SECOND AMENDED AND RESTATED AGENTED CREDIT AGREEMENT

Exhibit 10.1

 

SECOND AMENDED AND RESTATED

AGENTED CREDIT AGREEMENT

 

This Second Amended and Restated Agented Credit Agreement (“Agreement”) is dated as of April 9, 2007, among ORCHIDS PAPER PRODUCTS COMPANY , a Delaware corporation ("Borrower"), and BANK OF OKLAHOMA, N.A. (“BOK”), BANCFIRST , and COMMERCE BANK, N.A. (individually a "Bank" and collectively the "Banks"), and BANK OF OKLAHOMA, N.A. , as agent for the Banks hereunder (in such capacity, the "Agent").

 

RECITALS

 

A.          Reference is made to the Amended and Restated Agented Revolving Credit and Term Loan Agreement by and among Borrower, Banks, and Agent, dated June 24, 2005, and amended June 30, 2006 and October 31, 2006 (as amended, the "2005 Credit Agreement"), pursuant to which currently exists (i) a $14,084,646.81 term loan; (ii) a $5,000,000 revolving line of credit, and (iii) a $15,000,000 construction loan.

 

B.          Borrower has requested that (i) the $5,000,000 revolving line of credit be increased to $6,000,000, and the maturity date extended; (ii) the $14,084,646.81 term loan and the $15,000,000 construction loan be refinanced; and (iii) a new $3,000,000 construction loan be established to finance the construction of a water pre-treatment facility.

 

C.          The Banks have agreed to accommodate Borrower’s requests outlined in Paragraph B above, subject to the terms and conditions set forth in this Agreement. This Agreement shall restate the 2005 Credit Agreement in its entirety, and shall supercede and replace such document.

 

AGREEMENT

 

For valuable consideration received, it is agreed as follows:

 

1.            DEFINED TERMS . As used in this Agreement, the following terms have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa). All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 8.9, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.

 

1.1.       " Adjusted LIBOR Rate " shall mean the LIBOR Rate plus the LIBOR Rate Margin. The Adjusted LIBOR Rate shall be recalculated by Agent (which determination shall be conclusive subject to manifest error) on not less than a quarterly basis, upon Agent’s receipt of Borrower’s quarterly financial statements.

 

1.2.       " Adjusted Prime Rate " shall mean the Prime Rate plus the Prime Rate Margin. The Adjusted Prime Rate shall be recalculated by Agent (which determination shall be conclusive subject to manifest error) on not less than a quarterly basis, upon Agent’s receipt of Borrower’s quarterly financial statements.

 

1.3.       " Advance " means a disbursement by Agent to or for the benefit or account of Borrower of any proceeds of the Construction Loan.

 

1.4.       " Advance Request " means a written request from Borrower (and such other parties as may be required by Agent from time to time) to Agent specifying the requested Advance amount, the disbursement date, and making certain certifications to Agent, all as more specifically set forth in

 

 

the Advance Request form, a copy of which is attached hereto as Schedule "1.4" . If requested by Agent, (i) each Advance Request shall be accompanied by billing statements, vouchers and invoices, in form and content satisfactory to Agent, with regard to items that are the subject of the Advance Request; and (ii) each Advance Request shall be accompanied by appropriate waivers of lien rights, in form and content satisfactory to Agent and its legal counsel, executed and acknowledged by all contractors, subcontractors, laborers and materialmen who have furnished labor or materials relating to the Improvements. If requested, partial lien waivers must be delivered to Agent within five (5) business days following each Advance for the amount of work completed and paid for as of the date of billing on which the latest Advance was based, and general lien waivers must be delivered to Agent upon the disbursement of the final Advance and, if requested by Agent, such waivers shall be accompanied by an indemnity agreement or affidavit of payment from Borrower and Contractor in favor of Agent, in form and content satisfactory to Agent, regarding discharge or prevention of any mechanics' or materialmen's lien(s).

 

1.5.       " Affiliate " means any Person: (i) which directly or indirectly controls, or is controlled by, or is under common control with, Borrower; (ii) which directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of Borrower; or (iii) five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

 

1.6.       " Agreement " means this Second Amended and Restated Agented Credit Agreement, as amended, supplemented, or modified from time to time.

 

1.7.       " Appraisal " shall mean a FIRREA conforming written appraisal of the Mortgaged Property prepared by a public appraiser acceptable to Agent.

 

1.8.       " Approved Budget " means a budget or cost schedule prepared by Borrower in form and content satisfactory to Agent, and specifying the cost by item of: (a) all labor, materials and services necessary for completion of the Improvements in accordance with the Plans and all Governmental Requirements; and (b) all other expenses anticipated by Borrower incident to the Loan, the Land and construction of the Improvements, and estimating the dates on which Borrower contemplates requiring advances from Agent hereunder for such costs and expenses.

 

1.9.       “ Borrower’s Authority Documents ” shall mean the following: (i) a Certificate of Good Standing from Borrower’s state of incorporation and such other states in which Borrower does business and is required to domesticate or otherwise register; (ii) a certified copy of Borrower’s certificate of incorporation and any amendments thereto; (iii) a copy of Borrower’s bylaws and any amendments thereto; and (iv) a certificate of the secretary of Borrower, in form and content set forth on Schedule “1.9” hereto, certifying resolutions authorizing Borrower to enter into the Loan.

