10-K

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KapStone Paper and Packaging Corporation (INDEX TO FINANCIAL STATEMENTS)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                 to                                  ,

Commission File No.: 001-33494

KapStone Paper and Packaging Corporation
(Exact Name of Registrant as Specified in its Charter)

Delaware	20-2699372
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

KapStone Paper and Packaging Corporation
1101 Skokie Blvd. Suite 300
Northbrook, IL 60062
(Address of Principal Executive Offices) (ZIP Code)

Registrant's telephone number, including area code: (847) 239-8800

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of Each Class	Name of Exchange On Which Registered
Common Stock (Par Value $.0001)	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes o    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of the above in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o Accelerated Filer ý Non-Accelerated Filer o Smaller Reporting Company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         The aggregate market value of the 20,599,751 shares of Common Stock held by non-affiliates of the registrant on June 30, 2009, was $96,612,832. This calculation was made using a price per share of Common Stock of $4.69; the closing price of the Common Stock on the NASDAQ on June 30, 2009 the last day of the registrant's most recently completed second fiscal quarter of 2009. Solely for purposes of this calculation, all shares held by directors and executive officers of the registrant have been excluded. This exclusion should not be deemed an admission that these individuals are affiliates of the registrant.

         On February 28, 2010, the number of shares of Common Stock outstanding, excluding 40,000 treasury shares, was 45,418,074.

DOCUMENTS INCORPORATED BY REFERENCE:

         The registrant's Definitive Proxy Statement for its 2010 Annual Meeting of Stockholders will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to General Instruction G(3) of the Form 10-K. Information from such Definitive Proxy Statement will be incorporated by reference into Part III.

TABLE OF CONTENTS

Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Reserved	15
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 8.	Financial Statements and Supplementary Data	35
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	35
Item 9A.	Controls and Procedures	35
Item 9B.	Other Information	36
Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Executive Compensation	37
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	37
Item 13.	Certain Relationships and Related Transactions and Director Independence	37
Item 14.	Principal Accountant Fees and Services	37
Item 15.	Exhibits and Financial Statement Schedule	38
	INDEX TO FINANCIAL STATEMENTS	F-1

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Forward Looking Statements.

        This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us, including the risks set forth in Item 1A. Risk Factors below, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission filings. All subsequent written and oral forward-looking statements attributable to KapStone or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. KapStone disclaims any intention or obligation to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

PART I

Item 1.    Business

Overview

        KapStone Paper and Packaging Corporation, formerly Stone Arcade Acquisition Corporation, ("KapStone" or the "Company") was formed in Delaware as a special purpose acquisition corporation on April 15, 2005 for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an unidentified operating business in the paper, packaging, forest products and related industries.

        On August 19, 2005, we consummated our initial public offering of 20,000,000 units with each unit consisting of one share of our common stock and two warrants. Each warrant entitled the holder to purchase one share of our common stock at an exercise price of $5.00 per share. The units sold in our initial public offering were sold at an offering price of $6.00 per unit, generating gross proceeds of $120.0 million.

        On January 2, 2007, we consummated the purchase from International Paper Company ("IP") of substantially all of the assets, and the assumption of certain liabilities, of the Kraft Papers Business ("KPB") for $155 million less $7.8 million of closing adjustments. The assets consisted of an unbleached kraft paper manufacturing facility in Roanoke Rapids, North Carolina, and Ride Rite® Converting, an inflatable dunnage bag manufacturer located in Fordyce, Arkansas, trade accounts receivable and inventories. The liabilities assumed consisted of trade accounts payable, accrued expenses and certain long-term liabilities. The purchase price included two contingent earn-out payments of up to $60 million if certain EBITDA targets are achieved. We obtained a $95 million senior secured credit facility from LaSalle Bank National Association, which was used to fund a portion of the KPB purchase price.

        On July 1, 2008, we consummated the purchase from MeadWestvaco Corporation ("MWV") of substantially all of the assets and the assumption of certain liabilities of the Charleston Kraft Division ("CKD"), for $485 million less $8.9 million of working capital adjustments. The assets consisted of an unbleached kraft paper manufacturing facility in North Charleston, South Carolina, including a cogeneration facility, chip mills located in Elgin, Hampton, Andrews and Kinards, South Carolina and a lumber mill located in Summerville, South Carolina, trade accounts receivables and inventories. The

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liabilities assumed consisted of trade accounts payable, accrued expenses and certain long-term liabilities.

        The CKD acquisition was financed by cash on hand and by a new senior secured credit facility of $515 million consisting of a five-year term loan of $390 million, a seven-year term loan of $25 million and a $100 million revolving credit facility. In addition, $40 million of seven-year 8.30% senior notes were issued. In connection with the transaction the Company paid off the remaining amount due under its prior credit facility.

        On March 31, 2009, the Company consummated the sale of its dunnage bag business to Illinois Tool Works Inc. for $36.0 million less $1.1 million of working capital adjustments. The Company considered the sale an opportunity to lower its debt and focus on its core business. The sale of the dunnage bag business accelerated a contingent earn-out payment of $4.0 million. As a result, future contingent earn-out payments total $55.0 million if certain EBITDA targets are achieved.

Acquisitions

        In an effort to diversify and/or grow our business we have been, and continue to be, engaged in evaluating a number of potential acquisition opportunities. No assurance can be given that we will consummate additional transactions. The structuring and financing of any future acquisitions may be dependent on the terms and availability of additional financing to us that either replaces or does not conflict with the Company's existing senior secured credit facility.

General

        We produce and sell a variety of unbleached kraft paper, linerboard, saturating kraft and unbleached folding carton board.

        In 2009, the Company determined, in accordance with Accounting Standards Codification 280, Segment Reporting, to make changes to its reportable segments. All segment disclosures in this Report are presented in conformance with the new presentation. For additional information regarding the change in segments, and the results of our segments, see Note 20 of the Notes to Consolidated Financial Statements.

Industry Overview

        We view the unbleached kraft market as including kraft paper, linerboard, saturating kraft and unbleached folding carton board.

        The American Forest and Paper Association ("AF&PA") estimation of the size of the U.S. kraft paper market is as follows:

(In millions)	2009		2008		2007
Total U.S. sales		1.29 tons		1.56 tons		1.55 tons
U.S. production		1.25 tons		1.49 tons		1.36 tons
Imports		0.20 tons		0.25 tons		0.36 tons
Exports		0.16 tons		0.18 tons		0.17 tons
U.S. operating rates		73%		93%		94%

        The kraft paper market is comprised of three general product types. Multiwall paper is used to produce bags for agricultural products, pet food, baking products, cement and chemicals. Specialty converting paper is used for a large variety of end uses within coating and laminating applications that require a smooth surface. Specialty converting is also used to produce shingle wrap, end caps, roll wrap and dunnage bags. Grocery bag and sack paper is converted into retail shopping bags, grocery sacks and lawn and leaf refuse bags.

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        Over the last two decades unbleached kraft paper capacity declined due to a shift in market demand from paper bags to plastic. The multiwall market has contracted due to conversion to plastics in certain end-use markets primarily in the insulation, pet food and lawn and garden markets. After bottoming in 2006, capacity has increased 2.3% in 2007 and 4.6% in 2008 as the net impact of machines shifting from other grades to kraft paper was realized. According to AF&PA's annual survey kraft paper capacity was 1.7 million tons in 2009 and is expected to hold constant through 2011.

        Linerboard is primarily used to manufacture corrugated containers for packaging products. U.S. demand for corrugated boxes and linerboard tends to be driven by industrial production of processed foods, nondurable goods and certain durable goods.

        The AF&PA estimation of the size of the U.S. linerboard market is as follows:

(In millions)	2009		2008		2007
Total U.S. sales		19.8 tons		21.3 tons		22.6 tons
U.S. production		22.6 tons		24.2 tons		25.2 tons
Imports		0.37 tons		0.56 tons		0.55 tons
Exports		3.18 tons		3.32 tons		3.20 tons
U.S. operating rates		85%		91%		97%

        We target our linerboard for specialty independent corrugated and laminated products customers who focus on specialty niche packaging.

        Our saturating kraft product line is used in multiple industries including construction, electronics manufacturing and furniture manufacturing around the world. The major end-use markets are in the thin high pressure laminates (HPL) creating decorative surfaces such as kitchen and bath countertops, home and office furniture and flooring. In Europe, there is a growing and distinct HPL segment that involves a much thicker product called compact laminates, which create surfacing products such as exterior cladding, partitions and doors. In Asia, there is significant use of our products for the manufacturing of printed circuit boards (PCB) and copper clad laminates (CCL) and there is also a growing use for thin HPL in decorative surfaces. There is no published data reporting the size of the market. Barriers to entry for producing high quality saturating kraft are high as it is a technically difficult grade of paper to produce.

        Our unbleached folding carton board product line, sold under the trade name Kraftpak®, is a unique, low density virgin fiber board. Kraftpak® applications are widely spread throughout end uses in the general folding carton segment of paperboard packaging. KapStone believes that the best growth opportunities for Kraftpak® are in consumer brands that are changing their images to promote environmental friendliness and sustainability, thus taking shares from coated recycled board, coated natural kraft board and solid bleached sulfate board which are much larger markets. There is no published data reporting the size of the market.

Customers

        The Company has over 400 customers, many of which are leading world class converters. In 2007, the Company had approximately 100 customers. Upon acquiring CKD in July of 2008, the Company's number of customers increased to approximately 400, of which approximately 100 were based in foreign countries. No customer accounted for more than 10% of consolidated net sales in 2009. Graphic Packaging accounted for 10.7% of consolidated net sales in 2008. Altivity Packaging and Exopack, LLC, accounted for 17.1% and 10.4% of consolidated net sales in 2007, respectively. In 2008, Graphic Packaging acquired Altivity Packaging. KapStone continues to build long-term relationships, most of which were established by KPB and CKD before we acquired them. We believe that the risk of losing customers or business with customers is reduced due to the long-term relationships that have been established.

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        Kraft paper is sold to converters who produce multiwall bags for agricultural products, pet food, cement and chemicals, grocery bags and specialty conversion products such as wrapping paper products, dunnage bags and roll wrap. The Company's kraft paper product line accounted for approximately 26% of total unit sales for 2009, 43% for 2008 and 79% for 2007.

        Linerboard is sold to domestic and foreign converters in the corrugated box industry and to other converters for a variety of end users including laminated tier sheets and wrapping material, among others. Our focus is on independent producers who do not have their own mill systems or producers who commonly purchase linerboard on the open market. The Company's linerboard product line accounted for approximately 47% of total unit sales for 2009, 32% for 2008 and 21% for 2007.

        Our saturating kraft customer base is split among three geographic regions, the Americas, Europe and Asia. Approximately 70% of our sales are exports to customers in Europe, Latin America and Asia where growth opportunities are favorable. KapStone, or its predecessor, have done business with many of these customers for well over 30 years. Some customers have consolidated to form a greater presence in their markets. Customer consolidation is particularly evident for North America and in the early phase in Europe. In Asia, there are numerous players and it is a highly fragmented market making entry difficult for some companies that do not have a presence in the region. KapStone has acquired a leadership position through knowledge of our markets and understanding the technical needs of our customers' manufacturing process and the demanding requirements of their products. The Company's saturating kraft product line accounted for approximately 21% of total unit sales for 2009 and 19% for 2008.

        Our Kraftpak® customer base consists primarily of integrated and independent converters in the folding carton industry. The Company's Kraftpak® product line accounted for approximately 6% of total unit sales for 2009 and 6% for 2008.

Sales and Marketing

        The sales and marketing team works directly with our technical, manufacturing and product development teams to offer solutions and meet new customer demands and product requirements. We market and sell our products through a national sales force for our domestic sales. Our international sales are supported by sales teams based in Europe and Asia. We sell export linerboard to unaffiliated resellers.

Manufacturing and Distribution

        Our manufacturing facilities are based in Roanoke Rapids, North Carolina and North Charleston, South Carolina and include production facilities consisting of integrated pulp and paper mills that produce kraft paper, linerboard, saturating kraft products sold under the DuraSorb® brand and folding carton board sold under the Kraftpak® brand. Our Roanoke Rapids paper mill began operations in 1907 and the North Charleston paper mill began operations in 1937.

        The Company's paper mills' annual production capacity is approximately 1.3 million tons. Machinery and equipment is regularly inspected to maintain good working order through planned maintenance outages.

        Softwood pulp used to make kraft paper, folding carton board and linerboard is produced from a combination of locally sourced roundwood and pine woodchips. After the wood is debarked and chipped, the chips are loaded into digesters for cooking. Woodchips, chemicals and steam are mixed in the digester to produce softwood pulp. Hardwood pulp is produced in North Charleston in a similar fashion for the production of DuraSorb® saturating kraft. The pulp is screened and washed through a series of washers, and then stored prior to the paper making process. The Company processes softwood pulp using up to five paper machines. Management monitors productivity on a real-time basis with

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on-line reporting tools that track production values versus targets. Overall equipment efficiency is also monitored daily through production reporting systems.

        The majority of our domestic sales are distributed directly to customers by a combination of third parties mainly by truck and rail. Export linerboard and saturating kraft are shipped to customers via ocean vessel.

Transitional Support

        We have entered into two transitional services agreements to provide for certain services, including information technology and centralized transaction processing, until we could convert acquisitions to our own Enterprise Resource Planning ("ERP") systems. Our transitional support services from IP ended on April 1, 2008 after a term of 15 months at a cost of $3.2 million. Our transitional service agreement with MWV, which began on July 1, 2008, ended on December 31, 2009, resulting in a term of 18 months at a cost of $8.7 million.

        The total cost of transferring services from IP to us was approximately $6.0 million, consisting primarily of the cost of installing a new ERP system which included general ledger, order entry and receivables management, purchasing and payment plus additional modules. The system supports operations in North Carolina and South Carolina as well as the corporate headquarters. We incurred approximately $5.8 million to migrate and upgrade the Charleston operations to our ERP system.

Suppliers

        The raw materials needed to process unbleached kraft paper and related products consist primarily of round wood, woodchips and chemicals. In addition, we purchase coal, fuel oil and natural gas to run boilers and our cogeneration facility in South Carolina. We believe that these raw materials are readily available and that there are a number of suppliers from whom the materials can be bought in the open market.

        In 2009, approximately 20% of our combined paper mills' fiber supply (round wood and woodchips) was delivered under a long-term supply agreement. Upon acquisition of the CKD business from MWV, we entered into a 15 year fiber supply agreement whereby MWV provides us with up to 25% of our South Carolina fiber requirements with prices tied to a market index. The balance of fiber is purchased from third parties in North Carolina, Virginia, Georgia and South Carolina.

        The primary chemical used in our pulp making process is caustic soda which we purchase at market prices. We have fixed-pricing contracts with two long-term suppliers for coal. Fuel oil is purchased from third parties at market prices.

        Typical contracts for raw materials range from one to three years in length and are at fixed pricing, driven by market pricing, or tied to a documented moving index for each material. As costs for raw materials, supplies and services increase, we implement price increases to recover these rising material costs from our customers, when possible. We currently do not use futures contracts or enter into hedging arrangements to manage the risk of fluctuations in coal or fuel prices. Thus, if we cannot pass on the rise in energy or other costs to our customers, such rise in costs will have an adverse effect on our gross profit margins.

Competition

        We are one of the leading manufacturers of unbleached kraft paper in North America. Other key U.S. market suppliers are Georgia-Pacific, Longview Fibre, Delta Natural, and Smurfit-Stone. A number of other competitors comprise the remainder of North American unbleached kraft paper production. We believe the key parameters on which North American unbleached kraft suppliers compete are supply reliability, delivered price and product quality. We have longstanding relationships

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with many of our customers and historically have entered into contracts with initial terms of at least two years. We believe our longstanding relationships are based on our ability to provide the best value proposition to our customers through quality products, consistent and reliable service and technical innovation.

        The overall U.S. linerboard capacity is in excess of 25 million tons. As such, the combined market share between our two mills is just over two percent. International Paper is the largest producer, followed by Smurfit-Stone, Georgia-Pacific and Temple-Inland Packaging. Our emphasis is on the independent producers of corrugated packaging and other users of linerboard.

        In the saturating kraft market, there are three major manufacturers (KapStone, International Paper and Stora Enso). The remainder is supplied by local producers of lower quality material in various regions of the world.

        Kraftpak® competes primarily with uncoated recycled board which is produced by Newark, Rock-Tenn, Caraustar and Graphic Packaging, and a variety of smaller producers.

Environmental Regulation

        Our operations are subject to environmental regulation by federal, state, and local authorities in the United States, including requirements that regulate discharge into the environment, waste management, and remediation of environmental contamination. Environmental permits are required for the operation of our businesses and are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with environmental requirements and violators are subject to injunctions, civil penalties and criminal fines. Third parties may also have the right to sue to enforce compliance with such regulations.

        KapStone is committed to maintaining high environmental quality standards which meet or exceed those established by all relevant environmental laws, regulations and other applicable requirements including Sustainable Forestry Initiatives. KapStone's goal is 100% compliance with all environmental laws and regulations wherever we do business. This is achieved by identifying, understanding and giving priority consideration to the environmental aspects and impacts of KapStone's activities, products and services while integrating continual environmental improvement, pollution prevention and employee diligence into daily operations.

        On December 8, 2009, the EPA ("Environmental Protection Agency") announced that for the first time in nearly 40 years, it is proposing to strengthen the nation's sulfur dioxide (SO₂) air quality standard to protect public health. This standard and the impending Industrial Boiler MACT standard will affect fuel combustion sources at our facilities. Our North Carolina mill has completed an application for a Boiler MACT permit under new state regulations with expectation of compliance in 2014. We continue to monitor the process the EPA is undertaking to develop new standards for industrial boilers and process heaters so that we can determine our potential liability regarding any future related regulations.

        The EPA is continuing the development of new programs and standards, such as additional wastewater discharge allocations, water intake structure requirements and national ambient air quality standards. We believe that our operations are in compliance in all material respects with all current environmental regulations and we are not aware of any pending regulatory agency compliance actions.

        The U.S. Congress is actively considering legislation to reduce emissions of greenhouse gases. In addition, several states have already taken legal measures to require the reduction of emissions of greenhouse gases by companies and public utilities, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Passage of climate control legislation by Congress or various states of the U.S., or the adoption of regulations by the EPA or analogous state agencies that restrict emissions of greenhouse gases in areas in which we

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conduct business, may have a material effect on our operations in the United States. We expect that we will not be disproportionately impacted by these measures relative to typical owners of comparable properties in the United States.

Employees

        At December 31, 2009, KapStone had approximately 1,600 employees. Of these employees, approximately 1,000 employees were covered by collective bargaining agreements with the United Steelworkers. Currently, there is a collective bargaining agreement in place with union employees in Roanoke Rapids, North Carolina, through August 31, 2010. There are approximately 600 employees at the mill in North Charleston, South Carolina that are represented by one of four unions. Those employees are currently working without a contract. Their respective union contract had expired on June 30, 2009. The union employees represented by three of the four unions have approved the Company's most recent contract offer. The Company is in negotiations with the remaining union. There have not been any slow-downs or work stoppages since the contracts expired on June 30^th of last year. We believe that we have a good relationship with our employees and union leadership.

        In January 2007, upon consummation of the acquisition of KPB, we began hiring a corporate staff to manage our operations. This included a vice president and chief financial officer, a vice president and general manager to manage KPB and other corporate staff employees. Additional hiring at the corporate headquarters occurred throughout 2007, 2008 and 2009 upon termination of post-acquisition transitional services agreements with IP and MWV.

        As part of the CKD acquisition, we acquired 11 employees who are located in Europe and Asia. These employees perform sales and order entry activities in support of the Company's export shipments to customers based in Europe and Asia.

International Sales

        For the years ended December 31, 2009, 2008 and 2007, the Company had export shipments from the United States to customers in foreign countries of $239 million, $165 million and $44 million, respectively. No foreign country accounted for more than 10% of our consolidated net sales for any year.

Website Access to Company Reports

        The Company's annual reports on Form 10-K, including this Form 10-K, as well as the quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports are filed electronically with the Securities and Exchange Commission ("SEC") and are also available free of charge through our website, www.kapstonepaper.com, as soon as reasonably practicable after such material is filed electronically with, or furnished to, the SEC. Also, copies of our annual report will be made available, free of charge, upon written request.

Item 1A.    Risk Factors

        You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, in evaluating us and our business before making an investment decision regarding our securities. If any of the events or circumstances described in the following risk factors were to actually occur, our business, financial condition or results of operations could be materially and adversely affected. The risks listed below are not the only risks that we face.

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Risks associated with our business

Recent changes in U.S. and global economic conditions could have a continuing adverse effect on the profitability of some or all of our businesses.

        Recent concerns over declining consumer and business confidence, the availability and cost of credit, reduced consumer spending and business investment, the volatility and strength of the capital and credit markets, and inflation all affect the business and economic environment and, ultimately, the profitability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our products is adversely affected. Adverse changes in the economy could negatively affect earnings and could have a material adverse effect on our business, results of operations, cash flows and financial position. We cannot predict whether or when such circumstances may occur, or what impact, if any such circumstances could have on our business, results of operations, cash flows and financial position.

Conditions in the global capital and credit markets and the economy generally may materially adversely affect our business, results of operations and financial position and we do not expect these conditions to improve in the near future.

        Our results of operations and financial position could be materially affected by adverse changes in the global capital and credit markets and the economy generally, including recent declines in consumer and business confidence and spending, both in the U.S. and elsewhere around the world. The capital and credit markets have been experiencing extreme volatility and disruption over the last year. In some cases, these markets have exerted downward pressure on availability of liquidity and credit and increased the costs of credit when such credit is available. Conditions in the capital and credit markets and the effects of the declines in consumer and business confidence and spending may adversely impact the ability of our lenders, suppliers and customers to conduct their business activities. The consequences of such adverse effects could include the interruption of production at the facilities of our customers, the reduction, delay or cancellation of customer orders, delays in or the inability of customers to obtain financing to purchase our products, and bankruptcy of customers or other creditors. Moreover, the current worldwide financial crisis has reduced the availability of liquidity and credit to fund or support the continuation and expansion of business operations worldwide as many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers.

        While we have procedures to monitor and limit exposure to credit risk, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, which could have a material adverse effect on our business, results of operations and cash flows and financial position.

We rely on key customers and a loss of one or more of our key customers could adversely affect our business, results of operations, cash flows and financial position.

        During the year ended December 31, 2009, no customer accounted for more than 10% of consolidated net sales. However, losses of key customers could significantly impact our business, results of operations, cash flows and financial position.

We are dependent upon key management executives the loss whom may adversely impact our business.

        We depend on the expertise, experience and continued services of corporate and mill management. The loss of such management, or an inability to attract or retain other key individuals, could materially adversely affect our business. There can be no assurance that our salaries and incentive compensation plans will allow us to retain the services of these key management executives or hire new key employees.

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KapStone's indebtedness may adversely affect its financial health.

        As of December 31, 2009, we had approximately $152 million of outstanding debt. As a result of the indebtedness, our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes may be impaired in the future. The debt could make us vulnerable to economic downturns and may hinder our ability to adjust to rapidly changing market conditions.

        A substantial portion of our cash flow from operations will be needed to meet the payment of principal and interest on our indebtedness. The business may not generate sufficient cash flow from operations to enable it to repay our indebtedness and to fund other liquidity needs, including capital expenditure requirements. The indebtedness incurred by us under our senior secured credit facility bears interest at variable rates, and therefore if interest rates increase, our debt service requirements would increase. In such case, we may need to refinance or restructure all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness, including the senior secured credit facility, on commercially reasonable terms, or at all. If we cannot service or refinance our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, any of which could have a material adverse effect on our operations and financial condition.

        Our senior secured credit facility contains restrictive covenants that limit our liquidity and corporate activities. Our credit facility imposes operating and financial restrictions that limit our ability to:

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incur additional indebtedness;

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create additional liens on our assets;

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make investments;

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engage in mergers or acquisitions;

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pay dividends; and

•

sell all or any substantial part of our assets

        In addition, the credit facility also imposes other restrictions on us. Therefore, we would need to seek permission from the lenders in order to engage in certain corporate actions. The lenders' interests may be different from ours, and no assurance can be given that we will be able to obtain the lenders' permission when needed. This may prevent us from taking actions that are in our best interest.

        The credit facility requires us to maintain certain financial ratios. The failure to maintain the specified ratios could result in an event of default if not cured or waived.

        In the event of a default under our senior credit facility, the lenders generally would be able to declare all of such indebtedness, together with accrued interest, to be due and payable. In addition, borrowings under the credit facility are secured by a first priority lien on all of our assets and, in the event of a default under that facility the lenders generally would be entitled to seize the collateral. A default under any debt instrument, unless cured or waived, would likely have a material adverse effect on our business and financial condition.

If we fail to extend or renegotiate the collective bargaining agreements with the United Steelworkers Union as they expire from time to time, or if our unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed.

        Most of our hourly paid employees are represented by trade unions. We are a party to collective bargaining contracts which apply to approximately 600 employees at the North Charleston mill and

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385 employees at the Roanoke Rapids mill. No assurance can be given that we will be able to successfully extend or renegotiate the collective bargaining agreements as they expire from time to time. Currently, there is a collective bargaining agreement in effect with respect to Roanoke Rapids through August 31, 2010. There are approximately 600 union employees at the mill in North Charleston, South Carolina that are represented by one of four unions. Those employees have been working without a contract since June 30, 2009. However, the employees represented by three of the four unions have approved the Company's most recent contract offer. The Company remains in negotiations with the remaining union. If we are unable to extend or negotiate new agreements without work stoppages, it could negatively impact our ability to manufacture our products and adversely affect results of operations.

Our operations are global in nature, and accordingly our business, results of operations, cash flows and financial position could be adversely affected by the political and economic conditions of the countries in which we conduct business, by fluctuations in exchange rates and other factors related to our international operations.

        Approximately 38% and 32% of our annual revenues in 2009 and 2008, respectively, were derived from export sales. As our international operations and activities expand, we face increasing exposure to the risks of selling to customers in foreign countries. These factors include:

•

Changes in foreign currency exchange rates which could adversely affect selling prices for our products, and therefore our competitive position in a particular market.

•

Trade protection measures in favor of local producers of competing products, including government subsidies, tax benefits, trade actions (such as anti-dumping proceedings) and other measures giving local producers a competitive advantage over the company.

•

Changes generally in political, regulatory or economic conditions in the countries in which we conduct business.

        These risks could affect the cost of selling our products, our pricing, sales volume, and ultimately our financial performance. The likelihood of such occurrences and their potential effect on the company vary from country to country and are unpredictable.

If we fail to maintain effective systems for disclosure controls and internal control over financial reporting, we may be unable to comply with the requirements of Section 404 of the Sarbanes Oxley Act of 2002 in a timely manner.

        Section 404 of the Sarbanes-Oxley Act of 2002 requires us to document and test the effectiveness of our internal controls over financial reporting in accordance with an established internal control framework and to report on management's conclusion as to the effectiveness of its internal controls. It also requires an independent registered public accounting firm to test our internal controls over financial reporting and report on the effectiveness of such controls for our fiscal year ending December 31, 2009, and subsequent years. It may cost us more than we expect to comply with these controls and procedure related requirements. If we discover areas of our internal controls that need improvement, we cannot be certain that any remedial measures taken will ensure that we implement and maintain adequate internal controls over financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could harm our operating results or cause us to fail to meet our reporting obligations.

We may be required to record a charge to our earnings if our goodwill becomes impaired.

        We test for impairment of goodwill annually at the beginning of the fourth quarter in accordance with generally accepted accounting standards. When events or changes in circumstances indicate that

10

the carrying value for such assets may not be recoverable, however, we review goodwill for impairment on an interim basis. Factors that may be considered a change in circumstances requiring our interim testing include a decline in stock price as compared to our book value per share, future cash flows and slower growth rates. In connection with future annual or interim tests, we may be required to record a non-cash charge to earnings during the period in which any impairment of goodwill is determined, which would adversely impact our results of operations.

See Note 2. "Summary of Significant Accounting Policies—Goodwill and Intangible Assets" in the Notes to the Consolidated Financial Statements for additional information related to impairment of goodwill.

Our business depends on effective information management systems.

        We rely on our enterprise resource planning (ERP) systems to support such critical business operations as processing sales orders and invoicing, inventory control, purchasing and supply chain management, payroll and human resources, and financial reporting. We periodically implement upgrades to such systems or migrate one or more of our affiliates, facilities or operations from one system to another. If we are unable to adequately maintain such systems to support our developing business requirements or effectively manage any upgrade or migration, we could encounter difficulties that could have a material adverse impact on our business, internal controls over financial reporting, financial results, or our ability to timely and accurately report such results.

We may incur business disruptions.

        We take measures to minimize the risks of disruptions at our manufacturing facilities. The occurrence of a natural disaster, such as a hurricane, tropical storm, earthquake, tornado, flood, fire or other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance could cause operational disruptions and could materially adversely affect our earnings and cash flows. Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles.

Environmental regulations could materially adversely affect our results of operations and financial position.

        We are subject to environmental regulation by federal, state, and local authorities in the United States, including requirements that regulate discharge into the environment, waste management, and remediation of environmental contamination. Maintaining compliance with existing and new environmental laws may require capital expenditures for compliance.

        Due to past history of industrial operations at the Roanoke Rapids and North Charleston mills, the possibility of onsite and offsite environmental impact to the soil and groundwater may present a heighted risk of contamination. If we are required to make significant expenditures for remediation, the costs of such efforts may have a significant negative impact on our results of operations and financial condition.

        MWV retained responsibility for certain offsite environmental conditions resulting from the operations at the North Charleston mill existing prior to the closing of the CKD acquisition. The overall indemnification by MWV for certain losses includes assumed environmental liabilities, subject to an $8.5 million threshold and a cap equal to 15% of the purchase price of $485 million, MWV's obligation to indemnify us for any historical onsite liability or breach of certain environmental representations and warranties terminates on December 31, 2013. MWV's indemnification for certain offsite historical liabilities survive indefinitely. Because we are unable to presently make a determination as to whether the environmental impact, if any, would be widespread or significant, the negotiated cap and survival period may not be sufficient to cover future losses.

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We may be required to pay income taxes related to the Alternative Fuel Mixture Tax Credit.

        On March 31, 2009, we received approval from the Internal Revenue Service for our registration as an alternative fuel mixer, which provides for a refund of $0.50 per gallon of alternate fuel used in our pulp making process. For the year ended December 31, 2009, we received refunds of $165 million. We have taken the position that the tax credit is similar to a federal excise tax refund, and as a result, is not taxable. To date, the Internal Revenue Service has issued no guidance concerning this issue.

        As of December 31, 2009 we have recorded a $63 million liability for an unrecognized tax benefit relating to the taxability of alternative fuel mixture tax credits.

Risks Associated with KapStone's Common Stock

The market price for our common stock may be highly volatile.

        The market price of our common stock may be volatile due to certain factors, including, but not limited to; quarterly fluctuations in our financial and operating results; general conditions in the paper and packaging industries; or changes in earnings estimates.

Shares available for future issuance, conversion and exercise could have an adverse effect on the earnings per share and the market price of our common stock.

        Any future issuance of equity securities, including upon exercise of outstanding stock options, could dilute the interests of our existing stockholders and could substantially decrease the trading price of our common stock.

Our executive officers and directors control a substantial percentage of our common stock and thus may influence certain actions requiring a stockholder vote.

        At December 31, 2009, our executive officers and directors owned 7.8 million shares of our common stock, or approximately 17.3% of our total issued and outstanding common stock. Accordingly, our executive officers and directors may have considerable influence over the outcome of all matters requiring approval by our stockholders, including future acquisitions and the election of directors. In addition, our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. At the annual meeting, as a consequence of our "staggered" board of directors, only a minority of the board of directors will be considered for election and our officers and directors, because of their ownership position, will have considerable influence regarding the outcome of the election.

Some of our executive officers and directors may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.

        Some of our executive officers and directors have, or may in the future, become affiliated with entities, including "blank check" companies, engaged in business activities similar to those conducted by us. Additionally, our executive officers and directors may become aware of business opportunities which may be appropriate for presentation to us as well as the other entities to which they have an affiliation. Accordingly, they may have conflicts as to questions pertaining to which entity a particular business opportunity should be presented.

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Risks associated with the paper, packaging, forest products and related industries

The paper, packaging, forest products and related industries are highly cyclical. Fluctuations in the prices of and the demand for products could result in smaller profit margins and lower sales volumes.

        Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, sales volume and margins for products in the paper, packaging, forest products and related industries. The length and magnitude of industry cycles have varied over time and by product, but generally reflect changes in macroeconomic conditions and levels of industry capacity. Most paper products and many wood products used in the packaging industry are commodities that are widely available from many producers. Because commodity products have few distinguishing qualities from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand. The overall levels of demand for these commodity products reflect fluctuations in levels of end-user demand, which depend in large part on general macroeconomic conditions in North America and regional economic conditions in our markets, as well as foreign currency exchange rates. The foregoing factors could materially and adversely impact sales and profitability of our company.

Difficulty obtaining wood fiber at favorable prices, or at all, may negatively impact companies in the paper and packaging industry.

        Wood fiber is the principal raw material in many parts of the paper and packaging industry. Wood fiber is a commodity, and prices historically have been cyclical. Environmental litigation and regulatory developments have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in the United States. These reductions have caused the closure of plywood and lumber operations in some of the geographic areas in which a target company might operate. In addition, future domestic or foreign legislation and litigation concerning the use of timberlands, the protection of endangered species, the promotion of forest health and the response to and prevention of catastrophic wildfires could also affect timber supplies. Availability of harvested timber may further be limited by fire, insect infestation, disease, ice storms, wind storms, flooding and other natural and manmade causes, thereby reducing supply and increasing prices.

        Industry supply of commodity paper and wood products is also subject to fluctuation, as changing industry conditions can influence producers to idle or permanently close individual machines or entire mills. In addition, to avoid substantial cash costs in connection with idling or closing a mill, some producers will choose to continue to operate at a loss, sometimes even a cash loss, which could prolong weak pricing environments due to oversupply. Oversupply in these markets can also result from producers introducing new capacity in response to favorable short-term pricing trends. Industry supply of commodity papers and wood products is also influenced by overseas production capacity, which has grown in recent years and is expected to continue to grow. Wood fiber pricing is subject to regional market influences, and the cost of wood fiber may increase in particular regions due to market shifts in those regions. In addition, the ability to obtain wood fiber from foreign countries may be impacted by legal and political conditions in those countries as well as transportation difficulties.

An increase in the cost of purchased energy and raw materials would lead to higher manufacturing costs, thereby reducing margins which would have an adverse effect on our results of operations.

        Energy is a significant raw material in the paper and packaging industry. Energy prices, particularly for electricity, coal and fuel oil, have been volatile in recent years and currently coal and electricity exceed historical averages. These fluctuations have historically impacted manufacturing costs of companies in these industries, often contributing to reduced margins and increased earnings volatility. Recent significant increases in energy prices can be expected to adversely impact businesses in these

13

industries. In addition, we could be materially adversely impacted by supply disruptions or the inability to pass on cost increases to our customers.

Paper and packaging companies face strong competition.

        The paper and packaging industry is highly fragmented, and we face competition from numerous competitors, domestic as well as foreign. Some of our competitors will be large, vertically integrated companies that have greater financial and other resources, greater manufacturing economies of scale, greater energy self-sufficiency and/or lower operating costs.

Certain paper and wood products are vulnerable to long-term declines in demand due to competing technologies or materials.

        Companies in the paper and packaging industry are subject to possible declines in demand for their products as the use of alternative materials and technologies grows and the prices of such alternatives become more competitive. Any substantial shift in demand from wood and paper products to competing technologies or materials could result in a material decrease in sales of our products and could adversely affect our results of operations. We cannot ensure that any efforts we might undertake to adapt our product offerings to such changes would be successful or sufficient.

Paper and packaging companies are subject to significant environmental regulation and environmental compliance expenditures, as well as other potential environmental liabilities.

        Companies in the paper and packaging industry are subject to a wide range of general and industry-specific environmental laws and regulations, particularly with respect to air emissions, wastewater discharges, solid and hazardous waste management, site remediation, forestry operations and endangered species habitats. We may incur substantial expenditures to maintain compliance with applicable environmental laws and regulations, which could adversely affect our results of operations. Failure to comply with applicable environmental laws and regulations could expose us to civil or criminal fines or penalties or enforcement actions, including orders limiting operations or requiring corrective measures, installation of pollution control equipment or other remedial actions.

Risks Associated with Acquisitions

Future acquisitions of businesses by us would subject us to additional business, operating and industry risks, the impact of which cannot presently be evaluated, and could adversely impact our capital structure.

