EXECUTION COPY
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND
AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"), dated
as of September 30, 2009 is by and among APPLETON PAPERS INC., a
Delaware
corporation (the "U.S. Borrower"), PAPERWEIGHT DEVELOPMENT CORP., a
Wisconsin
corporation ("Holdings"), certain subsidiaries of Holdings
identified on the
signature pages hereto as Guarantors, the Lenders identified on the
signature
pages hereto and BANK OF AMERICA, N.A., as Administrative Agent,
Swing Line
Lender and L/C Issuer. All capitalized terms used herein and not
otherwise
defined herein shall have the respective meanings provided such
terms in the
Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, the
U.S. Borrower, Bemrosebooth Limited, a company organized
under the laws of the United Kingdom, certain Subsidiaries of the
U.S. Borrower
party thereto, Holdings, the Lenders party thereto and the
Administrative Agent
entered into that certain Credit Agreement dated as of June 5, 2007
(as amended,
restated, modified and/or supplemented from time to time, the
"Credit
Agreement");
WHEREAS,
Holdings and the U.S. Borrower wish to amend and/or modify
certain provisions of the Credit Agreement in order to permit the
exchange of
not less than $87,560,000 of the Senior Unsecured Notes and not
less than
$99,750,000 of the Senior Subordinated Notes for Second Lien Notes
(as defined
below) pursuant to the Exchange Offer (as defined below);
WHEREAS, the
Second Lien Notes shall be secured by a Lien on certain
of the Collateral pursuant to the Second Lien Security Documents
(as defined
below), which Lien shall rank subordinated and junior to the Lien
on the
Collateral pursuant to the Security Documents; and
WHEREAS,
Holdings and the U.S. Borrower have requested that the
Lenders amend the Credit Agreement to modify certain provisions
contained
therein; and
WHEREAS, the
Required Lenders have agreed to amend the Credit
Agreement on the terms and subject to the conditions set forth
herein.
NOW,
THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties hereto agree as follows:
I. Amendments to Credit Agreement.
1. Section 1.01 of the Credit
Agreement is hereby amended by inserting
the following new definitions in the appropriate alphabetical
order:
<PAGE>
"Exchange Offer" means the tender and
exchange of Senior Unsecured Notes
and Senior Subordinated Notes for Second Lien Notes pursuant to
that certain
Offering Circular, dated August 18, 2009, in respect of the Senior
Unsecured
Notes, the Senior Subordinated Notes and the Second Lien Notes.
"Intercreditor Agreement" means the
Intercreditor Agreement executed by
Holdings, the U.S. Borrower, the other Loan Parties from time to
time party
thereto, the Administrative Agent and the collateral agent under
the Second Lien
Note Indenture, as the same may be amended, restated, supplemented,
waived
and/or otherwise modified from time to time in accordance with the
terms thereof
and of this Agreement.
"Second Amendment" means the Second
Amendment to this Agreement, dated as
of September 30, 2009.
"Second Amendment Effective Date" has the
meaning specified in the Second
Amendment.
"Second Lien Note Indenture" means the
indenture entered into by Holdings,
the U.S. Borrower, certain of its Subsidiaries and U.S. Bank
National
Association, as trustee, in connection with the issuance of the
Second Lien
Notes, as the same may be amended, restated, supplemented, waived
and/or
otherwise modified from time to time in accordance the terms
thereof, of this
Agreement and of the Intercreditor Agreement.
"Second Lien Note Documents" means the
Second Lien Note Indenture, the
Second Lien Notes, the Second Lien Security Documents and each
other document,
instrument or agreement relating to the issuance of the Second Lien
Notes, as
the same may be amended, restated, supplemented, waived and/or
otherwise
modified from time to time in accordance with the terms thereof, of
this
Agreement and of the Intercreditor Agreement.
"Second Lien Notes" means the 11.25%
senior secured second lien notes of
the U.S. Borrower due 2015 to be issued and exchanged pursuant to
the Second
Lien Note Indenture and in accordance with the Exchange Offer.
"Second Lien Security Documents" means the
collective reference to each
security agreement, pledge agreement, mortgage, deed of trust,
collateral
agreement, instrument or other document granting or perfecting a
Lien on any
asset or assets of any Person in accordance with the terms of the
Intercreditor
Agreement to secure the obligations and liabilities of Holdings,
the U.S.