 

1.10.     " Borrowing Base " means, at any date of determination thereof, the sum of eighty-five percent (85%) of Borrower's Qualified Receivables at such date, plus fifty percent (50%) of Borrower's Qualified Inventory other than parent rolls at such date plus sixty percent (60%) of Borrower’s Qualified Inventory consisting of parent rolls at such date, as determined by Agent based upon the most recent information relating thereto provided to Agent pursuant to Section 2.3; provided, however, that total Qualified Inventory (including parent rolls) shall not exceed the Qualified Inventory Cap as determined by Agent in its sole discretion. The "Qualified Inventory Cap" shall equal the lesser of 50% of Qualified Inventory or 85% of Borrower's Qualified Receivables such that Qualified Inventory comprises no more than 50% of the overall Borrowing Base.

 

 

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1.11.     " Borrowing Base Certificate " means each certificate from Borrower to Agent relating to the Borrowing Base, substantially in the form of Schedule "1.11" hereto.

 

1.12.     " Business Day " means any day other than a Saturday, Sunday, or other day on which commercial banks in Oklahoma are authorized or required to close under the laws of the State of Oklahoma.

 

1.13.     " Capital Lease " means all leases which have been or should be capitalized on the books of the lessee in accordance with GAAP.

 

1.14.     " Certificate of Completion" means certificates satisfactory to Agent signed by the Borrower and Contractor, certifying that the Improvements have been completed in accordance with the Plans.

 

1.15.     " Code " means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and published interpretations thereof.

 

1.16.     " Collateral " means all property in which the Banks are intended to have a security interest, as described in Section 3.

 

1.17.     " Commitment " means each Bank's obligation to make loans to the Borrower pursuant to this Agreement. Each Bank’s Commitment shall be equal to its Pro Rata Share of the total amount committed under the Revolving Line, the Term Loan A, the Term Loan B, and the Construction Loan.

 

1.18.     " Commonly Controlled Entity " means an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 414(b) or 414(c) of the Code.

 

1.19.     " Completion Date " shall mean the date which is twenty-four (24) months from the date of the first Advance under the Construction Loan.

 

1.20.     " Construction Contract " means the written agreement between Borrower and Contractor regarding the construction of the Improvements pursuant to the Plans.

 

1.21.     “ Construction Loan ” shall mean the $3,000,000 advancing term loan from Banks to Borrower.

 

1.22.     “ Construction Notes ” shall mean the promissory notes payable to each Bank in amounts based on each Bank’s Pro Rata Share of $3,000,000.

 

1.23.

" Contractor " shall mean a contractor reasonably acceptable to Agent.

 

1.24.     " Debt " means, including but not limited to: (i) indebtedness or liability for borrowed money; (ii) obligations evidenced by bonds, debentures, notes, or other similar instruments; (iii) obligations for the deferred purchase price of property or services (including trade obligations); (iv) obligations under letters of credit; (v) obligations under acceptance facilities; (vi) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or entity, or otherwise to assure a creditor against loss; and (vii) obligations secured by any Liens, whether or not the obligations have been assumed.

 

 

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1.25.     " Debt Service Coverage Ratio " shall mean the ratio of (i) EBITDA less cash taxes actually paid for the preceding four (4) consecutive fiscal quarters of Borrower, to (ii) Borrower's Debt Service Requirement for the same four (4) consecutive fiscal quarters.

 

1.26.     " Debt Service Requirement " shall mean the sum of (i) interest expense (whether paid or accrued and including interest attributable to Capital Leases), (ii) actual principal payments on borrowed money, and (iii) capitalized lease expenditures, all determined without duplication and in accordance with GAAP.

 

1.27.     " EBITDA " shall mean net income plus (i) interest expense, (ii) depreciation, depletion, obsolescence and amortization of property, (iii) capitalized lease expense, and (iv) tax expense, all determined in accordance with GAAP, and for a particular period.

 

1.28.     " ERISA " means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof.

 

1.29.

" Event of Default ” means any of the events specified in Section 12.

 

1.30.     “ Excess Cash Flow ” means EBITDA less the sum of cash taxes, capital expenditures, distributions, interest expense, scheduled principal payments on long-term debt and capital lease payments.

 

1.31.     “ Excess Cash Flow Threshold ” means that Borrower has maintained EBITDA of $5,000,000 or more for two (2) consecutive quarters, combined, commencing January 31, 2007, as reflected in its quarterly reports on Form 10-Q, as filed with the Securities Exchange Commission.

 

1.32.     “ Federal Funds Rate ” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day by the Federal Reserve Bank of New York, or if such rate is not so published for such day, the average of the quotations for such day on such transactions received by the Agent from three (3) federal funds brokers of recognized standing selected by it.

 

1.33.     " Funded Debt " shall mean, to the extent actually funded and outstanding at a specified time, all interest bearing Debt of Borrower plus Subordinated Debt and permitted Capitalized Lease Expenditures.

 

1.34.     " GAAP " means generally accepted accounting principles in the United States, applied on a consistent basis.