        We intend to pursue other acquisition opportunities in an effort to diversify our investments and/or grow our business. Any business acquired by us may cause us to be affected by numerous risks inherent in the acquired business' operations. If we acquire a business in an industry characterized by a high level of risk, we may be adversely affected by the currently unascertainable risks of that industry. We cannot ensure that we would be able to properly ascertain or assess all of the significant risk factors with any such acquisitions.

        In addition, the financing of any acquisition completed by us could adversely impact our capital structure as any such financing would likely include the issuance of additional equity securities and/or the borrowing of additional funds. The issuance of additional equity securities may significantly reduce the equity interest of our stockholders and/or adversely affect prevailing market prices for our common stock. Increasing our indebtedness could increase the risk of a default that would entitle the holder to declare all of such indebtedness due and payable and/or to seize any collateral securing the indebtedness. In addition, default under one debt instrument could in turn permit lenders under other debt instruments to declare borrowings outstanding under those other instruments to be due and payable pursuant to cross default clauses. Accordingly, the financing of future acquisitions could adversely impact our capital structure and the value of your equity interest in us.

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        Except as required by law or the rules of any securities exchange on which our securities might be listed at the time we seek to consummate a subsequent acquisition, stockholders will not be asked to vote on any such proposed acquisition and no redemption rights in connection with any such acquisition will exist.

Our operations are dependent upon certain operating agreements for fiber.

        We rely on certain supply arrangements to provide us roundwood and woodchips. If one of these suppliers suffered a setback, KapStone's supply of roundwood and woodchips may not be adequate to cover customer needs.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        We believe that our properties are well-maintained, in good operating condition and adequate for our present needs. The following table sets forth our principal properties, as of December 31, 2009:

Location	Segment	Owned/Leased
North Charleston, South Carolina	Unbleached kraft paper	Owned
Roanoke Rapids, North Carolina	Unbleached kraft paper	Owned
Northbrook, Illinois	Corporate	Leased

        The lease for our corporate headquarters expires in 2015.

Item 3.    Legal Proceedings

        We are party to various legal proceedings arising from our operations. We establish reserves for claims and proceedings when it is probable that liabilities exist and where reasonable estimates can be made. While it is not possible to predict the outcome of any these matters, based on our assessment of the facts and circumstances now known, we do not believe that any these matters, individually or in the aggregate, are material. However, actual outcomes may be different from those expected and could have a material effect on our results of operations or cash flows in a particular period.

Disclosure of Certain Tax Penalties

        The Company has no tax penalties owing to the Internal Revenue Service.

Item 4.    Reserved

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        The Company's common stock and warrants were traded on the NASDAQ Global Market from May 29, 2007 through January 3, 2010 under the symbols "KPPC" and "KPPCW," respectively. Effective January 4, 2010, the Company's common stock began trading on the New York Stock Exchange under the "KS" trading symbol. Previously, KapStone's common stock and warrants were traded on the Over-the-Counter Bulletin Board under the symbols "SCDE" and "SCDEW," respectively, since September 14, 2005. The following table sets forth the high and low bid information for the Company's securities from January 1, 2008 through December 31, 2009, as reported by the various exchanges where its securities are traded. The quotations reflect inter-dealer prices, are without retail markup, markdowns or commissions, and may not represent actual transactions.

		2009				2008
	Quarter	Low		High		Low		High
Common Stock	1st	$	1.05	$	3.07	$	6.31	$	6.98
	2nd	$	2.14	$	5.01	$	6.41	$	7.18
	3rd	$	4.50	$	8.80	$	6.10	$	7.97
	4th	$	6.48	$	9.90	$	2.06	$	6.07
Warrants	1st					$	1.45	$	2.00
	2nd					$	1.46	$	2.17
	3rd					$	1.31	$	2.87
	4th					$	0.05	$	1.25

        Effective August 17, 2009, the Company's warrants expired. Prior to expiration, approximately 20.5 million warrants were exercised. Data for 2009 closing share prices for warrants are not available.

Number of Holders of Common Stock

        The number of beneficial holders of record of our common stock on December 31, 2009 was 3,686.

Dividends

        There were no cash dividends or other cash distributions made by us during the fiscal years 2009, 2008 or 2007. The Company's senior secured credit facility restricts the declaration or payment of cash dividends. The Company does not expect to pay dividends in the foreseeable future.

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Stock Performance Graph

        The performance graph shall not be deemed to be "soliciting material" or to be "filed" with the commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934 as amended.

        The following graph compares a $100 investment in Company stock on August 31, 2005 with a $100 investment in each of the S&P 500 and the S&P Paper and Packaging Index (the Company's peer group) also made on August 31, 2005. The graph portrays total return, 2005-2009, assuming reinvestment of dividends.

Comparison of 4 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2009

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Item 6.    Selected Financial Data

        The following table sets forth KapStone's selected financial information derived from its audited consolidated financial statements as of, and for the years ended, December 31, 2009, 2008, 2007 and 2006 as well as KPB Predecessor's audited financial statements as of, and for the years ended December 31, 2006, and 2005.

        The selected financial data presented below summarizes certain financial data which has been derived from and should be read in conjunction with Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and KapStone's audited financial statements included in Item 7.

										Predecessor KPB
	Years Ended December 31,									Years Ended December 31,
In thousands, except per share amounts	2009		2008		2007		2006			2006		2005
Statement of Income Data:
Net sales	$	632,478	$	524,549	$	256,795	$	—		$	246,161	$	221,972
Operating income / (loss)	$	151,362	$	50,656	$	44,300	$	(1,976	)	$	33,951	$	9,478
Net income	$	80,280	$	19,665	$	26,963	$	2,196		$	19,967	$	4,933
Basic net income per share	$	2.32	$	0.74	$	1.08	$	0.09		$	n/a	$	n/a
Diluted net income per share	$	2.29	$	0.57	$	0.75	$	0.07		$	n/a	$	n/a
Balance Sheet Data:
Cash and cash equivalents	$	2,440	$	4,165	$	56,635	$	—		$	1	$	1
Total assets	$	669,123	$	727,190	$	225,450	$	119,257		$	257,382	$	269,328
Long-term liabilities	$	213,637	$	419,545	$	37,668	$	—		$	22,622	$	24,064
Total stockholders' equity	$	348,790	$	180,767	$	144,185	$	116,045		$	219,685	$	228,557

        For the year ended December 31, 2006, net income allocable to holders of nonredeemable common stock was $1.5 million.

        See Notes 4 and 5 to Notes to Consolidated Financial Statements for acquisition information.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

        We were a special purpose acquisition corporation formed on April 15, 2005 for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an unidentified operating business in the paper, packaging, forest products and related industries.

        We have consummated two acquisitions since January 2007, as we drive towards our five year strategic objective of being a $2 billion revenue company.

        KapStone's operating results in 2008 benefited from the July 1, 2008 acquisition of the CKD business from MeadWestvaco. We financed the acquisition with a new $515 million senior secured credit facility, which includes up to a $100 million revolving credit line to provide flexibility during these uncertain economic times, and the issuance of $40 million of seven year 8.3% senior notes and cash.

        Our operating results for 2008 reflect six months of operations for CKD. The acquisition accounted for $254.1 million of net sales and $16.3 million of operating income. In addition, we successfully increased selling prices throughout 2008 to offset the tremendous amount of inflation experienced by our industry. We experienced double digit increases in fiber and certain key chemical costs, energy and transportation. Overall, our operations had a strong 2008, producing approximately 830,000 tons of paper and related products with minimal unplanned outages.

        In January 2009, we announced compensation and benefit reductions for all salaried employees to reduce costs by approximately $1 million a month, effective February 1, 2009. These reductions included temporary salary reductions, and the suspension of management and sales force incentives and 401k matching contributions. On November 30, 2009, the Company lifted certain curtailments and reimbursed employees for lost salaries and wages and accrued $1.9 million for certain retirement benefits. Effective January 1, 2010, the management and sales incentives plans and Company 401k match benefits were reinstated.

        On March 31, 2009, the Company consummated the sale of its dunnage bag business for $36.0 million less certain working capital adjustments to Illinois Tool Works Inc. ("ITW"). The results of operations for the dunnage bag business were included in the dunnage bags segment until the date of the sale. In conjunction with the sale, the Company signed a long-term supply agreement with ITW, pursuant to which the Company sells kraft paper to ITW.

        Our operating results for 2009 include $164 million of alternative fuel mixture tax credits which significantly improved earnings. In addition, the cash generated from this tax credit and other sources was used to make over $280 million of repayments on our long-term debt. At December 31, 2009, we have recorded a $63 million reserve relating to alternative fuel mixture tax credits as it meets the requirements of Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes (codified primarily in Accounting Standards Codification No. 740, Income Taxes). Our position is that these tax credits are not taxable for federal income purposes. However, the Internal Revenue Service has not issued any specific guidance.

        After a sluggish start to 2009 following the economic decline that started in late 2008, the Company's operations returned to historical production and sales volumes. After falling as low as 71% in early 2009, our operating rate reached approximately 97% by the end of the year. Overall, our operations had a strong year producing approximately 1.14 million tons of paper and related products with minimal unplanned outages. Market driven price reductions, occurring as a result of lower demand in the first two quarters of 2009, reduced our average selling prices by $118 per ton. To offset some of the volume loss, the Company sold a higher percentage of linerboard to export customers at a lower price. In December 2009, a $20 per ton price increase for kraft paper was implemented followed by an

19

additional $20 per ton in January 2010. In January 2010, a $50 per ton price increase was announced for certain linerboard grades and is expected to be fully implemented by the end of the first quarter of 2010.

        In August 2009, approximately 17 million of our common stock warrants were exercised, generating over $85 million of cash for the Company. In accordance with our Senior Credit Agreement and Note Purchase Agreement, the warrant proceeds were used to make mandatory debt repayments. The exercises increased the number of common stock outstanding from approximately 28.4 million shares in early 2009 to 45.4 million shares at December 31, 2009.

        We continue to invest in our infrastructure. In 2009, we spent $8 million on a new and upgraded enterprise resource planning ("ERP") system, allowing us to migrate our CKD operations from an ERP system hosted by MWV to our own ERP system, which will save us approximately $3 million, of pre-tax income annually. Our transition from the IP hosted ERP system occurred in April 2008.

Results of Operations for the Years Ended December 31, 2009, 2008, and 2007

        The following table compares results of operations for the years ended December 31, 2009 and 2008:

		Year Ended December 31,								% of Net Sales
							% Change
($ in thousands)		2009		2008						2009			2008
Net sales		$	632,478	$	524,549			20.6	%		100.0	%		100.0	%
	Cost of sales excluding depreciation and amortization		355,088		362,462			(2.0	)%		56.1			69.1
	Freight and distribution expenses		57,395		50,154			14.4	%		9.1			9.6
	Selling, general and administrative expenses		31,377		30,411			3.2	%		5.0			5.8
	Depreciation and amortization		54,667		31,683			72.5	%		8.6			6.0
	Gain on sale of business		16,417		—				%		(2.6	)		—
	Other operating income		994		817			21.7	%		(0.1	)		(0.2	)
Operating income			151,362		50,656			198.8	%		23.9			9.7
	Foreign exchange gain (loss)		219		(987	)		(122.2	)%		—			(0.2	)
	Interest income		12		927			(98.7	)%		—			0.1
	Interest expense		19,176		18,449			3.9	%		3.0			3.5
	Income before income taxes		132,417		32,147			311.9	%		20.9			6.1
	Provision for income taxes		52,137		12,482			(317.7	)%		8.2			2.4
Net income		$	80,280	$	19,665			308.2	%		12.7	%		3.7	%

        Net sales for the year ended December 31, 2009 were $632.5 million compared to $524.5 million for the year ended December 31, 2008, an increase of 20.6%. The full year of sales for CKD in 2009, compared to six months in 2008 (acquisition consummated on July 1, 2008), accounted for $188.2 million of the increase in net sales. Excluding the additional six months of CKD's sales and $26.1 million of lower sales due to the sale of the dunnage bag business on March 31, 2009, net sales in 2009 were lower than in 2008 by $54.1 million, of which $61.0 million was due to lower selling prices and $27.4 million was due to a less favorable product mix, as the Company had a higher percentage of linerboard sales, which has a lower average selling price than other products. This was partially offset by $34.3 million of higher volume in the second half of 2009.

        Cost of sales for the year ended December 31, 2009 was $355.1 million compared to $362.5 million for the year ended December 31, 2008, a decrease of $7.4 million or 2.0%. Excluding $130.7 million for the additional six months of CKD's results and $18.6 million of lower cost of sales due to the sale of

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the dunnage bag business on March 31, 2009, cost of sales decreased by $119.5 million, of which $129.8 million was due to alternative fuel mixture tax credits and $9.3 million was due to deflation on energy and raw material costs. This was offset by $15.6 million of additional costs due to higher sales volume and $4.0 million of unplanned downtime.

        The total amount of alternative fuel mixture tax credits recorded as a reduction in cost of sales for the year ended December 31, 2009 was $164.0 million, of which $34.2 million was included in the additional six months of CKD's results.

        Freight and distribution expenses for the year ended December 31, 2009 totaled $57.4 million, compared to $50.2 million for the year ended December 31, 2008, an increase of $7.2 million. Excluding $15.9 million for the additional six months of CKD's results less $1.4 million for the sale of the dunnage bag business, freight and distribution expenses were $7.3 million lower in 2009 than in 2008. This decrease was due to a $5.6 million increase in customer-billed freight shipments and $6.6 million of lower fuel oil surcharges and lower costs due to favorable freight contract negotiations, partially offset by $4.9 million due to higher sales volume.

        Selling, general and administrative expenses for the year ended December 31, 2009 totaled $31.4 million compared to $30.4 million for the same period in 2008. The increase of $1.0 million reflects $4.2 million for the additional six months of CKD's results, $3.1 million of higher professional fees and information technology expenses and $1.5 million of transitional services provided by MWV reflecting twelve months of charges in 2009 compared to only six months in 2008. These increases were partially offset by $2.3 million of lower compensation and benefit expenses as the Company suspended the management incentive plan, sales incentive plan and 401k matching contributions as a result of economic conditions, $2.4 million of lower start-up expenses related to the CKD acquisition, $1.8 million of lower bad debt expenses (three customer bankruptcies in 2008 compared to one in 2009) and $1.3 million due to the sale of the dunnage bag business. As a percentage of net sales, selling, general and administrative expenses dropped from 5.8% in 2008 to 5.0% in 2009.

        Depreciation and amortization for the year ended December 31, 2009 totaled $54.7 million compared to $31.7 million for the same period in 2008. The increase of $23.0 million was mainly due to the additional six months of CKD's results, which added $14.4 million of depreciation and $6.7 million of amortization of intangibles, including $4.9 million of amortization for an intangible asset related to an acquired coal contract with below market prices at July 1, 2008. The acquired coal contract expired on December 31, 2009, and therefore, the related intangible asset was fully amortized as of year-end. Excluding the additional six months of CKD results, depreciation and amortization increased by $1.9 million primarily due to an upgrade to the Company's ERP system, the migration of the CKD acquisition to the Company's ERP system and other capital expenditures.

        The $16.4 million gain on sale of business reflects the sale of the dunnage bag business to Illinois Tool Works Inc. on March 31, 2009.

        Other operating income for the years ended December 31, 2009 and 2008 totaled $1.0 million and $0.8 million, respectively. Other operating income includes commissions the Company receives from marketing bleached paper produced and sold by IP to KapStone customers.

        Foreign exchange gains for the year ended December 31, 2009 were $0.2 million compared to a foreign exchange loss of $1.0 million for the year ended December 31, 2008. The change reflects the weakening of the U.S. dollar in 2009 compared to the euro. As a result of the CKD acquisition on July 1, 2008, the Company acquired certain European customers who are invoiced in euros.

        Interest income for the year ended December 31, 2009 decreased by $0.9 million compared to the same period in 2008. Due to lower interest rates in 2009, the Company used its excess cash to pay down principal balances on its long-term debt.

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        Interest expense for the years ended December 31, 2009 and 2008 was $19.2 million and $18.4 million, respectively. Interest expense reflects interest on the Company's long-term debt and amortization of debt issuance costs. Interest expense was $0.8 million higher in the year ended December 31, 2009 due to $3.0 million of accelerated amortization of debt issuance costs related to $283.1 million of mandatory and voluntary debt prepayments, partially offset by lower expenses due to lower debt balances and interest rates. Amortization of debt issuance costs for the period ended December 31, 2009 was $6.0 million compared to $2.0 million for the same period in 2008.

        Provision for income taxes for the years ended December 31, 2009 and 2008 was $52.1 million and $12.5 million, respectively, reflecting an effective tax rate of 39.4% compared to 38.8% for the same period in 2008. The $39.6 million increase in provision for income taxes is a result of $100.3 million of higher pre-tax income and a slightly higher effective tax rate due to a return to provision adjustment for state income taxes.

        The following table presents a reconciliation of consolidated net sales and operating income to amounts reported by operating segment:

	Years Ended December 31,
Operating Segment ($ 000s):	2009			2008
Consolidated net sales:
Unbleached kraft	$	626,450		$	495,864
Other		6,927			33,041
Elimination of intersegment sales		(899	)		(4,356	)
Total	$	632,478		$	524,549
Operating income / (loss):
Unbleached kraft	$	155,904		$	66,871
Other		748			5,248
Gain on sale of business		16,417			—
Corporate		(21,707	)		(21,463	)
Total	$	151,362		$	50,656

Unbleached Kraft

	Years Ended December 31,
	2009			2008			Change			%
Net sales	$	626,450		$	495,864		$	130,586			26.3	%
Operating income		155,904			66,871			89,033			133.1	%
Operating income % of net sales		24.9	%		13.5	%		11.4	%
Average revenue per ton	$	524		$	603		$	(79	)		(13.1	)%
Tons of paper sold		1,149,595			805,605			343,990			42.7	%

        For the year ended December 31, 2009, unbleached kraft segment net sales increased by $130.6 million, or 26.3%, to $626.5 million compared to $495.9 million for the year ended December 31, 2008. The increase in net sales was due to a full year of sales in 2009 for CKD compared to six months for the same period in 2008, as the acquisition occurred on July 1, 2008, which increased sales by $188.2 million. Excluding the additional six months of CKD's results, net sales were lower by $57.6 million in 2009 compared to the same period in 2008, mainly due to $61.0 million of lower average revenue per ton and $27.4 million of a less favorable product mix, as the Company had a higher percentage of linerboard sales. Average revenue per ton for 2009 was $524 per ton, or $79 per

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ton lower than average revenue per ton in the same period of 2008 as market prices for paper were reduced in the first two quarters of 2009 due to lower overall industry demand.

        Unbleached kraft segment operating income increased by $89.0 million, or 133.1%, to $155.9 million for the year ended December 31, 2009, compared to $66.9 million for the year ended December 31, 2008. Operating income increased by $16.3 million due to the additional six months of CKD's results, $129.8 million due to alternative fuel mixture tax credits, $16.0 million of deflation on energy, raw materials and freight costs, $8.4 million of increased sales volume and $1.7 million due to lower bad debts, partially offset by $61.0 million of lower average revenue per ton, $21.9 million of a less favorable product mix and $4.0 million due to unplanned outages. Included in operating income for 2009 and 2008 is $9.7 million and $4.3 million, respectively, of amortization expense for an intangible asset, acquired as part of the CKD acquisition, consisting of a coal contract with favorable prices. The coal contract expired on December 31, 2009 and was fully amortized by year-end.

        The total amount of the alternative fuel mixture tax credits recorded in operating income for 2009 was $164.0 million of which $34.2 million is included in the additional six months of CKD's results.

        Operating income for the year ended December 31, 2008, was negatively impacted by non-cash purchase accounting charges of $0.7 million, adjusting acquired finished goods inventories to fair value.

        Operating income for the years ended December 31, 2009, and 2008 includes $6.0 million of expenses relating to the Company's annual planned maintenance outage. Operating income as a percentage of net sales increased to 24.9% mainly due to the alternative fuel mixture tax credits offset by lower prices and mix.

Other

        Other includes the Company's dunnage bag business which was sold on March 31, 2009 to Illinois Tool Works, Inc. For the year ended December 31, 2009, net sales of $6.9 million and operating income of $0.7 million decreased by $26.1 million and $4.5 million, respectively, due to the sale of the business.

Corporate

        Corporate expenses for the year ended December 31, 2009, totaled $21.7 million compared to $21.5 million for the year ended December 31, 2008. The increase of $0.2 million is primarily due to a $1.5 million increase in transitional services provided by MWV for twelve months in 2009 compared to six months in 2008, $2.3 million of higher professional services and other costs and $0.8 million of higher depreciation and amortization expenses relating to ERP investments partially offset by $2.3 million of lower CKD acquisition start up costs, $2.1 million of lower compensation and benefit expenses as the Company temporarily suspended management and sales incentive plans and the 401k match as a result of economic conditions.

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        The following table compares results of operations for the years ended December 31, 2008 and 2007:

		Year Ended December 31,								% of Net Sales
							% Change
($ in thousands)		2008			2007					2008			2007
Net sales		$	524,549		$	256,795		104.3	%		100.0	%		100.0	%
	Cost of sales excluding depreciation and amortization		362,462			162,429		123.2	%		69.1			63.3
	Freight and distribution expenses		50,154			23,581		112.7	%		9.6			9.2
	Selling, general and administrative expenses		30,411			16,482		84.5	%		5.8			6.4
	Depreciation and amortization		31,683			11,327		179.7	%		6.0			4.4
	Other operating income		817			1,324		(38.3	)%		(0.2	)		(0.6	)
Operating income			50,656			44,300		14.3	%		9.7			17.3
	Foreign exchange gain / (loss)		(987	)		—		100.0	%		(0.2	)		—
	Interest income		927			2,096		(55.8	)%		0.1			0.8
	Interest expense		18,449			4,295		329.5	%		3.5			1.7
	Income before income taxes		32,147			42,101		(23.6	)%		6.1			16.4
	Provision for income taxes		12,482			15,138		(17.5	)%		2.4			5.9
Net income		$	19,665		$	26,963		(27.1	)%		3.7	%		10.5	%

        Net sales for the year ended December 31, 2008 were $524.5 million compared to $256.8 million for the year ended December 31, 2007, an increase of 104%. The increase in net sales was driven primarily by the acquisition of CKD on July 1, 2008. The acquisition accounted for $254.1 million, or 95% of the increase. The balance of the increase in net sales was driven by $18.8 million of higher prices, which was offset by lower volume of $5.2 million primarily in the unbleached kraft segment. The higher prices reflect increases implemented in 2007 and 2008 to offset the inflationary impact on raw material and freight costs.

        Cost of sales for the year ended December 31, 2008 was $362.5 million compared to $162.4 million for the year ended December 31, 2007, an increase of 123%. The increase in cost of sales was primarily driven by the acquisition of CKD on July 1, 2008. The acquisition accounted for $189.1 million, or 95% of the increase. The balance of the increase in cost of sales was mainly due to inflation on fiber, caustic soda, coal and other costs of $14.8 million and a $1.4 million increase in the cost of the annual planned maintenance outage due to higher inspection costs for a turbine generator, partially offset by lower sales volume. In addition, 2008 and 2007 results included $0.7 million and $1.5 million, respectively, of non-cash purchase accounting charges to adjust acquired finished goods inventory to fair value as part of the CKD and KPB acquisitions.

        Freight and distribution expenses for the year ended December 31, 2008 totaled $50.2 million compared to $23.6 million for the year ended December 31, 2007. The increase of $26.6 million mainly reflects the acquisition of CKD which accounted for $23.7 million of the increase. The balance of the increase in freight and distribution expenses reflects $3.3 million in higher fuel oil surcharges and $0.6 million due to a higher percentage of shipments by truck compared to rail, partially offset by lower sales volume of $1.0 million.

        Selling, general and administrative expenses for the year ended December 31, 2008 totaled $30.4 million compared to $16.5 million for the same period in 2007. The increase of $13.9 million reflects CKD's direct selling and administrative expenses of $4.8 million, acquisition related start up expenses of $2.4 million, transitional services provided by MWV of $3.6 million, higher stock compensation costs of $1.1 million, higher bad debt provisions of $2.1 million and other cost increases of $1.5 million, offset by lower transitional support services from IP of $1.6 million as the Company

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terminated its transitional services agreement with IP upon converting to its new ERP system in April 2008. As a percentage of net sales, selling, general and administrative expenses dropped from 6.4% for the year ended December 31, 2007 to 5.8% for the year ended December 31, 2008.

        Depreciation and amortization for the year ended December 31, 2008 totaled $31.7 million compared to $11.3 million for the same period in 2007. The increase of $20.4 million is primarily due to the CKD acquisition; which resulted in an additional $14.0 million of depreciation and $6.2 million of amortization of intangible assets, including $4.3 million of amortization for the intangible asset related to an acquired coal contract with prices below market at July 1, 2008. The acquired coal contract expired on December 31, 2009.

        Other operating income for the years ended December 31, 2008 and 2007 totaled $0.8 million and $1.3 million, respectively. Other operating income includes commissions the Company receives from marketing bleached paper produced and sold by IP to KapStone customers.

        Foreign exchange losses of $1.0 million for the year ended December 31, 2008, reflect the impact of a stronger U.S. dollar of approximately 11 percent from July 1, 2008 through December 31, 2008. As a result of the CKD acquisition on July 1, 2008, the Company acquired certain European customers which are invoiced in euros.

        Interest income for the years ended December 31, 2008 and 2007 was $0.9 million and $2.1 million, respectively. Interest income represents earnings on our cash and cash equivalents. The decrease in interest income reflects our use of cash and cash equivalents to fund a portion of the CKD acquisition.

        Interest expense for the years ended December 31, 2008 and 2007 was $18.4 million and $4.3 million, respectively. Interest expense reflects interest on the Company's long-term debt and amortization of debt issuance costs. Interest expense was $14.1 million higher in the year ended December 31, 2008, primarily due to obtaining a new $515 million senior secured credit facility and $40 million of senior notes issued to finance the CKD acquisition. Amortization of debt issuance costs for the years ended December 31, 2008 and 2007 was $2.0 million and $0.3 million, respectively. The increase of $1.7 million is due to amortization of the $12.6 million paid in 2008 for the new senior secured credit facility. Prior to the CKD acquisition, the Company had $37.4 million of outstanding debt.

        Provision for income taxes for the year ended December 31, 2008 decreased by $2.7 million due to lower pre-tax income offset by a higher effective tax rate. The higher effective tax rate was driven by a lower benefit from the federal domestic manufacturing deduction. The effective tax rate was 38.8% for the year ended December 31, 2008 compared to 36.0% for the same period in 2007.

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        The following table presents a reconciliation of consolidated net sales and operating income to amounts reported by operating segment:

	Years Ended December 31,
Operating Segment ($ 000s):	2008			2007
Consolidated net sales:
Unbleached kraft	$	495,864		$	227,921
Other		33,041			32,801
Elimination of intersegment sales		(4,356	)		(3,927	)
Total	$	524,549		$	256,795
Operating income / (loss):
Unbleached kraft	$	66,871		$	51,901
Other		5,248			6,350
Corporate		(21,463	)		(13,951	)
Total	$	50,656		$	44,300

Unbleached Kraft

	Years Ended December 31,
	2008			2007			Change			%
Net sales	$	495,864		$	227,921		$	267,943			117.6	%
Operating income		66,871			51,901			14,970			28.8	%
Operating income % of net sales		13.5	%		22.8	%		(9.3	)%
Average revenue per ton	$	603		$	547		$	56			10.2	%
Tons of paper sold		805,605			416,501			389,104			93.4	%

        For the year ended December 31, 2008, unbleached kraft segment net sales increased by $267.9 million, or 117.6%, to $495.9 million compared to $227.9 million for the year ended December 31, 2007. The acquisition of CKD on July 1, 2008 accounted for $254.1 million of the increase. Average revenue per ton increased $56 due to the full realization of price increases implemented in 2007 and the partial realization of multiple price increases implemented throughout 2008, accounting for approximately $17.9 million of the sales increase. Volume of paper sold increased by 389,104 tons, of which 396,262 tons was due to the CKD acquisition.

        Unbleached kraft segment operating income increased by $15.0 million, or 28.8%, to $66.9 million for the year ended December 31, 2008 compared to $51.9 million for the year ended December 31, 2007. The acquisition of CKD on July 1, 2008 accounted for $16.3 million of the increase. The balance of the change in operating income is due to higher average revenue per ton which contributed $17.9 million of additional operating income for the year ended December 31, 2008, but was offset by higher fiber and caustic soda costs of $10.2 million, inflation on freight and fuel oil surcharges of $3.0 million, inflation on utilities of $1.9 million and other cost increases of $3.0 million. In addition, the cost of the annual planned maintenance outage increased by $1.4 million due to higher inspection costs for a turbine generator and the segment incurred approximately $2.0 million of bad debt provisions in 2008. Operating income in the year ended December 31, 2007 was negatively impacted by $1.0 million due to a two-day unplanned outage caused by an electrical fire and other smaller unplanned outages during the fourth quarter.

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        Operating income for the years ended December 31, 2008 and 2007 was negatively impacted by non-cash purchase accounting charges of $0.7 million and $1.2 million, respectively, adjusting acquired finished goods inventories to fair value.

        Operating income for the years ended December 31, 2008 and 2007 includes $6.0 million and $4.6 million, respectively, of expenses relating to our annual planned maintenance outage. Operating income as a percentage of net sales declined to 13.5%.

Other

        Other includes the Company's dunnage bag business. For the year ended December 31, 2008, net sales increased by $0.2 million, or 0.7%, to $33.0 million compared to $32.8 million for the year ended December 31, 2007. The increase in net sales is mainly due to $0.9 million of price increases implemented to offset higher raw material and freight costs, partially offset by a 1.5% volume decline.

        Operating income decreased by $1.2 million, or 18.8%, to $5.2 million for the year ended December 31, 2008, compared to $6.4 million for the year ended December 31, 2007. The decrease in operating income is due to inflation on raw material and freight costs. Operating income as a percentage of net sales declined to 15.9%.

Corporate

        Corporate expenses for the year ended December 31, 2008 totaled $21.5 million compared to $14.0 million for the year ended December 31, 2007. The increase of $7.5 million is due to $2.4 million of CKD related acquisition start-up expenses, $3.6 million of transitional services provided by MWV, $1.1 million of higher stock compensation costs, $1.1 million of additional depreciation and amortization for the Company's new ERP system which went live in April 2008 and other cost increases of $0.9 million, partially offset by $1.6 million of lower transitional support services from IP as the Company terminated its transitional services agreement with IP upon converting to its new ERP system in April 2008.

Liquidity and Capital Resources

Acquisitions

        The Company has consummated two acquisitions totaling $625.5 million. The assets acquired consisted of unbleached kraft paper mills in Roanoke Rapids, North Carolina and North Charleston, South Carolina, Ride Rite® Converting, an inflatable dunnage bag manufacturer located in Fordyce, Arkansas and a lumber mill in Summerville, South Carolina. The KPB acquisition in 2007 includes contingent earn-out payments of up to $60.0 million based on KPB's annual earnings before interest, income taxes, depreciation and amortization ("EBITDA") during the five year period immediately following the acquisition. The first contingent payment will be equal to 5.3 times KPB's average annual EBITDA for the five year period immediately following the acquisition, less $165.0 million and subject to a maximum of $35.0 million. The second contingent payment is an "all or nothing" payment and is payable if KPB's average annual EBITDA for the same five year period equals or exceeds $49.2 million. Both payments, if earned, will be due and paid at the end of the five year period. Due to the sale of the dunnage bag business in March 2009, a $4.0 million earn-out payment was made in April 2009 and reduced the potential future contingent earn-out payments from $60.0 million up to $55.0 million.

        If these contingent earn-out payments are made, they will be accounted for as additional purchase price consideration and recorded as goodwill. The purchase agreement for the CKD acquisition has no provision for contingent earn-out payments.

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Credit Facilities

Senior Credit Agreement

        We are party to a Senior Credit Agreement, (the "Senior Credit Agreement"), dated as of June 12, 2008 and effective with the consummation of the acquisition of CKD, among us, KapStone Kraft Paper Corporation, as borrower ("KapStone Kraft"), our other subsidiaries named therein, as guarantors, the lenders named therein, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer. The Senior Credit Agreement provides for an aggregate of up to $515 million in senior secured credit facilities (the "Senior Credit Facilities"), consisting of a $390 million term A loan facility, a $25 million term B loan facility and a $100 million revolving credit facility (including a letter of credit subfacility). The Senior Credit Facilities are guaranteed by KapStone Kraft and our other domestic subsidiaries and are secured by substantially all of our assets, including all of the capital stock of the borrower and guarantor subsidiaries and up to 66% of the capital stock of our foreign subsidiaries.

        The term A loan facility has future consecutive quarterly repayments of $3.9 million on March 31, 2010 and June 30, 2010 and then $4.9 million from September 30, 2010 thru March 31, 2013, with a final payment of all outstanding principal and interest on the maturity date. The term B loan is required to be repaid by KapStone in consecutive quarterly installments of $0.2 million on March 31, 2010 and June 30, 2010 and then $0.3 million from September 30, 2010 to March 31, 2015 and $2.3 million on the maturity date. Borrowings under the revolving credit facility may be used for working capital and other general corporate purposes and are required to be repaid in full on the maturity date. The maturity date is the earlier of: (a) June 12, 2013 with respect to the term A loan facility and the revolving credit facility, and June 12, 2015 with respect to the term B loan facility, and (b) the date which is 90 days prior to the date on which any earn-out obligations to International Paper will become (or are reasonably expected to become) due; provided that the maturity date will not be so accelerated if, among other things, the total leverage ratio at the end of the then most recent fiscal quarter is less than 2.0 to 1.0.

        Outstanding principal under the term A loan facility and the revolving credit facility bears interest at a rate equal to, at our option, either (1) the base rate, or (2) the reserve adjusted one, two, three or six-month Eurodollar rate plus a margin of 1.50%. The undrawn portion of the revolving credit facility is subject to an unused line fee calculated at an annual rate of 0.3750%. Outstanding letters of credit are subject to an annual fee of 1.5% the plus a fronting fee on the undrawn amount thereof.

        Outstanding principal under the term B loan facility bears interest at a rate equal to, at our option, either (1) the base rate (which is the higher of the then current Federal Funds rate plus 0.5% or the prime rate most recently announced by Bank of America, N.A., the administrative agent under the Senior Credit Facilities) plus a margin of 2.00% or (2) the reserved adjusted one, two, three or six-month Eurodollar rate plus a margin of 3.50%.

        The term loan facilities and the revolving credit facility may be prepaid at any time without premium. The Senior Credit Facilities are subject to mandatory prepayment with specified percentages of the net cash proceeds of certain asset dispositions, casualty events, exercise of outstanding warrants, debt and equity issuances, and with excess cash flow, in each case subject to certain conditions.

        In accordance with its debt agreements, the Company's availability under its Revolving Credit Facility has been reduced by the amount of standby letters of credit issued of $13.0 million as of December 31, 2009. These letters of credit are used as security for certain contractual commitments and workers' compensation obligations. These letters of credit expire at various dates through 2010 unless extended. In addition, $7.4 million was borrowed under the Revolving Credit Facility as of December 31, 2009. The Company's total availability under the Revolving Credit Facility was $79.6 million at year-end.

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        The Senior Credit Facilities contain covenants that restrict, among other things, our ability to create liens, incur indebtedness and guarantees, make certain investments or acquisitions, merge or consolidate, dispose of assets, pay dividends, repurchase or redeem capital stock and subordinated indebtedness, change the nature of our business, enter into certain transactions with affiliates, and make changes in accounting policies or practices except as required by generally accepted accounting principles. The Senior Credit Facilities also contain a total leverage ratio covenant and a fixed charge coverage ratio. The Senior Credit Facilities contain events of default including, but not limited to, nonpayment of principal or interest, violation of covenants, breaches of representations and warranties, cross-default to other indebtedness, bankruptcy and other insolvency events, material judgments, certain ERISA events, actual or asserted invalidity of loan documentation and certain changes of control.

Note Purchase Agreement

        Pursuant to the Note Purchase Agreement dated July 1, 2008, (the "Note Purchase Agreement") by and among us, KapStone Kraft and the purchasers listed in the Purchaser Schedule attached to the Note Purchase Agreement (the "Purchasers"), the Purchasers purchased from KapStone Kraft senior secured promissory notes (the "Senior Notes") with an aggregate principal amount of $40 million. The Senior Notes are guaranteed by the Company and the Company's other domestic subsidiaries and are secured by substantially all of our assets, including all of the capital stock of KapStone Kraft and the other guarantor subsidiaries and up to 66% of the capital stock of the Company's foreign subsidiaries.

        The Senior Notes were extinguished in July 2009 using cash from operations.

