide a portion of any Commitment Increase) or by any other Eligible Assignee. Commitments in respect of Commitment Increases shall become Commitments (or in the case of a Commitment Increase to be provided by an existing Lender, an increase in such Lender’s applicable Commitment) under this Agreement pursuant to an amendment (an “ Incremental Amendment ”) to Schedule 1.1 (with a joinder agreement in the case of any Eligible Assignee providing any portion of such Commitment Increases), executed by the Agent, each Lender and Eligible Assignee agreeing to provide any portion of a Commitment Increase and the Obligors , and reaffirmations of the Security Documents and any other Loan Documents as reasonably requested by Agent, executed by the Obligors. The Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate (including any increase in the Applicable Margin and the fees set out in Sections 3.2.1 and 3.2.3 , provided that any such increase shall apply to and be for the benefit of all the Lenders), in the reasonable opinion of the Agent and the Borrower, to effect the provisions of this Section 2.3.1. The effectiveness of any Incremental Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 6.2 (it being understood that all references to “the date of such funding, issuance or grant” or similar language in such Section 6.2 shall be deemed to refer to the effective date of such Incremental Amendment) and such other conditions as may be required by the Agent. The Borrower may use Commitment Increases for any purpose not prohibited by this Agreement.

(b) Upon each increase in the Commitments pursuant to this Section 2.3.1, (x) each Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Lender providing a portion of the Commitment Increase (each a “ Commitment Increase Lender ”) in respect of such increase, and each such Commitment Increase Lender will automatically and without further act be deemed to have assumed, a portion of such Lender’s participations hereunder in outstanding Letters of Credit and Swingline Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding (i) participations hereunder in Letters of Credit and (ii) participations hereunder in Swingline Loans held by each Lender (including each such Commitment Increase Lender) will equal the percentage of the aggregate Commitments of all Lenders represented by such Lender’s Commitment and (y) if, on the date of such increase, there are any Loans outstanding, portions of such Loans shall on the date of the effectiveness of such Commitment Increase be prepaid with the proceeds of additional Loans made by the Commitment Increase Lenders (such that after giving effect to such prepayment, the percentage of the Loans held by each Lender will equal the percentage of the aggregate Commitments of all Lenders represented by such Lender’s Commitment after giving effect to such Commitment Increase), which prepayment shall be accompanied by accrued interest on the Loans being prepaid and any costs incurred by any Lender in accordance with Section 3.9. The Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence. Except as permitted under Section 2.3.1(a) with respect to any increase in Applicable Margin and fees, the terms and conditions of such Commitment Increases (including pricing and maturity date) shall be identical to those applicable to the Aggregate Commitments immediately prior to the effectiveness of such Commitment Increases and the applicable commitments shall constitute Commitments hereunder. This Section 2.3.1 shall supersede any provisions in Section 12.5 or 15.1 to the contrary.

 

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