 

1.35.     " Government Approvals " shall mean authorizations required by Governmental Authorities for the construction and operation of the Improvements contemplated by the Plans including, without limitation, a copy of the building permit and zoning clearance issued by the city which has jurisdiction over the contemplated project.

 

1.36.     " Governmental Authority " means the United States, the state, the county, the city or any other political subdivision in which the Land is located, and any other political subdivision, agency or instrumentality exercising jurisdiction over Borrower, Guarantor or all or any portion of the Land.

 

1.37.     " Governmental Requirements " means all laws, orders, decrees, ordinances, rules and regulations of any Governmental Authority.

 

 

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1.38.     " Guarantor " means any future Subsidiary which guarantees the Obligations hereunder in accordance with Section 8.12 hereof.

 

1.39.     " Guaranty Agreement " means the guaranty agreement executed and provided to Agent by any Guarantor in accordance with Section 8.12 hereof.

 

1.40.     " Improvements " means the improvements described in the Plans to be made to the Land.

 

1.41.      “ Insurance Certificate ” means a certificate or certificates evidencing that policies of insurance, with insurance companies satisfactory to Agent, in such amounts and against such risks as shall be required by Agent, as set forth in Section 8.6 hereof, have been obtained by Borrower and are in full force and effect, and that Agent is listed as an additional insured or loss payee thereon.

 

1.42.     " Interest Period " shall mean a period of time equal to the lesser of: (i) at the election of the Borrower, thirty (30), sixty (60), or ninety (90) days; or (ii) the number of days between the contemplated effective date specified by the Borrower in the applicable Interest Rate Election and the maturity date of the applicable Note.

 

1.43.     " Interest Rate Election " means written notice from Borrower to Agent no earlier than twenty (20) days and no later than five (5) days prior to the contemplated effective date, in form and content acceptable to Agent, whereby Borrower may elect from time to time that interest shall accrue under the Notes at the Adjusted Prime Rate or the Adjusted LIBOR Rate.

 

1.44.     “ Interest Reserve Account ” means an account established and maintained by Borrower with Agent, for the benefit of Banks, under the terms of the 2005 Credit Agreement.

 

1.45.     “ Issuing Bank ” means Bank of Oklahoma, N.A., or any successor issuing lender hereunder.

 

1.46.

" Land " means the real property described on Schedule "1. 46" attached hereto.

 

1.47.     " Letter of Credit " means any letter of credit issued pursuant to Section 2.16 or outstanding hereunder.

 

1.48.     “ Letter of Credit Action ” means the issuance, supplement, amendment, renewal, extension, modification or other action relating to a Letter of Credit.

 

1.49.     “ Letter of Credit Application ” means an application for a Letter of Credit Action as shall at any time be in use by Issuing Bank.

 

1.50.     “ Letter of Credit Commitment ” means an amount equal to the lesser of (a) $3,000,000 or (b) the combined Commitments of the Banks.

 

1.51.     " Letter of Credit Fee " means a fee of two percent (2%) per annum on the face amount of any Letter of Credit issued or renewed after the date hereof.

 

1.52.     “ Letter of Credit Usage ” means, as at any date of determination, the aggregate undrawn face amount of outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by Issuing Bank and not reimbursed to Issuing Bank by the Borrower or converted into Loans.

 

 

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1.53.     " LIBOR Loan " means any Loan when and to the extent that the interest rate therefor is determined by reference to the LIBOR Rate.

 

1.54.     " LIBOR Rate " means the London Interbank Offered Rate composite rate per annum for U.S. Dollars for the applicable Interest Period which appears on the LIBOR 01 page of the Reuters information service on the day the Interest Rate Election is received by Agent. The LIBOR Rate shall remain fixed during the applicable Interest Period.

 

1.55.

" LIBOR Margin " shall mean the following:

 

RATIO OF FUNDED DEBT TO EBITDA	LIBOR MARGIN FOR REVOLVING LINE	LIBOR MARGIN FOR TERM LOAN A	LIBOR MARGIN FOR TERM LOAN B	LIBOR MARGIN FOR CONSTRUCTION LOAN
>4.0 to 1	3.75%	1.8%	3.0%	2.5%
> 3.5 to 1 but <4.0 to 1	3.25%	1.8%	3.0%	2.5%
> 3.0 to 1 but <3.5 to 1	3.0%	1.8%	3.0%	2.5%
> 2.25 to 1 but <3.0 to 1	2.5%	1.8%	2.5%	2.0%
> 1.5 to 1 but <2.25 to 1	2.25%	1.8%	2.25%	1.75%
<1.5 to 1	2.0%	1.8%	2.0%	1.5%

 

1.56.     " Lien " means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing.)

 

1.57.     “ Line Advance ” means a disbursement by Agent to or for the benefit or account of Borrower of any proceeds of the Revolving Line.

 

1.58.     “ Line Notes " shall mean the promissory notes payable to each Bank in amounts based on each Bank’s Pro Rata Share of $6,000,000.

 

1.59.     " Loan " means advances under the Revolving Line, the Term Loan A, the Term Loan B, and the Construction Loan.