Debt Covenants

        Under the financial covenants of the Senior Credit Agreement, KapStone must comply on a quarterly basis with a maximum permitted leverage ratio. The leverage ratio is calculated by dividing KapStone's debt by its rolling twelve month total earnings before interest expense, taxes, depreciation and amortization and allowable adjustments. The maximum permitted leverage ratio declines over the life of the Senior Credit Agreement. On December 31, 2009, the maximum permitted leverage ratio was 3.00 to 1.00. On December 31, 2009, KapStone was in compliance with the Senior Credit Agreement with a leverage ratio of 0.84 to 1.00.

        The Senior Credit Agreement also includes a financial covenant requiring a minimum fixed charge coverage ratio. This ratio is calculated by dividing KapStone's twelve month total earnings before interest expense, taxes, depreciation and amortization and allowable adjustments less cash payments for income taxes and capital expenditures by the sum of our cash interest and required principal payments during the twelve month period. From the closing date of the Senior Credit Agreement through the quarter ending September 30, 2011 the fixed charge coverage ratio is required to be at least 1.10 to 1.00. Starting with the quarter ending December 31, 2011 through the expiration of the Senior Credit Agreement, the fixed charge coverage ratio is required to be not less than 1.15 to 1.00. On December 31, 2009, KapStone was in compliance with the Senior Credit Agreement with a fixed charge coverage ratio of 4.30 to 1.00.

        As of December 31, 2009, KapStone was in compliance with all applicable covenants in the Senior Credit Agreement.

Alternative Fuel Mixture Tax Credit

        On March 31, 2009, the Company received approval from the Internal Revenue Service for its registration as an alternative fuel mixer, which provides for a refund of $0.50 per gallon of alternate fuel used in the Company's pulp making process. As a result, for the year ended December 31, 2009, the Company received refunds of $165 million. The Company received refunds in early 2010 of approximately $13 million for amounts generated through December 31, 2009.

29

        The alternative fuel mixture tax credit ("AFTC") expired on December 31, 2009.

Sale of Dunnage Bag Business

        On March 31, 2009, the Company sold its dunnage bag business to Illinois Tool Works Inc. for $36.0 million less certain working capital adjustments. Of the net cash proceeds, $32.8 million was required to pay down the Company's long-term debt and notes under the terms of the Senior Credit Agreement. As a condition of sale, $2.5 million of the sale proceeds are being held in escrow until September 30, 2010 to be available to satisfy any losses or indemnity claims that may arise against the Company in connection with the sale.

        As a result of the sale, the Company incurred an earn-out liability of $4.0 million in accordance with the asset purchase agreement dated June 23, 2006 with International Paper Company. The terms of the asset purchase agreement include a contingent earn-out payment on the fifth anniversary of the acquisition; however, in the event of a sale of the dunnage bag business prior to that date, a percentage of the earn-out became due and payable within 30 days following the sale provided certain criteria is met. The Company paid the earn-out on April 30, 2009.

        Since the Company will continue to supply paper under a long term supply agreement with ITW, it represents a significant continuing involvement in the operations of the dunnage bag business. Under accounting principles generally accepted in the United States, the operating results for the dunnage bag business have been included in operating income in the accompanying Consolidated Statements of Income through the date of sale.

Income Taxes

        For the year ended December 31, 2009, the Company received $11.3 million of federal and state income tax refunds. Additional refunds for previously filed tax returns of $13.2 million are expected to be received in 2010 from the carryback of a 2009 tax operating loss.

        The Company has recorded a $63 million tax contingency reserve at December 31, 2009 for an unrecognized tax benefit relating to the taxability of alternative fuel mixture tax credits. The Company has taken the position that the AFTC is similar to a federal excise tax and as a result is not taxable. To date, the Internal Revenue Service has issued no guidance concerning this issue.

        For 2010, the Company is evaluating two additional tax benefits for which we may qualify for directly or indirectly. The first is a tax credit under Section 40(b)(6) of $1.01 per gallon for cellulosic biofuel producers. The second is a subsidy of up to $45 per dry ton under the Biomass Crop Assistance Program (BCAP) for suppliers of biomass who sell to approved facilities, which will convert biomass to energy. Both of KapStone's mills are approved facilities, and the Company is researching how we can indirectly benefit from this subsidy in the form of lower raw material costs.

Exercises of warrants to purchase common stock

        In August 2009, the Company received $85.2 million from exercises of warrants to purchase common stock. The entire proceeds were used to make mandatory prepayments on the Company's long-term loans in accordance with the Senior Credit Agreement. On August 17, 2009, the remaining unexercised balance of approximately 19.5 million warrants expired.

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Sources and Uses of Cash

Years ended December 31 (dollars in thousands)	2009			2008			2007
Operating activities	$	201,235		$	47,352		$	52,235
Investing activities		256			(490,569	)		(47,416	)
Financing activities		(203,216	)		390,747			51,816

2009

        Cash and cash equivalents of $2.4 million at December 31, 2009 decreased by $1.7 million from December 31, 2008, reflecting cash provided by operations of $201.2 million and cash provided by investing activities of $0.3 million, offset by cash used in financing activities of $203.2 million.

        Cash provided by operating activities was $201.2 million due to $80.3 million of net income and $83.3 million of non-cash charges offset by the gain on sale of the dunnage bag business of $16.4 million. Changes in operating assets and liabilities provided $54.0 million.

        Cash provided by investing activities was $0.3 million reflecting proceeds from the sale of the dunnage bag business of $34.9 million and $1.0 million received as a working capital adjustment related to the CKD acquisition offset by $29.2 million of capital expenditures, $4.0 million paid for the KPB earn-out related to the sale of the dunnage bag business and $2.5 million of proceeds from the sale of the dunnage bag business held in escrow. Capital expenditures included $21.1 million for the unbleached kraft segment for equipment upgrades and replacements at the paper mills. In addition, $8.1 million was spent on upgrading the Corporate ERP system and migrating CKD to our systems.

        Cash used in financing activities totaled $203.2 million reflecting $243.1 million of repayments on term loans, $40.0 million for extinguishment of the senior notes, $85.0 million of payments on the revolving credit facility and $0.3 million of debt issuance costs, offset by borrowings under the revolving credit facility of $80.0 million and $85.2 million of proceeds from exercised common stock warrants.

2008

        Cash and cash equivalents of $4.2 million at December 31, 2008 decreased by $52.5 million during the year ended December 31, 2008, reflecting net cash inflow from operating activities of $47.4 million, net cash outflow from investing activities of $490.6 million and net cash inflow from financing activities of $390.7 million.

        Net cash inflow from operating activities was $47.4 million due to net income of $19.7 million, an increase in operating assets and liabilities of $24.7 million and non-cash charges of $52.4 million. Operating assets and liabilities increased mainly due to a $14.2 million increase in inventories driven by higher levels of finished goods at year end and $14.1 million for refundable and prepaid income taxes.

        Net cash outflow from investing activities was $490.6 million and included payment of $467.4 million for the CKD acquisition and capital expenditures of $23.2 million. Capital expenditures of $20.3 million for the unbleached kraft segment include equipment upgrades and replacements at paper mills in Roanoke Rapids, North Carolina and North Charleston, South Carolina. In addition, $2.3 million of capital expenditures at corporate reflect final costs to complete the Company's new ERP system. Capital expenditures for other operating segments totaled $0.6 million.

        Net cash inflow from financing activities totaled $390.7 million during the year ended December 31, 2008 and included $415.0 million of proceeds from two term loans as part of a new senior secured credit facility, $78.5 million of proceeds from borrowings under a revolving credit line, $40.0 million of proceeds from the issuance of Senior Notes and $15.5 million exercised common stock warrants. In addition, during the year, the Company made $145.6 million of long-term debt principal

31

payments and paid $12.6 million of debt issuance costs associated with its new senior secured credit facility.

2007

        Cash flow from all activities during the year ended December 31, 2007 increased by $56.6 million from December 31, 2006, reflecting the receipt of funds held in trust at December 31, 2006 and not used for the KPB acquisition of $28.3 million, and cash generated from operations of $52.2 million, partially offset by capital expenditures of $11.9 million, repayment of long-term debt of $7.5 million, acquisition costs paid of $1.2 million and an investment banking fee paid of $1.2 million.

        Net cash inflow from operating activities was $52.2 million due to net income for the period of $27.0 million, changes in operating assets and liabilities of $12.8 million and non-cash charges of $12.4 million.

        Net cash outflow from investing activities was $47.4 million and included payment for the KPB acquisition of $149.6 million and capital expenditures of $11.9 million. Capital expenditures of $6.1 million were for the unbleached kraft segment and included equipment upgrades and replacements at the paper mill in Roanoke Rapids, North Carolina. In addition, $5.4 million of capital expenditures at corporate included $3.9 million paid for development of a new ERP system. Capital expenditures for the dunnage bags segment totaled $0.4 million. These amounts were partially offset by receipt of funds held in trust for the KPB acquisition of $115.2 million.

        Net cash inflow from financing activities totaled $51.8 million during the year ended December 31, 2007 and included proceeds from the long-term loan of $60.0 million and $1.6 million from the exercise of common stock warrants. In addition, during the year, the Company made long-term debt principal payments of $7.5 million, paid its investment banker a $1.2 million fee relating to services performed for the Company's Initial Public Offering and paid a $0.9 million fee for its credit facility.

Future Cash Needs

        We expect that cash generated from operating activities in 2010 and, if needed, the ability to draw from our revolving credit facility will be sufficient to meet anticipated cash needs, which primarily consist of $18.6 million of debt service, approximately $35.0 million of expected capital expenditures, $4.1 million of pension plan funding and any additional working capital needs. At December 31, 2009, the Company utilized $7.4 million of borrowings under the revolving credit facility. The Company's remaining availability under the revolving credit facility was $79.6 million at December 31, 2009.

        On a longer term basis, we expect that cash generated from operating activities and, if needed, the ability to draw from our revolving credit facility will be sufficient to meet long term obligations, which primarily consist of $134.4 million of debt service and interest which includes a $75 million final payment on our term A loan in June 2013, capital expenditures, working capital needs and any contingent earn-out associated with the KPB acquisition.

Off-Balance Sheet Arrangements

        We have not entered into any off-balance sheet arrangements and have not established any special purpose entities. We have not guaranteed any debt or commitments of other non-related entities or entered into any options on non-financial assets.

Critical Accounting Policies

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported

32

amounts of expenses during the reporting period. Actual results could differ from those estimates. KapStone believes our critical accounting policies are those described below. For a detailed discussion of these and other accounting policies, see Note 2 of the Notes to the Consolidated Financial Statements.

        Revenue Recognition—Revenue is recognized when the customer takes title and assumes the risks and rewards of ownership. Sales with terms designated f.o.b. (free on board) shipping point are recognized at the time of shipment. For sales transactions with terms f.o.b. destination, revenue is recorded when the product is delivered to the customer's site and when title and risk of loss are transferred. Sales on consignment are recognized in revenue at the earlier of the month that the goods are consumed or after a period of time subsequent to receipt by the customer as specified by contract terms. Incentive rebates are typically paid in cash and are netted against revenue on an accrual basis as qualifying purchases are made by the customer to earn and thereby retain the rebate.

        The Company recognizes revenue from the sale of shaft horsepower, generated by our cogeneration facility, on a gross basis and within net sales. These sales are included in the unbleached kraft segment.

        Freight charged to customers is recognized in net sales.

        Goodwill and Intangible Assets—Goodwill is the excess of cost over the fair value of the net assets of businesses acquired. On an annual basis and in accordance with Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other, the Company tests for goodwill impairment using a two-step process, unless there is a triggering event, in which case a test would be performed at the time that such triggering event occurs. The first step is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount. For all periods presented, the Company's reporting units are consistent with its operating segments. The estimates of fair value of a reporting unit are determined based on a market approach as well as an income approach using a discounted cash flow analysis. A discounted cash flow analysis requires the Company to make various judgmental assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on the forecast and long-term business plans of the Company's operating segment. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. If necessary, the second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

        Pension and Postretirement Benefits—KapStone provides pension and postretirement benefits to certain employees. For financial reporting purposes, long-term assumptions are developed through consultations with actuaries. Such assumptions include the expected long-term rate of return on plan assets, discount rates, health care trend rates and mortality rates. The discount rate for the current year is based on long-term high quality bond rates.

        Income Taxes—The Company accounts for income taxes under the liability method in accordance with ASC 740, Income Taxes. Accordingly, deferred income taxes are provided for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

        Stock Based Compensation Costs—The Company accounts for stock compensation expense in accordance with ASC 718, Compensation—Stock Compensation. The compensation expense for stock

33

options is recorded on an accelerated basis over the awards' vesting periods. The compensation expense for restricted stock is recorded on a straight-line basis over the awards' vesting periods.

Recent Accounting Pronouncements

        See Note 2 in the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Contractual Obligations

        The following table summarizes our contractual obligations as of December 31, 2009, ($000s):

	Payments Due by Period
Contractual Obligations	Total		1 Year		2 Years		3 Years		4 Years		5 Years		Thereafter
Long-term debt(1)	$	152,297	$	26,030	$	20,699	$	20,699	$	81,003	$	1,247	$	2,619
Interest on long-term debt(2)		11,695		3,577		3,000		2,616		1,556		904		42
Operating lease obligations(3)		13,989		3,760		3,333		2,645		1,644		1,162		1,445
Purchase obligations(4)		338,217		33.748		32,397		31,721		31,045		29,483		179,823
Minimum pension plan funding(5)		4,062		4,062		—		—		—		—		—
Total(6,7)	$	520,260	$	71,177	$	59,429	$	57,681	$	115,248	$	32,796	$	183,929

(1)

These obligations are reflected on our Consolidated Balance Sheets at December 31, 2009, in current portion of long-term debt and notes, revolver and long-term debt and notes net of current portion, as appropriate.

(2)

Assumes debt is carried to full term. Debt bears interest at variable rates and the amounts above assume future interest will be incurred at the rates in effect on December 31, 2009. These obligations are not reflected on our Consolidated Balance Sheet at December 31, 2009.

(3)

These obligations are not reflected on our Consolidated Balance Sheet at December 31, 2009. The Company has no capital lease obligations.

(4)

Purchase obligations are agreements to purchase goods that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased. These obligations are not reflected on our Consolidated Balance Sheet at December 31, 2009. See Notes 4 and 17 of Notes to Consolidated Financial Statements regarding the Company's purchase obligation relating to the Long Term Fiber Supply with MWV.

(5)

The Company's pension and post retirement liabilities total $5.9 million as of December 31, 2009. This minimum pension plan funding represents the Company's expected 2010 contributions and was determined in consultation with its actuary in accordance with IRS guidelines.

(6)

Other liabilities as included in the accompanying Consolidated Balance Sheets represent $63 million of unrecognized tax benefits relating to alternative fuel mixture tax credits. The year for which the unrecognized tax benefit will be settled is unknown and is not included in the contractual obligations table as all conditions for the payment have not been met.

(7)

The KPB acquisition includes remaining contingent earn-out payments of up to $55.0 million based on KPB's EBITDA during the five year period immediately following the acquisition. The payments, if earned, will be due and payable in April 2012. The potential earn-out payments are not included in the contractual obligations table as all conditions for the payments have not been met. In 2009, the Company paid a $4.0 million earn-out upon selling the dunnage bag business.

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Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        Market risk is the sensitivity of income to changes in interest rates, commodity prices and foreign currency changes. The Company is exposed to the following types of market risk: interest rates, commodity prices and foreign currency.

Interest rates

        Under KapStone's Senior Secured Credit Facility, at December 31, 2009, we had outstanding variable based interest rate term loans totaling $152.3 million. The facility has various maturity dates from June 12, 2013 through June 12, 2015. Borrowings under the term loan accrue interest, at our option, at either: Eurodollar plus 1.5% to 3.5% depending on KapStone's total debt to EBITDA ratio (as defined in the agreement); or the Base Rate (prime rate) plus 0% to 2.0% depending on KapStone's total debt to EBITDA ratio.

        Changes in market rates may impact the bank's Eurodollar rate. For instance, if the bank's Eurodollar rates were to increase or decrease by one percentage point (1.0%), our annual interest expense would change by approximately $1.5 million based upon our expected future monthly loan balances per our existing repayment schedule.

Commodity prices

        We are exposed to price fluctuations of certain commodities used in production. Key raw materials and energy used in the production process include roundwood and woodchips, fuel oil, electricity and caustic soda. We purchase these raw materials and energy at market prices, and do not use forward contracts or other financial instruments to hedge our exposure to price risk related to these commodities. We have two contracts to purchase coal at fixed prices that expire on December 31, 2010.

        We are exposed to price fluctuations in the price of our finished goods. The prices we charge for our products are primarily based on market conditions.

Foreign currency

        We are exposed to currency fluctuations as we invoice certain European customers in euros. The Company did not use forward contracts to reduce the impact of currency fluctuations in 2009. No such contracts were outstanding at December 31, 2009 and 2008.

Item 8.    Financial Statements and Supplementary Data

        Financial statements are attached hereto beginning on Page F-1.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

Disclosure Controls and Procedures.

        An evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2009 was made by our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

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Internal Control over Financial Reporting.

        Management Annual Report on Internal Control over Financial Reporting.    Our management's report on internal control over financial reporting is set forth on page F-2 of this report.

        Changes in Internal Control over Financial Reporting.    Effective October 1, 2009, the Company's CKD operations, which constituted 67.4% of net sales in 2009, migrated to a new ERP system. Management concluded this implementation has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no other changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

        None.

36

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        The information required by this item is incorporated by reference from our definitive proxy statement to be filed on or about April 26, 2010 with the SEC.

        Additional information required by this Item (i) with respect to members of our Board of Directors will be contained in the Company's Proxy Statement to be filed with the SEC on or about April 26, 2010 under the caption "Election of Directors," (ii) with respect to our audit committee will be contained in the Company's Proxy Statement under the caption "Election of Directors—What Committees has the Board of Directors Established?," (iii) with respect to compliance under Section 16(a) of the Securities Exchange Act of 1934 will be contained in Company's Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting Compliance," and (iv) with respect to our code of ethics will be contained in the Company's Proxy Statement under the caption "Code of Ethics," and is incorporated herein by this reference.

Item 11.    Executive Compensation

        The information required by this Item will be contained in the Company's Proxy Statement to be filed with the SEC on or about April 26, 2010 under the captions "Executive Compensation," "Compensation Discussion and Analysis," "Report of the Compensation Committee of the Board of Directors," "Compensation Committee Interlocks and Insider Participation," "Summary Compensation Information," "Grants of Plan-Based Awards Table," "Outstanding Equity Awards at December 31, 2009," "Potential Payments upon Termination or Change-in-Control," and "2009 Director Compensation" and is incorporated herein by this reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information required by this Item will be contained in the Company's Proxy Statement to be filed with the SEC on or about April 26, 2010 under the captions "Securities Authorized for Issuance Under Equity Compensation Plan", "Stock Ownership of Directors and Executive Officers" and "Certain Beneficial Stockholders" and is incorporated herein by this reference.

Item 13.    Certain Relationships and Related Transactions and Director Independence

        The information required by this Item will be contained in the Company's Proxy Statement to filed with the SEC on or about April 26, 2010 under the captions "Certain Relationships and Related Person Transactions," "Nominating and Governance Committee" and "Election of Directors—What Committees has the Board Established?" and is incorporated herein by this reference.

Item 14.    Principal Accountant Fees and Services

        The information required by this Item will be contained in the Company's Proxy Statement to be filed with the SEC on or about April 26, 2010 under the caption "Independent Registered Public Accounting Firm" and is incorporated herein by this reference.

37

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

        An index to Consolidated Financial Statements appears on page F-1.

(a)(2) Financial Statement Schedule

        Certain financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

(b) Exhibits.

        The following Exhibits are filed as part of this report:

Exhibit No.			Description
	2.1		Purchase Agreement, dated June 23, 2006, by and among International Paper Company, the Registrant, and KapStone Kraft Paper Corporation.(1)
	2.2		Letter Amendment to Purchase Agreement, dated June 23, 2006, by and among International Paper Company, the Registrant, and KapStone Kraft Paper Corporation, dated December 15, 2006.(2)
	2.3		Asset Purchase Agreement dated April 4, 2008, among MeadWestvaco South Carolina LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition, LLC.(3)
	3.1		Restated Certificate of Incorporation of KapStone Paper and Packaging Corporation (as amended through January 2, 2007).
	3.2		Certificate of Amendment of the Amended and Restated Certificate of Incorporation.(2)
	3.3		Amended and Restated By-laws.(4)
	4.1		Specimen Unit Certificate.(5)
	4.2		Specimen Common Stock Certificate.(5)
	4.3		Specimen Warrant Certificate.(5)
	4.4		Form of Unit Purchase Option to be granted to Representative.(2)
	4.5		Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant.(5)
	4.6		Amended and Restated Warrant Clarification Agreement.(6)
	4.7		Amended and Restated Unit Purchase Clarification Agreement.(7)
	10.1		Form of Letter Agreement among the Registrant, Morgan Joseph & Co. Inc. and each of the Initial Stockholders.(5)
	10.2	+	Amendment to the KapStone Paper and Packaging Corporation 2006 Incentive Plan.(8)
	10.3	+	Performance Incentive Plan of KapStone Paper and Packaging Corporation.(8)
	10.4	+	Form of Restricted Stock Unit Agreement.(8)

38

Exhibit No.			Description
	10.5		Long-Term Fiber Supply Agreement, dated July 1, 2008, by and among MeadWestvaco Forestry LLC and KapStone Charleston Kraft LLC (with certain confidential information deleted there from).(9)
	10.6		Note Purchase Agreement, dated July 1, 2008, by and among KapStone Paper and Packaging Corporation, KapStone Kraft Paper Corporation and The Prudential Insurance Company of America.
	10.7		Credit Agreement, dated June 12, 2008, by and among KapStone Kraft Paper Corporation, as Borrower, KapStone Paper and Packaging Corporation, as Parent, the Subsidiaries of the Borrower identified therein, as Guarantors, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Other Lenders Party thereto.
	10.8		First Amendment to Credit Agreement dated as of August 25, 2008, by and among KapStone Kraft Paper Corporation, as Borrower, KapStone Paper and Packaging Corporation, as Parent, the Subsidiaries of the Borrower identified therein, as Guarantors, Bank of America, N.A. , as Administrative Agent, Swing Line Lender and L/C Issuer, and the Other Lenders Party thereto.
	10.9		Second Amendment and Limited Waiver Agreement dated as of March 30, 2009, by and among KapStone Kraft Paper Corporation, as Borrower, KapStone Paper and Packaging Corporation, as Parent, the Subsidiaries of the Borrower identified therein, as Guarantors, Bank of America, N.A. , as Administrative Agent, Swing Line Lender and L/C Issuer, and the Other Lenders Party thereto.(10)
	10.10		Intercreditor and Collateral Agency Agreement, dated July 1, 2008, by and among Bank of America N.A., as Collateral Agent, and Bank of America, N.A., as Administrative Agent Under the Credit Facility Agreement on Behalf of the Secured Lender Parties and Certain Institutional Lenders.
	10.11		2009 Employee Stock Purchase Plan.(11)
	10.12		Form of Warrant Purchase Agreement among each of the Initial Stockholders and Morgan Joseph & Co. Inc.(5)
	10.13	+	2006 Incentive Plan.(12)
	14.0		Code of Ethics.
	21.1		Subsidiaries.
	23.1		Consent of Ernst & Young LLP.
	31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
	31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
	32.l		Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+

Management compensatory plan or arrangement.

39

(1)

Incorporated by reference to Annex A of the Registrant's Definitive Proxy Statement (DEFM 14A) filed on December 15, 2006.

(2)

Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 4, 2007.

(3)

Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 7, 2008.

(4)

Incorporated by reference to the Registrant's Current Report on Form 8-K filed on October 5, 2009.

(5)

Incorporated by reference to the Registrant's Registration Statement on Form S-1/A (File No. 333-124601) filed on June 14, 2005.

(6)

Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q/A for the period ended June 30, 2006, filed on December 12, 2006.

(7)

Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q/A for the period ended September 30, 2006, filed on December 12, 2006.

(8)

Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 14, 2008.

(9)

Incorporated by reference to the Registrant's Current Report on Form 8-K filed on July 2, 2008.

(10)

Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 1, 2009.

(11)

Incorporated by reference to the Registrant's Form S-8 filed on December 11, 2009.

(12)

Incorporated by reference to Annex C of the Definitive Proxy Statement (No. 000-51444), dated December 15, 2006.

40

SIGNATURES

        Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant had duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KAPSTONE PAPER AND PACKAGING CORPORATION
March 10, 2010	By: /s/ Roger W. Stone Roger W. Stone, Chairman of the Board, Chief Executive Officer and Director

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

March 10, 2010	By: /s/ Roger W. Stone Roger W. Stone, Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)
March 10, 2010	By: /s/ Andrea K. Tarbox Andrea K. Tarbox, Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
March 10, 2010	By: /s/ Matthew Kaplan Matthew Kaplan, President, Secretary and Director
March 10, 2010	By: /s/ John M. Chapman John M. Chapman, Director
March 10, 2010	By: /s/ James Doughan James Doughan, Director
March 10, 2010	By: /s/ Jonathan R. Furer Jonathan R. Furer, Director
March 10, 2010	By: /s/ Brian R. Gamache Brian R. Gamache, Director
March 10, 2010	By: /s/ Ronald J. Gidwitz Ronald J. Gidwitz, Director
March 10, 2010	By: /s/ Muhit U. Rahman Muhit U. Rahman, Director
March 10, 2010	By: /s/ S. Jay Stewart S. Jay Stewart, Director
March 10, 2010	By: /s/ David P. Storch David P. Storch, Director

41

KapStone Paper and Packaging Corporation

(INDEX TO FINANCIAL STATEMENTS)

Financial Statements	Page
Management's Annual Report on Internal Control over Financial Reporting	F-2
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	F-3
Report of Independent Registered Public Accounting Firm for 2009, 2008, and 2007	F-4
Consolidated Balance Sheets as of December 31, 2009, and December 31, 2008	F-5
Consolidated Statements of Income for the years ended December 31, 2009, 2008, and 2007	F-6
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2009, 2008 and 2007	F-7
Consolidated Statements of Cash Flows for years ended December 31, 2009, 2008, and 2007	F-8
Notes to Consolidated Financial Statements	F-9

F-1

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 3a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. Management based this assessment on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control—Integrated Framework."

        Based on this assessment, management concluded that, as of December 31, 2009, our internal control over financial reporting is effective.

        Ernst & Young LLP, independent registered public accounting firm, has audited the consolidated financial statements of the Company and the Company's internal control over financial reporting and has included their reports herein.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
KapStone Paper and Packaging Corporation

        We have audited KapStone Paper and Packaging Corporation's internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). KapStone Paper and Packaging Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, KapStone Paper and Packaging Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of KapStone Paper and Packaging Corporation as of December 31, 2009 and 2008, and the related statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2009, and our report dated March 10, 2010, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, IL
March 10, 2010

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
KapStone Paper and Packaging Corporation

        We have audited the accompanying consolidated balance sheets of KapStone Paper and Packaging Corporation as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of KapStone Paper and Packaging Corporation as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        We have also audited, in accordance with the standards of the Public Company Oversight Board (United States), the effectiveness of KapStone Paper and Packaging Corporation's internal controls over financial reporting as of December 31, 2009, based on criteria establish in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, IL
March 10, 2010

F-4

KapStone Paper and Packaging Corporation

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

		December 31,
		2009			2008
Assets
Current assets:
	Cash and cash equivalents	$	2,440		$	4,165
	Trade accounts receivable, less allowance of $1,217 in 2009 and $2,421 in 2008		58,408			71,489
	Other receivables		16,487			6,207
	Inventories		61,377			89,692
	Refundable and prepaid income taxes		13,757			14,145
	Prepaid expenses and other current assets		1,690			1,748
	Restricted cash		2,500			—
	Deferred income taxes		5,604			3,363
Total current assets			162,263			190,809
Plant, property and equipment, net			470,278			483,780
Other assets			4,935			882
Intangible assets, net			26,198			45,195
Goodwill			5,449			6,524
Total assets		$	669,123		$	727,190
Liabilities and Stockholders' Equity
Current liabilities:
	Current portion of long-term debt and notes	$	18,630		$	40,556
	Borrowings under revolving credit facility		7,400			—
	Accounts payable		52,147			42,214
	Accrued expenses		20,800			30,462
	Accrued compensation costs		7,719			13,646
Total current liabilities			106,696			126,878
Other liabilities:
	Long-term debt and notes, net of current portion		121,031			389,374
	Pension and post-retirement benefits		5,949			8,355
	Deferred income taxes		38,577			15,951
	Other liabilities		48,080			5,865
Total other liabilities			213,637			419,545
Commitments and contingencies
Stockholders' equity:
	Preferred stock $.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding		—			—
	Common stock $.0001 par value, 175,000,000 shares authorized; 45,418,074 shares issued and outstanding (40,000 treasury shares outstanding) at December 31, 2009 and 28,370,248 issued and outstanding at December 31, 2008 (40,000 treasury shares outstanding)		5			3
	Additional paid-in capital		219,828			132,206
	Retained earnings		129,046			48,766
	Accumulated other comprehensive loss		(89	)		(208	)
Total stockholders' equity			348,790			180,767
Total liabilities and stockholders' equity		$	669,123		$	727,190

See notes to consolidated financial statements.

F-5

KapStone Paper and Packaging Corporation

Consolidated Statements of Income

(In thousands, except share and per share amounts)

		Years Ended December 31,
		2009		2008			2007
Net sales		$	632,478	$	524,549		$	256,795
Cost of sales, excluding depreciation and amortization			355,088		362,462			162,429
Freight and distribution expenses			57,395		50,154			23,581
Selling, general and administrative expenses			31,377		30,411			16,482
Depreciation and amortization			54,667		31,683			11,327
Gain on sale of business			16,417		—			—
Other operating income			994		817			1,324
Operating income			151,362		50,656			44,300
Foreign exchange gains/(losses)			219		(987	)		—
Interest income			12		927			2,096
Interest expense			19,176		18,449			4,295
Income before provision for income taxes			132,417		32,147			42,101
Provision for income taxes			52,137		12,482			15,138
Net income		$	80,280	$	19,665		$	26,963
Weighted-average number of shares outstanding:
	Basic		34,675,804		26,486,924			25,010,057
	Diluted		35,067,923		34,455,816			36,134,488
Net income per share:
	Basic	$	2.32	$	0.74		$	1.08
	Diluted	$	2.29	$	0.57		$	0.75

See notes to consolidated financial statements.

F-6

KapStone Paper and Packaging Corporation

Consolidated Statements of Changes in Stockholders' Equity

(In thousands, except share amounts)

	Common Stock, net of Treasury Stock
											Accumulated Other Comprehensive Income/(Loss)
						Additional Paid-In Capital			Retained Earnings					Total Stockholders' Equity
	Shares			Amount
Balance—December 31, 2006		25,000,000		$	3	$	113,904		$	2,138	$	—		$	116,045
Purchase of redeemed common stock		(40,000	)		—		—			—		—			—
Exercises of warrants into common stock		320,197			—		1,601			—		—			1,601
Stock based compensation expense		—			—		697			—		—			697
Underwriter fee		—			—		(1,200	)		—		—			(1,200	)
Comprehensive Income:
Net income		—			—		—			26,963		—			26,963
Actuarial gain on pension and postretirement plans (net of tax of $44)		—			—		—			—		79			79
Total Comprehensive Income															27,042
Balance—December 31, 2007		25,280,197		$	3	$	115,002		$	29,101	$	79		$	144,185
Stock based compensation expense		—			—		1,754			—		—			1,754
Exercises of warrants into common stock		3,090,051			—		15,450			—		—			15,450
Comprehensive Income:
Net income		—			—		—			19,665		—			19,665
Actuarial loss on pension and postretirement plans (net of tax of $174)		—			—		—			—		(287	)		(287	)
Total Comprehensive Income															19,378
Balance—December 31, 2008		28,370,248		$	3	$	132,206		$	48,766	$	(208	)	$	180,767
Stock based compensation expense		—			—		2,377			—		—			2,377
Exercises of warrants into common stock		17,043,376			2		85,215			—		—			85,217
Exercise of stock options		4,450			—		30			—		—			30
Comprehensive Income:
Net income		—			—		—			80,280		—			80,280
Actuarial gain on pension and postretirement plans (net of tax of $80)		—			—		—			—		119			119
Total Comprehensive Income															80,399
Balance—December 31, 2009		45,418,074		$	5	$	219,828		$	129,046	$	(89	)	$	348,790

See notes to consolidated financial statements.

F-7

KapStone Paper and Packaging Corporation

Consolidated Statements of Cash Flows

(In thousands)

		Years Ended December 31,
		2009			2008			2007
Operating activities
Net income		$	80,280		$	19,665		$	26,963
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		54,667			31,683			11,327
	Stock based compensation expense		2,377			1,754			697
	Amortization of debt issuance costs		5,980			2,007			254
	Loss on disposal of fixed assets		800			299			463
	Deferred income taxes		19,459			16,644			(244	)
	Gain on sale of business		(16,417	)		—			—
Changes in operating assets and liabilities:
	Trade accounts receivable, net		10,288			(1,280	)		(3,710	)
	Other receivables		(13,398	)		(4,827	)		(521	)
	Inventories		23,465			(14,172	)		5,767
	Refundable and prepaid income taxes		388			(14,145	)		—
	Prepaid expenses and other current assets		58			(945	)		995
	Other assets		(1,031	)		(42	)		—
	Accounts payable		10,641			1,570			2.923
	Accrued expenses		32,051			8,189			(2,063	)
	Accrued compensation costs		(5,967	)		1,154			6,625
	Accrued pension and postretirement benefits		(2,406	)		1,275			1,282
	Accrued income taxes		—			(1,477	)		1,477
Net cash provided by operating activities			201,235			47,352			52,235
Investing activities
CKD acquisition (net of cash acquired)			1,000			(467,399	)		(1,191	)
KPB acquisition			(3,977	)		—			(149,603	)
Proceeds from sale of business			34,898			—			—
Capital expenditures			(29,165	)		(23,170	)		(11,861	)
Purchase of short-term investments			—			—			(35,000	)
Maturity of short-term investments			—			—			35,000
Restricted cash			(2,500	)		—			—
Restricted cash held in trust			—			—			115,239
Net cash provided by (used in) investing activities			256			(490,569	)		(47,416	)
Financing activities
Proceeds from revolving credit facility			80,000			78,500			—
Repayments on revolving credit facility			(85,000	)		(66,100	)		—
Proceeds from long-term debt and notes			—			455,000			60,000
Repayments of long-term debt and notes			(283,093	)		(79,510	)		(7,500	)
Debt issuance costs paid			(370	)		(12,593	)		(855	)
Redemption of shares			—			—			(230	)
Investment banking fee paid			—			—			(1,200	)
Proceeds from exercises of warrants into common stock			85,217			15,450			1,601
Proceeds from exercise of stock options			30			—			—
Net cash provided by (used in) financing activities			(203,216	)		390,747			51,816
Net increase (decrease) in cash and cash equivalents			(1,725	)		(52,470	)		56,635
Cash and cash equivalents-beginning of year			4,165			56,635			—
Cash and cash equivalents-end of year		$	2,440		$	4,165		$	56,635
Cash paid (received) during the period:
	Income taxes	$	(11,306	)	$	11,441		$	13,812
	Interest	$	19,952		$	9,132		$	3,976

See notes to consolidated financial statements.

F-8

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. Formation, Basis of Presentation and Description of Business

        KapStone Paper and Packaging Corporation (formerly Stone Arcade Acquisition Corporation), or the "Company", produces and sells a variety of unbleached kraft, linerboard, saturating kraft and unbleached folding carton board in the United States and globally. The Company was incorporated on April 15, 2005 in Delaware.

        In connection with the Company's initial public offering, on August 19, 2005, the Company sold 20,000,000 units ("Units") for a gross price of $6.00 per Unit.

        On January 2, 2007, the Company acquired substantially all of the assets and assumed certain liabilities of the Kraft Papers Business ("KPB") from International Paper Company ("IP"). The accompanying consolidated financial statements include the results of KPB since the date of acquisition. Prior to the acquisition of KPB, the Company had no operations and was considered a development stage enterprise (see Note 5).

        On July 1, 2008, the Company acquired substantially all of the assets and assumed certain liabilities of MeadWestvaco Corporation's ("MWV") Charleston Kraft Division ("CKD"). The accompanying consolidated financial statements include the results of CKD since the date of acquisition (see Note 4).

        On March 31, 2009, the Company consummated the sale of its dunnage bag business to Illinois Tool Works. The accompanying consolidated financial statements include the results of the dunnage bag business through the date of sale (see Note 6).