Borrower and certain of its Subsidiaries under the Second Lien Note
Documents.
"Specified Litigation" means that certain
litigation commenced by the U.S.
Borrower in September 2007 against a former contractor, in which
the U.S.
Borrower asserted claims including breach of obligations under a
February 2007
agreement to perform certain engineering services, and in
connection with which
the U.S. Borrower received a favorable jury verdict on May 14,
2009.
<PAGE>
2. The definition of
"Applicable Rate" appearing in Section 1.01 of the
Credit Agreement is hereby amended by (a) deleting the grid
contained in such
definition and inserting the following new grid in lieu
thereof:
Eurodollar
Rate Loans
and
Pricing
Consolidated
Letter of Base Rate
Level
Leverage Ratio Commitment Fee Credit
Fee Loans
--------
--------------- --------------
------------ ----------
1 <=
3.50:1
0.50%
3.125% 2.125%
2 > 3.50:1
but
<= 4.00:1
0.50%
3.625% 2.625%
3 > 4.00:1
but
<= 4.50:1
0.50%
4.125% 3.125%
4 >
4.50:1
0.50%
4.625% 3.625%
and (b) adding the following new sentence at the end thereof:
"The
Applicable Rate in effect from the Second Amendment Effective
Date through the first Business Day
immediately following the date a
Compliance Certificate is required to be
delivered pursuant to Section
6.02(a) for the fiscal quarter ending on
or about September 30, 2009 shall
be determined based upon Pricing Level
4."
3. The definition of
"Consolidated EBITDA" appearing in Section 1.01 of
the Credit Agreement is hereby amended by deleting the first
paragraph of such
definition and inserting the following new paragraph in lieu
thereof:
""Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period
plus (ii) without duplication and
to the extent reflected as a charge in the
statement of such Consolidated
Net Income for such period, the sum of (a)
income tax expense, (b) interest
expense, amortization or writeoff of debt
discount and debt issuance costs
and commissions, discounts and other fees
and charges associated with
Indebtedness (including the Loans), (c)
depreciation and amortization
expense (including, but not limited to,
goodwill), (d) any extraordinary
charges or losses determined in accordance
with GAAP, (e) non-cash charges
from employee compensation deferrals and
employer matching contributions
pursuant to the ESOP Documentation
relating to ESOP Stock Issuances, (f)
cash losses from Asset Sales, (g) cash
restructuring charges and/or
non-recurring cash charges or losses not
to exceed $2,000,000 in any twelve
month period, (h) any other non-cash
charges, non-cash expenses or non-cash
losses of Holdings or any of its
Subsidiaries (provided, however, that cash
payments made in any future period in
respect of such non-cash charges
added back in determining Consolidated
EBITDA for periods ending after the
Closing Date (as with any other non-cash
charge, expense or loss added to
Consolidated Net Income pursuant to this
clause (h)) shall be subtracted
from Consolidated Net Income in
calculating Consolidated EBITDA in the
period when such payments are made) and
(i) litigation expenses in
connection with the Specified Litigation
or one-time costs associated with
the machinery and equipment involved in
such litigation (including start-up
costs), but only up to the aggregate
amount of cash proceeds received by
the U.S. Borrower during such period in
connection with such litigation (it
being understood that
<PAGE>
approximately $5,600,000 of such costs
were incurred in the fourth quarter
of fiscal year 2008, approximately
$3,500,000 of such costs were incurred
in the first quarter of fiscal year 2009
and approximately $3,000,000 of
such costs were incurred in the second
quarter of fiscal year 2009), minus
(iii) to the extent included in the
statement of such Consolidated Net
Income for such period, the sum of,
without duplication, (a) interest
income, (b) any extraordinary income or
gains determined in accordance with
GAAP (including, in any event, proceeds of
the Specified Litigation (except
to the extent permitted to be added back
to Consolidated Net Income
pursuant to clause (ii)(i) above) and any
other litigation that is unusual
in nature and non-recurring), (c) any
cancellation-of-debt income resulting
from repurchases or exchanges of
Indebtedness after the Closing Date, (d)
cash gains from Asset Sales and (e) any
other non-cash income (excluding
any items that represent the reversal of
any accrual of, or cash reserve
for, anticipated cash charges in any prior
period that are described in the
parenthetical to clause (h) above), all as
determined on a consolidated
basis."