 

1.60.     " Loan Documents " shall mean any and all agreements, contracts, promissory notes, security agreements, assignments, subordination agreements, pledge or hypothecation agreements, mortgages, deeds of trust, leases, guaranties, instruments, letters of credit, letter of credit agreements and documents now and hereafter existing between Banks and/or Agent and Borrower, executed and/or delivered pursuant to this Agreement or otherwise or guaranteeing, securing or in any other manner relating to any of the Obligations, including, without limitation, the instruments and documents referred to in Section 4 hereof together with any other instrument or document executed by Borrower, Agent or any other person in connection with the Loan.

 

1.61.     “ Majority Banks ” means at least sixty-six percent (66%) of the Banks (i.e., currently Majority Banks would be two out of three Banks).

 

1.62.     " Mortgage " means that certain first and prior Second Amended and Restated Mortgage, Assignment of Rents and Leases, Security Agreement and Financing Statement in favor

 

 

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of Agent, for the benefit of the Banks, on the Mortgaged Property, in form and content substantially as set forth on Schedule "1.62" hereto.

 

1.63.

" Mortgaged Property " means the Land and Improvements.

 

1.64.

" Mortgage Related Documents " means, with regard to the Mortgaged Property:

 

(i)          a Title Insurance Policy Endorsement, evidencing only those exceptions acceptable to Agent; and

 

(ii)          an Appraisal on the Mortgaged Property, in form and content satisfactory to Agent and the Banks, evidencing an aggregate minimum value reasonably acceptable to Agent and the Banks.

 

1.65.

" Multiemployer Plan " means a Plan described in Section 4001(a)(3) of ERISA.

 

1.66.     " Note Rate " means (i) the Adjusted Prime Rate or (ii) the Adjusted LIBOR Rate, as elected by Borrower pursuant to an Interest Rate Election; provided, that at the end of any applicable Interest Period, the Note Rate shall revert to the Adjusted Prime Rate unless a new Interest Rate Election has been properly made by Borrower.

 

1.67.     " Notes " means, separately and collectively, the Term Notes A, the Term Notes B, the Line Notes, and the Construction Notes.

 

1.68.     " Obligations " shall include the full and punctual observance and performance of all present and future duties, covenants and responsibilities due to Banks by Borrower under this Agreement, the Notes, the Loan Documents and otherwise, all present and future obligations and liabilities of Borrower to Banks for the payment of money under this Agreement, the Notes, the Loan Documents and otherwise (extending to all principal amounts, interest, late charges, fees and all other charges and sums, as well as all costs and expenses payable by Borrower under this Agreement, the Notes, the Loan Documents and otherwise), whether direct or indirect, contingent or noncontingent, matured or unmatured, accrued or not accrued, related or unrelated to this Agreement, whether or not now contemplated, whether or not any instrument or agreement relating thereto specifically refers to this Agreement and whether or not of the same character or class as Borrower’s obligations under this Agreement or the Notes, including, without limitation, Rate Management Transactions, overdrafts in any checking or other account of Borrower at Banks and claims against Borrower acquired by assignment to Banks, whether or not secured under any other document, or agreement or statutory or common law provision, as well as all renewals, refinancings, consolidations, re-castings and extensions of any of the foregoing, the parties acknowledging that the nature of the relationship created hereby contemplates the making of future advances by Banks to Borrower.

 

1.69.     " Opinion of Borrower's Counsel " means a legal opinion from Borrower's legal counsel including, without limitation, the opinions relating to Borrower and this loan transaction as set forth on Schedule "1.69" attached hereto.

 

1.70.     “ Outstanding Line Obligations ” means, as of any date, and giving effect to making any advances requested under the Revolving Line on such date and all payments, repayments and prepayments made on such date, the sum of (a) the aggregate outstanding principal amount under the Revolving Line, and (b) all Letter of Credit Usage.

 

1.71.     " PBGC " means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

 

 

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1.72.     " Payment and Performance Bonds " means guarantees of payment and performance satisfactory to Banks.

 

1.73.

" Permitted Liens " means, as to Borrower and all Subsidiaries:

 

(1)

Liens in favor of the Banks;

 

(2)         Liens for taxes or assessments or other government charges or levies if not yet due and payable or, if due and payable or, if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained;

 

(3)         Liens imposed by law, such as mechanics', materialmen's, landlords', warehousemen's, and carriers' liens, and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due for more than thirty (30) days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established;

 

(4)         Liens under workers' compensation, unemployment insurance, Social Security, or similar legislation;

 

(5)         Liens, deposits, or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business;

 

(6)

The liens described on Schedule "1.73(6)" ;

 

(7)         Judgment and other similar liens arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively bonded, stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings;

 

(8)         Easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by the Borrower of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; and

 

(9)         Purchase-money liens on any property hereafter acquired or the assumption of any lien on property existing at the time of such acquisition (and not created in contemplation of such acquisition), or a lien incurred in connection with any conditional sale or other title retention agreement or a Capital Lease; provided that :

 

(a)         Any property subject to any of the foregoing is acquired by the Borrower or any subsidiary in the ordinary course of its business; and

 

(b)         Each such lien shall attach only to the property so acquired and fixed improvements thereon.

 

1.74.     " Person " means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature.