        As a result of these transactions, the accompanying 2009 consolidated financial statements are not comparative to 2008 and 2007.

2. Significant Accounting Policies

        The consolidated statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The significant accounting policies are summarized below:

        Principles of Consolidation—The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

        Use of Estimates—The preparation of financial statements and related disclosures requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates.

        Revenue Recognition—Revenue is recognized when the customer takes title and assumes the risks and rewards of ownership. Sales with terms f.o.b. (free on board) shipping point are recognized at the time of shipment. For sales transactions with terms f.o.b. destination, revenue is recorded when the product is delivered to the customer's site and when title and risk of loss are transferred. Sales on consignment are recognized in revenue at the earlier of the month that the goods are consumed or after a period of time subsequent to receipt by the customer as specified by contract terms, provided all other revenue recognition criteria is met. Incentive rebates are typically paid in cash and are netted

F-9

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

2. Significant Accounting Policies (Continued)

against revenue on an accrual basis as qualifying purchases are made by the customer to earn and thereby retain the rebate. Prepaid rebates are recorded in prepaid expenses until earned.

        The Company recognizes revenue from the sale of shaft horsepower, generated by our cogeneration facility, on a gross basis presented in net sales. These sales are included in the unbleached kraft segment.

        Freight charged to customers is recognized in net sales.

        Cost of Sales—Cost of sales is determined on a first-in first-out basis and includes the following: the cost of inventory sold during the period, maintenance, property taxes related to manufacturing facilities, but excludes depreciation and amortization. Proceeds received from the sale of by-products generated from the paper manufacturing process are reflected as a reduction to cost of sales. By-product revenue is derived primarily from the sale of tall oil, hardwood and turpentine to third parties. During 2009, 2008 and 2007, cost of sales was reduced by $11.5 million, $10.5 million and $5.9 million, respectively, for by-product revenue.

        Alternative fuel mixtures tax credits—The Company has elected to take the alternative fuel mixture tax credit as an excise tax credit and not as a reduction of federal income taxes payable; and accordingly, credits earned are reflected in operating income versus income tax expense. The amount of alternative fuel mixture tax credit earned is based on the volume of black liquor burned in the Company's production process. Black liquor is a raw material used in our production process and is recognized on the Company's balance sheet within inventory. The Company's accounting policy for alternative fuel mixture tax credits earned was determined by the fuel tax credits' direct link to the manufacturing process. Accordingly, credits earned during the reporting period are reflected as a reduction of the cost basis of inventory and therefore capitalized at the end of the period for inventory on hand. As products are sold, the credits are included in the income statement as a reduction to cost of goods sold. The amount of tax credit associated with ending inventory at December 31, 2009, totaled $14.3 million. A $13.1 million receivable for the tax credit was recorded in other receivables in the consolidated balance sheet at December 31, 2009. The tax credit expired on December 31, 2009 (see Note 7).

        Annual Maintenance Cost—The Company recognizes the cost of major maintenance activities in the period in which they occur under the direct expense method in accordance with ASC 360, Property, Plant and Equipment. Other maintenance costs are expensed as incurred.

        The Company completed its annual planned maintenance outage, at its North Carolina unbleached kraft facility, in the quarter ended December 31, 2009. Costs of approximately $6.0 million related to the outage are included in cost of sales for the years ended December 31, 2009 and 2008 and $4.6 million in 2007.

        Net Income per Common Share—Basic net income per share is based on the weighted average number of common shares outstanding during the period. Diluted income per share reflects the potential dilution assuming common shares were issued for the exercise of outstanding in-the-money warrants and stock options and unvested restricted stock awards and assuming the proceeds thereof were used to purchase common shares at the average market price during the period such awards were outstanding and inclusion of such shares is dilutive to net income per share.

F-10

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

2. Significant Accounting Policies (Continued)

        Concentrations of Risk—Financial instruments that potentially expose the Company to concentrations of credit and market risk consist primarily of cash and cash equivalents and trade accounts receivable from sales of product to third parties. When excess cash and cash equivalents are invested they are placed in investment grade commercial paper.

        A summary of net sales to major customers who exceeded 10% of consolidated net sales is as follows:

	Years ended December 31,
	2009		2008
Net sales to major customers	$	—	$	56,091

        Sales to the above major customer are reflected in the unbleached kraft operating segment. Trade accounts receivables from these customers that potentially expose the Company to concentrations of credit risk totaled $7.5 million at December 31, 2008.

        The Company establishes its allowance for doubtful accounts based upon factors mainly surrounding the credit risks of specific customers and other related information. Once an account is deemed uncollectible, it is written off. At December 31, 2009, and 2008 the allowance for doubtful accounts totaled $1.2 million and $2.4 million, respectively. For the years ended December 31, 2009 and 2008, the Company had bad debt expenses of $0.6 million and $2.4 million, respectively. For the year ended December 31, 2009, the Company wrote off $1.7 million of uncollectible accounts.

        Foreign Currency Transactions—The Company invoices certain European customers in euros. Balance sheet accounts for such transactions are translated into U.S. dollars at the year-end rate of exchange and statements of income items are translated at the weighted average exchange rates for the period. Gains and losses arising from these transactions are included in income.

        Cash and Cash Equivalents—Cash equivalents include all highly liquid investments with maturities of three months or less when purchased.

        Fair value of Financial Instruments—The Company's cash, including restricted cash, and cash equivalents are financial assets with carrying values that approximate fair value. The Company's variable rate term loans are financial liabilities with fair values that approximate $120 million.

        Inventories—Inventories are valued at the lower of cost or market; whereby, cost includes all direct and indirect materials, labor, and manufacturing overhead, less by-product recoveries and alternative fuel mixture tax credits. Costs of raw materials, work-in-process, and finished goods are determined using the first-in, first-out method. Replacement parts and other supplies are stated using the average cost method.

        Plant, Property, and Equipment, net—Plant and equipment is stated at cost less accumulated depreciation. Property, plant and equipment acquired in acquisitions were recorded at fair value on the

F-11

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

2. Significant Accounting Policies (Continued)

dates of acquisition (see Notes 4 and 5). Depreciation is computed using the straight-line method over the assets' estimated useful lives. The range of estimated useful lives is as follows:

	Years
Machinery and equipment	3 - 30
Buildings	15 - 40
Computer hardware and software	3 - 5
Furniture and office equipment	5 - 10
Land improvements	10 - 25
Leasehold improvements	Lesser of life of leasehold improvements or term of the lease

        The Company accounts for costs incurred for the development of software for internal use in accordance with the ASC 350 Intangibles—Goodwill and Other. This standard requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software.

        Goodwill and Intangible Assets—Goodwill is the excess of purchase price over the fair value of the net assets of businesses acquired. On an annual basis and in accordance with ASC 350, Intangibles—Goodwill and Other, the Company tests for goodwill impairment using a two-step process, unless there is a triggering event, in which case a test would be performed at the time that such triggering event occurs. The first step is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount. For all periods presented, the Company's reporting units are consistent with its operating segments. The Company estimates the fair value of a reporting unit principally based on a discounted cash flow analysis. A discounted cash flow analysis requires the Company to make various judgmental assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on the forecast and long-term business plans of each operating segment. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. These assumptions would be considered Level 3 inputs in the fair value hierarchy defined in ASC 820 "Fair Value Measurements and Discounts". Management also considers market multiple information to corroborate the fair value conclusions reached through the discounted cash flow analysis. If necessary, the second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The Company's goodwill impairment analysis is performed annually at the beginning of the fourth quarter and did not result in an impairment charge.

        Intangible assets are initially valued at the fair market value using generally accepted valuation methods appropriate for the type of the intangible asset. Definite-lived intangible assets are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. The evaluation of the impairment is based upon a comparison of the carrying amount of the intangible asset to the estimated future undiscounted cash flows expected to be generated by the asset. If the estimated undiscounted future cash flows are less than the carrying amount of the assets, the asset is considered to be impaired.

        Indefinite-lived intangibles consisting of the Ride Rite® Converting trademark, are reviewed for impairment annually and upon the occurrence of events or changes in circumstances that indicate that

F-12

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

2. Significant Accounting Policies (Continued)

the carrying value of the assets or group of assets may not be recoverable. The impairment test consists of a comparison of the fair value of the trademark with its carrying amount and if the carrying amount exceeds its fair value, an impairment loss is recognized as an amount equal to that excess.

        Income Taxes—The Company accounts for income taxes under the liability method in accordance with ASC 740, Income Taxes. Accordingly, deferred income taxes are provided for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company records interest on unrecognized tax benefits in the provision for income taxes.

        Amortization of Debt Issuance Costs—The Company capitalizes costs incurred in connection with borrowings or establishment of credit facilities. These costs are amortized over the life of the borrowing or life of the credit facility using the effective interest method.

        Stock Based Compensation Expense—The Company accounts for employee stock and stock based compensation in accordance with ASC 718, Compensation—Stock Compensation. Accordingly, compensation expense for the fair value of stock options, as determined on the date of grant, is recorded on an accelerated basis over the awards' vesting periods. The compensation expense for the fair value of restricted stock units, as determined on the date of grant, is recorded on a straight-line basis over the awards' vesting periods.

Recent Accounting Pronouncements

        The Accounting Standards Codification ("ASC") has become the source of authoritative U.S. generally accepted accounting principles ("U.S. GAAP"). The ASC only changes the referencing of financial accounting standards and does not change or alter existing U.S. GAAP.

        The Company adopted a new accounting standard included in ASC 855, "Subsequent Events" which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. This statement became effective for interim and annual periods ending after June 15, 2009.

        The Company adopted ASC 820, "Fair Value Measurements and Disclosures" which provide additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This standard also includes guidance on identifying circumstances that indicate a transaction is not orderly. This standard emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. This standard became effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. The adoption of this standard did not have an effect on the consolidated financial statements.

F-13

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

2. Significant Accounting Policies (Continued)

        The Company adopted a new accounting standard included in ASC 825, "Financial Instruments" requiring disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This standard became effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this standard did not have an effect on the consolidated financial statements.

3. Reclassification

        Receivables from sales of shaft horsepower of $2.9 million and other receivables of $6.2 million as of December 31, 2008 have been reclassified from prepaid and other current assets to trade account receivables and other receivables, respectively, to conform to the current period presentation.

4. CKD Acquisition

        On July 1, 2008, the Company consummated the purchase of substantially all of the assets and assumed certain liabilities of MeadWestvaco Corporation's (MWV) Charleston Kraft Division (CKD), for $485 million, subject to certain adjustments pursuant to an asset purchase agreement with MWV. CKD consists of an unbleached kraft paper manufacturing facility in North Charleston, South Carolina, including a cogeneration facility, chip mills located in Elgin, Hampton, Andrews and Kinards, South Carolina and a lumber business located in Summerville, South Carolina.

        The acquisition was financed by cash on hand and by a new senior secured credit facility of $515 million consisting of a Eurodollar based five-year term loan of $390 million, a Eurodollar based seven-year term loan of $25 million and a $100 million revolving credit facility. In addition, $40 million of seven-year 8.30% senior notes were issued. A portion of the proceeds were used to redeem the Company's prior credit facility.

        The CKD business was deemed an attractive acquisition candidate based upon meeting the Company's objectives of being a North American-based, profitable company in the paper and packaging industry and for its synergies with the Company's existing operations.

        In connection with the CKD acquisition, the Company entered into the Long Term Fiber Supply Agreement ("Supply Agreement") with MWV. Pursuant to the Supply Agreement, the Company will purchase, on a take or pay basis, certain amounts of pine pulpwood and saw timber at market prices for a period of 15 years. The purchases are accounted for as raw materials.

        The CKD acquisition was accounted for in accordance with the provisions of ASC 805, Business Combinations and the accompanying consolidated financial statements include the results of CKD in the unbleached kraft segment.

        The excess of the purchase price over the aggregate estimated fair value of net assets acquired was allocated to goodwill. The following table summarizes the acquisition consideration:

Purchase price (net of cash acquired of $10,572)	$	474,428
Working capital adjustments		(8,918	)
Transaction costs		5,497
Total acquisition consideration	$	471,007

F-14

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

4. CKD Acquisition (Continued)

        The following table summarizes the allocation of acquisition consideration to the fair value of the assets acquired and liabilities assumed at the date of acquisition:

Trade accounts receivable	$	36,912
Inventories		55,674
Prepaid expenses and other current assets		4,431
Plant, property and equipment		382,368
Deferred income taxes		2,435
Other assets		3,521
Intangible assets		45,668
Goodwill		5,449
Accounts payable		(29,594	)
Accrued expenses		(17,593	)
Accrued compensation costs		(5,867	)
Other liabilities		(9,024	)
Pension and postretirement benefits		(3,373	)
Allocation of acquisition consideration	$	471,007

        The goodwill resulting from this transaction was allocated to the unbleached kraft segment. See Note 20 for additional discussion regarding the Company's segments. Goodwill is being deducted for tax purposes.

        The following table summarizes the acquired intangible assets and their respective fair value and estimated useful life at the date of acquisition:

	Fair Value			Average Remaining Useful Life In Years
Trademarks	$	27,700			8
Coal supply contract with below-market terms		14,080			1.5
Engineering documents		2,220			12
Customer lists		2,025			20
Transportation lease		500			5
Land lease		290			99
Customer backlog		100			1
Emission credits		60			1
Equipment lease obligation with above-market terms		(1,307	)		3.5
Total fair value of intangible assets	$	45,668

F-15

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

4. CKD Acquisition (Continued)

        The fair value of the intangible assets are amortized on a straight-line basis over the remaining useful lives. Amortization expense for the acquired CKD intangible assets recorded for 2008, 2009 and the estimated amortization expense for the next five years is as follows:

2008 (third and fourth quarter only)	$	6,178
2009		13,346
2010		3,534
2011		3,568
2012		3,639
2013		3,802
2014		3,752
Thereafter		7,849
Total amortization	$	45,668

        The following unaudited pro forma consolidated results of operations assume that the acquisition of CKD occurred as of the beginning of the periods presented. This pro forma data is based on historical information and does not necessarily reflect the actual results that would have occurred, nor is it indicative of future results of operations.

	December 31,
	2008		2007
	(Unaudited)
Net sales	$	777,855	$	765,286
Net income	$	6,997	$	16,744
Net income per share basic	$	0.26	$	0.67
Net income per share diluted	$	0.20	$	0.46

        Certain corporate services were performed and allocated or charged by MWV to the historical CKD business. For the years ended December 31, 2008 and 2007, amounts allocated or charged by MWV to CKD were $14.8 million and $23.2 million, respectively, and are included in pro forma net income and pro forma per share amounts above.

5. KPB Acquisition

        On January 2, 2007, the Company purchased substantially all of the assets and assumed certain liabilities of the Kraft Papers Business, or KPB, a division of IP, consisting of an unbleached kraft paper manufacturing facility in Roanoke Rapids, North Carolina and Ride Rite® Converting, an inflatable dunnage bag manufacturer located in Fordyce, Arkansas, trade accounts receivables, and inventories for a cash purchase price of $155.0 million less certain post-closing adjustments of $7.8 million and excluding transaction costs and two contingent earn-out payments of up to $60.0 million (in aggregate), which payments are based on KPB's annual earnings before interest, income taxes and depreciation and amortization, or EBITDA, during the five years immediately following the acquisition. Any contingent earn-out payments will be accounted for as additional purchase price consideration and will be recorded as goodwill if such performance targets are achieved. KPB was deemed an attractive acquisition candidate based on meeting the objectives of being a North American based profitable operating company in the paper and packaging industry.

F-16

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

5. KPB Acquisition (Continued)

        In March 2009 the Company sold its dunnage bag business (see Note 6) for approximately $36 million. As a result of the sale, an approximately $4.0 million earn-out payment was made and recorded as goodwill. The total future remaining unrecorded contingent earn-out payments total up to $55.0 million at December 31, 2009.

        The KPB acquisition was accounted for in accordance with the provisions of ASC 805, Business Combinations.

        The Company used a portion of restricted cash held in trust at December 31, 2006, of $115.2 million, combined with the net long-term loan proceeds of $59.1 million ($60.0 million less $0.9 million of financing costs) to fund the acquisition.

        The excess of the purchase price over the aggregate estimated fair value of net assets acquired was allocated to goodwill. The following table summarizes the purchase price:

Purchase price	$	155,000
Post closing adjustments		(7,765	)
Transaction costs		3,268
Total acquisition consideration (excluding contingent purchase price)	$	150,503

        The following table summarizes the allocation of the acquisition consideration to the fair value of the assets acquired and the liabilities assumed at the date of the acquisition.

Trade accounts receivable	$	26,498
Inventories		25,613
Prepaid expenses and other current assets		1,089
Plant, property and equipment		104,820
Other assets		1,103
Goodwill		1,063
Intangible assets		6,058
Deferred income taxes, net		556
Accounts payable		(7,931	)
Accrued expenses		(5,843	)
Pension and post-retirement benefits		(2,258	)
Other liabilities		(265	)
Allocation of acquisition consideration	$	150,503

        The following table summarizes the acquired intangible assets and their fair value:

	Fair Value		Average Remaining Useful Life In Years
Building lease with below market terms	$	3,100		19
Trademark		2,800		—
Customer lists		158		8
Total fair value of intangible assets	$	6,058

F-17

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

5. KPB Acquisition (Continued)

        For each of the years ended December 31, 2009, 2008 and 2007, amortization expense totaled $0.2 million. The trademark was appraised with an indefinite life and as a result is not being amortized, but is subject to an annual impairment review.

        At December 31, 2008, goodwill of $1.1 million was allocated to the dunnage bag business. Goodwill is not deductible for tax purposes.

        The following unaudited pro forma consolidated results of operations for the year ended December 31, 2006, assume that the KPB acquisition occurred on January 1, 2006:

	Unaudited
Net sales	$	246,161
Net income	$	21,490
Net income per share basic	$	0.86
Net income per share diluted	$	0.73

6. Sale of Dunnage Bag Business

        On March 31, 2009, the Company consummated the sale of its dunnage bag business to Illinois Tool Works Inc. ("ITW") for $36.0 million less $1.1 million of working capital adjustments. The Company considered the sale an opportunity to lower its debt and focus on its core business. As a condition of sale, $2.5 million of the sale proceeds are being held in escrow until September 30, 2010 to be available to satisfy any losses or indemnity claims that may arise against the Company in connection with the sale. The Company realized a gain on the sale of the dunnage bag business as follows:

Sale price	$	36,000
Working capital adjustments		(1,102	)
		34,898
Transaction costs		(89	)
Net assets of dunnage bag business		(18,392	)
Gain on sale of business	$	16,417

F-18

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

6. Sale of Dunnage Bag Business (Continued)

        The following table shows the major categories of net assets of the dunnage bag business as of December 31, 2008:

	December 31, 2008
Trade accounts receivable, net	$	2,742
Inventories		5,281
Plant, property and equipment		2,318
Intangible assets		5,633
Goodwill		1,063
Other assets		95
Accounts payable and accrued expenses		(2,522	)
Total net assets	$	14,610

        The terms of the dunnage bag sale agreement include a contingency for certain slow-moving inventory items, which were excluded from the working capital adjustment calculated at closing. The Company incurred approximately $0.3 million for working capital adjustments related to this contingency.

        Since the Company will continue to supply paper under a long term supply agreement with ITW, it represents a significant continuing involvement in the operations of the dunnage bag business. Under accounting principles generally accepted in the United States, the operating results for the dunnage bag business have been included in operating income in the accompanying Consolidated Statements of Income through the date of sale.

        For segment reporting purposes, the dunnage bag business is included in other.

7. Alternative Fuel Mixture Tax Credit

        The federal government implemented an incentive program through the U.S. Internal Revenue Code that provides payments under certain circumstances for the use of alternative fuels and alternative fuel mixtures in lieu of fossil-based fuels. The credit is based on the amount of alternative fuel contained in the mixture. The Company qualifies for the alternative fuel mixture tax credit because it uses a bio-fuel known as black liquor, which is a byproduct of its wood pulping process, to power its mills.

        In March 2009, the Internal Revenue Service approved the Company's registration as an alternative fuel mixer. The Company generated refund claims totaling $178.3 million for the year ended December 31, 2009 covering fuel used at its Charleston mill from January 29^th through December 31,

F-19

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

7. Alternative Fuel Mixture Tax Credit (Continued)

2009 and at its Roanoke Rapids mill from February 14^th through December 31, 2009. A summary of the alternative fuel mixture tax credits is as follows:

		2009
Total gallons of fuel burned (000's) (unaudited)			356,517
Tax credit for each gallon burned (unaudited)		$	0.50
Total alternative fuel mixture tax credit generated		$	178,258
Less tax credit included in inventory at December 31, 2009 based on FIFO			14,260
	Total alternative fuel mixture tax credits included as a reduction to cost of sales for the year ending December 31, 2009	$	163,998

        The alternate fuel mixture tax credit expired on December 31, 2009.

8. Inventories

        Inventories consist of the following at December 31, 2009 and 2008, respectively:

	December 31,
	2009		2008
Raw materials	$	13,082	$	19,877
Work in process		980		2,070
Finished goods		27,475		49,804
Replacement parts and supplies		19,840		17,941
Total inventories	$	61,377	$	89,692

        At December 31, 2009 and 2008, finished goods inventory included inventory consigned to third parties which totaled $3.8 million and $0.6 million, respectively.

9. Plant, Property and Equipment, net

        Plant, property and equipment, net consist of the following at December 31, 2009 and 2008, respectively:

	December 31,
	2009		2008
Land and land improvements	$	25,822	$	23,950
Buildings and leasehold improvements		25,665		25,235
Machinery and equipment		482,987		448,161
Construction-in-progress		12,623		22,819
		547,097		520,165
Less accumulated depreciation and amortization		76,819		36,385
Plant, property and equipment, net	$	470,278	$	483,780

F-20

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

9. Plant, Property and Equipment, net (Continued)

        Depreciation expense for the years ended December 31, 2009, 2008, and 2007, was $41.3 million, $25.3 million and $11.1 million, respectively.

        At December 31, 2009 and 2008, unamortized capitalized software costs totaled approximately $8.0 million and $5.0 million, respectively. Such amount is being amortized over five years. Amortization expense for the years ended December 31, 2009 and 2008, for software development costs were $1.7 million and $1.0 million, respectively.

10. Goodwill and Other Intangible Assets

        The following table shows changes in goodwill for the years ended December 31, 2009 and 2008, by operating segment:

	Unbleached kraft			Other			Total
Goodwill at December 31, 2007	$	1,064		$	1,231		$	2,295
CKD acquisition		5,461			—			5,461
KPB acquisition adjustment		(1,064	)		(168	)		(1,232	)
Goodwill at December 31, 2008	$	5,461		$	1,063		$	6,524
KPB earn-out		—			3,977			3.977
Sale of business		—			(5,040	)		(5,040	)
CKD acquisition adjustment		(12	)		—			(12	)
Goodwill at December 31, 2009	$	5,449		$	—		$	5,449

        Intangible assets other than goodwill include the following:

	Indefinite-lived trademarks			Definite-lived trademarks			Customer lists			Leases, contracts and other			Total
Other intangibles at December 31, 2007	$	2,800		$	—		$	138		$	2,937		$	5,875
CKD acquisition		—			27,700			2,029			15,947			45,676
Amortization expense		—			(1,731	)		(71	)		(4,554	)		(6,356	)
Other intangibles at December 31, 2008	$	2,800		$	25,969		$	2,096		$	14,330		$	45,195
CKD acquisition		—			—			(4	)		(4	)		(8	)
Sale of business		(2,800	)		—			(57	)		(2,732	)		(5,589	)
Amortization expense		—			(3,463	)		(104	)		(9,833	)		(13,400	)
Other intangibles at December 31, 2009	$	—		$	22,506		$	1,931		$	1,761		$	26,198

        Estimated amortization expense for the next five years, beginning with 2010, is as follows: $3.5 million, $3.6 million, $3.6 million, $3.8 million, and $3.8 million. At December 31, 2009, the weighted average remaining useful life for trademarks is 8 years; customer relationships is 20 years; other contractual agreements is 28 years; and for intangible assets in total is 10 years. As of December 31, 2009, the estimated remaining useful lives are as follows: definite-lived trademarks 6 years, customer lists 18 years and leases, contracts and other 1 to 97 years.

F-21

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

11. Accrued expenses

        Accrued expenses consist of the following at December 31, 2009 and 2008, respectively:

	December 31,
	2009		2008
Accrued interest	$	170	$	7,024
Accrued taxes other than income		5,315		6,896
Accrued energy costs		5,182		5,453
Other accruals		10,133		11,089
Total accrued expenses	$	20,800	$	30,462

12. Long-term Debt and Senior Credit Facility

        Long-term debt and notes, net, at December 31, 2009 and 2008, are summarized as follows:

	December 31,
	2009			2008
Term A loan with interest payable monthly at LIBOR plus 1.5% at December 31, 2009 and 3.0% at December 31, 2008	$	136,168		$	364,616
Term B loan with interest payable monthly at LIBOR plus 3.5%		8,729			23,373
Senior Notes with interest payable quarterly at 8.3%		—			40,000
Revolving credit facility (3.25% at December 31, 2009 and 4.75% at December 31, 2008)		7,400			12,400
Sub-total		152,297			440,389
Less current portion of long-term debt and notes		(18,630	)		(40,556	)
Less current portion of revolving credit facility		(7,400	)		—
Less unamortized debt issuance costs		(5,236	)		(10,460	)
Total long-term debt and notes, net of current portion	$	121,031		$	389,374

        The principal portion of long-term debt and outstanding amounts on the revolving credit facility at December 31, 2009 becomes due as follows:

		Total
Fiscal year ending:
	2010	$	26,030
	2011		20,699
	2012		20,699
	2013		81,003
	2014		1,247
	2015 and thereafter		2,619
	Total	$	152,297

F-22

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

12. Long-term Debt and Senior Credit Facility (Continued)

        The Company incurred approximately $12.6 million of debt issuance costs associated with the new Senior Credit Agreement, which is being amortized over a five-year period using the effective interest method. For the years ended December 31, 2009, 2008 and 2007, $6.0 million, $2.0 million and $0.3 million, respectively, of debt issuance costs have been amortized and recognized within interest expense.

Senior Credit Agreement

        On June 12, 2008, the Company entered into a Senior Credit Agreement (the "Senior Credit Agreement"), effective with the consummation of the acquisition of CKD, which provides for an aggregate of up to $515 million in senior secured credit facilities (the "Senior Credit Facilities"), consisting of a $390 million term A loan facility, a $25 million term B loan facility and a $100 million revolving credit facility (including a letter of credit sub-facility). The Senior Credit Agreement replaces the prior senior secured credit facility due on December 31, 2011. The Senior Credit Facilities are guaranteed by the Company and its domestic subsidiaries and are secured by substantially all of the Company's assets.

        The Senior Credit Facilities are required to be repaid in consecutive quarterly installments with final payments of all outstanding principal and interest on the maturity date. The maturity date is the earlier of: (a) June 12, 2013 with respect to the term A loan facility and the revolving credit facility, and June 12, 2015 with respect to the term B loan facility, and (b) the date which is 90 days prior to the date on which the earn-out obligations to International Paper Company will become (or are reasonably expected to become) due (January 2, 2012); provided that the maturity date will not be so accelerated if, among other things, the total leverage ratio as of the end of the then most recent fiscal quarter is less than 2.0 to 1.0.

        Outstanding principal under the term A loan facility and the revolving credit facility initially bears interest at a rate equal to, at the Company's option, either (1) the base rate plus a margin of 1.50%, or (2) the reserve adjusted one, two, three or six-month Eurodollar rate plus a margin of 3.00%. Commencing six months after the closing of the Senior Credit Facilities, pricing under the term A loan facility, the revolving credit facility and the unused line fee for the revolving credit facility will be determined by reference to a pricing grid based on our total leverage ratio. Under the pricing grid, the applicable margins for the term A loan facility and the revolving credit facility will range from 0.0% to 1.5% for base rate loans and from 1.50% to 3.00% for Eurodollar loans, and the unused line fee for the revolving credit facility will range from 0.375% to 0.50%. At December 31, 2009 and 2008, the term loan A was a Eurodollar loan with a 1.7309% interest rate based on 1.50% margin and 6.1225% interest rate based on a 3.0% margin, respectively. At December 31, 2009 and 2008, the interest rate on the revolving credit facility was 3.25% and 4.75%, respectively. The unused line fee for the revolving credit facility was 0.375% and 0.50% at December 31, 2009 and 2008, respectively.

        Outstanding principal under the term B loan facility bears interest at a rate equal to, at the Company's option, either (1) the base rate plus a margin of 2.00% or (2) the reserved adjusted one, two, three or six-month Eurodollar rate plus a margin of 3.50%. At December 31, 2009 and 2008, the term B loan was a Eurodollar loan with a 3.7309% and 6.6225% rate, respectively.

        The term loan facilities and the revolving credit facility may be prepaid at any time without premium penalties. The Senior Credit Facilities are subject to mandatory prepayment with specified

F-23

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

12. Long-term Debt and Senior Credit Facility (Continued)

percentages of the net cash proceeds of certain asset dispositions, casualty events, exercise of outstanding warrants, debt and equity issuances, and with excess cash flow, in each case subject to certain conditions. During the years ended December 31, 2009 and 2008, $120.5 million and $13.5 million, respectively, of mandatory prepayments were made.

        In accordance with its debt agreements, the Company's availability under its Revolving Credit Facility has been reduced by the amount of standby letters of credit issued of $13.0 million as of December 31, 2009. These letters of credit are used as security for certain contractual commitments and workers' compensation obligations. These letters of credit expire at various dates through 2010 unless extended.

        Borrowings under the revolving credit facility may be used for working capital and other general corporate purposes. At December 31, 2009, borrowings under the revolving credit facility totaled $7.4 million and are included as current liabilities in the accompanying consolidated balance sheets as its management's intention to repay this debt in the next twelve months.

Note Purchase Agreement

        Pursuant to the Note Purchase Agreement dated July 1, 2008, (the "Note Purchase Agreement") the Company issued senior secured promissory notes (the "Senior Notes") with an aggregate principal amount of $40 million and interest rate of 8.30%. The Senior Notes are guaranteed by the Company and secured by substantially all of the Company's assets.

        The Senior Notes were extinguished in July 2009 using cash from operations.

Debt Covenants

        The Company's Senior Credit Agreement contains, among other provisions, covenants with which we must comply while they are in force. The covenants limit our ability to, among other things, incur indebtedness, create additional liens on its assets, make investments, engage in mergers and acquisitions, pay dividends and sell any assets outside the normal course of business.

        Under the financial covenants of the Senior Credit Agreement, we must comply on a quarterly basis with a maximum permitted leverage ratio. The leverage ratio is calculated by dividing our debt by its rolling twelve month total earnings before interest expense, taxes, depreciation and amortization and allowable adjustments as defined in the Senior Credit Agreement. On December 31, 2009, the maximum permitted leverage ratio is 3.00 to 1.00 and continues throughout the remainder of the term. On December 31, 2009, the Company was in compliance with the Senior Credit Agreement with a leverage ratio of 0.84 to 1.00.

        The Senior Credit Agreement also includes a financial covenant requiring a minimum fixed charge coverage ratio. This ratio is calculated by dividing our twelve month total earnings before interest expense, taxes, depreciation and amortization and allowable adjustments, as defined by the Senior Credit Agreement, less cash payments for income taxes and capital expenditures by the sum of our cash interest and required principal payments during the twelve month period. From the closing date of the Senior Credit Agreement through the quarter ending September 30, 2011, the fixed charge coverage ratio is required to be at least 1.10 to 1.00. Starting with the quarter ending December 31, 2011, through the end of the Senior Credit Agreement, the fixed charge coverage ratio is required to be not

F-24

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

12. Long-term Debt and Senior Credit Facility (Continued)

less than 1.15 to 1.00. On December 31, 2009, the Company was in compliance with the Senior Credit Agreement with a fixed charge coverage ratio of 4.30 to 1.00.

        As of December 31, 2009, the Company was in compliance with all other applicable covenants in the Senior Credit Agreement.

13. Retirement Plans

Defined Benefit Plan

        As part of the KPB acquisition, the Company established the KapStone Paper and Packaging Corporation Defined Benefit Plan ("Plan") to provide benefits for union employees. This Plan is part of the collective bargaining agreement between KapStone and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial, Chemical and Service Workers Union, AFL-CIO, CLC. The assumed liability for the retroactive benefits provided for prior service was $1.4 million at January 2, 2007, and employees accrue benefits under the Plan as of January 1, 2007.

        As part of the CKD acquisition approximately 615 union employees were added to the Company's Plan. In addition, the Company assumed a liability for certain benefits for prior service of $1.6 million at July 1, 2008.

        As a result of the sale of the dunnage bag business on March 31, 2009, approximately 100 employees ceased earning benefits under the Plan.

        As of December 31, 2009, there were approximately 1,000 union employees participating in the Plan.

        The annual measurement date for the Plan is December 31.

Net Pension cost

        Net pension cost recognized for the years ended December 31, 2009, 2008 and 2007, for the Company's pension plan is as follows:

	Years Ended December 31,
	2009			2008			2007
Service cost for benefits earned during the year	$	2,839		$	1,999		$	1,154
Interest cost on projected benefit obligations		373			198			84
Return on plan assets		(153	)		(26	)		(1	)
Net pension cost	$	3,059		$	2,171		$	1,237

Actuarial assumptions

        The Company annually evaluates and updates as necessary the assumptions used in the determination of net pension cost, including the discount rate and the expected return on plan assets. The discount rate for the years ended December 31, 2009 and 2008 was 6.0%. The long-term expected rate of return on plan assets for the years ended December 31, 2009 and 2008 was 6.5% and 7.5%, respectively.

F-25

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

13. Retirement Plans (Continued)

        For the expected return on plan assets assumption, the Company, based on recommendations from its actuary, used historical and future expected returns of multiple asset classes to develop a risk-free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the Plan.

Funded status of Plan

        As of December 31, 2009 and 2008, the Plan is under funded by $3.2 million and $5.4 million, respectively, and has been included in the accompanying Consolidated Balance Sheets as a non-current liability. The Company will fund its pension plan according to IRS funding limitations. Based on those limitations, KapStone expects to contribute $4.1 million to its pension plan in 2010.

Changes in Benefit Obligations and Plan Assets

        The following reconciles beginning and ending projected benefit obligation for the Company.

	Years Ended December 31,
	2009			2008
Projected benefit obligation at beginning of year	$	6,240		$	2,639
Projected benefit obligation assumed for CKD acquisition		—			1,368
Benefit increase for dunnage bag business employees		60			—
Service cost for benefits earned during the year		2,839			1,999
Interest cost on projected benefit obligations		373			198
Benefits paid		(260	)		(2	)
Actuarial loss		231			38
Projected benefit obligation at end of year	$	9,483		$	6,240

        The accumulated benefit obligation at December 31, 2009 and 2008 was $9.5 million and $6.2 million, respectively.

F-26

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

13. Retirement Plans (Continued)

        Assets in the plan consist primarily of debt and equity securities. The following reconciles beginning and ending fair value of the Company's plan assets:

	Years Ended December 31,
	2009			2008
Fair value of plan assets at beginning of year	$	832		$	4
Actual gain / (loss) on plan assets		296			(218	)
Benefits paid		(260	)		(2	)
Employer contributions		5,399			1,048
Fair value of plan assets at end of year	$	6,267		$	832

        The Company's pension plan weighted average asset allocations at December 31, 2009 and 2008, by asset category were as follows:

				Years Ended December 31,
	Target Allocation
				2009			2008
Equity securities		20	%		21	%		20	%
Debt securities		77	%		79	%		76	%
Real estate		3	%		—	%		4	%
Total assets		100	%		100	%		100	%

        The investment objectives for the pension plan assets are to generate returns that will enable the plans to meet their future obligations. The strategies balance the requirement to generate returns through investments such as equity securities, with the need to control risk through less volatile assets such as debt securities. The Plan assets are managed in two separate portfolios, an equity portfolio and a bond portfolio. The strategy is to invest 20% and 80% of the plan assets in equity securities and debt securities, respectively. The total return is tracked to the relevant market index, within specified tolerances, for each of the funds in which the assets are invested.