4. The definition of
"Consolidated Senior Secured Leverage Ratio"
appearing in Section 1.01 of the Credit Agreement is hereby amended
by (i)
replacing the words "Senior Secured" with "First Lien", (ii)
inserting the text
"the Second Lien Notes," immediately after the text "Senior
Unsecured Notes"
appearing in such definition, (iii) inserting the text "(in right
of payment or
in right of lien priority)" immediately following the text "(i)
subordinated"
appearing in such definition and (iv) deleting the text
"subordination
provisions of the Senior Subordinated Notes" appearing in such
definition and
inserting the text "payment subordination provisions of the Senior
Subordinated
Notes or lien subordination provisions of the Second Lien Notes, as
applicable".
In addition, each other reference to "Consolidated Senior Secured
Leverage
Ratio" in the Credit Agreement is hereby amended to read
"Consolidated First
Lien Leverage Ratio".
5. The definition of "Excess
Cash Flow" appearing in Section 1.01 of the
Credit Agreement is hereby amended by (i) inserting the text
"Second Lien
Notes," immediately after the text "Existing Senior Subordinated
Notes,"
appearing in such definition, (ii) replacing the text "Section
7.08(a)(C)" with
the text "Section 7.08(a)(D)" and (iii) inserting the text "or
resulting from
the receipt of casualty or condemnation proceeds or other
Extraordinary
Receipts" immediately after the text "(vii) the aggregate net
amount of income
on the Disposition of property".
6. The definition of "Loan
Documents" appearing in Section 1.01 of the
Credit Agreement is hereby amended by deleting the text "and (i)
each Bilateral
Facility Document" and inserting the text ", (i) each Bilateral
Facility
Document and (j) the Intercreditor Agreement" in lieu thereof.
7. The definition of
"Permitted Refinancing Debt" appearing in Section
1.01 of the Credit Agreement is hereby amended by inserting the
following text
immediately preceding the text "(x) in connection" appearing in
such Section:
"(w) in connection with any refinancing of
the Second Lien Notes, new
Indebtedness of the U.S. Borrower having
terms (other than pricing), taken
as a whole, not materially less favorable
to the U.S. Borrower than those
applicable to the Second Lien Notes or
otherwise on then market terms and
conditions for comparable debt securities
(as
<PAGE>
determined in good faith by the U.S.
Borrower) or otherwise acceptable to
the Administrative Agent; provided that in
no event shall such Indebtedness
(a) amortize, or otherwise be subject to
scheduled redemptions, repurchases
or other payments of principal or have a
final maturity date that is
earlier than December 15, 2015 (i.e., the
original maturity date of the
Second Lien Notes), (b) require
prepayments or mandatory redemptions in a
manner materially more extensive than the
Second Lien Notes, (c) contain
maintenance financial covenants that are
more restrictive than those under
this Agreement, (d) be secured by Liens
that are not subordinated to the
Liens securing the Obligations in a manner
at least as favorable to the
Lenders as provided for in the
Intercreditor Agreement or (e) contain other
terms and conditions that are more
restrictive, taken as a whole, than
those under this Agreement;"
8. The definition of
"Specified Change of Control" appearing in Section
1.01 of the Credit Agreement is hereby amended by inserting the
text "in the
Second Lien Note Indenture," immediately after the text "in the
Senior Unsecured
Note Indenture," appearing in such Section.
9. Section 2.01(b) of the
Credit Agreement is hereby amended by adding
the following new paragraph to the end thereof:
"As of
August 1, 2008, (i) BemroseBooth Limited, the UK Borrower, was
sold by Rose Holdings Limited, released
from its obligations under the Loan
Documents and no longer constituted a
Designated Foreign Subsidiary
Borrower pursuant to Section 2.15(e) and
(ii) accordingly, the Bilateral
Facilities available to the UK Borrower
are no longer applicable. As of the
First Amendment Effective Date, (i) no
other Designated Foreign Subsidiary
Borrower had been designated pursuant to
Section 2.15(e), (ii) no new
Designated Foreign Subsidiary Borrowers
are permitted pursuant to Section
2.15(e) and (iii) accordingly, Revolving
Credit Loans are no longer
available in Alternative Currencies."