 

 

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1.75.     " Plan " means any pension plan which is covered by Title IV of ERISA and in respect of which the Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA.

 

1.76.     " Plans " shall mean the final working drawings and specifications for the construction of the Improvements prepared by the Contractor and approved by Agent, Borrower, and any necessary Governmental Authority.

 

1.77.     " Prime Loan " means any Loan when and to the extent that the interest rate therefor is determined by reference to the Prime Rate.

 

1.78.     " Prime Rate " means a rate which is subject to change from time to time based on changes in an index which is the BOKF National Prime Rate, described as the rate of interest set by BOK Financial Corporation, in its sole discretion, on a daily basis as published by BOK Financial Corporation (“BOKF”) from time to time (the “Index”). The Index is not necessarily the lowest rate charged by Agent or Banks on loans and is set by Agent in its sole discretion. If the Index becomes unavailable during the term of this Loan, Agent may designate a substitute index after notifying Borrower. Agent will provide Borrower the current index rate upon Borrower’s request. The interest rate change will not occur more often than each day. Borrower understands that Banks may make loans based on other rates as well. NOTICE: Under no circumstances will the interest rate on the Notes be more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Agent, at its option, may do one or more of the following: (A) increase Borrower’s payments to ensure Borrower’s loan will pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing interest, (C) increase the number of Borrower’s payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s final payment.

 

1.79.

" Prime Rate Margin " shall mean the following:

 

RATIO OF FUNDED DEBT TO EBITDA	PRIME MARGIN FOR REVOLVING LINE
>4.0 to 1	1.50%
> 3.5 to 1 but <4.0 to 1	1.0%
> 3.0 to 1 but <3.5 to 1	.50%
> 2.25 to 1 but <3.0 to 1	0%
> 1.5 to 1 but <2.25 to 1	-.25%
<1.5 to 1	-.50%

 

1.80.     " Principal Office " means the main office of each Bank and Agent, as set forth on the signature pages hereof.

 

1.81.     " Prohibited Transaction " means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code.

 

1.82.     " Pro Rata Share " shall mean, as to Bank of Oklahoma, N.A., 56.33803%, as to BancFirst, 21.83099%, and as to Commerce Bank, N.A., 21.83099%.

 

1.83.     " Qualified Inventory " means the amount of inventory of Borrower located in the United States of America that is not subject to any Lien or adverse claim and that conforms to the representations and warranties contained in this Agreement and that is acceptable to the Agent in its sole discretion, less any packaging materials and supplies, damaged or unsalvageable goods returned or rejected by its customers, goods to be returned to its suppliers, goods in transit to third

 

 

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parties (other than its agent or warehouses), goods out at contractors, and work in process, and less any reserves required by the Agent in its sole discretion including, but not limited to, for special order goods, market value declines and bill and hold (deferred shipment) sales. Notwithstanding the foregoing, however, parent rolls and furnish products shall be included as Qualified Inventory.

 

1.84.     " Qualified Receivables " means and includes only accounts receivable of Borrower which meet the following specifications at the time they came into existence and continue to meet the same until collected in full.

 

1.84.1.        The account is due and payable. No account shall be outstanding for more than ninety (90) days from the date of the applicable invoice.

 

1.84.2.        The account arose from a bona fide outright sale of goods previously made or from the performance of services, but not from leasing, and Borrower has possession of or has delivered to Agent shipping and delivery receipts evidencing shipment of the goods or, if representing services, the services have been fully performed for the respective account debtor.

 

1.84.3.        The account is not subject to any assignment, claim, lien or security interest of any character or subject to any attachment, levy, garnishment or other judicial process, except the security interest of Agent.

 

1.84.4.        The account is not subject to any claim for credit, setoff, allowance, adjustment by the account debtor or counterclaim, and Borrower has not received any notice of any such claim for credit, setoff, allowance, adjustment or counterclaim from or on behalf of the account debtor.

 

1.84.5.        The account arose in the ordinary course of Borrower's business and no notice of the bankruptcy, insolvency or adverse change in the financial condition of the account debtor has been received by Borrower or Agent.

 

1.84.6.        Agent has not previously notified Borrower that the account or the account debtor is or has become unsatisfactory, based upon reasonable credit standards, or the account debtor has been adjudicated bankrupt or is subject to a similar proceeding.

 

1.84.7.        The account is not evidenced by a judgment, an instrument or chattel paper.

 

1.84.8.        The account debtor is not a governmental entity or a foreign (i.e., residing or incorporated in or organized under a jurisdiction outside the United States) person or company and is not a parent, subsidiary, officer, employee, director, agent or Affiliate of any Borrower, and the account debtor and any Borrower do not have common shareholders, officers or directors.

 

1.84.9.        All receivables of one account debtor shall become ineligible if more than 10% of such receivables are over ninety (90) days past due from the invoice.

 

1.84.10.      The accounts receivable of the account debtor cannot exceed 10% of the total accounts receivable, and any amounts over 10% will be excluded from the Borrowing Base unless specifically waived in writing in each instance by Agent in its sole discretion. Notwithstanding the foregoing, the accounts receivable of Dollar General Store, Family Dollar and Wal-Mart (or their respective successors) shall be included as Qualified Receivables up to 30%, and any amounts over 30% of total accounts receivable will be

 

 

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excluded from the Borrowing Base unless specifically waived in writing in each instance by the Banks in their sole discretion.