F-27

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

13. Retirement Plans (Continued)

        Disclosures concerning assets measured at fair value on a recurring basis at December 31, 2009, which have been categorized under the fair value hierarchy for the Plan by the Company, are as follows:

		KapStone Paper and Packaging Defined Benefit Plan
		Fair Value Measurements at December 31, 2009
Asset Category		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Observable Inputs (Level 3)
Equity Securities:
	U.S. large-cap	$	883	$	—	$	883	$	—
	U.S. mid-cap growth		78		—		78		—
	U.S. small-cap		77		—		77		—
	International funds		254		—		254		—
Debt securities:
	Corporate bonds		2,943		—		2,943		—
	Mortgage-backed securities		2,011		—		2,011		—
Real estate			21		—		—		21
Total		$	6,267	$	—	$	6,246	$	21

Benefit Payments

        The following benefit payments are expected to be paid over the next 10 fiscal years ending December 31:

2010	$	160
2011		240
2012		330
2013		440
2014		540
Years 2015-2019	$	4,900

Other Post-retirement Benefits

        As part of the KPB acquisition, the Company assumed $0.9 million of liabilities for retiree medical/life obligation for the prior service of hourly employees not eligible to retire at December 31, 2006.

        As part of the CKD acquisition, the Company assumed $1.8 million of liabilities for retiree medical/life obligation for the prior service of hourly employees.

        The annual measurement date for the plan is December 31.

F-28

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

13. Retirement Plans (Continued)

Post Retirement Costs

        Net post-retirement cost recognized for the years ended December 31, 2009, 2008 and 2007 for the Company's retiree medical and life insurance benefits is as follows:

	Years Ended December 31,
	2009			2008			2007
Service cost for benefits earned during the year	$	112		$	66		$	27
Interest cost on projected benefit obligations		167			100			48
Expected return on plan assets		—			—			—
Amortization of net gain		(58	)		(31	)		—
Net post-retirement cost	$	221		$	135		$	75

        The effect of a one percentage point increase or decrease in the assumed health care cost trend rates is not material to total service and interest costs and the postretirement benefit obligation.

        Included in accumulated other comprehensive income at December 31, 2009 and 2008, is an immaterial unrecognized actuarial gain. The estimated actuarial gain that will be recognized in 2010 periodic post-retirement cost is $0.5 million.

Actuarial Assumptions

        The Company annually evaluates and updates as necessary the assumptions used in the determination of post-retirement benefit cost, including the discount rate and health care trend rates. The discount rates as of December 31, 2009 and 2008 were 6.0%.

Changes in Benefit Obligations

        As of December 31, 2009 and 2008, the plan is under funded by $2.7 million and $2.9 million, respectively, which has been included in the accompanying Consolidated Balance Sheets. The plan is only funded in an amount equal to benefits paid. The Company does not fund these benefits prior to payment of claims.

F-29

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

13. Retirement Plans (Continued)

        The following reconciles beginning and ending projected benefit obligations:

	Years Ended December 31,
	2009			2008
Projected benefit obligation at beginning of the year	$	2,893		$	761
Projected benefit obligation assumed for CKD acquisition		—			1,819
Service cost for benefits earned during the year		112			66
Interest cost on projected benefit obligations		167			100
Actuarial (gain) loss		(412	)		147
Plan modification due to sale of dunnage bag business		(46	)		—
Benefits paid		—			—
Projected benefit obligation at end of year	$	2,714		$	2,893

Benefit Payments

        The following benefit payments are expected to be paid over the next 10 fiscal years ending December 31:

2010	$	107
2011		196
2012		268
2013		294
2014		295
Years 2015-2019		1,390

Defined Contribution Plans

        In January 2007 the Company established a defined contribution plan covering all eligible employees. Company contributions to the 401(k) plan are based on matching of employee contributions, vest immediately for salaried employees and vest after three years for union employees. For the years ended December 31, 2009, 2008 and 2007, the Company recognized expense of $2.1 million, $2.4 million and $1.0 million, respectively, for matching contributions. Effective February 1, 2009, matching contributions for salaried employees were temporarily suspended due to economic conditions. The matching contributions were reinstated effective January 1, 2010.

        The Company's Retirement Savings Plan, which covers all eligible salaried employees, provides for contributions based on an employee's salary and age. The Company contributions vest 100% after three years. For the years ended December 31, 2009, 2008 and 2007, the expense recognized by the Company for contributions to the Retirement Savings Plan was $1.9 million, $1.3 million and $0.6 million, respectively.

F-30

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

14. Income taxes

        The Company's U.S. federal statutory tax rate is 35.0% for each of 2009, 2008 and 2007. The Company's effective tax rate for the years ended December 31, 2009, 2008, and 2007 was 39.4%, 38.8% and 36.0%, respectively. Substantially all income is earned in the United States.

        The Company's provision for income taxes for the years ended December 31, 2009, 2008, and 2007 consists of the following:

			Years Ended December 31,
			2009		2008			2007
Current:
	Federal		$	27,367	$	(4,035	)	$	13,298
	State			5,311		(127	)		2,084
		Total current		32,678		(4,162	)		15,382
Deferred:
	Federal		$	15,945	$	14,585		$	(152	)
	State			3,514		2,059			(92	)
		Total deferred		19,459		16,644			(244	)
Total provision for income taxes			$	52,137	$	12,482		$	15,138

        The Company's effective tax rate differs from the statutory federal income tax rate as follows:

	Years Ended December 31,
	2009			2008			2007
Statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		4.0			3.9			3.2
Manufacturing deduction		—			—			(2.0	)
Other		0.4			(0.1	)		(0.2	)
Effective tax rate		39.4	%		38.8	%		36.0	%

        The effective tax rate for the year ended December 31, 2007 includes a 2.0% benefit, provided to U.S. manufacturers' under the American Jobs Creation Act of 2004.

F-31

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

14. Income taxes (Continued)

        The tax effects of the temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2009 and 2008, for the Company are as follows:

		December 31,
		2009			2008
Deferred tax assets and liabilities resulting from:
Trade accounts receivable		$	376		$	775
Inventories			3,738			2,923
Accrued compensation costs			1,499			1,083
Acquisition transaction costs			1,441			1,745
Pension and post-retirement benefits			2,351			218
Stock based compensation			1,729			943
Tax credits			247			1,016
Intangible assets			5,762			687
Other			432			541
	Total deferred tax assets		17,575			9,931
Prepaid expenses			(500	)		(1,294	)
Tax depreciation in excess of book depreciation			(49,501	)		(20,239	)
Intangible assets and other			(547	)		(986	)
	Total deferred tax liabilities		(50,548	)		(22,519	)
Net deferred tax (liabilities) / assets, net		$	(32,973	)	$	(12,588	)

        At December 31, 2009 and 2008, the Company had the following net deferred tax (liabilities) / assets on the Consolidated Balance Sheets:

		December 31,
		2009			2008
Current deferred tax assets, net		$	5,604		$	3,363
Non current deferred tax (liabilities) / assets, net			(38,577	)		(15,951	)
	Total deferred tax (liabilities) / assets, net	$	(32,973	)	$	(12,588	)

        The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits.

        Additionally, for uncertain tax positions, a threshold condition must be met for any part of the benefit of such a position to be recognized in the financial statements.

F-32

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

14. Income taxes (Continued)

        The following is a reconciliation of the total amount of unrecognized tax benefits:

	2009
Unrecognized tax benefits—January 1, 2009	$	—
Gross increase—tax positions prior period		—
Gross decrease—tax positions prior period		—
Gross increase—tax positions current period		62,943
Settlement		—
Lapse of statute of limitations		—
Unrecognized tax benefits—December 31, 2009	$	62,943

        Total unrecognized tax benefits as of December 31, 2009 were $62.9 million, of which $62.9 million would impact the effective tax rate if recognized. The Company classifies interest and penalties as component of the provision for income taxes. Total accrued interest and penalties as of December 31, 2009, were approximately $0.4 million. Unrecognized tax benefits of $62.9 million are included in other long term liabilities in the accompanying Consolidated Balance Sheets.

        In the normal course of business, the Company is subject to examination by taxing authorities. The Company's open tax years are 2005 through 2009. The Company's tax returns for 2007 and 2008 are currently under examination by the Internal Revenue Service.

15. Stockholder's equity

Common Stock Warrants

        In connection with the Company's initial public offering, on August 19, 2005, the Company sold 20,000,000 units ("Units") for a gross price of $6.00 per Unit. Each Unit consisted of one share of the Company's common stock, $0.0001 par value, and two warrants. Each warrant entitled the holder to purchase from the Company one share of common stock at an exercise price of $5.00 with an expiration date of August 17, 2009. For the years ended December 31, 2009 and 2008, 17.0 million and 3.1 million of common stock warrants were exercised with proceeds totaling $85.2 million and $15.5 million, respectively. On August 17, 2009, 19.5 million warrants expired.

Employee Stock Purchase Plan

        In December 2009 the Company established, subject to shareholder approval, the KapStone Paper and Packaging Corporation Employee Stock Purchase Plan ("ESPP"), effective January 1, 2010. The Plan allows for employees to purchase shares of company stock at a five percent discount from market price. A total of 500,000 shares are reserved for future awards. No shares were issued for the year ended December 31, 2009.

Common Stock Reserved for Issuance

        At December 31, 2009, approximately 1.7 million shares of common stock were reserved for issuance upon 0.2 million shares for stock awards, 1.0 million shares for the underwriter's purchase option and 0.5 million shares for the ESPP.

F-33

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

15. Stockholder's equity (Continued)

Underwriter's Fee

        In connection with the Company's initial public offering on August 19, 2005, the Company agreed to pay the underwriter $1.2 million relating to the Company's initial public offering payable upon a successful business combination. Upon the consummation of KPB acquisition in January 2007, the fee was paid and charged against additional paid in capital.

Underwriter's Purchase Option

        In connection with the Company's initial public offering, the Company paid the underwriters an underwriting discount of five percent of the gross proceeds of the offering. The Company also issued for $100 an option to the representative of the underwriters to purchase up to a total of 1,000,000 units at a price of $7.50 per unit. The units issuable upon the exercise of this option are identical to those offered in the public offering, except that the exercise price of the warrants included in the underwriter's purchase option is $6.25. This option is exercisable commencing on the later of the consummation of a Business Combination or one year from the date of the public offering, expires five years from the date of the public offering, and may be exercised on a cashless basis. However, the option may be transferred to any underwriter or selected dealer participating in the public offering and their bona fide officers or partners.

        The underwriters' purchase option and the Warrants (including the warrants underlying the underwriters' option) will be exercisable only if at the time of exercise a current registration statement covering the underlying securities is effective or, in the opinion of counsel, not required, and if the securities are qualified for sale or exempt from qualification under the applicable state securities laws of the exercising holder. The Company is obligated to use its best efforts to maintain an effective registration statement during the term of the option and the Warrants; however, it may be unable to do so. Holders of the option and the Warrants are not entitled to receive a net cash settlement or other settlement in lieu of physical settlement if the common stock underlying the Warrants, or securities underlying the option, as applicable, are not covered by an effective registration statement. Accordingly, the Warrants, which do not have a cashless exercise provision, may expire unexercised and worthless if a current registration statement covering the common stock is not effective.

        The holders of the option have demand and piggy-back registration rights under the Securities Act for periods of five and seven years, respectively, from the date of the prospectus with respect to registration of the securities directly and indirectly issuable upon exercise of the option. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances, including issuances of a stock dividend, recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances at a price below its exercise price.

        The Company has estimated, based upon a Black Scholes model, that the fair value of the purchase option on the date of sale was approximately $980,000, using an expected life of four years, volatility of 23.9 percent, and a risk-free interest rate of 3.93 percent. However, because the Units did not have a trading history, the volatility assumption was based on information available to management. The volatility estimate was derived using five-year historical stock prices for the nine companies in the Standard and Poor's Supercomposite Paper Packaging Index. The Company believes the volatility estimate calculated from this index is a reasonable benchmark to use in estimating the expected

F-34

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

15. Stockholder's equity (Continued)

volatility of the Units; however, the use of an index to estimate volatility may not necessarily be representative of the volatility of the underlying securities.

        The Company accounted for this purchase option, inclusive of the receipt of the $100 cash payment, as an expense of the public offering resulting in a charge directly to stockholders' equity. Accordingly there was no impact in the Company's financial position or results of operations except for the recording of the $100 proceeds from the sale.

Redemption of Common Stock

        The registration statement for the Company's initial public offering indicated that, after signing a definitive agreement for the acquisition of a target business, the Company would submit such transaction for stockholder approval. Based on the votes submitted on December 29, 2006, 40,000 shares voted against the proposed KPB business combination and sought to be redeemed for cash. The stock redemption occurred in February 2007 and the redeemed shares have been held in treasury since the redemption.

16. Stock-Based Compensation

        On December 29, 2006, stockholders approved the 2006 Incentive Plan ("Incentive Plan"). A maximum of 3.0 million shares of our common stock, available for issuance pursuant to stock options, restricted stock awards or stock appreciation rights (collectively called "Awards"), may be granted under the Incentive Plan. If any Award is forfeited or expires without being exercised, or if restricted stock is repurchased by the Company, the shares of stock subject to the Award shall be available for additional grants under the Incentive Plan. The number of shares available under the Incentive Plan is subject to adjustment in the event of any stock split, stock dividend, recapitalization, spin-off or other similar action. Awards may be granted to employees, officers and directors of, and consultants or advisors to, the Company and any subsidiary corporations. Options intended to qualify, under the standards set forth in certain federal tax rules, as incentive stock options ("ISOs") may be granted only to employees while actually employed by the Company. Non-employee directors, consultants and advisors are not entitled to receive ISOs. Option Awards granted under the Incentive Plan are exercisable for a period fixed by the Administrator, but no longer than 10 years from the date of grant, at an exercise price which is not less than the fair market value of the shares on the date of the grant.

        The Company's Compensation Committee approves all stock awards. The Company accounts for stock awards in accordance with ASC 718, Compensation—Stock Compensation, which requires that the cost resulting from all share-based payment transactions be recognized as compensation cost over the vesting period based on the fair value of the instrument on the date of grant. As a result, the Company recognized $2.4 million, $1.8 million and $0.7 million of compensation expense for the years ended December 31, 2009, 2008 and 2007, respectively.

        At December 31, 2009, there were 0.2 million shares of common stock reserved for future stock awards.

        ASC 718 requires that cash flows relating to the benefits of tax deductions in excess of recognized compensation cost be reported as financing cash flow, rather than as an operating cash flow, as

F-35

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

16. Stock-Based Compensation (Continued)

previously required. The Company did not recognize any excess tax benefits for the years ended December 31, 2009, 2008 and 2007.

Stock options

        In 2009, 2008 and 2007 the Company's Compensation Committee granted 829,702, 748,428 and 631,050, respectively, stock option grants to executive officers, directors and employees as compensation for service. The Company's outstanding stock options vest as follows: 50% after two years and the remaining 50% after three years. Stock options granted in 2009 and 2008 have a contractual term of ten years. Stock options granted in 2007 have a contractual term of seven years. The stock options are subject to forfeiture should these employees terminate their employment with the Company for certain reasons prior to vesting in their awards, or the occurrence of certain other events such as termination with cause. The exercise price of these stock options is based on closing market price of our common stock on the date of grant and compensation expense is recorded on an accelerated basis over the awards' vesting periods.

        A summary of information related to stock options is as follows:

	Options			Weighted Average Exercise Price			Weighted Average Remaining Life (Years)		Intrinsic Value
Outstanding January 1, 2007		—		$	—			—	$	—
Granted		631,050			6.77			6.3		—
Exercised		—			—			—		—
Lapsed		—			—			—		—
Outstanding at December 31, 2007		631,050		$	6.77			6.3	$	147
Granted		748,428			6.96
Exercised		—			—
Lapsed (forfeited or cancelled)		(33,131	)		(6.98	)
Outstanding at December 31, 2008		1,346,347			6.87			7.7	$	(6,045	)
Granted		829,702			3.70			9.4		5,086
Exercised		(4,450	)		9.25
Lapsed (forfeited or cancelled)		(9,522	)		6.85
Outstanding at December 31, 2009		2,162,077		$	5.66			7.6	$	9,029
Exercisable at December 31, 2009		306,300		$	6.76			4.3	$	940

        Total stock-based compensation recorded in the Consolidated Statements of Income related to stock option grants was $1.4 million, $1.1 million and $0.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009, there was $1.6 million of unrecognized compensation expense related to non-vested stock options that will be recognized over the remaining vesting period of approximately two years.

        The weighted average fair value of the KapStone stock options granted in 2009, 2008 and 2007 was $1.79, $2.22 and $2.30, respectively. The fair value cost of awards granted in 2009, 2008 and 2007 was

F-36

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

16. Stock-Based Compensation (Continued)

$1.5 million, $1.6 million and $1.5 million, respectively. The fair value was calculated using the Black-Scholes option-pricing model based on the market price at the grant date and the weighted average assumptions specific to the underlying options. The expected volatility assumption is based on volatility of related industry stocks. The Company uses the "simplified method", defined in SEC Staff Accounting Bulletin ("SAB") No. 107, to determine the expected term assumption for all of its options. The Company uses the "simplified method", as permitted by SAB No. 110, as it does not have historical exercise data to provide a reasonable basis upon which to estimate expected life due to the limited time its equity shares have been publicly traded. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term similar to the expected term of the stock options.

        The assumptions utilized for determining the fair value of stock options awarded during the period 2009, 2008 and 2007 are as follows:

	December 31,
	2009			2008			2007
KapStone Stock Options Black-Scholes-Merton assumptions (weighted average):
Expected volatility		47.0	%		24.4	%		28.6	%
Expected term (years)		6.25			6.5			5.0
Risk-free interest rate		2.3	%		3.4	%		4.6	%
Expected dividend yield		—	%		—	%		—	%

Restricted Stock

        In 2009, 2008 and 2007 the Company's Compensation Committee granted 219,864, 194,903 and 174,000 respectively, restricted stock units to executive officers and employees as compensation for service. These are restricted as to transferability until they vest three years from the grant date. These restricted shares are subject to forfeiture should these employees terminate their employment with the Company for certain reasons prior to vesting in their awards, or the occurrence of certain other events. The value of these restricted shares is based on the closing market price of our common stock on the date of grant and compensation expense is recorded on a straight-line basis over the awards' vesting periods.

F-37

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

16. Stock-Based Compensation (Continued)

        The following table summarizes restricted stock amounts and activity:

	Shares/Units			Weighted Average Grant Price
Outstanding at January 1, 2007		—		$	—
Granted		174,000			6.76
Vested		—			—
Forfeited		—			—
Outstanding at December 31, 2007		174,000		$	6.76
Granted		194,903			6.98
Vested		—			—
Forfeited		—			—
Outstanding at December 31, 2008		368,903		$	6.88
Granted		219,864			3.70
Vested		—			—
Forfeited		(3,098	)		6.84
Outstanding at December 31, 2009		585,669		$	5.68

        Total stock-based compensation expense recorded in the Consolidated Statements of Income related to the restricted stock awards was $1.0 million, $0.7 million and $0.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009, 2008 and 2007, there was $1.3 million, $1.5 million and $0.8 million, respectively, of total unrecognized compensation expense related to restricted stock that will be recognized over the remaining vesting period of approximately two years.

17. Commitments and Contingencies

Transition Services Agreements

        In conjunction with the KPB and CKD acquisitions, the Company entered into transition services agreements with IP and MWV for certain transitional support services. The Company terminated its transitional services agreement with IP upon converting to its new ERP system in April 2008. The Company terminated a portion of services being provided by MWV upon migrating CKD to the Company's ERP on October 1, 2009. The balance of MWV services were terminated effective December 31, 2009 when CKD migrated to a new production, order entry and receivables management application. For the years ended December 31, 2009, 2008 and 2007, the Company incurred and expensed approximately $5.1 million, $4.3 million and $2.4 million, respectively for such services.

Commercial Commitments

        KapStone's commercial commitments as of December 31, 2009 represent commitments not recorded on the balance sheet, but potentially triggered by future events, primarily consist of letters of credit to provide security for certain transactions and operating leases as requested by third parties. As

F-38

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

17. Commitments and Contingencies (Continued)

of December 31, 2009, KapStone had $13.0 million of these commitments, with a majority expiring in 2010 if not renewed. No amounts have been drawn under these letters of credit.

Legal claims

        We are party to various legal proceedings arising from our operations. We establish reserves for claims and proceedings when it is probable that liabilities exist and where reasonable estimates can be made. While it is not possible to predict the outcome of any these matters, based on our assessment of the facts and circumstances now known, we do not believe that any these matters, individually or in the aggregate, will have a material adverse effect on our financial position. However, actual outcomes may be different from those expected and could have a material effect on our results of operations or cash flows in a particular period.

Operating Leases

Future minimum rentals under non-cancellable leases

        The following represents the Company's future minimum rental payments due under non-cancellable operating leases that have initial or remaining lease terms in excess of one year as of the following years:

Years Ending December 31,
2010	$	3,760
2011		3,333
2012		2,645
2013		1,644
2014		1,162
Thereafter		1,445
Total	$	13,989

        The Company's rental expense under operating leases amounted to $4.9 million, $3.9 million and $1.1 million for the years ended December 31, 2009, 2008, and 2007, respectively.

Purchase Obligation

        In conjunction with the CKD acquisition, the Company entered into a long-term fiber supply agreement with MWV. Pursuant to the agreement, the Company will purchase approximately 25% of its pine pulpwood and 60% of its saw timber requirements for a period of 15 years. The purchases are based on market prices and are accounted for as raw materials. The Company purchased approximately $35.2 million and $17.1 million of materials in accordance with the agreement for years ended December 31, 2009 and 2008, respectively.

F-39

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

18. Net income per share

        The Company's basic and diluted net income per share is calculated as follows:

	Years Ended December 31,
	2009		2008		2007
Net income as reported	$	80,280	$	19,665	$	26,963
Weighted-average number of common shares for basic net income per share		34,675,804		26,486,924		25,010,057
Incremental effect of dilutive common stock equivalents:
Common stock warrants		—		7,766,391		10,994,018
Underwriter's purchase option		15,051		90,083		111,536
Unexercised stock option awards		119,592		—		—
Unvested restricted stock awards		257,476		112,418		18,877
Weighted-average number of shares for diluted net income per share		35,067,923		34,455,816		36,134,488
Net income per share—basic	$	2.32	$	0.74	$	1.08
Net income per share—diluted	$	2.29	$	0.57	$	0.75

        In August 2009, 17.0 million warrants were exercised and converted into common stock. The 19.4 million remaining warrants expired.

        Stock option awards of 1.3 million shares and 0.6 million shares were outstanding at December 31, 2008 and 2007, respectively, but were not included in the computation of diluted net income per share because the options were not-in-the money.

19. Performance Improvement Plan

        In May 2008 shareholders approved the KapStone Paper and Packaging Performance Improvement Plan ("PIP"). The PIP, effective January 1, 2009, provides for annual incentive awards to executive officers and other participating employees. The PIP is to promote the interests of the Company and its stockholders by providing an incentive for participating employees to meet specified performance goals. The PIP rewards outstanding performance by those individuals whose decisions and actions affect the sustainable growth, profitability and efficient operation of the Company. The performance criteria set forth in the PIP are intended to align the interests of participating employees with the interests of stockholders.

        The PIP is administered by the Compensation Committee ("Committee"), at least two members of which are "outside directors" under Section 162(m) of the Code. The Committee selects participants, sets the performance criteria and targets, and makes all decisions with respect to employees. The Compensation Committee selects eligible participants no later than 90 days after the beginning of the year.

        No later than 90 days after the beginning of the year, the Committee determines the target award for each participant or category of participant. This is typically specified as a percentage of salary. In addition, the Committee will choose one or more performance criteria to be applied and set the

F-40

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

19. Performance Improvement Plan (Continued)

performance goals for each of the criteria. When the Committee sets the performance goals, the Committee may take into account any extraordinary or one-time or other non-recurring items or any events, transactions or other circumstances that the Committee deems relevant in light of the nature of the performance goals set or the assumptions made by the Committee regarding such goals.

        Due to economic conditions in early 2009, the Company temporarily suspended the PIP and no incentive compensation was paid or accrued for the year ended December 31, 2009. For the years ended December 31, 2008 and 2007, incentive compensation expense totaled $1.5 million and $1.7 million, respectively.

20. Segment Information

        The Company has one reportable segment, unbleached kraft. The unbleached kraft segment consists of the Company's paper mills in Roanoke Rapids, North Carolina and North Charleston, South Carolina, which produce unbleached kraft paper, linerboard, saturating kraft and unbleached folding carton board. These products are sold to customers who convert our products into end-market finished products. In the table below, Other represents the Company's dunnage bag business, which was sold on March 31, 2009, to Illinois Tool Works Inc.

        The Company's reportable and operating segment is based on financial information regularly evaluated by the chief operating decision maker in determining resource allocation and assessing performance, in accordance with ASC 805, "Segment Reporting." In the third quarter 2009, the Company revised its reporting structure. Segment disclosures have been revised to conform to the current presentation for all reporting periods.

F-41

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

20. Segment Information (Continued)

        Corporate expenses that benefit the entire organization are not charged to the operating segments.

	Years Ended December 31,
Operating Segment (In thousands):	2009			2008			2007
Net sales:
Unbleached kraft	$	626,450		$	495,864		$	227,921
Other		6,927			33,041			32.801
Elimination of intersegment sales		(899	)		(4,356	)		(3,927	)
Total	$	632,478		$	524,549		$	256,795
Net sales to external customers:
Unbleached kraft	$	625,551		$	491,508		$	223,994
Other		6,927			33,041			32,801
Total	$	632,478		$	524,549		$	256,795
Operating income/(loss):
Unbleached kraft	$	155,904		$	66,871		$	51,901
Other		748			5,248			6,350
Gain on sale of business		16,417			—			—
Corporate		(21,707	)		(21,463	)		(13,951	)
Total	$	151,362		$	50,656		$	44,300
Depreciation and amortization:
Unbleached kraft	$	52,687		$	30,231		$	10,966
Other		101			384			349
Corporate		1,879			1,068			12
Total	$	54,667		$	31,683		$	11,327
Capital spending:
Unbleached kraft	$	26,347		$	20,575		$	6,095
Other		—			310			359
Corporate		2,818			2,285			5,407
Total	$	29,165		$	23,170		$	11,861
Total assets (at December 31, 2009 and 2008):
Unbleached kraft	$	638,050		$	679,606
Other		—			17,132
Corporate		31,073			30,452
Total	$	669,123		$	727,190

F-42

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

20. Segment Information (Continued)

        Net sales for the years ended December 31, 2009, 2008 and 2007, are as follows:

	Years Ended December 31,
	2009		2008		2007
Net sales:
To customers located in the United States	$	393,133	$	359,113	$	211,962
Export sales to foreign based customers		239,345		165,436		44,833
Total	$	632,478	$	524,549	$	256,795

        No foreign country accounted for more than 10% of consolidated net sales in 2009, 2008 and 2007.

21. Quarterly Financial Information (Unaudited)

        The following tables set forth the historical unaudited quarterly financial data for fiscal 2009 and 2008. The information for each of these periods has been prepared on the same basis as the audited consolidated financial statements and, in our opinion, reflects all adjustments consisting only of normal recurring adjustments necessary to present fairly our financial results. Operating results for previous periods do not necessarily indicate results that may be achieved in any future period.

		Quarters Ended
Fiscal 2009 (In thousands):		March 31, 2009		June 30, 2009		September 30, 2009		December 31, 2009(1)
Net sales		$	140,584	$	156,493	$	170,335	$	165,066
Gross profit(2)		$	17,163	$	41,486	$	53,597	$	53,082
Operating income(3)		$	26,237	$	33,368	$	46,499	$	45,258
Net income		$	11,112	$	18,112	$	25,672	$	25,384
Net income per share:
	Basic	$	0.39	$	0.64	$	0.70	$	0.56
	Diluted	$	0.39	$	0.63	$	0.69	$	0.55

(1)

Operating income in the quarter ended December 31, 2009, includes annual planned maintenance outage costs of $6.0 million.

(2)

Gross profit in each of the 2009 quarters includes alternative fuel mixture tax credits of $5.4 million, $48.6 million, $53.5 million and $56.5 million, respectively. The tax credit expired on December 31, 2009.

(3)

Operating income in the quarter ended March 31, 2009, includes $17.4 million for the gain on the sale of the dunnage bag business.

F-43

KAPSTONE PAPER AND PACKAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share amounts)

21. Quarterly Financial Information (Unaudited) (Continued)

		Quarters Ended
Fiscal 2008 (In thousands):		March 31, 2008		June 30, 2008		September 30, 2008(1)		December 31, 2008
Net sales		$	67,129	$	68,162	$	207,671	$	181,587
Gross profit		$	16,391	$	17,603	$	23,685	$	22,571
Operating income		$	11,645	$	13,226	$	14,146	$	11,639
Net income		$	7,230	$	8,251	$	2,305	$	1,879
Net income per share:
	Basic	$	0.29	$	0.32	$	0.09	$	0.07
	Diluted	$	0.21	$	0.22	$	0.06	$	0.07

(1)

Operating income in the quarter ended September 30, 2008, includes annual planned maintenance outage costs of $6.0 million.

F-44

KAPSTONE PAPER AND PACKAGING CORPORATION

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Allowance for doubtful accounts (In thousands):

			Additions
Year ended:	Balance at beginning of year		Charged to Expense		Other(1)			Deductions(2)			Balance at end of year
December 31, 2009	$	2,421	$	594	$	(102	)	$	(1,696	)	$	1,217
December 31, 2008	$	—	$	2,360	$	61		$	—		$	2,421
December 31, 2007	$	—	$	—	$	—		$	—		$	—

(1)

2009-reflects allowance associated with dunnage bag business which was sold. 2008-reflects allowance for doubtful accounts assumed as part of the CKD acquisition.

(2)

2009-customer accounts reserved in 2008 and deemed worthless in 2009 and written off.

EX-3.1

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION
OF KAPSTONE PAPER AND PACKAGING CORPORATION

(REFLECTING ALL AMENDMENTS THROUGH January 2, 2007)

FIRST: The name of the corporation is KapStone Paper and Packaging Corporation.

SECOND: The registered office of the Corporation is to be located at 615 South DuPont Highway, Kent County, Dover, Delaware. The name of its registered agent at that address is National Corporate Research, Ltd.

THIRD: The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (the “GCL”).

FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 176,000,000 of which 175,000,000 shares shall be Common Stock of the par value of $.0001 per share and 1,000,000 shares shall be Preferred Stock of the par value of $.0001 per share.

(A) Preferred Stock. The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “Preferred Stock Designation”) and as may be permitted by the GCL. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.

(B) Common Stock. Except as otherwise required by law or as otherwise provided in any Preferred Stock Designation, the holders of the Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote.

FIFTH: The name and mailing address of the sole incorporator of the Corporation are as follows:

Name	Address
Derek T. Lively	Loeb & Loeb LLP
	345 Park Avenue, 19th Floor
	New York, New York 10154

SIXTH: The Board of Directors shall be divided into three classes: Class A, Class B and Class C. The number of directors in each class

shall be as nearly equal as possible. At the first election of directors by the incorporator, the incorporator shall elect a Class C director for a term expiring at the Corporation’s third Annual Meeting of Stockholders. The Class C director shall then elect additional Class A, Class B and Class C directors. The directors in Class A shall be elected for a term expiring at the first Annual Meeting of Stockholders, the directors in Class B shall be elected for a term expiring at the second Annual Meeting of Stockholders and the directors in Class C shall be elected for a term expiring at the third Annual Meeting of Stockholders. Commencing at the first Annual Meeting of Stockholders, and at each annual meeting thereafter, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Except as the GCL may otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of directors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum (as defined in the Corporation’s Bylaws), or by the sole remaining director. All directors shall hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified. A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy and until his successor shall have been elected and qualified.

SEVENTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

(A) Election of directors need not be by ballot unless the by-laws of the Corporation so provide.

(B) The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the by-laws of the Corporation as provided in the by-laws of the Corporation.

(C) The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and binding upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors’ interests, or for any other reason.

(D) In addition to the powers and authorities hereinbefore or by

2

statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this Certificate of Incorporation, and to any by-laws from time to time made by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made.

EIGHTH:

(A) A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the GCL, as so amended. Any repeal or modification of this paragraph A by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.

(B) The Corporation, to the full extent permitted by Section 145 of the GCL, as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.

NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

3

EX-10.6

Exhibit 10.6

Execution Copy

KAPSTONE PAPER AND PACKAGING CORPORATION
KAPSTONE KRAFT PAPER CORPORATION

$40,000,000

8.30% SENIOR SECURED NOTES DUE JULY 1, 2015

NOTE PURCHASE AGREEMENT

Dated as of July 1, 2008

TABLE OF CONTENTS

(Not Part of Agreement)

			Page
1.	AUTHORIZATION OF ISSUE OF NOTES		1
2.	PURCHASE AND SALE OF NOTES		1
3.	CONDITIONS OF CLOSING		2
	3A.	Documents	2
	3B.	Opinion of Purchasers’ Special Counsel	4
	3C.	Opinion of Company’s and Guarantors’ Counsel	5
	3D.	Representations and Warranties; No Default; Satisfaction of Conditions; Material Adverse Effect	5
	3E.	Purchase Permitted By Applicable Laws; Approvals	5
	3F.	Title Insurance, Surveys and Environmental Assessments	6
	3G.	Certificates of Insurance	6
	3H.	Material Adverse Change	6
	3I.	New Credit Agreement	6
	3J.	Termination of Existing Credit Agreement	7
	3K.	Kraft Acquisition	7
	3L.	Note Assignment; BONY Documents; SCANA Side Letters; Underwriting Agreement; Warrants; International Paper Purchase Agreement	7
	3M.	Financial Information	8
	3N.	Capitalization	8
	3O.	Debt	8
	3P.	Intercompany Subordinated Note	8
	3Q.	Fees and Expenses	9
	3R.	Structuring Fee	9
	3S.	Proceedings	9
4.	PREPAYMENTS		9
	4A(1).	Required Prepayments	9
	4A(2).	Required Prepayment Pursuant to Intercreditor Agreement	9
	4B.	Optional Prepayment With Yield-Maintenance Amount	9
	4C.	Notice of Optional Prepayment	10
	4D.	Partial Payments Pro Rata	10
	4E.	Offer to Prepay Notes upon a Senior Debt Prepayment Event	10
	4F.	No Acquisition of Notes	11
5.	AFFIRMATIVE COVENANTS		11
	5A.	Financial Statements	11
	5B.	Information Required by Rule 144A	15

i

TABLE OF CONTENTS

(continued)

			Page
	5C.	Inspection of Property	15
	5D.	Covenant to Secure Notes Equally	15
	5E.	Compliance with Law	15
	5F.	Maintenance of Insurance	16
	5G.	Maintenance of Properties	16
	5H.	Payment of Taxes	16
	5I.	Corporate Existence	16
	5J.	Lines of Business	16
	5K.	Subsequent Guarantors	17
	5L.	Deliveries; Further Assurances	17
	5M.	Agreement Assuming Liability on Notes	18
	5N.	Compliance with Terms of Leaseholds	18
	5O.	Material Contracts	18
	5P.	Amendments to Credit Agreement or Loan Documents	18
6.	NEGATIVE COVENANTS		19
	6A.	Financial Covenants	19
	6A(1).	Total Leverage Ratio	19
	6A(2).	Fixed Charge Coverage Ratio	19
	6B.	Debt	19
	6C.	Liens	21
	6D.	Operating Leases	22
	6E.	Restricted Payments	22
	6F.	Mergers, Consolidations, Acquisitions, Sales	23
	6G.	Modification of Organization Documents	24
	6H.	Transactions with Affiliates	24
	6I.	Unconditional Purchase Obligations	24
	6J.	Inconsistent Agreements	24
	6K.	Business Activities; Issuance of Equity	25
	6L.	Investments	25
	6M.	Restriction of Amendments to Certain Documents	26
	6N.	Working Capital Facility	26
	6O.	Accounting Changes; Fiscal Year	26
	6P.	Prepayments, Etc. of Debt	26
	6Q.	Amendment, Etc. of Debt	26
	6R.	Holding Company	27
	6S.	Limitation on Speculative Hedging	27
	6T.	Terrorism Sanctions Regulations	27
7.	EVENTS OF DEFAULT		27
	7A.	Acceleration	27

ii

TABLE OF CONTENTS

(continued)

			Page
	7B.	Rescission of Acceleration	30
	7C.	Notice of Acceleration or Rescission	30
	7D.	Other Remedies	31
8.	REPRESENTATIONS, COVENANTS AND WARRANTIES		31
	8A(1).	Organization; Subsidiary Preferred Equity	31
	8A(2).	Power and Authority	31
	8A(3).	Execution and Delivery of Transaction Documents	31
	8B.	Financial Statements	32
	8C.	Actions Pending	32
	8D.	Outstanding Debt	33
	8E.	Title to Properties	33
	8F.	Taxes	33
	8G.	Conflicting Agreements and Other Matters	33
	8H.	Offering of Notes	34
	8I.	Use of Proceeds	34
	8J.	ERISA	34
	8K.	Governmental Consent	35
	8L.	Compliance with Environmental and Other Laws	35
	8M.	Regulatory Status	36
	8N.	Permits and Other Operating Rights	36
	8O.	Rule 144A	36
	8P.	Absence of Financing Statements, Etc.	36
	8Q.	Establishment of Security Interest	36
	8R.	Foreign Assets Control Regulations, Etc.	37
	8S.	Disclosure	37
	8T.	Labor Matters	38
	8U.	Related Agreements, etc.	38
	8V.	Casualty, Etc.	39
	8W.	Material Contracts	39
	8X.	Kraft Acquisition Documents	39
9.	REPRESENTATIONS OF EACH PURCHASER		40
	9A.	Nature of Purchase	40
	9B.	Source of Funds	40
10.	DEFINITIONS; ACCOUNTING MATTERS		41
	10A.	Yield-Maintenance Terms	41
	10B.	Other Terms	43
	10C.	Accounting Principles, Terms and Determinations	60

iii

TABLE OF CONTENTS

(continued)

			Page
11.	MISCELLANEOUS		61
	11A.	Note Payments	61
	11B.	Expenses	61
	11C.	Consent to Amendments	62
	11D.	Form, Registration, Transfer and Exchange of Notes; Lost Notes	63
	11E.	Persons Deemed Owners; Participations	64
	11F.	Survival of Representations and Warranties; Entire Agreement	64
	11G.	Successors and Assigns	64
	11H.	Independence of Covenants	64
	11I.	Notices	64
	11J.	Payments Due on Non-Business Days	65
	11K.	Satisfaction Requirement	65
	11L.	GOVERNING LAW	65
	11M.	SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL	65
	11N.	Severability	66
	11O.	Descriptive Headings; Advice of Counsel; Interpretation; Time of the Essence	66
	11P.	Counterparts; Facsimile or Electronic Signatures	66
	11Q.	Severalty of Obligations	67
	11R.	Independent Investigation	67
	11S.	Directly or Indirectly	67
	11T.	Confidential Information	67
	11U.	Transaction References	68
	11V.	Binding Agreement	69

iv

PURCHASER SCHEDULE

SCHEDULE 3A	—	EXCLUDED ESTOPPEL AND CONSENT AGREEMENTS
SCHEDULE 3H	—	MATERIAL ADVERSE EFFECT
SCHEDULE 6B(f)	—	EXISTING DEBT
SCHEDULE 6B(g)	—	DEBT TO BE REPAID
SCHEDULE 6C	—	EXISTING LIENS
SCHEDULE 6I	—	UNCONDITIONAL PURCHASE OBLIGATIONS
SCHEDULE 6L	—	INVESTMENTS
SCHEDULE 6R	—	HOLDING COMPANY CONTRACTS
SCHEDULE 8A(1)	—	SUBSIDIARIES
SCHEDUL 8C	—	ACTONS PENDING
SCHEDULE 8F	—	TAXES
SCHEDULE 8G	—	LIST OF AGREEMENTS RESTRICTING INDEBTEDNESS
SCHEDULE 8K	—	FILINGS AND RECORDINGS
SCHEDULE 8Q	—	INFORMATION REGARDING THE PARENT AND SUBSIDIARIES
SCHEDULE 8T	—	LABOR MATTERS
SCHEDULE 8V	—	CASUALTY
SCHEDULE 8W	—	MATERIAL CONTRACTS
EXHIBIT A	—	FORM OF NOTE
EXHIBIT B	—	FORM OF DISBURSEMENT DIRECTION LETTER
EXHIBIT C	—	FORM OF GUARANTY AGREEMENT
EXHIBIT D-1	—	FORM OF OPINION OF COMPANY’S AND GUARANTORS’ COUNSEL
EXHIBIT D-2	—	FORM OF OPINION OF COMPANY’S AND GUARANTOR’S LOCAL COUNSEL

v

KAPSTONE PAPER AND PACKAGING CORPORATION
KAPSTONE KRAFT PAPER CORPORATION
1101 Skokie Boulevard, Suite 300
Northbrook, Illinois  60062

As of July 1, 2008

To Each of the Purchasers Named in the
Purchaser Schedule Attached Hereto

Ladies and Gentlemen:

The undersigned, Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”), and Kapstone Paper and Packaging Corporation, a Delaware corporation and the owner of all of the outstanding shares of capital stock of the Company (the “Parent”), hereby agree with the purchasers named in the Purchaser Schedule attached hereto (herein called the “Purchasers”) as set forth below.  Reference is made to paragraph 10 hereof for definitions of capitalized terms used herein and not otherwise defined.