10. Section 2.05(b) of the Credit
Agreement is hereby amended by deleting
clause (ii) of such Section and inserting the following new clause
(ii) in lieu
thereof:
"(ii) If any
Loan Party or any of its Subsidiaries (x) Disposes of any
property in a Disposition constituting an
Asset Sale which results in the
realization by such Person of Net Cash
Proceeds, (y) receives Net Cash
Proceeds of casualty insurance or
condemnation awards (or from payments in
lieu thereof) or any Extraordinary
Receipts (excluding for purposes of this
clause (y) (I) any Net Cash Proceeds from
"Recoveries" (as defined in the
AWA Environmental Indemnity Agreement and
the API Environmental Indemnity
Agreement), which must be paid to AWA
under the terms of the applicable Fox
River Indemnity Arrangements and (II) the
first $20,000,000 of
Extraordinary Receipts received by the
Loan Parties or any of their
Subsidiaries in connection with the
Specified Litigation on or after the
Second Amendment Effective Date) or (z)
incurs or issues any Indebtedness
(other than Indebtedness expressly
permitted to be incurred or issued
pursuant to Section 7.02), the U.S.
Borrower shall prepay an aggregate
principal amount of Term B Loans equal to
100% of such Net Cash Proceeds
within five Business Days of the receipt
thereof by such Person (such
prepayments to be applied as set forth in
clause (iii) below); provided,
however, that, (A)
<PAGE>
the U.S. Borrower shall only be required
to prepay an aggregate principal
amount of Term B Loans pursuant to
preceding clause (x) above in this
Section 2.05(b)(ii) equal to 50% of any
Net Cash Proceeds received by the
U.S. Borrower as a result of the
Disposition by it of the Capital Stock of
C&H Packaging Company, Inc. on or
after the Second Amendment Effective
Date, (B) so long as no Event of Default
shall have occurred and be
continuing, with respect to any prepayment
of Term B Loans required to be
made pursuant to preceding clause (x)
above in this Section 2.05(b)(ii), if
such prepayment would result in the
prepayment of one or more Eurodollar
Rate Loans on a day other than the last
day of the then current Interest
Period for each such Eurodollar Rate Loan,
the U.S. Borrower may defer the
relevant portion of such required payment
until the last day of the
relevant then current Interest Period of
each such applicable Eurodollar
Rate Loan (provided that such deferral
period shall in no case exceed 60
days) and during such deferral period the
U.S. Borrower may apply all or
any part of such relevant portion of such
required payment to prepay
Revolving Credit Loans and may, subject to
the fulfillment of the
applicable conditions set forth in Article
IV, reborrow such amounts (which
amounts, to the extent originally
constituting Net Cash Proceeds, shall be
deemed to retain their original character
as Net Cash Proceeds when so
reborrowed) for application as required by
this Section 2.05(b)(ii)
(provided that, upon the occurrence of an
Event of Default during any such
deferral period, the U.S. Borrower shall
immediately prepay Term B Loans in
the amount of all Net Cash Proceeds
received by the U.S. Borrower and other
amounts, as applicable, that are required
to be applied to prepay Loans
under this Section 2.05(b)(ii) (without
giving effect to this clause (B))
but which have not previously been so
applied) and (C) with respect to any
Net Cash Proceeds of casualty insurance or
condemnation awards (or from
payment in lieu thereof) otherwise
required to be applied under preceding
clause (y) above in this Section
2.05(b)(ii), at the election of the U.S.
Borrower (as notified by the U.S. Borrower
to the Administrative Agent (of
its intent to reinvest) within five
Business Days of the date of such
Disposition), and so long as no Event of
Default shall have occurred and be
continuing at the time of such election,
such Loan Party or such Subsidiary
may reinvest all or any portion of such
Net Cash Proceeds in operating
assets so long as within 180 days after
the receipt of such Net Cash
Proceeds, such purchase shall have been
consummated; and provided further,
however, that any Net Cash Proceeds of
casualty insurance or condemnation
awards (or from payment in lieu thereof)
not so reinvested shall be
immediately applied (on such 180th day or,
if sooner, to the extent (I) the
U.S. Borrower makes an earlier
determination that such funds will not be so
invested or (II) an Event of Default has
occurred and is continuing and the
Required Lenders have requested immediate
application) to the prepayment of
the Term B Loans as set forth in this
Section 2.05(b)(ii)."
11. Section 2.05(b) of the Credit
Agreement is hereby further amended by
deleting clause (iii) of such Section and inserting
th