 

1.85.     " Rate Management Transaction " means any transaction, (including an agreement with respect thereto) now existing or hereafter entered into by the Borrower, and the Agent, or any of its subsidiaries or affiliates or their successors, which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

 

1.86.

" Reportable Event " means any f the events set forth in Section 4043 of ERISA.

 

1.87.     “ Revolving Line ” means the $6,000,000 revolving line of credit established in favor of Borrower by Banks pursuant to Section 2.3 hereof.

 

1.88.     " Security Agreement " means the Second Amended and Restated Security Agreement in form and content as set forth on Schedule “1.88” hereto.

 

1.89.     “ Subordinated Debt ” means the aggregate principal amount of up to $2,150,000 evidenced by the Subordinated Notes issued to the lenders set forth on Schedule “1.89” hereto and in such amounts set forth opposite each lender’s name on Schedule “1.89” .

 

1.90.     “ Subordinated Notes ” means the unsecured, subordinated Promissory Notes issued by OAG (now Borrower), the form of which is attached as Schedule “1.90” hereto.

 

1.91.     “ Subordination Agreement ” means the Second Amended and Restated Subordination Agreement, in form and content as set forth on Schedule “1.91” hereto.

 

1.92.     " Subsidiary " or " Subsidiaries " means, separately and collectively, any corporation of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by the Borrower.

 

1.93.     " Survey " means a survey of the Land prepared following completion of the Improvements by and certified to Agent by a licensed civil engineer or surveyor satisfactory to Agent, which survey shall show the location of all completed Improvements, and otherwise be in form and content reasonably satisfactory to Agent.

 

1.94.

“ Term Loan A ” means the $10,000,000 Term Loan from Banks to Borrower.

 

1.95.

“ Term Loan B ” means the $16,500,000 Term Loan from Banks to Borrower.

 

1.96.     " Term Notes A " shall mean the promissory notes payable to each Bank in amounts based on each Bank’s Pro Rata Share of $10,000,000.

 

1.97.     " Term Notes B " shall mean the promissory notes payable to each Bank in amounts based on each Bank’s Pro Rata Share of $16,500,000

 

1.98.

" Termination Date " means April 9, 2010.

 

 

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1.99.     “ Title Insurance Policy ” means the ALTA mortgagee title insurance policy issued pursuant to the terms of the 2005 Credit Agreement.

 

1.100.   " Title Insurance Policy Endorsement " means a "date-down" endorsement to the Title Insurance Policy dated effective the date of the requested Advance, stating that the effective date of the Title Insurance Policy is extended to the date of the applicable Endorsement, and showing a state of facts reasonably acceptable to Agent including, but not limited to, a showing that no claim for mechanics' and materialmen's liens has been filed against the Mortgaged Property. The Endorsement must have the effect of increasing the coverage of the Title Insurance Policy by an amount equal to the Advance then being made, if the Title Insurance Policy does not by its terms automatically provide for such increase.

 

1.101.

" UCC " shall mean the Uniform Commercial Code of the applicable jurisdiction.

 

1.102.   " UCC Chattel Check " means a UCC records search as to Borrower from the UCC Division of the Secretary of State of Delaware, the Oklahoma County Clerk, and from any other office deemed necessary or advisable by Agent, which chattel checks must evidence no conflicting security interests, except the Permitted Liens.

 

2.	AMOUNT AND TERMS OF THE LOANS .

 

2.1.        Term Loan A . Subject to the terms and conditions of this Agreement, each Bank agrees to make Term Loan A to Borrower in the amount of its Pro Rata Share of $10,000,000, to be further evidenced by the Term Notes A.

 

2.2.        Term Loan B . Subject to the terms and conditions of this Agreement, each Bank agrees to make Term Loan B to Borrower in the amount of its Pro Rata Share of $16,500,000, to be further evidenced by the Term Notes B.

 

2.3.        Revolving Line . Subject to the terms and conditions of this Agreement, and so long as no Event of Default has occurred, each Bank agrees to loan to Borrower (by advancing funds or issuing Letters of Credit in amounts not to exceed $6,000,000 in the aggregate), such amounts up to said Bank's Pro Rata Share of the aggregate principal amount of $6,000,000 as Borrower may request from time to time on or before the Termination Date, to be further evidenced by the Line Notes; provided that the aggregate amount of Outstanding Line Obligations at any time outstanding shall not exceed the lesser of (i) $6,000,000 or (ii) the Borrowing Base. Such Borrowing Base shall be computed on a monthly basis, and Borrower agrees to provide to Agent on the 15th day of each month with regard to the immediately preceding month all information requested in connection therewith, including without limitation a Borrowing Base Certificate. In the event Outstanding Line Obligations shall at any time exceed the formula set forth above, all such Outstanding Line Obligations shall, nevertheless, be secured by all Collateral. In the event Outstanding Line Obligations with respect to Qualified Receivables or Qualified Inventory fail to comply with such formula, by reason of any accounts receivable or inventory ceasing to be so qualified, for whatever reason, then Borrower shall immediately notify Agent of such situation and shall, within five (5) Business Days of the imbalance, either (i) reduce the amount of the outstanding balances to bring such amounts within the formulas prescribed, or (ii) provide additional Qualified Receivable or Qualified Inventory, without any additional advance being made by Banks with respect thereto, necessary to comply with the formulas required herein. Within the limits set forth in this Section 2.3, Borrower may borrow, repay and reborrow at any one time and from time to time.