1.AUTHORIZATION OF ISSUE OF NOTES.  The Company will authorize the issue of its senior secured promissory notes (the “Notes”) in the aggregate principal amount of $40,000,000, to be dated the date of issue thereof, to mature July 1, 2015, to bear interest on the unpaid balance thereof from the date thereof until the principal thereof shall have become due and payable at the rate of 8.30% per annum (provided that, during any period when an Event of Default shall be in existence, at the election of the Required Holder(s) the outstanding principal balance of the Notes shall bear interest from and after the date of such Event of Default and until the date such Event of Default ceases to be in existence at the rate per annum from time to time equal to the Default Rate) and on overdue payments at the rate per annum from time to time equal to the Default Rate, and to be substantially in the form of Exhibit A attached hereto.  The term “Notes” as used herein shall include each such senior secured promissory note delivered pursuant to any provision of this Agreement and each such senior secured promissory note delivered in substitution or exchange for any other Note pursuant to any such provision.

2.PURCHASE AND SALE OF NOTES.  The Company hereby agrees to sell to each Purchaser and, subject to the terms and conditions herein set forth, each Purchaser agrees to purchase from the Company the aggregate principal amount of Notes set forth opposite such Purchaser’s name in the Purchaser Schedule attached hereto at 100% of such aggregate principal amount.  The Company will deliver to each Purchaser, at the offices of Schiff Hardin LLP at 6600 Sears Tower, Chicago, Illinois, 60606, one or more Notes registered in such Purchaser’s name (or, if specified in the Purchaser Schedule, in the name of the nominee(s) for such Purchaser specified in the Purchaser Schedule), evidencing the aggregate principal amount of Notes to be purchased by such Purchaser and in the denomination or denominations specified with respect to such Purchaser in the Purchaser Schedule against payment of the purchase price thereof by transfer of immediately available funds on the date of closing, which shall be July 1,

2008 (herein called the “closing” or the “date of closing”), for credit to the account or accounts as shall be specified in a letter on the Company’s letterhead, in substantially the form of Exhibit B attached hereto, from the Company to the Purchasers delivered prior to the date of closing.

3.CONDITIONS OF CLOSING.  Each Purchaser’s obligation to purchase and pay for the Notes to be purchased by such Purchaser hereunder is subject to the satisfaction, on or before the date of closing, of the following conditions:

3A.Documents.  Such Purchaser shall have received original counterparts or, if satisfactory to such Purchaser, certified or other copies, of all of the following, each duly executed and delivered by the party or parties thereto, in form and substance satisfactory to such Purchaser, dated the date of closing unless otherwise indicated, and on the date of closing in full force and effect with no event having occurred and being then continuing that would constitute a default thereunder or constitute or provide the basis for the termination thereof:

(i)the Note or Notes to be purchased by such Purchaser in the form of Exhibit A attached hereto;

(ii)an Intercreditor and Collateral Agency Agreement among the Purchasers, the Bank Agent, the Collateral Agent, the Company and the Guarantors (herein, as the same may be amended, modified or supplemented from time to time in accordance with the provisions thereof, called the “Intercreditor Agreement”);

(iii)a Guaranty Agreement made by each Guarantor in favor of the holders of the Notes in the form of Exhibit C attached hereto (together with any other guaranty pursuant to which the Notes are guarantied and which is entered into as contemplated hereby or by the Intercreditor Agreement or by any other Transaction Document, as the same may be amended, modified or supplemented from time to time in accordance with the provisions thereof, together with all joinders thereto, the “Guaranty Agreement”);

(iv)a Pledge and Security Agreement made by the Company and each Guarantor in favor of the Collateral Agent for the benefit of the Banks and the holders of the Notes under which the Notes, the Company’s obligations under the Credit Agreement and such Guarantor’s obligations under its Guaranty Agreement are secured by a security interest in all personal property of the Company and such Guarantor, including without limitation by a pledge of all of the capital stock of or other ownership interests in the Company and each Subsidiary of the Company (together with any other security agreement pursuant to which the Notes are secured and which is entered into as contemplated hereby, by the Intercreditor Agreement or by any other Transaction Document, as the same may be amended, modified, or supplemented from time to time in accordance with the provisions thereof, collectively called the “Security Agreements” and individually called a “Security Agreement”);

(v)a Mortgage or Leasehold Mortgage made by the Company and each Guarantor, as appropriate, with respect to each parcel of real property owned or leased by the Company or such Guarantor which is listed on Schedule 8Q hereto in favor of the Collateral Agent for the benefit of the Banks and the holders of the Notes under which

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the Notes, the Company’s obligations under the Credit Agreement and such Guarantor’s obligations under its Guaranty Agreement, as applicable, are secured by a mortgage lien in such parcel or leasehold interest, as the case may be (together with any other mortgage pursuant to which the Notes are secured and which is entered into as contemplated hereby, by the Intercreditor Agreement or by any other Transaction Document, as the same may be amended, modified or supplemented from time to time in accordance with the provisions thereof, collectively called the “Mortgages” and individually called a “Mortgage”);

(vi)Deposit Account Control Agreements and the Securities Account Control Agreements made by the Company and each Guarantor to the extent required under the Security Agreement, in favor of the Collateral Agent for the benefit of the Banks and the holders of the Notes under which the Notes, the Company’s obligations under the Credit Agreement and such Guarantor’s obligations under its Guaranty Agreement, as applicable, are secured by a lien in such each deposit account and each securities account of the Company and the Guarantors described therein;

(vii)except as set forth on Schedule 3A, estoppel and consent agreements executed by each of the lessors of the leased real properties of the Company and each Guarantor, along with (1) a memorandum of lease in recordable form with respect to such leasehold interest, executed and acknowledged by the owner of the affected real property, as lessor, or (2) evidence that the applicable lease with respect to such leasehold interest or a memorandum thereof has been recorded in all places necessary or desirable, in such Purchaser’s reasonable judgment, to give constructive notice to third-party purchasers of such leasehold interest, or (3) if such leasehold interest was acquired or subleased from the holder of a recorded leasehold interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form satisfactory to such Purchaser;

(viii)all chattel paper, instruments and documents of title in which the Collateral Agent has been granted a security interest and are then required under the Collateral Documents to be delivered to the Collateral Agent, together with the related transfer documents executed in blank, in each case received by the Collateral Agent, all Uniform Commercial Code financing statements perfecting the security interests and liens granted to the Collateral Agent, duly filed in all offices necessary to perfect such security interests and liens or deemed by such Purchaser to be advisable, and all such other certificates, documents, agreements, recording and filings necessary to establish a valid and perfected first priority lien and security interest (subject only to Liens described in paragraph 6C) in favor of the Collateral Agent in all of the Collateral or deemed by such Purchaser to be advisable;

(ix)a Secretary’s Certificate signed by the Secretary or an Assistant Secretary and one other officer of the Company and each Guarantor certifying, among other things, (a) as to the names, titles and true signatures of the officers of the Company or such Guarantor, as the case may be, authorized to sign the Transaction Documents to which the Company or such Guarantor, as the case may be, is a party, (b) that attached thereto is

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a true, accurate and complete copy of the certificate of incorporation or other formation document of the Company or such Guarantor, as the case may be, certified by the Secretary of State of the state of organization of the Company or such Guarantor, as the case may be, as of a recent date, (c) that attached thereto is a true, accurate and complete copy of the by-laws, operating agreement or other organizational document of the Company or the Guarantor, as the case may be, which were duly adopted and are in effect as of the date of closing and have been in effect immediately prior to and at all times since the adoption of the resolutions referred to in clause (d), below, (d) that attached thereto is a true, accurate and complete copy of the resolutions of the board of directors or other managing body of the Company or such Guarantor, as the case may be, duly adopted at a meeting or by unanimous written consent of such board of directors or other managing body, authorizing the execution, delivery and performance of the Transaction Documents to which the Company or such Guarantor, as the case may be, is a party, and that such resolutions have not been amended, modified, revoked or rescinded, are in full force and effect and are the only resolutions of the shareholders, partners or members of the Company or such Guarantor, as the case may be, or of such board of directors or other managing body or any committee thereof relating to the subject matter thereof, (e) that the Transaction Documents executed and delivered to such Purchaser by the Company or such Guarantor, as the case may be, are in the form approved by its board of directors or other managing body in the resolutions referred to in clause (d), above, and (f) that no dissolution or liquidation proceedings as to the Company or any Subsidiary have been commenced or are contemplated;

(x)a certificate of corporate or other type of entity and tax good standing for the Company and each Guarantor from the Secretary of State of the state of organization of the Company and each Guarantor and of each state in which the Company or any Guarantor is required to be qualified to transact business as a foreign organization, in each case dated as of a recent date;

(xi)Certified copies of Requests for Information or Copies (Form UCC-11) or equivalent reports listing all effective financing statements which name the Company, any Subsidiary or any Guarantor (under its present name and previous names) or any Seller (to the extent the collateral described on such financing statement includes any “Purchased Assets” as defined in the Mead Purchase Agreement) as debtor and which are filed in the office of the Secretary of State in any state in which the Company, any Subsidiary or any Guarantor or any Seller is located (as determined under the UCC), and lien and judgment search reports from the county recorder of any county in which the Company, any Subsidiary or any Guarantor or any Seller maintains an office or in which any assets of the Company, any Subsidiary or any Guarantor or any Seller (to the extent such assets include any “Purchased Assets” as defined in the Mead Purchase Agreement) are located; and

(xii)such other certificates, documents and agreements as such Purchaser may reasonably request.

3B.Opinion of Purchasers’ Special Counsel.  Such Purchaser shall have received from Schiff Hardin LLP, who are acting as special counsel for the Purchasers in connection with

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this transaction, a favorable opinion satisfactory to such Purchaser as to such matters incident to the matters herein contemplated as it may reasonably request.

3C.Opinion of Company’s and Guarantors’ Counsel.  Such Purchaser shall have received from (i) Sonnenschein Nath & Rosenthal LLP, special counsel for the Company and the Guarantors, a favorable opinion satisfactory to such Purchaser and substantially in the form of Exhibit D-1 attached hereto, (ii) Ellis Lawhorne & Sims, P.A., special South Carolina counsel to the Company and the Guarantors, a favorable opinion satisfactory to such Purchaser and substantially in the form of Exhibit D-2 attached hereto, and (iii) Seller’s counsel, a favorable opinion delivered in connection with the Kraft Acquisition which opinion is either (A) addressed to such Purchaser or (B) accompanied by a reliance letter from such counsel addressed to such Purchaser that expressly states that such Purchaser may rely on such opinion, and each of the Parent and the Company, by its execution hereof, hereby requests and authorizes the counsel referenced in clauses (i) and (ii) to render such opinions and to allow such Purchaser to rely on such opinions, and understands and agrees that each Purchaser receiving such opinions will be relying, and is hereby authorized to rely, on such opinions.

3D.Representations and Warranties; No Default; Satisfaction of Conditions; Material Adverse Effect.  The representations and warranties contained in paragraph 8 hereof and in the other Transaction Documents shall be true on and as of the date of closing, both before and immediately after giving effect to the issuance of the Notes on the date of closing and the consummation of any other transactions contemplated hereby, including the consummation of the Kraft Acquisition, and by the other Transaction Documents; there shall exist on the date of closing no Event of Default or Default, both before and immediately after giving effect to the issuance of the Notes on the date of closing and the consummation of any other transactions contemplated hereby, including the consummation of the Kraft Acquisition, and by the other Transaction Documents; the Company and each Guarantor shall have performed all agreements and satisfied all conditions required under this Agreement or the other Transaction Documents to be performed or satisfied on or before the date of closing; and the Company and each Guarantor shall have delivered to such Purchaser an Officer’s Certificate of the Parent, dated the date of closing, to each such effect.

3E.Purchase Permitted By Applicable Laws; Approvals.  The purchase of and payment for the Notes to be purchased by such Purchaser on the date of closing on the terms and conditions herein provided (including the use of the proceeds of such Notes by the Company) shall not violate any applicable law or governmental regulation (including, without limitation, section 5 of the Securities Act or Regulation T, U or X of the Board of Governors of the Federal Reserve System) and shall not subject such Purchaser to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and such Purchaser shall have received such certificates or other evidence as it may request to establish compliance with this condition.  All necessary authorizations, consents, approvals, exceptions or other actions by or notices to or filings with any court or administrative or governmental body or other Person required in connection with the execution, delivery and performance of this Agreement, the Notes and the other Transaction Documents and the Mead Purchase Agreement or the consummation of the transactions contemplated hereby or thereby shall have been issued or made, shall be final and in full force and effect and shall be in form and substance satisfactory

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to such Purchaser, and the Company and each Guarantor shall have delivered to such Purchaser an Officer’s Certificate, dated the date of closing, to each such effect.

3F.Title Insurance, Surveys and Environmental Assessments.  Such Purchaser shall have received (i) fully paid American Land Title Association Lender’s Extended Coverage title insurance policies or binder therefore (the “Mortgage Policies”), with endorsements and in amounts acceptable to the Required Holders, issued, coinsured and reinsured by title insurers acceptable to such Purchaser, insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only those encumbrances specifically permitted under each respective Mortgage and other Liens permitted under the Transaction Documents, and providing for such other affirmative insurance (including for mechanics’ and materialmen’s Liens and for zoning of the applicable property) and such coinsurance and direct access reinsurance as such Purchaser may deem necessary or desirable, (ii) Express Map form surveys, for which all necessary fees (where applicable) have been paid, and dated no more than 30 days before the day of closing, and which shall be in form sufficient to delete any standard “survey exception” which would otherwise be contained in the related Mortgage Policy, certified to such Purchaser and the issuer of the Mortgage Policies in a manner satisfactory to such Purchaser by a land surveyor duly registered and licensed in the States in which the property described in such surveys is located and acceptable to such Purchaser, showing all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects acceptable to such Purchaser, (iii) engineering, soils and other reports (including environmental audits and corresponding reliance letters) as to the properties described in the Mortgages, from professional firms acceptable to such Purchaser, (iv) evidence of the insurance required by the terms of the Mortgages, and (v) evidence that all other action that such Purchaser or the Collateral Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken.

3G.Certificates of Insurance.  The Company shall have delivered from insurance carriers acceptable to such Purchaser certificates of insurance in such forms and amounts acceptable to such Purchaser evidencing insurance required to be maintained under paragraph 5F hereof or under any of the Collateral Documents under insurance policies with loss payable and additional insured clauses in favor of the Collateral Agent and acceptable to such Purchaser.

3H.Material Adverse Change.  No material adverse change in the business, condition (financial or otherwise), operations or prospects of the Parent, the Company and its Subsidiaries, taken as a whole, since December 31, 2007 shall have occurred or be threatened, as determined by such Purchaser in its sole judgment, except as set forth on Schedule 3H hereto.

3I.New Credit Agreement.  The Credit Agreement, providing for a $100,000,000 revolving credit facility to the Company and for term loans to the Company in the aggregate principal amount of $415,000,000 (or if the Term B-2 Loan (as defined in the Credit Agreement) is funded prior to the date of closing, then $455,000,000) and having other terms and conditions satisfactory to such Purchaser, shall have been duly executed and delivered by the Company, the Bank Agent and the Banks, and shall be in full force and effect.  All conditions precedent to the

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making of the term loans and the initial revolving loan under the Credit Agreement shall have been satisfied (except to the extent waived with the consent of such Purchaser) and the Company shall have received the proceeds of the term loans and the initial revolving loan thereunder.  Such Purchaser shall have received a copy of the Credit Agreement and all instruments, documents and agreements delivered at the closing of making of the term loan and the initial revolving loan thereunder, certified by an Officer’s Certificate of the Parent, dated the date of closing, as correct and complete.

3J.Termination of Existing Credit Agreement.  All obligations of the Company under the Credit Agreement, dated January 2, 2007, between the Company, LaSalle Bank National Association, as agent, and the lenders party thereto (as amended and in effect on the date of closing, the “Existing Credit Agreement”), shall have been discharged, the Existing Credit Agreement shall have been terminated, all liens and security interests securing any of such obligations, and all financing statements or other filings and recordings relating thereto, shall have been terminated and released, or such Purchaser shall have received payoff letters with respect to the release of such liens and termination of such financing statements, and otherwise in form and substance satisfactory to such Purchaser, and such payoff letters shall be in full force and effect, and such Purchaser shall have received such evidence as it may reasonably request to demonstrate the satisfaction of the foregoing.

3K.Kraft Acquisition.  The Asset Purchase Agreement dated April 4, 2008, among the Sellers, the Parent and Oak Acquisition LLC (the “Mead Purchase Agreement”), shall be in form and substance satisfactory to such Purchaser, shall have been duly executed and delivered by the parties thereto and shall be in full force and effect.  All conditions precedent to the Company’s obligations to acquire the “Purchased Assets” (as defined in the Mead Purchase Agreement) thereunder (the “Kraft Acquisition”) shall have been satisfied (except to the extent waived with the consent of such Purchaser), and substantially concurrently with the closing of the transaction contemplated hereby, Oak Acquisition LLC (now known as Kapstone Charleston Kraft LLC) shall have consummated the acquisition of the assets to be acquired thereunder.  All necessary authorizations, consents, approvals, exceptions or other actions by or notices to or filings with any court or administrative or governmental body or other Person required in connection with the execution, delivery or performance of the Mead Purchase Agreement or the consummation of the transactions contemplated thereby shall be final and in full force and effect and shall be in form and substance satisfactory to such Purchaser.  Such Purchaser shall have received (i) a copy of the Mead Purchase Agreement and all instruments, documents and agreements related thereto (the “Kraft Acquisition Documents”), and all other Related Agreements, certified by an Officer’s Certificate of the Parent, dated the date of closing, as correct and complete, (ii) an Officer’s Certificate of the Parent, dated as of the date of closing, certifying that no event or circumstance since December 31, 2007 that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect (as such term is defined in the Mead Purchase Agreement) except as set forth on Schedule 3H hereto shall have occurred or be threatened; and (iii) evidence that the sum of (a) the aggregate purchase price of the Kraft Acquisition, (b) the amount required to refinance the Existing Credit Agreement and (c) related fees and expenses shall not exceed $551,000,000.

3L.Note Assignment; BONY Documents; SCANA Side Letters; Underwriting Agreement; Warrants; International Paper Purchase Agreement.  Such Purchaser shall have

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received a copy of (i) the assignment agreement relating to the assignment of the Cogen Notes from Teachers to the Seller (the “Note Assignment”), (ii) the acknowledgement signed by Teachers relating to the Note Assignment, (iii) the BONY documents, (iv) the SCANA Side Letters, (v) the Underwriting Agreement, (vi) the Warrants and (vii) the International Paper Purchase Agreement, each on terms and conditions satisfactory to such Purchaser, certified by an Officer’s Certificate of the Parent, dated the date of closing, as correct and complete.

3M.Financial Information.  Such Purchaser shall have received:

(i)the financial statements described in paragraph 8B;

(ii)projected income statements, balance sheets and cash flow statements prepared by the Company on a Pro Forma Basis and giving effect to the Kraft Acquisition, the issuance of the Notes contemplated hereby and the Loans (as defined in the Credit Agreement) contemplated by the Credit Agreement and the use of proceeds therefrom, on a quarterly basis for the fiscal year ending December 31, 2008 and on an annual basis for each fiscal year thereafter;

(iii)a pro forma consolidated balance sheet of the Parent and its Subsidiaries as of the date of the most recent consolidated balance sheet delivered pursuant to clause (ii) of this paragraph 3M, adjusted to give effect to the consummation of the Kraft Acquisition and the issuance of the Notes contemplated hereby and the Loans (as defined in the Credit Agreement) contemplated by the Credit Agreement as if such transactions had occurred on such date, and which is consistent in all material respects with the sources and uses of cash for the Kraft Acquisition previously described to such Purchaser and the forecasts previously provided to such Purchaser; and

(iv)an officer’s certificate prepared by the chief financial officer of the Company as to the financial condition, solvency and related matters of the Company and its Subsidiaries, after giving effect to the Kraft Acquisition, the issuance of the Notes and the Loans (as defined in the Credit Agreement) to be made on the date of closing and the other transactions contemplated by the Transaction Documents, in form and substance reasonably satisfactory to such Purchaser.

3N.Capitalization.  The pro forma capitalization and structure of the Parent and its Subsidiaries (excluding any change in ownership of the Parent involving a non-material shareholder) after giving effect to the Kraft Acquisition as disclosed in the Mead Purchase Agreement shall not have been modified in any material respect without the approval of the Required Holders.

3O.Debt.  Such Purchaser shall have received evidence that the Parent and its Subsidiaries shall have no Debt other than the Debt evidenced by the Notes and other Debt permitted pursuant to paragraph 6B.

3P.Intercompany Subordinated Note.  Such Purchaser shall have received a copy of the Intercompany Subordinated Note in form and substance satisfactory to such Purchaser, certified by an Officer’s Certificate of the Parent, dated the date of closing, as correct and complete.

8

3Q.Fees and Expenses.  Without limiting the provisions of paragraph 11B hereof, the Company shall have paid the reasonable fees, charges and disbursements of special counsel to the Purchaser referred to in paragraph 3B hereof.

3R.Structuring Fee.  The Company shall have paid to such Purchaser, by wire transfer of immediately available funds, such Purchaser’s ratable portion (in proportion to the aggregate principal amount of the Notes to be purchased by such Purchaser) of a structuring fee in the aggregate amount, for all Purchasers, of $300,000.00.

3S.Proceedings.  All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in substance and form to such Purchaser, and such Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request.

4.PREPAYMENTS.  The Notes shall be subject to prepayment only with respect to the required prepayments specified in paragraphs 4A and 4E, the optional prepayments permitted by paragraph 4B, and upon acceleration pursuant to paragraph 7A.

4A(1).Required Prepayments.  Until the Notes shall be paid in full, the Company shall apply to the prepayment of the Notes, without premium, the sum of $3,000,000 on July 1, 2009, $4,000,000 on July 1, 2010, and $5,000,000 on July 1 in each of the years 2011 to 2014, inclusive, and such principal amounts of the Notes, together with interest thereon to the prepayment dates, shall become due on such prepayment dates (provided that upon any prepayment or purchase of the Notes pursuant to paragraph 4B, 4E or 4F the principal amount of each required prepayment of the Notes becoming due under this paragraph 4A(1) on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase).  The remaining outstanding principal amount of the Notes, together with any accrued and unpaid interest thereon, shall become due on July 1, 2015, the maturity date of the Notes.

4A(2).Required Prepayment Pursuant to Intercreditor Agreement.  If any amounts are to be applied to the principal of the Notes on any date pursuant to the terms of the Intercreditor Agreement other than as a result of a Senior Debt Prepayment Event (prepayments as a result of which are governed by paragraph 4E), such principal amount of the Notes, together with interest thereon to such date and together with the Yield-Maintenance Amount, if any, with respect to each Note, shall be due and payable on such date.  Any partial prepayment of the Notes pursuant to this paragraph 4A(2) shall be applied in satisfaction of the required payments of principal thereof (including the required payment of principal due upon the maturity thereof) in the  inverse order of their scheduled due dates.

4B.Optional Prepayment With Yield-Maintenance Amount.  The Notes shall be subject to prepayment, in whole at any time or from time to time in part (in integral multiples of $1,000,000 and in a minimum amount of $5,000,000 on any one occurrence), at the option of the Company, at 100% of the principal amount so prepaid plus interest thereon to the prepayment date and the Yield-Maintenance Amount, if any, with respect to each Note.  Any partial prepayment of the Notes pursuant to this paragraph 4B shall be applied in satisfaction of required

9

payments of principal thereof (including the required payment of principal due upon the maturity thereof) on a pro rata basis in proportion to the respective amounts thereof.

4C.Notice of Optional Prepayment.  The Company shall give the holder of each Note irrevocable written notice of any prepayment pursuant to paragraph 4B not less than 10 Business Days prior to the prepayment date, specifying such prepayment date and the aggregate principal amount of the Notes, and of the Notes held by such holder, to be prepaid on such date and stating that such prepayment is to be made pursuant to paragraph 4B.  Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the prepayment date and together with the Yield-Maintenance Amount, if any, with respect thereto, shall become due and payable on such prepayment date.  The Company shall, on or before the day on which it gives written notice of any prepayment pursuant to paragraph 4B, give telephonic notice of the principal amount of the Notes to be prepaid and the prepayment date to each Significant Holder which shall have designated a recipient of such notices in the Purchaser Schedule attached hereto or by notice in writing to the Company.

4D.Partial Payments Pro Rata.  In the case of each prepayment of less than the entire outstanding principal amount of all Notes pursuant to paragraph 4A(1), 4A(2) or 4B, the principal amount so prepaid shall be allocated pro rata to all Notes at the time outstanding in proportion to the respective outstanding principal amounts thereof.

4E.Offer to Prepay Notes upon a Senior Debt Prepayment Event.

4E(1).Notice of Senior Debt Prepayment Event.  The Company will, at least 15 days prior to any Senior Debt Prepayment Event (or, if such prior notice is not possible, as promptly as possible), give written notice of such Senior Debt Prepayment Event to each holder of the Notes.  Such notice shall contain and constitute an offer to prepay the Notes as described in paragraph 4E(3) and shall be accompanied by the certificate described in paragraph 4E(6).

4E(2).Notice of Acceptance of Offer under Paragraph 4E(1).  If the Company shall at any time receive an acceptance to an offer to prepay Notes under paragraph 4E(1) from some, but not all, of the holders of the Notes, then the Company will, within two Business Days after the receipt of such acceptance, give written notice of such acceptance to each other holder of the Notes.

4E(3).Offer to Prepay Notes.  The offer to prepay Notes contemplated by paragraph 4E(1) shall be an offer to prepay, in accordance with and subject to this paragraph 4E, the Ratable Portion of the Notes held by each holder (in this case only, “holder” in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) at the time of the occurrence of the Senior Debt Prepayment Event.

4E(4).Rejection; Acceptance.  A holder of Notes may accept or reject the offer to prepay made pursuant to this paragraph 4E by causing a notice of such acceptance or rejection to be delivered to the Company prior to the prepayment date.  A failure by a

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holder of Notes to so respond to an offer to prepay made pursuant to this paragraph 4E shall be deemed to constitute a rejection of such offer by such holder if no Event of Default exists at the time of such Senior Debt Prepayment Event and no Event of Default would result therefrom, or an acceptance of such offer by such holder if an Event of Default exists at the time of such Senior Debt Prepayment Event or would result therefrom.

4E(5).Prepayment.  Prepayment of the Notes to be prepaid pursuant to this paragraph 4E shall be at 100% of the principal amount of such Notes to be prepaid, together with interest on the principal amount of such Notes to be prepaid accrued to the date of prepayment and, if an Event of Default exists at the time of such Senior Debt Prepayment Event or would result therefrom, the Yield-Maintenance Amount, if any, with respect thereto.  The prepayment shall be made at the time of occurrence of a Senior Debt Prepayment Event.

4E(6).Officer’s Certificate.  Each offer to prepay the Notes pursuant to this paragraph 4E shall be accompanied by a certificate, executed by a Responsible Officer of the Company and dated the date of such offer, specifying (i) the proposed prepayment date (which shall be the date of the Senior Debt Prepayment Event), (ii) that such offer is made pursuant to this paragraph 4E, (iii) the Ratable Portion of the principal amount of each Note offered to be prepaid, (iv) the interest that would be due on the ratable Portion of each Note offered to be prepaid, accrued to the prepayment date, (v) that the conditions of this paragraph 4E have been fulfilled, and (vi) in reasonable detail, the nature and anticipated date of the Senior Debt Prepayment Event.

4F.No Acquisition of Notes.  The Company shall not, and shall not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final maturity (other than by prepayment pursuant to paragraph 4A or 4B, upon acceptance of an offer to prepay pursuant to paragraph 4E or upon acceleration of such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any holder unless the Company or such Subsidiary or Affiliate shall have offered to prepay or otherwise retire or purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of Notes held by each other holder of Notes at the time outstanding upon the same terms and conditions.  Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose under this Agreement.

5.AFFIRMATIVE COVENANTS.

5A.Financial Statements.  Each of the Parent and the Company  covenants that it will deliver to each Significant Holder in duplicate:

(i)as soon as practicable and in any event within 30 days after the end of each month (other than the last month of a quarterly period) in each fiscal year, consolidated statements of earnings and cash flows of the Parent and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such month, and a consolidated balance sheet of the Parent and its Subsidiaries as at the end of such month,

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setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by an authorized financial officer of the Parent as fairly presenting, in all material respects, the financial position of the Parent and its Subsidiaries and their results of operations and cash flows, subject to changes resulting from year-end adjustments; provided, however, that any comparisons delivered in accordance with this clause (i) with respect to any period preceding the date of closing shall include a comparison with respect to the Business for such period;

(ii)as soon as practicable and in any event within 45 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, consolidated statements of earnings and cash flows of the Parent and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of the Parent and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the budget for such quarterly period and for the corresponding period in the preceding fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles applicable to quarterly financial statements and certified by an authorized financial officer of the Parent as fairly presenting, in all material respects, the financial position of the Parent and its Subsidiaries and their results of operations and cash flows, subject to changes resulting from year-end adjustments; provided, however, that any comparisons delivered in accordance with this clause (ii) with respect to any period preceding the date of closing shall include a comparison with respect to the Business for such period;

(iii)as soon as practicable and in any event within 90 days after the end of each fiscal year, consolidating and consolidated statements of earnings and cash flows of the Parent and its Subsidiaries for such year, and a consolidating and consolidated balance sheet of the Parent and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the budget for such fiscal year and from the preceding annual audit, all in reasonable detail and prepared in accordance with generally accepted accounting principles and, as to the consolidated statements, certified without reference to going concern value and without qualification by independent public accountants of recognized national standing selected by the Parent and reasonably acceptable to the Required Holder(s), and, as to the consolidating statements, certified by an authorized financial officer of the Parent; provided, however, that any comparisons delivered in accordance with this clause (iii) with respect to any period preceding the date of closing shall include a comparison with respect to the Business for such period;

(iv)promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to the Parent’s public stockholders generally and copies of all registration statements (without exhibits) (other than on Form S-8) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission);

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(v)promptly upon receipt thereof, a copy of each management letter or other report submitted to the Parent, the Company or any other Subsidiary of the Parent by independent accountants in connection with any annual or interim audit made by them of the books of the Parent, the Company or any other Subsidiary of the Parent;

(vi)as soon as practicable, and in any event not later than 45 days after the commencement of each fiscal year, financial projections for the Parent and its Subsidiaries for such fiscal year (including quarterly operating and cash flow budgets) prepared in a manner consistent with the projections delivered by the Parent to the Purchasers prior to the date of closing or otherwise in a manner reasonably satisfactory to the Required Holders, accompanied by an Officer’s Certificate of the Parent on behalf of the Parent to the effect that (a) such projections were prepared by the Parent in good faith, (b) the Parent has a reasonable basis for the assumptions contained in such projections and (c) such projections have been prepared in accordance with such assumptions;

(vii)promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Parent or the Subsidiary affected thereby with respect thereto:

(a)any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Company to the holders of the Notes which has been instituted or, to the knowledge of the Company or the Parent, is threatened against the Parent or any Subsidiary or to which any of the properties of any thereof is subject which might reasonably be expected to have a Material Adverse Effect;

(b)the institution of any steps by any member of the Controlled Group or any other Person to terminate any Plan, or the failure of any ERISA Affiliate to make a required contribution to any Plan (if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA) or to any Multiemployer Plan, or the taking of any action with respect to a Plan which could result in the requirement that the Parent or any Subsidiary furnish a bond or other security to the PBGC or such Plan, or the occurrence of any event with respect to any Plan or Multiemployer Plan which could result in the incurrence by any ERISA Affiliate of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Plan), or any material increase in the contingent liability of the Parent or any Subsidiary with respect to any post-retirement welfare benefit plan or other employee benefit plan of the Company or another ERISA Affiliate, or any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent but only to the extent that the event(s) described in this subsection individually or in the aggregate might reasonably be expected to have a Material Adverse Effect;

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(c)any cancellation or material change in any material insurance maintained by the Parent or any Subsidiary; or

(d)any other event (including (1) any violation of any Environmental Law or the assertion of any Environmental Claim or (2) the enactment or effectiveness of any law, rule or regulation) which might reasonably be expected to have a Material Adverse Effect.

(viii)promptly following receipt, copies of any material notices (including notices of default or acceleration) received in connection with the Related Transactions;

(ix)simultaneously with the transmission thereof, to the extent not otherwise furnished hereunder, copies of all notices, reports, financial statements or other communications given to the Bank Agent or the Banks under the Credit Agreement, excluding routine borrowing requests and notices selecting interest rates applicable thereto; and

(x)with reasonable promptness, such other information as such Significant Holder may reasonably request.

Together with each delivery of financial statements required by clauses (ii) and (iii) above, the Parent will deliver to each Significant Holder an Officer’s Certificate of the Parent demonstrating (with computations in reasonable detail) compliance by the Parent and its Subsidiaries with the provisions of paragraphs 6A(1), 6A(2), 6B, 6D, 6E, 6F and 6L and stating that there exists no Event of Default or Default, or, if any Event of Default or Default exists, specifying the nature and period of existence thereof and what action the Parent and its Subsidiaries propose to take with respect thereto.  The Parent also covenants that immediately after any Responsible Officer obtains knowledge of an Event of Default or Default, it will deliver to each Significant Holder an Officer’s Certificate of the Parent specifying the nature and period of existence thereof and what action the Parent proposes to take with respect thereto.

Documents required to be delivered pursuant to paragraphs 5A(i), (ii) (iii) and (iv) (to the extent any such documents are included in materials otherwise filed with the Securities and Exchange Commission) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Parent posts such documents, or provides a link thereto on the Parent’s website on the Internet at the website address [www.kapstonepaper.com] to which each holder of the Notes has access; or (ii) on which such documents are posted on the Parent’s behalf on an Internet or intranet website, if any, to which each holder of the Notes has access (whether a commercial, third-party website); provided that:  (a) the Parent shall deliver paper copies of such documents to each Significant Holder that requests the Parent to deliver such paper copies until a written request to cease delivering paper copies is given by such Significant Holder and (b) the Parent shall notify each holder of the Notes (by telecopier or, if instructed by such Significant Holder, electronic mail) of the posting of any such documents and provide to the such Significant Holder by electronic mail, electronic versions (i.e., soft copies) of such documents and any passwords or other requirements to access such documents on the website where they have been posted.  Notwithstanding anything contained herein, in every instance the Parent shall be required to provide paper copies of the Officer’s Certificates of the

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Parent and the certificate of accountants described in the prior paragraph to each Significant Holder.

5B.Information Required by Rule 144A.  The Company covenants that it will, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to and in compliance with the reporting requirements of section 13 or 15(d) of the Exchange Act.  For the purpose of this paragraph 5B, the term “qualified institutional buyer” shall have the meaning specified in Rule 144A under the Securities Act.

5C.Inspection of Property.  Each of the Parent and the Company covenants that it will permit any Person designated by any Significant Holder in writing, at such Significant Holder’s expense if no Default or Event of Default exists and at the Company’s expense if a Default or an Event of Default exists, to visit and inspect any of the properties of the Parent, the Company and any Subsidiary, to examine the corporate books and financial records of the Parent, the Company and any Subsidiary and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of any of such corporations with the principal officers of the Parent and the Company and its independent public accountants, all at such reasonable times and with reasonable notice (or at any time without notice if an Event of Default exists) and as often as such Significant Holder may reasonably request.

5D.Covenant to Secure Notes Equally.  Each of the Parent and the  Company covenants that if the Parent, the Company or any other Subsidiary of the Parent shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of paragraph 6C (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to paragraph 11C), it will make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Debt thereby secured so long as any such other Debt shall be so secured; provided that the creation and maintenance of such equal and ratable Lien shall not in any way limit or modify the right of the holders of the Notes to enforce the provisions of paragraph 6C.

5E.Compliance with Law.  Each of the Parent and the Company covenants that it will, and will cause each of the Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, environmental laws, and will obtain and maintain in full force and effect all licenses, certificates, permits, franchises, operating rights and other authorizations from federal, state, foreign, regional, municipal and other local regulatory bodies or administrative agencies or governmental bodies having jurisdiction over the Parent and its Subsidiaries or any of their respective properties necessary to the ownership, operation or maintenance of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in full force and effect such licenses, certificates, permits, franchises,

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operating rights and other authorizations could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

5F.Maintenance of Insurance.  Each of the Parent and the  Company covenants that it will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

5G.Maintenance of Properties.  Each of the Parent and the  Company covenants that it will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), and from time to time make, or cause to be made, all needful and proper repairs, renewals and replacements thereto, so that the business carried on in connection therewith may be properly conducted at all times, provided that this paragraph 5G shall not prevent the Parent or any of its Subsidiaries from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and such discontinuance could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

5H.Payment of Taxes.  Each of the Parent and the Company covenants that it will, and will cause each of its Subsidiaries to, file all income tax or similar tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges or levies payable by any of them, and to pay and discharge all amounts payable for work, labor and materials, in each case to the extent such taxes, assessments, charges, levies and amounts payable have become due and payable and before they have become delinquent, provided that neither the Parent nor any Subsidiary of the Parent need pay any such tax, assessment, charge, levy or amount payable if (i) the amount, applicability or validity thereof is being actively contested by the Parent or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Parent or such Subsidiary has established adequate reserves therefor in accordance with generally accepted accounting principles on the books of the Parent or such Subsidiary or (ii) the nonpayment of all such taxes, assessments, charges, levies and amounts payable in the aggregate could not reasonably be expected to have a Material Adverse Effect.

5I.Corporate Existence.  Each of the Parent and the Company will at all times preserve and keep in full force and effect its corporate existence.  The Parent will at all times preserve and keep in full force and effect the corporate existence of the Company.  Subject to paragraphs 6F and 6G, each of the Parent and the Company will at all times preserve and keep in full force and effect the corporate, limited liability company or partnership, as the case may be, existence of each of the Subsidiaries (other than the Company), unless the termination of or failure to preserve and keep in full force and effect such corporate existence, certificate, could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

5J.Lines of Business.  Each of the Parent and the Company covenants that it will not, and it will not permit any of the Subsidiaries to, engage in any business if, as a result

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thereof, the general nature of the businesses of the Parent and its Subsidiaries, taken as a whole, would be substantially changed from the businesses of the Parent and its Subsidiaries as conducted as of the date of closing.

5K.Subsequent Guarantors.  Each of the Parent and the Company covenants that if at any time any Person, which is not a Domestic Subsidiary as of the date hereof, shall become a Domestic Subsidiary, the Parent and the Company will cause such Person to execute and deliver to the holders of the Notes a joinder to the Guaranty Agreement substantially in the form of the joinder attached to the Guaranty Agreement delivered at the closing pursuant to paragraph 3A(iii) hereof, and will cause such Person to comply with the provisions of paragraph 5L hereof.  Each such joinder shall be accompanied by a certificate of the Secretary or Assistant Secretary of such Person certifying such Person’s charter and by-laws (or comparable governing documents), resolutions of the board of directors (or comparable governing body) of such Person authorizing the execution and delivery of such joinder to the Guaranty Agreement and documents executed by such Person pursuant to paragraph 5L hereof and incumbency and specimen signatures of the officers of such Person executing such documents.  Without limiting the generality of the foregoing, the Company shall cause Cogen JV and any other Domestic Subsidiary acquired or formed in connection with the consummation of the Kraft Acquisition to comply with the provisions of this paragraph 5K and the provisions of paragraph 5L not later that 14 days after the date of closing.

5L.Deliveries; Further Assurances.  Each of the Parent and the Company covenants to, and to cause each Subsidiary to, at its sole expense, promptly execute and deliver, or cause to be executed and delivered, to the holders of the Notes or the Collateral Agent, in due form for filing or recording (the Company hereby agrees to pay the cost of filing or recording the same (including without limitation any and all filing fees and recording taxes)) in all public offices necessary or deemed necessary by the Required Holder(s) or the Collateral Agent, such collateral assignments, security agreements, pledge agreements, mortgages, leasehold mortgages, warehouse receipts, bailee letters, consents, waivers, financing statements and other instruments and documents, and do such other acts and things, including, without limitation, all acts and things as the Required Holder(s) or the Collateral Agent may from time to time reasonably request, to establish and maintain to the satisfaction of the Required Holder(s) and the Collateral Agent a valid and perfected first priority security interest in favor of the Collateral Agent in all of the present and/or future Collateral free of all other Liens whatsoever (subject only to the Liens permitted by paragraph 6C), and to deliver to the Collateral Agent or the holders of the Notes such certificates, documents, instruments and opinions in connection therewith as may be reasonably requested by the Collateral Agent or the Required Holder(s), each in form and substance reasonably satisfactory to the Collateral Agent and the Required Holder(s).  In the event that the Company or any Subsidiary hereafter acquires any real property or interest in real property on which a Lien is required to be granted to the Collateral Agent pursuant to this paragraph, then the Company shall also supply to the Collateral Agent and the holders of the Notes, at the Company’s sole cost and expense, a survey, environmental report, hazard insurance policy and a mortgagee’s policy of title insurance from a title insurer reasonably acceptable to the Required Holder(s) insuring the validity of such Lien on the real property or interest in real property encumbered thereby, each in form and substance reasonably satisfactory to the Collateral Agent and the Required Holder(s).  Each of the Parent and the Company hereby irrevocably makes, constitutes and appoints the Collateral Agent (and all other persons

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designated by the Collateral Agent for that purpose) as the Parent’ and the Company’s true and lawful agent and attorney-in-fact to, if the Parent or the Company, as the case may be, fails to do so as required upon the request of the Required Holder(s) or the Collateral Agent, sign the Parent’s or the Company’s, as the case may be, name on any such agreements, instruments and documents referred to in the preceding sentences and to deliver such agreements, instruments and documents to such Persons as the Required Holder(s) or the Collateral Agent in their sole discretion may elect.

5M.Agreement Assuming Liability on Notes.  Each of the Parent and the Company covenants that, if at any time any Person should become liable (as co-obligor, endorser, guarantor or surety) on any other obligation of the Parent or any Subsidiary under the Credit Agreement or any other Loan Documents (as defined in the Credit Agreement), the Parent and the Company will, at the same time, cause such Person to deliver to the holders of the Notes an agreement pursuant to which such Person becomes similarly liable on the Notes.  The delivery of such an agreement shall not in any way limit or modify the rights of the holders of the Notes to enforce the provisions of paragraph 6B.

5N.Compliance with Terms of Leaseholds.  Each of the Parent and the Company covenants to, and shall cause its Subsidiaries to, make all payments and otherwise perform all obligations in respect of all leases of real property to which the Parent, the Company or any other Subsidiary is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the holders of the Notes of any default by any party with respect to such leases and cooperate with the holders of the Notes in all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

5O.Material Contracts.  Each of the Parent and the Company covenants to, and shall cause the Subsidiaries to, perform and observe all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect (except in connection with the termination or replacement of such Material Contracts in the ordinary course of business), enforce each such Material Contract in accordance with its terms, except, in any case, where the failure to do so, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5P.Amendments to Credit Agreement or Loan Documents.  Each of the Parent and the Company covenants that if either the Credit Agreement or any of the other Loan Documents (as defined in the Credit Agreement as in effect on the date of closing) is amended after the date of closing to change (in a manner that is more restrictive to the Parent, the Company or any of the other Subsidiaries) any financial covenant, negative covenant or event of default as it exists on the date of closing, or any such section or other provision of such document is amended to include any additional financial covenants, negative covenants or events of default that are not set forth in (or that are more restrictive than those set forth in) this Agreement, then the Parent and the Company shall, and shall cause each applicable Subsidiary to, offer to amend this Agreement and/or the other Transaction Documents, as applicable (and, upon the request of the Required Holders, the Parent and the Company shall, and shall cause

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each applicable Subsidiary to, execute appropriate amendment documents) to reflect corresponding changes.

6.NEGATIVE COVENANTS.

6A.Financial Covenants.

6A(1).Total Leverage Ratio.The Parent covenants is shall not permit the Total Leverage Ratio as of the end of any fiscal quarter of the Parent set forth below to be greater than the ratio corresponding to such fiscal quarter:

Calendar Year	March 31	June 30	September 30	December 31
2008	N/A	4.00:1.00	4.00:1.00	3.75:1.00
2009	3.50:1.00	3.50:1.00	3.50:1.00	3.00:1.00
2010	3.00:1.00	3.00:1.00	3.00:1.00	3.00:1.00
2011	3.00:1.00	3.00:1.00	3.00:1.00	3.00:1.00
2012	3.00:1.00	3.00:1.00	3.00:1.00	3.00:1.00
2013	3.00:1.00	2.50:1.00	2.50:1.00	2.50:1.00
Thereafter	2.50: 1.00	2.50: 1.00	2.50: 1.00	2.50: 1.00

6A(2).Fixed Charge Coverage Ratio.  The Parent covenants it shall not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Parent to be less than (i) from the date of closing to and including the fiscal quarter ending September 30, 2011, 1.10:1.00 and (ii) commencing with the fiscal quarter ending December 31, 2011 and thereafter, 1.15:1.00.

6B.Debt.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any Debt, except:

(a)the obligations under this Agreement and Notes;

(b)Debt secured by Liens permitted by paragraph 6C(d), and extensions, renewals and refinancings thereof; provided that the aggregate amount of all such Debt at any time outstanding shall not exceed $5,000,000;

(c)Debt (other than the Intercompany Subordinated Debt) of the Company to any Guarantor or of any Guarantor to the Company; provided that to the extent requested in writing by the Required Holders such Debt shall be evidenced by a demand note in form and substance reasonably satisfactory to the Required Holders and pledged and delivered to the Collateral Agent pursuant to the Collateral Documents as additional collateral security for the Notes, and the obligations under such demand note shall be subordinated to the Notes in a manner reasonably satisfactory to the Required Holders;

(d)the Earn-Out Obligations;

(e)Hedging Obligations incurred for bona fide hedging purposes and not for speculation, and Debt in respect of Cash Management Agreements;

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(f)Debt outstanding on the date hereof and listed on Schedule 6B(f) and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Debt is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and (ii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Debt, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Parent, the Company and the other Subsidiaries or the holders of the Notes than the terms of any agreement or instrument governing the Debt being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Debt does not exceed the then applicable market interest rate;

(g)the Debt to be Repaid (which Debt shall include the Term B-2 Loan (as defined in the Credit Agreement) if such Term B-2 Loan is funded prior to the date of closing) set forth on Schedule 6B(g) (so long as such Debt is repaid on the date of closing);

(h)Contingent Liabilities arising with respect to indemnification obligations in favor of (i) sellers in connection with acquisitions or (ii) purchasers in connection with dispositions, in each case permitted under paragraph 6F;

(i)Intercompany Subordinated Debt in an aggregate outstanding principal amount not at any time exceeding $87,000,000 (plus accrued paid-in-kind interest);

(j)Contingent Liabilities in respect of guarantees of the Company or any Guarantor in respect of Debt or other obligations otherwise permitted hereunder and to the extent such Debt is required to be subordinated such Contingent Liabilities will be equally subordinated;

(k)subject to the terms of the Intercreditor Agreement (to the extent applicable), Debt pursuant to the Credit Agreement and the Loan Documents (as defined in the Credit Agreement) in an aggregate outstanding principal amount not at any time exceeding $515,000,000, and any refinancings, refundings, renewals or extensions thereof to the extent permitted under the Intercreditor Agreement (to the extent applicable), provided that the Term B-2 Loan (as defined in the Credit Agreement) shall not be permitted under this clause (k) and instead is addressed in the foregoing clause (g);

(l)unsecured Debt and Debt secured by Liens permitted under paragraph 6C(h), in addition to the Debt listed above, collectively, in an aggregate outstanding principal amount not at any time exceeding $20,000,000 so long as (i) no Default or Event of Default has occurred and is continuing on the date of any such Debt is incurred

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or would result therefrom, and (ii) after giving effect to such Debt, the Parent and its Subsidiaries are in compliance on a pro forma basis with the financial covenants set forth in paragraph 6A as of the last day of the most recent fiscal quarter for which an Officer’s Certificate of the Parent has been delivered in accordance with paragraph 5A; and

(m)other unsecured Debt, in addition to the Debt listed above, in an aggregate outstanding principal amount not at any time exceeding $30,000,000 so long as (i) such Debt is subordinated to the Notes, and pursuant to documentation, on terms satisfactory to the Required Holders, (ii) no Default or Event of Default has occurred and is continuing on the date of any such Debt is incurred or would result therefrom, and (iii) after giving effect to such Debt, the Parent and its Subsidiaries are in compliance on a pro forma basis with the financial covenants set forth in paragraph 6A as of the last day of the most recent fiscal quarter for which an Officer’s Certificate of the Parent has been delivered in accordance with paragraph 5A.

6C.Liens.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except:

(a)Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves;

(b)Liens arising in the ordinary course of business (such as (i) Liens of landlords, carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (ii) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any advances or borrowed money or the deferred purchase price of property or services and, in each case, for which it maintains adequate reserves;

(c)Liens described on Schedule 6C as of the date of closing;

(d)subject to the limitation set forth in paragraph 6B(b), (i) Liens arising in connection with Capital Leases (and attaching only to the property being leased), (ii) Liens existing on property at the time of the acquisition thereof by the Company or any Guarantor (and not created in contemplation of such acquisition) and (iii) Liens that constitute purchase money security interests on any property securing debt incurred for the purpose of financing all or any part of the cost of acquiring such property, provided that any such Lien attaches to such property within 60 days of the acquisition thereof and attaches solely to the property so acquired;

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(e)attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding $5,000,000 arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings;

(f)easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Parent, the Company or any other Subsidiary;

(g)Liens in favor of the Collateral Agent arising under the Collateral Documents, which also may secure, subject to the terms of the Intercreditor Agreement (to the extent applicable), the obligations under the Credit Agreement to the extent permitted under paragraph 6B(k);

(h)Liens on the property of a Person existing at the time such Person becomes a Subsidiary of the Company in a transaction permitted hereunder; provided, however, that any such Lien may not extend to any other property of the Parent, the Company or any other Subsidiary that is not a Subsidiary of such Person; provided, further, that any such Lien was not created in anticipation of or in connection with the transaction or series of transactions pursuant to which such Person became a Subsidiary of the Company; and

(i)the replacement, extension or renewal of any Lien permitted by clause (c) above upon or in the same property subject thereto arising out of the extension, renewal or replacement of the Debt secured thereby (without increase in the amount thereof).

6D.Operating Leases.  Each of the Parent and the Company covenants that it shall not permit the aggregate amount of all rental payments under Operating Leases made (or scheduled to be made) by the Parent, the Company and the other Subsidiaries (on a consolidated basis) to exceed $5,000,000 in any fiscal year.

6E.Restricted Payments.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, make any distribution to any holders of its Capital Securities, purchase or redeem any of its Capital Securities, pay any management fees or similar fees or expenses to any of its equityholders or any Affiliate thereof, make any redemption, prepayment, defeasance, repurchase or any other payment in respect of any Intercompany Subordinated Debt or set aside funds for any of the foregoing. Notwithstanding the foregoing:

(a)the Company may reimburse Parent for out-of-pocket costs and expenses incurred by Parent on behalf of or for the benefit of the Company, and for fees charged by Parent to the Company, in an aggregate amount not to exceed $4,000,000 during any fiscal year;

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(b)subject to the Intercompany Subordination Agreement, the Company may make payments in kind of scheduled interest on the Intercompany Subordinated Note at the non-default rate of interest set forth in the Intercompany Subordinated Note;

(c)any Subsidiary may pay dividends or make other distributions to the Company or to a Domestic Subsidiary that is a Wholly-Owned Subsidiary and a Guarantor;

(d)so long as the Company files a consolidated income tax return with Parent, the Company may make distributions to Parent to permit Parent to pay federal and state income taxes then due and owing; provided that the amount of such distribution shall not be greater, nor the receipt by the Company of tax benefits less, than they would have been had the Company not filed a consolidated return with Parent;

(e)the Company may make, and the Parent may distribute to its shareholders, the Permitted Parent Dividends and other cash distributions to Parent from time to time so long as (i) no Default or Event of Default has occurred and is continuing on the date of any such distribution or would result therefrom, (ii) after giving effect to any such distribution (and any Debt incurred to fund such distribution), the Parent is in compliance on a pro forma basis with the financial covenants set forth in paragraph 6A as of the last day of the most recent fiscal quarter for which an Officer’s Certificate of the Parent has been delivered in accordance with paragraph 5A, and (iii) after giving effect to any such distribution, the aggregate amount of all such distributions made following the date of closing shall not exceed Cumulative Available Excess Cash Flow as of the date of such distribution; and

(f)the Parent may satisfy its obligations in connection with the Warrants and the Underwriting Agreement.

6F.Mergers, Consolidations, Acquisitions, Sales.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to:

(a)be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or any Capital Securities of any class of, or any partnership or joint venture interest in, any other Person other than in connection with a Permitted Acquisition,

(b)sell, transfer, convey or lease all or any substantial part of its assets or Capital Securities (including the sale of Capital Securities of any Subsidiary) except for the disposition of assets no longer useful or used in connection with the Company or a Guarantor’s business, sales of inventory in the ordinary course of business and obsolete or worn-out equipment, or

(c)sell or assign with or without recourse any receivables,

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except for (i) any such merger, consolidation, sale, transfer, conveyance, lease or assignment of or by any Wholly-Owned Subsidiary into the Company or into any other Domestic Subsidiary that is a Wholly-Owned Subsidiary and a Guarantor; (ii) any such purchase or other acquisition by the Company or any Domestic Subsidiary that is a Wholly-Owned Subsidiary and a Guarantor of the assets or Capital Securities of any Wholly-Owned Subsidiary; (iii) sales and dispositions of assets (including the Capital Securities of Subsidiaries) for at least fair market value (as determined by the Board of Directors of the Parent) so long as the net book value of all assets sold or otherwise disposed of in any fiscal year does not exceed 10% of the net book value of the consolidated assets of the Parent and its Subsidiaries as of the last day of the preceding fiscal year.

6G.Modification of Organization Documents.  Each of the Parent and the Company covenants that it shall not permit any Organizational Documents of the Parent, the Company or any other Subsidiary to be amended or modified in any way which could reasonably be expected to adversely affect the interests of the holders of the Notes; and not change, or allow the Parent, the Company or any other Subsidiary to change, its state of formation or its organizational form upon less than 30 days’ prior notice to the holders of the Notes.

6H.Transactions with Affiliates.   Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates (other than the Company, the Parent and the other Guarantors) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates; provided, that the transactions contemplated under the Intercompany Subordinated Note shall not be deemed violative of this paragraph 6H.

6I.Unconditional Purchase Obligations.  Except as set forth on Schedule 6I, each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, enter into or be a party to any contract for the purchase of materials, supplies or other property or services if such contract requires that payment be made by it regardless of whether delivery is ever made of such materials, supplies or other property or services.

6J.Inconsistent Agreements.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, enter into any agreement containing any provision which would (a) be violated or breached by the issuance of the Notes by the Company hereunder or by the performance by the Company or any Subsidiary of its obligations hereunder, under the Notes or under any other Transaction Document, (b) prohibit the Parent, the Company or any other Subsidiary from granting to the Collateral Agent a Lien on any of its assets or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make other distributions to the Company or any other Subsidiary, or pay any Debt owed to the Company or any other Subsidiary, (ii) make loans or advances to the Company or any Guarantor or (iii) transfer any of its assets or properties to the Company or any Guarantor, other than (A) customary restrictions and conditions contained in agreements relating to the sale of all or a substantial part of the assets of any Subsidiary pending such sale, provided that such restrictions and conditions apply only to the Subsidiary to be sold and such sale is permitted hereunder (B) restrictions or conditions imposed by any agreement

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relating to purchase money Debt, Capital Leases and other secured Debt permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Debt and (C) customary provisions in leases and other contracts restricting the assignment thereof.

6K.Business Activities; Issuance of Equity.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, engage in any line of business other than the businesses engaged in on the date hereof and businesses reasonably related thereto. The Company covenants that it shall not, and each of the Parent and the Company covenants that it shall not permit any Subsidiary (other than the Parent) to, issue any Capital Securities other than any issuance by a Subsidiary to the Company or another Subsidiary that is a Guarantor in accordance with paragraphs 6E and 6L.

6L.Investments.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, make or permit to exist any Investment in any other Person, except the following:

(a)           contributions by the Company to the capital of any Domestic Subsidiary that is a Wholly-Owned Subsidiary, or by any Subsidiary to the capital of any other Domestic Subsidiary that is a Wholly-Owned Subsidiary, so long as the recipient of any such capital contribution has guaranteed the Company’s obligations under the Notes and this Agreement and such guaranty is secured by a pledge of all of its Capital Securities and substantially all of its  real and personal property, in each case in accordance with paragraph 5L;

(b)           Investments constituting Debt permitted by paragraph 6B;

(c)           Contingent Liabilities constituting Debt permitted by paragraph 6B or Liens permitted by paragraph 6C;

(d)           Cash Equivalent Investments;

(e)           bank deposits in the ordinary course of business and in connection with Cash Management Agreements; provided that any such deposit accounts shall (A) be subject to a Deposit Account Control Agreement in favor of the Collateral Agent or other similar arrangement satisfactory to the Required Holders or (B) not at any time exceed $150,000;

(f)            Investments in securities of Account Debtors received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors;

(g)           Investments in Foreign Subsidiaries in an aggregate amount not to exceed $500,000 at any one time outstanding; and

(h)           Investments listed on Schedule 6L as of the date of closing;

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provided that (x) any Investment which when made complies with the requirements of the definition of the term “Cash Equivalent Investment” may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (y) no Investment otherwise permitted by clause (b) or (c) shall be permitted to be made if, immediately before or after giving effect thereto, any Default or Event of Default exists.

6M.         Restriction of Amendments to Certain Documents.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Guarantor to, amend or otherwise modify, or waive any rights under, the Related Agreements, if, in any case, such amendment, modification or waiver could be adverse to the interests of the holders of the Notes. Without limiting the generality of the foregoing, the Company shall not amend the International Paper Purchase Agreement in any manner which would accelerate the payment of the Earn-Out Obligations and the Company shall not prepay the Earn-Out Obligations.

6N.          Working Capital Facility.  The Company covenants that it shall not at any time fail to maintain in full force and effect a working capital credit facility with aggregate commitments to provide revolving loans to the Company of not less than $75,000,0000.

6O.         Accounting Changes; Fiscal Year.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, make any change in (a) accounting policies or reporting practices, except as permitted by GAAP, or (b) its fiscal year.

6P.          Prepayments, Etc. of Debt.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except (a) the prepayment of the Notes in accordance with the terms of this Agreement, (b) regularly scheduled or required repayments or redemptions of Debt set forth in Schedule 6B(f) and refinancings and refundings of such Debt in compliance with paragraph 6B(c), (c) with respect to the term loans outstanding under the Credit Agreement, (i) scheduled principal amortization payments as provided in the Credit Agreement as in effect on the closing date, provided if the Term B-2 Loan (as defined in the Credit Agreement) has been funded prior to the date of closing, then it shall be prepaid on the date of closing with proceeds of the Notes, (ii) mandatory prepayments as provided in the Credit Agreement as in effect on the closing date, and (iii) so long as no Default or Event of Default has occurred or is continuing, optional prepayments of the Term Loans (as defined in the Credit Agreement) in accordance with the terms of this Agreement and the Intercreditor Agreement (to the extent applicable) and (d) repayments of the revolving loans outstanding under the Credit Agreement.

6Q.         Amendment, Etc. of Debt.  Each of the Parent and the Company covenants that it shall not, and shall not permit any Subsidiary to, amend, modify or change in any manner any term or condition of (a) any Debt set forth in Schedule 6B, except for (i) any refinancing, refunding, renewal or extension thereof permitted by paragraph 6B(c), (ii) in connection with Contingent Liabilities arising with respect to indemnification obligations, any modification or amendment that does not increase the amount or accelerate the time of payment of any such Debt

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and (iii) any other amendment or modification if, taken as a whole, such amendment or modification would not (w) be adverse in any material respect to the Parent, the Company and the other Subsidiaries, (x) shorten the final maturity or average life to maturity, (y) require any payment to be made sooner than originally scheduled or (z) increase the interest rate applicable thereto or (b) the Credit Agreement, except to the extent permitted under the Intercreditor Agreement (to the extent applicable) and in accordance with paragraph 6P hereof.

6R.Holding Company.  The Parent covenants that it shall not engage in any business or activity other than (a) the ownership of all outstanding Capital Securities of the Company, (b) maintaining its corporate existence, (c) formation and ownership of direct or indirect Subsidiaries, (d) the issuance of Equity Interests (subject to compliance with the applicable terms of this Agreement), (e) participating in tax, accounting and other administrative activities as the parent of the consolidated group of companies, including the Company and the other Guarantors (including execution and delivery of contracts and agreements in the ordinary course of business in connection therewith), (f) the execution and delivery of the Transaction Documents and Loan Documents (as defined in the Credit Agreement) to which it is a party and the performance of its obligations thereunder, (g) fulfilling its obligations as an issuer of publicly traded securities and an entity subject to (i) regulation by the SEC and (ii) applicable securities laws and NASDAQ rules, (h) acting as the lender under the Intercompany Subordinated Note, (i) the performance of its obligations under the applicable contracts set forth on Schedule 6R, (j) the performance of its obligations under the Warrants and the Underwriting Agreement, (k) guarantees of obligations of the Company and the other Guarantors in the ordinary course of business and (l) activities incidental to the businesses or activities described in clauses (a) through (l) of this paragraph 6Q.

6S.Limitation on Speculative Hedging.  Each of the Parent and Company covenants that it will not, and will not permit any Subsidiary to, at any time enter into any obligations under any swap, hedging or similar transactions except to the extent entered into in the ordinary course of business to hedge or limit currency exchange rate, interest rate, commodity price or other price exposures from its line of business and not entered into for speculative purposes.

6T.Terrorism Sanctions Regulations.  Each of the Parent and the Company covenants that it will not and will not permit any Subsidiary to (a) become a Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (b) engage in any dealings or transactions with any such Person.

7.EVENTS OF DEFAULT.

7A.Acceleration.  If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise):

(i)            the Company defaults in the payment of any principal of or Yield-Maintenance Amount payable with respect to any Note when the same shall become due, either by the terms thereof or otherwise as herein provided; or

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(ii)           the Company defaults in the payment of any interest on any Note for more than 3 days after the date due; or

(iii)          except for Contingent Liabilities arising with respect to indemnification obligations of the Parent, the Company or any other Subsidiary being contested in good faith by appropriate proceedings and for which the Parent, the Company or such other Subsidiary maintains adequate reserves, any default or other event shall occur under the terms applicable to (i) Debt under the Credit Agreement or any of the other Loan Documents (as defined in the Credit Agreement) or (ii) any other Debt of the Parent, the Company or any other Subsidiary in an aggregate amount (for all such Debt so affected and including undrawn committed or available amounts and amounts owing to all creditors under any combined or syndicated credit arrangement) exceeding $5,000,000 and, in either case, such default or event shall (a) consist of the failure to pay such Debt when due, whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable (or require the Parent, the Company or any other Subsidiary to purchase or redeem such Debt or post cash collateral in respect thereof) prior to its expressed maturity;

(iv)          any representation or warranty made by the Company, the Parent or any other Guarantor herein or in any other Transaction Document or by the Company, the Parent or any other Guarantor or any of its respective officers in any writing furnished in connection with or pursuant to this Agreement or any other Transaction Document shall be false or misleading in any material respect on the date as of which made; or

(v)           the Company fails to perform or observe any agreement contained in paragraph 4E or the Parent or the Company fails to perform or observe any agreement contained in paragraph 5C, 5E, 5H or 6; or

(vi)          (a) the Parent or the Company fails to perform or observe any agreement contained in paragraph 5A(i), (ii), (iii), (v) or (vi) or the penultimate paragraph of paragraph 5A and such failure shall not be remedied within 5 days after the earlier of the date any Responsible Officer obtains actual knowledge thereof or any notice thereof is given to the Parent or the Company by any Significant Holder, (b) the Parent or the Company fails to perform or observe any other agreement, term or condition contained herein and such failure shall not be remedied within 30 days after the earlier of the date any Responsible Officer obtains actual knowledge thereof or any notice thereof is given to the Parent or the Company by any Significant Holder, or (c) the Company or any Guarantor fails to perform or observe any agreement contained in any other Transaction Document and such failure shall not be remedied within the grace period, if any, provided therefor in such Transaction Document; or

(vii)         the Parent, the Company or any other Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or the Parent, the Company or any other Subsidiary applies for, consents to, or the Parent, the Company or any other Subsidiary acquiesces in the appointment of a trustee, receiver or other custodian for such Person or any property thereof, or makes a

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general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Parent, the Company or any other Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect of the Parent, the Company or any other Subsidiary, and if such case or proceeding is not commenced by such Person, it is consented to or acquiesced in by such Person, or remains for 60 days undismissed; or the Parent, the Company or any other Subsidiary takes any action to authorize, or in furtherance of, any of the foregoing; or

(viii)        one or more judgments or orders for the payment of money (not paid or fully covered by insurance maintained in accordance with the requirements of this Agreement and as to which the relevant insurance company has acknowledged coverage) aggregating in excess of $5,000,000 shall be rendered against any or all of the Parent, the Company or any other Subsidiary and either (a) enforcement proceedings shall have been commenced by any creditor upon any such judgments or orders or (b) there shall be any period of thirty (30) consecutive days during which a stay of enforcement of any such judgments or orders, by reason of a pending appeal, bond or otherwise, shall not be in effect; or

(ix)           (i) any Person institutes steps to terminate a Plan if as a result of such termination the Parent, the Company or any ERISA Affiliate could be required to make a contribution to such Plan, or could incur a liability or obligation to such Pension Plan, in excess of $5,000,000; (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) the Unfunded Liability exceeds twenty percent of the Total Plan Liability, or (iv) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding withdrawal liability that the Parent, the Company or any ERISA Affiliate have incurred on the date of such withdrawal) exceeds $5,000,000; or

(x)            any Guaranty Agreement or any Collateral Document shall cease to be in full force and effect, or the Company or any Guarantor shall contest or deny the validity or enforceability of, or deny that it has any liability or obligations under, any Guaranty Agreement or any Collateral Document, or the Collateral Agent does not have or ceases to have a valid first priority perfected security interest (subject only to Liens permitted by paragraph 6C) in any material part of the Collateral for the benefit of the holders of the Notes; or

(xi)           an “Event of Default”, as defined in the Credit Agreement, has occurred;

(xii)          the “Maturity Date” with respect to the “Revolving Credit Facility” or the “Term A Loan” (each as defined in the Credit Agreement), has occurred before June 12, 2013 or the “Maturity Date” with respect to the “Term B Loan” (each as defined in the Credit Agreement), has occurred before June 12, 2015; or

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(xiii)a Change of Control has occurred; or

(xiv)        any subordination provision in the Intercompany Subordination Agreement shall cease to be in full force and effect, or the Parent, the Company or any other Subsidiary shall contest in any manner the validity, binding nature or enforceability of any such provision;

then (a) if such event is an Event of Default specified in clause (i) or (ii) of this paragraph 7A, any holder of any Note (other than the Company or any of its Subsidiaries or Affiliates) may at its option, by notice in writing to the Company, declare all of the Notes held by such holder to be, and all of the Notes held by such holder shall thereupon be and become, immediately due and payable at par together with interest accrued thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, (b) if such event is an Event of Default specified in clause (vii) of this paragraph 7A with respect to the Company, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Amount, if any, with respect to each Note, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company, and (c) if such event is not an Event of Default specified in clause (vii) of this paragraph 7A with respect to the Company, the Required Holder(s) may at its or their option, by notice in writing to the Company, declare all of the Notes to be, and all of the Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Amount, if any, with respect to each Note, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company.  The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and without the occurrence of an Event of Default and that the provision for payment of Yield-Maintenance Amount by the Company in the event the Notes are prepaid or are accelerated as a result of an Event of Default is intended to provide compensation for the deprivation of such right under such circumstances.

7B.Rescission of Acceleration.  At any time after any or all of the Notes shall have been declared immediately due and payable pursuant to paragraph 7A, the Required Holder(s) may, by notice in writing to the Company, rescind and annul such declaration and its consequences if (i) the Company shall have paid all overdue interest on the Notes, the principal of and Yield-Maintenance Amount, if any, payable with respect to any Notes which have become due otherwise than by reason of such declaration, and interest on such overdue interest and overdue principal and Yield-Maintenance Amount at the Default Rate, (ii) the Company shall not have paid any amounts which have become due solely by reason of such declaration, (iii) all Events of Default and Defaults, other than non-payment of amounts which have become due solely by reason of such declaration, shall have been cured or waived pursuant to paragraph 11C, and (iv) no judgment or decree shall have been entered for the payment of any amounts due pursuant to the Notes or this Agreement.  No such rescission or annulment shall extend to or affect any subsequent Event of Default or Default or impair any right arising therefrom.