 

2.4.        Construction Loan . Subject to the terms and conditions of this Agreement, and so long as no Event of Default has occurred, each Bank agrees to loan to Borrower such amounts up

 

 

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to said Bank's Pro Rata Share of the lesser of (i) the aggregate principal amount of $3,000,000, or (ii) eighty percent (80%) of the cost for construction of the Improvements, as Borrower may request from time to time on or before the Construction Loan Termination Date (hereinafter defined), to be further evidenced by the Construction Notes. Advances pursuant to the Construction Loan are not revolving and once amounts are repaid pursuant to the Construction Notes, they cannot be reborrowed.

 

2.5.        Notice and Manner of Borrowing Under the Revolving Line . The Borrower shall give the Agent notice of any Line Advances under this Agreement, specifying the date and amount thereof, in writing or via telephone (with voice verification by the appropriate officer), no later than 12:00 p.m. (Tulsa time) on the date of such Line Advances. The Agent shall promptly notify each Bank of each such notice. Not later than 2:00 p.m. or three (3) hours following receipt of such notice, whichever is later, on the date of each request for a Line Advance, each Bank will make available to the Agent at Agent's Principal Office in immediately available funds, such Bank's Pro Rata Share of such Line Advances. After the Agent's receipt of such funds, and upon fulfillment of the applicable conditions, the Agent will make such Line Advances available to the Borrower in immediately available funds by crediting the amount thereof to the following account with the Agent: Account styled Orchids Paper Products Company, No. 209908802.

 

2.6.        Non-Receipt of Funds by Agent . Unless the Agent shall have received notice from a Bank prior to the date on which such Bank is to provide funds to the Agent for an Advance, Line Advance, or drawing under a Letter of Credit to be made by such Bank that such Bank will not make available to the Agent such funds, the Agent may assume that such Bank has made such funds available to the Agent on the date of such Advance, Line Advance, or drawing under a Letter of Credit in accordance with Section 2.5 or Section 6.2 and the Agent in its sole discretion may, but shall not be obligated to, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Bank shall not have made such funds available to the Agent, such Bank agrees to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at the Federal Funds Rate for three (3) Business Days and thereafter at the Prime Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Advance, Line Advance or drawing under a Letter of Credit for purposes of this Agreement. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower, and if the outstanding balance under the Revolving Line is equal to or exceeds the Pro Rata Share of the Commitment of the remaining Bank, within ten (10) days of such notice the Borrower shall pay such corresponding amount to the Agent with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at the rate of interest applicable at the time to such proposed Advance, Line Advance or drawing under a Letter of Credit. Notwithstanding the above, as long as no Event of Default exists, Bank's shall not unreasonably withhold funding of an Advance, Line Advance or drawing under a Letter of Credit requested by Borrower in accordance with the terms of Section 2.5 or 6.2.

 

Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent in its sole discretion may, but shall not be obligated to, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such

 

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Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate for three (3) Business Days and thereafter at the Prime Rate.

 

2.7.        Interest Rate Determination . The Agent shall determine the Note Rate, and shall give prompt notice to the Borrower and the Banks of the applicable interest rate, or any change therein, as determined by the Agent pursuant to the terms of this Agreement.

 

2.8.        Method of Payment . The Borrower shall make each payment under this Agreement and under the Notes on the date when due in lawful money of the United States to the Agent at its Principal Office for the account of each Bank in immediately available funds. The Agent will promptly thereafter cause to be distributed each Bank's Pro Rata Share of such payments of principal and interest in like funds to each Bank. The Borrower hereby authorizes each Bank, if and to the extent payment is not made when due under this Agreement or under the Notes, to charge from time to time against any account of the Borrower with such Bank any amount as due. Any amounts collected by any Bank under this provision shall be transferred to Agent, and Agent will promptly thereafter cause to be distributed each Bank's Pro Rata Share of such payments in like funds to each Bank. Whenever any payment to be made under this Agreement or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of the payment of interest and the Non-use Fee, as the case may be, except, in the case of a LIBOR Loan, if the result of such extension would be to extend such payment into another calendar month, such payment shall be made on the immediately preceding Business Day.

 

2.9.        Illegality . Notwithstanding any other provision in this Agreement, if any Bank determines that any applicable law, rule, or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency shall make it unlawful or impossible for such Bank to (1) maintain its Commitment, then upon notice to the Borrower by such Bank the Commitment of such Bank shall terminate; or (2) maintain or fund its LIBOR Loan, then upon notice to the Borrower by such Bank the outstanding principal amount of the LIBOR Loan, together with interest accrued thereon, and any other amounts payable to such Bank under this Agreement shall be repaid (a) immediately upon demand of such Bank if such change or compliance with such request, in the judgment of such Bank, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request.

 

2.10.      Disaster . Notwithstanding anything to the contrary herein, if Agent determines (which determination shall be conclusive) that:

 

(1)         Quotations of interest rates for the relevant deposits referred to in the definition of LIBOR Rate, as the case may be, are not being provided in the relevant amounts or for the relative maturities for purposes of determining the rate of interest on a LIBOR Loan as provided in this Agreement; or

 

(2)         The relevant rates of interest referred to in the definition of LIBOR Rate do not accurately cover the cost to the Banks of making or maintaining such LIBOR Loan;

 

then the Agent shall forthwith give notice thereof to the Borrower, whereupon (a) the obligation of the Banks to make the LIBOR Loan shall be suspended until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist; and (b) any outstanding LIBOR Loan shall automatically be converted to a Prime Loan on the last day of the then current Interest Period, unless no later than such date the Borrower repays in

 

 

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full the then outstanding principal amount of each LIBOR Loan, together with accrued interest thereon.

 

2.11.      Increased Cost . The Borrower shall pay to the Agent, for the account of the applicable Bank, from time to time such amounts as any Bank may determine to be necessary to compensate such Bank for any costs incurred by such Bank which such Bank determines are attributable to its making or maintaining any LIBOR Loan hereunder or its obligation to make any such Loan hereunder, or any reduction in any amount receivable by such Bank under this Agreement or the Notes in respect of any such Loan or obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any change after the date of this Agreement in U.S. federal, state, municipal, or foreign laws or regulations (including Regulation D), or the adoption or making after such date of any interpretations, directives, or requirements applying to a class of banks including such Bank or under any U.S. federal, state, municipal, or any foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof ("Regulatory Change"), which: (1) changes the basis of taxation of any amounts payable to such Bank under this Agreement or the Notes in respect of any such Loan (other than taxes imposed on the overall net income of such Bank for any such Loan by the jurisdiction where the Principal Office is located); or (2) imposes or modifies any reserve, special deposit, compulsory loan, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including any of such Loans or any deposits referred to in the definition of LIBOR Rate); or (3) imposes any other condition affecting this Agreement or the Notes (or any of such extensions of credit or liabilities). Such Bank will notify the Borrower of any event occurring after the date of this Agreement which will entitle such Bank to compensation pursuant to this Section 2.11 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation.

 

Determinations by any Bank for purposes of this Section 2.11 of the effect of any Regulatory Change on its costs of making or maintaining Loans or on amounts receivable by it in respect of Loans, and of the additional amounts required to compensate such Bank in respect of any Additional Costs, shall be conclusive, provided that such determinations are made on a reasonable basis.

 

2.12.      Risk-Based Capital . In the event that any Bank determines that (1) compliance with any judicial, administrative, or other governmental interpretation of any law or regulation or (2) compliance by such Bank or any corporation controlling such Bank with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) has the effect of requiring an increase in the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank, and such Bank determines that such increase is based upon its obligations hereunder, and other similar obligations, the Borrower shall pay to the Agent, for the account of the applicable Bank, such additional amount as shall be certified by such Bank to be the amount allocable to such Bank's obligations to the Borrower hereunder. Such Bank will notify the Borrower of any event occurring after the date of this Agreement that will entitle such Bank to compensation pursuant to this Section 2.12 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation.

 

Determinations by any Bank for purposes of this Section 2.12 of the effect of any increase in the amount of capital required to be maintained by such Bank and of the amount allocable to such Bank's obligations to the Borrower hereunder shall be conclusive, provided that such determinations are made on a reasonable basis.

 

2.13.      Funding Loss Indemnification . The Borrower shall pay to the Agent, for the account of the applicable Bank, upon the request of the Agent, such amount or amounts as shall be

 

 

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sufficient (in the reasonable opinion of the Agent) to compensate it for any loss, cost, or expense incurred as a result of any payment of a LIBOR Loan on a date other than the last day of the Interest Period for such Loan including, but not limited to, acceleration of the Loans by the Agent pursuant to Section 12.1, unless such loss, cost or expense resulted from the gross negligence or willful misconduct of Agent, or Banks.

 

2.14.      Non-use Fee. Borrower shall pay a non-use fee to the Agent, for the benefit of the Banks, from the date hereof to the Termination Date, computed at a rate equal to twenty-five hundredths of one percent (.25%) per annum on the average daily amount of the unused portion of the Revolving Line for the preceding quarter payable quarterly on the 15th day of each January, April, July and October and on the Termination Date or such earlier date as the Revolving Line shall terminate as provided herein. Upon receipt of any Non-use Fee, the Agent will promptly thereafter cause to be distributed such payment to each Bank in its Pro Rata Share.

 

2.15.      Agency Fee . Borrower shall pay to Agent, for Agent’s sole account, an annual fee equal to .05% of the aggregate Commitment hereunder, payable on each anniversary date hereof.

 

2.16.

Letters of Credit .

 

(a)          The Letter of Credit Commitment . Subject to the terms and conditions hereof, at any time and from time to time from the date hereof through the date that is 30 days prior to the Termination Date, the Issuing Bank shall take such Letter of Credit Actions under the Commitments as the Borrower may request; provided, however, that the Outstanding Line Obligations