7C.Notice of Acceleration or Rescission.  Whenever any Note shall be declared immediately due and payable pursuant to paragraph 7A or any such declaration shall be

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rescinded and annulled pursuant to paragraph 7B, the Company shall forthwith give written notice thereof to the holder of each Note at the time outstanding.

7D.          Other Remedies.  If any Event of Default or Default shall occur and be continuing, the holder of any Note may proceed to protect and enforce its rights under this Agreement, the other Transaction Documents and such Note by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in this Agreement or the other Transaction Documents or in aid of the exercise of any power granted in this Agreement or any Transaction Document.  No remedy conferred in this Agreement or the other Transaction Documents upon the holder of any Note or the Collateral Agent is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise.

8.             REPRESENTATIONS, COVENANTS AND WARRANTIES.  Each of the Parent and the Company represents, covenants and warrants as follows, both immediately before and after giving effect to the Kraft Acquisition:

8A(1).     Organization; Subsidiary Preferred Equity.  Each of the Parent and the Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware and each Subsidiary other than the Company is duly organized and existing in good standing under the laws of the jurisdiction in which it is organized.  The Parent, the Company and each of the other Subsidiaries have duly qualified or been duly licensed, and are authorized to do business and are in good standing, in each jurisdiction in which the ownership of their respective properties or the nature of their respective businesses makes such qualification or licensing necessary and in which the failure to be so qualified or licensed could be reasonably likely to have a Material Adverse Effect.  The Parent owns all of the outstanding shares of capital stock of the Company free and clear of any Liens other than Liens permitted by paragraph 6C(g).  Schedule 8A(1) hereto sets forth, as of the date hereof, a correct list of each Subsidiary, its jurisdiction of incorporation and its ownership.  No Subsidiary has any outstanding shares of any class of capital stock or other equity interests which has priority over any other class of capital stock or other equity interests of such Subsidiary as to dividends or distributions or in liquidation except as may be owned beneficially and of record by the Company or a Wholly-Owned Subsidiary.  Except as set forth on Schedule 8A(1), there are no  options for, rights to acquire, agreements to issue, or securities exercisable for or convertible into shares of the Company’s capital stock or the equity interests of any other Subsidiary.

8A(2).     Power and Authority.  The Parent, the Company and each other Subsidiary has all requisite corporate, limited liability company or partnership, as the case may be, power to own or hold under lease and operate their respective properties which it purports to own or hold under lease and to conduct its business as currently conducted and as currently proposed to be conducted.

8A(3).     Execution and Delivery of Transaction Documents.  The Parent, the Company and each other Subsidiary has all requisite corporate, limited liability company or partnership, as the case may be, power to execute, deliver and perform its obligations under this Agreement, the

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Notes and the other Transaction Documents to which it is a party.  The execution, delivery and performance of this Agreement, the Notes and the other Transaction Documents has been duly authorized by all requisite corporate, limited liability company or partnership, as the case may be, action, and this Agreement, the Notes and the other Transaction Documents have been duly executed and delivered by authorized officers of the Parent, the Company and each other Subsidiary which is a party thereto and are valid obligations of the Parent, the Company and each such other Subsidiary, legally binding upon and enforceable against the Parent, the Company and each such other Subsidiary in accordance with their terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

8B.          Financial Statements.   The Parent and the Company have furnished each Purchaser with the following financial statements, identified by a principal financial officer of the Parent:  (i) a consolidated balance sheet of the Parent and its Subsidiaries as at December 31 in each of the years 2005 to 2007, inclusive, and consolidated statements of income, stockholders’ equity and cash flows of the Parent and its Subsidiaries for each such year, all reported on by PricewaterhouseCoopers LLP; (ii) a consolidated balance sheet of the Business as at December 31 in each of the years 2005 to 2007, inclusive, and consolidated statements of income, stockholders’ equity and cash flows of the Seller and its Subsidiaries for each such year, all reported on by PricewaterhouseCoopers LLP; and (iii) unaudited consolidated balance sheet of the Parent and its Subsidiaries as at March 31, 2008 and consolidated statements of income or operations and cash flows for the three-month period ended on each such date, prepared by the Parent.  Such financial statements (including any related schedules and/or notes) are true and correct in all material respects (subject, as to interim statements, to changes resulting from audits and year-end adjustments), have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods involved and show all liabilities, direct and contingent, of the Parent and its Subsidiaries and the Seller and its Subsidiaries, as applicable, required to be shown in accordance with such principles.  The balance sheets fairly present the condition of the Parent and its Subsidiaries and the Seller and its Subsidiaries, as applicable, as at the dates thereof, and the statements of income, stockholders’ equity and cash flows fairly present the results of the operations of the Parent and its Subsidiaries and the Seller and its Subsidiaries, as applicable, and their respective cash flows for the periods indicated.  Since December 31, 2007, neither the Parent nor any Subsidiary of the Parent has paid or declared any dividend on any shares of its capital stock or made any other distribution on account of any shares of its capital stock (other than dividends or distributions payable solely to the Parent or a Wholly-Owned Subsidiary of the Parent) or redeemed, purchased, retired or otherwise acquired any shares of its capital stock or any warrants, rights or options to acquire, or securities convertible into or exchangeable for, any shares of its capital stock (other than from the Parent or a Wholly-Owned Subsidiary of the Parent).  There has been no material adverse change in the business, property or assets, condition (financial or otherwise), operations or prospects of the Parent, the Company and the other Subsidiaries taken as a whole or Seller and its Subsidiaries, taken as a whole, in either case since December 31, 2007, except as set forth on Schedule 3H.

8C.          Actions Pending.  There is no action, suit, investigation or proceeding pending or, to the knowledge of the Parent or the Company, threatened against the Parent, the Company

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or any of the other Subsidiaries, or any properties or rights of the Parent or any of its Subsidiaries, by or before any court, arbitrator or administrative or governmental body which, individually or in the aggregate, could reasonably be expected to result in any Material Adverse Effect, except as set forth on Schedule 8C.

8D.          Outstanding Debt.  Neither the Parent, nor the Company nor any other Subsidiaries has outstanding any Debt except as permitted by paragraph 6B.  There exists no material default under the provisions of any instrument evidencing such Debt or of any agreement relating thereto.

8E.          Title to Properties.  The Parent, the Company and each of the other Subsidiaries has good and marketable title to its respective real properties (other than properties which it leases) and good title to all of its other respective properties and assets, including the properties and assets reflected in the balance sheet of the Parent as at December 31, 2007 referred to in paragraph 8B (other than properties and assets disposed of in the ordinary course of business), and after giving effect to the Kraft Acquisition, the “Purchased Assets” (as defined in the Mead Purchase Agreement) reflected in the balance sheet of the Seller as at December 31, 2007, subject to no Lien of any kind except Liens permitted by paragraph 6C.  All leases necessary in any material respect for the conduct of the respective businesses of the Parent and its Subsidiaries are valid and subsisting and are in full force and effect.

8F.          Taxes.  Except as set forth on Schedule 8F, the Parent and the Company has, and each of the other Subsidiaries has, filed all federal, state and other income tax returns which, to the knowledge of the officers of the Parent and its Subsidiaries, are required to be filed, and each has paid all taxes as shown on such returns and on all assessments received by it to the extent that such taxes have become due, except such taxes as are being actively contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles.

8G.          Conflicting Agreements and Other Matters.  Neither the Parent, nor the Company nor any of the other Subsidiaries is a party to any contract or agreement or subject to any charter, by-law, limited liability company operating agreement, partnership agreement, or other corporate, limited liability company or partnership restriction which could reasonably be expected to have a Material Adverse Effect.  Neither the execution nor delivery of this Agreement, the Notes or the other Transaction Documents, nor the offering, issuance and sale of the Notes, nor fulfillment of nor compliance with the terms and provisions hereof and of the Notes and the other Transaction Documents will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien (other than Liens created pursuant to the Collateral Documents) upon any of the properties or assets of the Parent, the Company or any of the other Subsidiaries pursuant to, the charter, limited liability company operating agreement, partnership agreement, by-laws, limited liability company operating agreement or partnership agreement of the Parent, the Company or any of the other Subsidiaries, any award of any arbitrator or, assuming, solely with respect to the Existing Credit Agreement, the satisfaction of the condition contained in paragraph 3J, any agreement (including any agreement with stockholders, members or partners), instrument, order, judgment, decree, statute, law, rule or regulation to which the Parent, the Company or any of the other Subsidiaries is subject.  Neither the Parent, nor the Company nor

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any of the other Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Debt of the Parent, the Company or such other Subsidiary, any agreement relating thereto or any other contract or agreement (including its charter, by-laws, limited liability company operating agreement or partnership agreement) which limits the amount of, or otherwise imposes restrictions on the incurring of, Debt of the Company of the type to be evidenced by the Notes or Debt of any Guarantor of the type to be evidenced by the Guaranty Agreement except as set forth in the agreements listed on Schedule 8G.

8H.          Offering of Notes.  Neither the Company nor any agent acting on its behalf has, directly or indirectly, offered the Notes, any Guaranty Agreement or any similar security of the Company or any Guarantor for sale to, or solicited any offers to buy the Notes, any Guaranty Agreement or any similar security of the Company or any Guarantor from, or otherwise approached or negotiated with respect thereto with, any Person other than Institutional Investors, and neither the Company, any Guarantor nor any agent acting on its behalf has taken or will take any action which would subject the issuance or sale of the Notes or the execution and delivery of the Guaranty Agreements to the provisions of section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of any applicable jurisdiction.

8I.           Use of Proceeds.  Neither the Parent, nor the Company nor any other Subsidiary owns or has any present intention of acquiring any “margin stock” as defined in Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve System (herein called “margin stock”).  The proceeds of sale of the Notes will be used first, if the Term B-2 Loan (as defined in the Credit Agreement) has been funded prior to the date of closing, to repay the such Term B-2 Loan, and second to finance the Kraft Acquisition and for general corporate purposes.  None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any margin stock or for the purpose of maintaining, reducing or retiring any Debt which was originally incurred to purchase or carry any stock that is currently a margin stock or for any other purpose which might constitute the sale or purchase of any Notes a “purpose credit” within the meaning of such Regulation U.  Neither the Parent nor the Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock.  Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement, any of the other Transaction Documents or any Note to violate Regulation T, Regulation U or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or as the same may hereafter be in effect.

8J.          ERISA.

(a)           The Unfunded Liability of all Plans does not in the aggregate exceed the greater of (i) twenty percent of the Total Plan Liability for all such Plans and (ii) $5,000,000.  Each Plan complies in all material respects with all applicable requirements of law and regulations. No contribution failure under Section 412 of the Code, Section 302 of ERISA or the terms of any Plan has occurred with respect to any Plan, sufficient to give rise to a Lien under Section 302(f) of ERISA, or otherwise to have a Material Adverse Effect.  There are no pending or, to the knowledge of the Company, threatened, claims, actions, investigations or lawsuits against any Plan, any fiduciary of any Plan, or the Company or any ERISA Affiliate with respect to a Plan or

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a Multiemployer Plan which could reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any ERISA Affiliate has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan or Multiemployer Plan which could reasonably be expected to have a Material Adverse Effect. Within the past five years, neither the Company nor any ERISA Affiliate engaged in a transaction which resulted in a Plan with an Unfunded Liability being transferred out of the Company and its ERISA Affiliates, which could reasonably be expected to have a Material Adverse Effect.  No Termination Event has occurred or is reasonably expected to occur with respect to any Plan, which could reasonably be expected to have a Material Adverse Effect.

(b)           All contributions (if any) have been made to any Multiemployer Plan that are required to be made by the Company or any ERISA Affiliate under the terms of the plan or of any collective bargaining agreement or by applicable law; neither the Company nor any ERISA Affiliate has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any material withdrawal liability with respect to any such plan or received notice of any material claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan; and neither the Company nor any ERISA Affiliate has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

8K.          Governmental Consent.  Neither the nature of the Parent, of the Company or of any other Subsidiary, nor any of their respective businesses or properties, nor any relationship between the Parent, the Company or any other Subsidiary and any other Person, nor any circumstance in connection with the offering, issuance, sale or delivery of the Notes is such as to require any authorization, consent, approval, exemption or other action by or notice to or filing with any court or administrative or governmental body (other than routine filings after the date of closing with the Securities and Exchange Commission and/or state Blue Sky authorities and other than the filings and recordings necessary to perfect the Liens in the Collateral intended to be created by the Collateral Documents described on Schedule 8K hereto and any other consent or approval that has been obtained and is in full force and effect and copies of which have been provided to the Purchasers prior to the date of closing) in connection with the execution and delivery of this Agreement or the other Transaction Documents, the offering, issuance, sale or delivery of the Notes or fulfillment of or compliance with the terms and provisions hereof, thereof or of the Notes.

8L.          Compliance with Environmental and Other Laws.  The Parent, the Company and the other Subsidiaries and all of their respective properties and facilities have complied at all times and in all respects with all federal, state, local, foreign and regional statutes, laws, ordinances and judicial or administrative orders, judgments, rulings and regulations, including, without limitation, those  relating to protection of the environment except, in any such case, where failure to comply, individually or in the aggregate, could not reasonably be expected to  result in a Material Adverse Effect.

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8M.         Regulatory Status.  Neither the Parent, nor the Company nor any of the other Subsidiaries is (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or an “investment adviser” within the meaning of the Investment Advisers Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 2005, or (iii) a “public utility” within the meaning of the Federal Power Act, as amended.

8N.          Permits and Other Operating Rights.  The Parent, the Company and each other Subsidiary has all such valid and sufficient certificates of convenience and necessity, franchises, licenses, permits, operating rights and other authorizations from federal, state, foreign, regional, municipal and other local regulatory bodies or administrative agencies or other governmental bodies having jurisdiction over the Parent, the Company or any other Subsidiary or any of its properties, as are necessary for the ownership, operation and maintenance of its businesses and properties, as presently conducted and as proposed to be conducted while the Notes are outstanding, subject to exceptions and deficiencies which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and such certificates of convenience and necessity, franchises, licenses, permits, operating rights and other authorizations from federal, state, foreign, regional, municipal and other local regulatory bodies or administrative agencies or other governmental bodies having jurisdiction over the Parent, the Company, any other Subsidiary or any of its properties are free from restrictions or conditions which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and neither the Parent, nor the Company nor any other Subsidiary is in violation of any thereof in any material respect.

8O.         Rule 144A.  The Notes are not of the same class as securities of the Company, if any, listed on a national securities exchange, registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system.

8P.          Absence of Financing Statements, Etc.  Except with respect to the Liens permitted by paragraph 6C hereof, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future Lien on, or security interest in, any assets or property of the Parent, the Company or any other Subsidiary or any rights relating thereto.

8Q.         Establishment of Security Interest.  Schedule 8Q hereto sets forth as of the date of closing a complete and accurate list of (i) the name, jurisdiction of organization and organizational identification number of the Parent, the Company and each of its other Subsidiaries, (ii) if the Parent, the Company or any other Subsidiary is not a “registered organization” (as defined in the UCC) organized under that law of a “State” (as defined in the UCC), the location of its place of business (if it has only one place of business) or its chief executive office (if it has more than one place of business), (iii) all real property owned or leased by the Parent, the Company or any of the other Subsidiaries, and (iv) all registered patents, trademarks, trade names, service marks, services names or copyrights owned or licensed by the Parent, the Company or any of the other Subsidiaries.  As of the date hereof, all filings,

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assignments, pledges and deposits of documents or instruments have been made, and all other actions have been taken, that are necessary or advisable under applicable law and are required to be made or taken on or prior to the date of closing under the provisions of this Agreement and the other Transaction Documents to create and perfect a security interest in the Collateral in favor of the Collateral Agent to secure the Notes, the Company’s obligations under the Credit Agreement and each Guarantor’s obligations under its Guaranty Agreement, subject to no Liens other than Liens permitted under paragraph 6C.  The Collateral and the Collateral Agent’s rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses (except any such setoff, claim or defense which could not, individually or in the aggregate, materially impair the rights of the Collateral Agent with respect to the Collateral).  The Parent, the Company or another Subsidiary is the owner of the Collateral described in the Collateral Documents free from any Lien, security interest, encumbrance and any other claim or demand, except for Liens permitted under paragraph 6C.

8R.Foreign Assets Control Regulations, Etc.

(i)            Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.

(ii)           Neither the Parent, nor the Company nor any other Subsidiary (i) is a Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) engages in any dealings or transactions with any such Person.  The Company and its Subsidiaries are in compliance, in all material respects, with the USA Patriot Act.

(iii)          No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such Act applies to the Company.

8S.Disclosure.  Neither this Agreement, any other Transaction Document nor any other document, certificate or statement furnished to any Purchaser by or on behalf of the Parent, the Company or any Subsidiary in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading.  There is no fact or facts  peculiar to the Parent, the Company or any of the other Subsidiaries which materially adversely affects or in the future may (so far as the Parent or the Company can now reasonably foresee), individually or in the aggregate, reasonably be expected to materially adversely affect the business, property or assets, or financial condition of the Parent, the Company or any of the other Subsidiaries and which has not been set forth in this Agreement or in the other documents, certificates and statements furnished to each Purchaser by or on behalf of the Parent prior to the date hereof in connection with the transactions contemplated hereby.  Any financial projections delivered to

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any Purchaser on or prior to the date hereof are reasonable based on the assumptions stated therein and the best information available to the officers of the Company.

8T.Labor Matters.  Except as set forth on Schedule 8T, neither the Parent, nor the Company nor any other Subsidiary is subject to any labor or collective bargaining agreement. There are no existing or threatened strikes, lockouts or other labor disputes involving the Parent, the Company or any other Subsidiary that singly or in the aggregate could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Parent, the Company and the other Subsidiaries are not in material violation of the Fair Labor Standards Act or any other applicable law, rule or regulation dealing with such matters.

8U.Related Agreements, etc.

(a)           The Company has heretofore furnished the Purchasers a true and correct copy of the Related Agreements;

(b)           The Parent, the Company and each other Subsidiary and, to the Company’s knowledge, each other party to the Related Agreements, has duly taken all necessary corporate, partnership or other organizational action to authorize the execution, delivery and performance of the Related Agreements and the consummation of transactions contemplated thereby;

(c)           The Related Transactions will comply in all material respects with all applicable legal requirements, and all necessary governmental, regulatory, creditor, shareholder, partner and other material consents, approvals and exemptions required to be obtained by the Parent, the Company and the other Subsidiaries and, to the Parent’s and the Company’s knowledge, each other party to the Related Agreements in connection with the Related Transactions will be, prior to consummation of the Related Transactions, duly obtained and will be in full force and effect. As of the date of the Related Agreements, all applicable waiting periods with respect to the Related Transactions will have expired without any action being taken by any competent governmental authority which restrains, prevents or imposes material adverse conditions upon the consummation of the Related Transactions;

(d)           The execution and delivery of the Related Agreements did not, and the consummation of the Related Transactions will not, violate any statute or regulation of the United States (including any securities law) or of any state or other applicable jurisdiction, or any order, judgment or decree of any court or governmental body binding on the Parent, the Company or any other Subsidiary or, to the Parent’s and the Company’s knowledge, any other party to the Related Agreements, or result in a breach of, or constitute a default under, any material agreement, indenture, instrument or other document, or any judgment, order or decree, to which the Parent, the Company or any other Subsidiary is a party or by which the Parent, the Company or any other Subsidiary is bound or, to the Parent’s or the Company’s knowledge, to which any other party to the Related Agreements is a party or by which any such party is bound; and

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(e)           No statement or representation made in the Related Agreements by the Parent, the Company or any other Subsidiary or, to the Parent’s or the Company’s knowledge, any other Person, contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading.

8V.Casualty, Etc.  Except as set forth on Schedule 8V, neither the businesses nor the properties of the Parent, the Company or any other Subsidiary are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

8W.Material Contracts.  Schedule 8W lists, as of the date of closing, each Material Contract to which the Parent, the Company or any other Subsidiary is a party, by which either of them or their respective properties is bound or to which either of them is subject.  As of the date of closing, except as set forth on Schedule 8W, (a) each Material Contract is in full force and effect and is enforceable by the Parent, the Company and each other Subsidiary party thereto in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, statutes or rules of general application affecting the enforcement of creditor’s rights or general principles of equity, and (b) neither the Parent, nor the Company nor any other Subsidiary, nor, to the knowledge of the Parent, the Company and the other Subsidiaries, any other party thereto, is in breach of or default under any Material Contract in any material respect or has given notice of termination or cancellation of any Material Contract.

8X.Kraft Acquisition Documents.  With respect to each of the Kraft Acquisition Documents, (i) all representations made by the Parent, the Company or any other Subsidiary in the Kraft Acquisition Documents are complete, true and correct in all material respects as of the date of closing; (ii) the execution and delivery by the Parent, the Company or any other Subsidiary of the Kraft Acquisition Documents and the consummation of the transactions therein contemplated or the compliance with the provisions thereof will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Parent, the Company or such other Subsidiary or any of the provisions of the organizational documents of the Parent, the Company or any other Subsidiary or any of the provisions of any indenture, agreement, document, instrument or undertaking to which the Parent, the Company or any other Subsidiary is a party or subject, or by which the Parent, the Company or any other Subsidiary or any property of the Parent, the Company or any other Subsidiary is bound, or conflict with or constitute a default thereunder or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, agreement, document, instrument or undertaking, except to the extent such violation, conflict or default would not reasonably be likely to result in a Material Adverse Effect; (iii) no material order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental, regulatory, administrative or public body or authority, or any subdivision thereof, or any other Person is required to authorize, or is required in connection with, the execution, delivery or performance of, or the legality, validity, binding effect or enforceability of, any of the Kraft Acquisition

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Documents except those which have already been obtained or given; and (iv) upon the effectiveness of this Agreement, all conditions to effectiveness of the Mead Purchase Agreement have been satisfied.

9.REPRESENTATIONS OF EACH PURCHASER.  Each Purchaser represents as follows:

9A.Nature of Purchase.  Such Purchaser is not acquiring the Notes to be purchased by it hereunder with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act, provided that the disposition of such Purchaser’s property shall at all times be and remain within its control.

9B.Source of Funds.  At least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:

(i)            the Source is an “insurance company general account” (as that term is defined in the United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the “NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

(ii)           the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

(iii)          the Source is either (a) an insurance company pooled separate account, within the meaning of PTE 90-1, or (b) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (iii), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

(iv)          the Source constitutes assets of an “investment fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM

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Exemption), no employee benefit plan’s assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (a) the identity of such QPAM and (b) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this clause (iv); or

(v)           the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Section IV(h) of the INHAM Exemption) owns a 5% or more interest in the Company and (a) the identity of such INHAM and (b) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (v); or

(vi)          the Source is a governmental plan; or

(vii)         the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (vii); or

(viii)        the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this paragraph 9B, the terms “employee benefit plan”, “governmental plan”, and “separate account” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

10.DEFINITIONS; ACCOUNTING MATTERS.  For the purpose of this Agreement, the terms defined in paragraphs 10A and 10B (or within the text of any other paragraph) shall have the respective meanings specified therein and all accounting matters shall be subject to determination as provided in paragraph 10C.

10A.Yield-Maintenance Terms.

“Called Principal” shall mean, with respect to any Note, the principal of such Note that is to be prepaid pursuant to paragraph 4A(2), 4B or 4E or is declared to be or otherwise becomes due and payable pursuant to paragraph 7A, as the context requires.

“Discounted Value” shall mean, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such

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Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (as converted to reflect the periodic basis on which interest on such Note is payable, if interest is payable other than on a semi-annual basis) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” shall mean, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City local time) on the Business Day next preceding the Settlement Date with respect to such Called Principal for the most recent actively traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date on the display designated as “Page PX1” on Bloomberg Financial Markets (or such other display as may replace Page PX1 on Bloomberg Financial Markets or, if Bloomberg Financial Markets shall cease to report such yields or shall cease to be Prudential Capital Group’s customary source of information for calculating yield-maintenance amounts on privately placed notes, then such source as is then Prudential Capital Group’s customary source of such information), or (ii) if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable (including by way of interpolation), the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported as of the Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  In the case of each determination under clause (i) or (ii) of the preceding sentence, such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the applicable U.S. Treasury security with the maturity closest to and greater than such Remaining Average Life and (2) the applicable U.S. Treasury security with the maturity closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to that number of decimal places as appears in the coupon of the applicable Note.

“Remaining Average Life” shall mean, with respect to the Called Principal of any Note, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) each Remaining Scheduled Payment of such Called Principal (but not of interest thereon) by (b) the number of years (calculated to the nearest one-twelfth year) which will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” shall mean, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due on or after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date.

“Settlement Date” shall mean, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to paragraph 4A(2), 4B or 4E

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or is declared to be or otherwise becomes due and payable pursuant to paragraph 7A, as the context requires.

“Yield-Maintenance Amount” shall mean, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Called Principal of such Note over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of (including interest due on) the Settlement Date with respect to such Called Principal.  The Yield-Maintenance Amount shall in no event be less than zero.

10B.Other Terms.

“Account Debtor” has the meaning set forth in the Security Agreement.

“Account or Accounts” has the meaning set forth in the UCC.

“Acquisition” shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the Capital Securities of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).

“Adjusted Working Capital” shall mean the remainder of: (a) (i) the consolidated current assets of the Company and its Subsidiaries minus (ii) the amount of cash and cash equivalents included in such consolidated current assets; minus (b) (i) consolidated current liabilities of the Company and its Subsidiaries minus (ii) the amount of short-term Debt (including current maturities of long-term Debt) of the Company and its Subsidiaries included in such consolidated current liabilities.

“Affiliate” shall mean (i) with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such first Person, and (ii) with respect to Prudential, shall include any managed account, investment fund or other vehicle for which Prudential or any Affiliate of Prudential then acts as investment advisor or portfolio manager.  A Person shall be deemed to control a corporation or other entity if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation or entity, whether through the ownership of voting securities, by contract or otherwise.

“Anti-Terrorism Order” means Executive Order No. 13,224 of September 24, 2001, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.

“Asset Disposition” shall mean the sale, lease, assignment or other transfer for value (each, a “Disposition”) by the Parent, the Company or any other Subsidiary to any Person (other than the Company or a Guarantor) of any asset or right of the Parent, the Company or such other Subsidiary (including, the loss, destruction or damage of any portion thereof or any actual or threatened (in writing to the Parent, the Company or any other Subsidiary) condemnation,

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confiscation, requisition, seizure or taking thereof) other than (a) the sale or lease of inventory in the ordinary course of business and (b) other Dispositions in any fiscal year the Net Proceeds of which do not in the aggregate exceed $5,000,000.

“Bank Agent” shall mean Bank of America, N.A., as agent for the Banks under the Credit Agreement, and its successors and assigns in that capacity.

“Banks” shall mean the institutions from time to time party to the Credit Agreement as lenders, and their respective successors and assigns.

“BONY Documents” shall mean (a) Acknowledgment of Assignment of Indebtedness and Related Liens dated contemporaneously with the date of closing, executed by The Bank of New York and addressed to the Seller, Cogen South L.L.C. and Oak Acquisition, LLC, (b) Assignment of Mortgage and Assignment of Rents and Assignment and Security Agreement dated contemporaneously with the date of closing, executed by The Bank of New York for the benefit of Oak Acquisition, LLC, (c) the Resignation of Agent/Appointment of New Agent letter dated contemporaneously with the date of closing, executed by The Bank of New York and addressed to the Seller, Cogen South L.L.C. and Oak Acquisition, LLC, and (d) the Letter Agreement relating to the assignment of Collateral from the Bank of New York to Oak Acquisition, LLC.

“Business” has the meaning given such term in the Mead Purchase Agreement.

“Business Day” shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

“Capital Expenditures” shall mean all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of the Parent, including expenditures in respect of Capital Leases, but excluding any such expenditures for which the Company has been reimbursed by the Seller pursuant to the Kraft Acquisition Documents and expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced.

“Capital Securities” shall mean, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the date of closing, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership, interests in a trust, interests in other unincorporated organizations, warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests) or any other equivalent of such ownership interest.

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“Capital Lease” shall mean, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person.

“Cash Equivalent Investment” shall mean, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case rated at least A-l by S&P or P-l by Moody’s, (c) any certificate of deposit, time deposit or banker’s acceptance, maturing not more than one year after such time, or any overnight federal funds transaction that is issued or sold by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, (d) any repurchase agreement entered into with any commercial banking institution of the nature referred to in clause (c)  which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder and (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements, and (f) other short term liquid investments approved in writing by the Required Holders.

“Cash Management Agreement” shall mean any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, credit card processing, purchase card, ACH transactions, electronic funds transfer and other cash management arrangements.

“Change of Control” shall mean the occurrence of any of the following events: (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all Capital Securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than 35% of the Capital Securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent 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); provided that the acquisition by any one or more Exempt Persons (as defined below) (acting singly or in concert) of the “beneficial ownership” of 35% or more of the Capital Securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent 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) shall not be a Change of Control; (b) a majority of the members of the Board of Directors of the Parent shall cease to be Continuing Members (as defined below); (c) the Parent shall cease to own and control 100% of each class of the outstanding Capital Securities of the Company; (d) the Company shall cease to, directly or indirectly, own and control 100% of each class of the outstanding Capital Securities of each Subsidiary (other than the Company); or (e) all of Roger W. Stone (or a replacement reasonably satisfactory to the Required Holders),

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Matthew Kaplan (or a replacement reasonably satisfactory to the Required Holders) and Timothy Keneally (or a replacement reasonably satisfactory to the Required Holders) shall cease at any time to be employed full time by the Parent in a position at least equivalent to their current respective positions; provided, however, such an event under this clause (e) shall not constitute a Change of Control for up to 135 days if the Parent is diligently working to replace such Person(s) with a reasonably qualified candidate (or candidates) to perform the same or similar duties as such Person(s).  For purposes of the foregoing, (x) “Continuing Member” shall mean a member of the Board of Directors of Parent who either (i) was a member of Parent’s Board of Directors on the day before the date of closing and has been such continuously thereafter or (ii) became a member of such Board of Directors after the day before the date of closing and whose election or nomination for election by the stockholders of Parent was approved by a vote of the majority of the Continuing Members then members of Parent’s Board of Directors and (y) “Exempt Person” shall mean each member of the class consisting of:  (i) Roger Stone, (ii) Matthew Kaplan and (iii) so long as voting control is retained by such Person, any spouse, lineal descendant, parent or sibling of such Person, or any trust or similar estate planning entity controlled by such Person or whose beneficiaries or owners are solely comprised of such Person’s spouse, lineal descendant, parent or sibling.

“closing” or “date of closing” shall have the meaning given in paragraph 2 hereof.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Cogen Junior Notes” shall mean the subordinated promissory note from Cogen JV to the Company dated October 22, 2001 in the original principal amount of $9,500,000 and the subordinated promissory note from Cogen JV to the Company dated December 31, 2004 in the original principal amount of $57,500,000.

“Cogen JV” shall mean Cogen South LLC, a Delaware limited liability company.

“Cogen Loan Agreement” shall mean that certain Amended and Restated Construction and Term Loan Agreement of Cogen JV dated as of December 15, 1996, as amended or assigned, and all documents executed in connection therewith.

“Cogen Notes” shall mean the Cogen Senior Notes and the Cogen Junior Notes.

“Cogen Senior Notes” shall mean all indebtedness outstanding under the Cogen Loan Agreement, including those certain Replacement Promissory Notes dated as of December 31, 1998 executed by Cogen JV in favor of the Company in the principal amounts of $50,000,000 and $8,039,721.92, respectively.

“Collateral” shall mean all of the “Collateral” and “Mortgaged Property” referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Collateral Agent for the benefit of the Banks and the holders of the Notes.

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“Collateral Agent” shall mean Bank of America, N.A., in its capacity as collateral agent under the Intercreditor Agreement, and its successor and assigns in that capacity.

“Collateral Documents” shall mean the Security Agreements, the Mortgages, the Deposit Account Control Agreements, the Securities Account Control Agreements, the estoppel and consent agreements, and any other agreement, document or instrument in effect on the date of closing or executed by the Parent or any Subsidiary after the date of closing under which the Parent or such Subsidiary has granted a lien upon or security interest in any property or assets to the Collateral Agent to secure all or any part of the obligations of the Company under this Agreement or the Notes or of any Guarantor under any Guaranty Agreement, and all financing statements, certificates, documents and instruments relating thereto or executed or provided in connection therewith, each as amended, restated, supplemented or otherwise modified from time to time.

“Consolidated Net Income” shall mean, with respect to the Parent and its Subsidiaries for any period, the net income (or loss) of the Parent and its Subsidiaries for such period, excluding any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations.

“Contingent Liability” shall mean, with respect to any Person, each obligation and liability of such Person and all such obligations and liabilities of such Person incurred pursuant to any agreement, undertaking or arrangement by which such Person: (a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection), including any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (b) guarantees the payment of dividends or other distributions upon the Capital Securities of any other Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor, (ii) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, working capital or other financial condition of any other Person, or (iii) to make payment to any other Person other than for value received; (d) agrees to lease property or to purchase securities, property or services from such other Person with the purpose or intent of assuring the owner of such indebtedness or obligation of the ability of such other Person to make payment of the indebtedness or obligation; (e) induces the issuance of any letter of credit for the benefit of such other Person; or (f) undertakes or agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability which is in the form of a guaranty of Debt shall (subject to the limitation set forth below and any other limitation set forth herein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or other liability guaranteed or supported thereby.  The amount of any Contingent Liability which is not in the form of a guaranty of Debt shall be equal to the reasonably anticipated maximum amount of such Contingent Liability as determined by such Person in good faith.

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“Credit Agreement” shall mean the “Credit Agreement”, dated as of June 12, 2008, between the Parent, the Company, the Bank Agent and the Banks, as amended, restated, supplemented or otherwise modified from time to time.

“Cumulative Available Excess Cash Flow” shall mean, as of any date of determination, the sum of Available Excess Cash Flow (as defined below) for each of the fiscal years ended prior to such date of determination for which audited financial statements of the Parent and its Subsidiaries have been delivered to each Significant Holder in accordance with paragraph 5A(iii) (commencing with the 2008 fiscal year). “Available Excess Cash Flow” shall mean (a) with respect to the 2008 fiscal year, 50% of Excess Cash Flow for the period commencing the date of closing through the end of such fiscal year, (b) with respect to the 2009 fiscal year, 50% of Excess Cash Flow for such fiscal year and (c) with respect to the 2010 fiscal year and each fiscal year thereafter, (i) if as of such date of determination the Total Leverage Ratio is greater than or equal to 2.0:1.0, 50% of Excess Cash Flow for such fiscal year and (ii) if as of such date of determination the Total Leverage Ratio is less than 2.0:1.0, 100% of Excess Cash Flow for such fiscal year.

“Debt” of any Person shall mean, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business but including the Earn-Out Obligations), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person; provided that if such Person has not assumed or otherwise become liable for such indebtedness, such indebtedness shall be measured at the fair market value of such property securing such indebtedness at the time of determination, (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for the account of such Person (including the Letters of Credit), (f) all Hedging Obligations of such Person, (g) all Contingent Liabilities of such Person, (h) all Debt of any partnership of which such Person is a general partner, (i) the principal portion of all obligations of such Person under Synthetic Lease Obligations and other Off-Balance Sheet Liabilities (excluding Operating Leases to the extent they would otherwise be included) and (j) any Capital Securities or other equity instrument, whether or not mandatorily redeemable, that under GAAP is characterized as debt, whether pursuant to financial accounting standards board issuance No. 150 or otherwise.

“Debt to be Repaid” shall mean Debt listed on Schedule 6B(g).

“Debtor Relief Laws” shall mean the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” shall mean any of the events specified in paragraph 7A, whether or not any requirement for such event to become an Event of Default has been satisfied.

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“Default Rate” shall mean a rate per annum from time to time equal to the greater of (i) 10.30% or (ii) 2.00% over the rate of interest publicly announced by JPMorgan Chase Bank from time to time as its “prime rate.”

“Deposit Account Control Agreement” shall mean an agreement, among the Company or a Guarantor, a depository institution, and the Collateral Agent, which agreement is in a form acceptable to the Collateral Agent and which provides the Collateral Agent with “control” (as such term is used in Article 9 of the Uniform Commercial Code) over the deposit account(s) described therein, as the same may be amended, modified, extended, restated, replaced, or supplemented from time to time.

“Domestic Subsidiary” shall mean any Subsidiary that is organized under the laws of any political subdivision of the United States.

“Earn-Out Obligations” shall mean the Company’s payment obligations under Sections 1.11 and 1.12 of the International Paper Purchase Agreement.

“EBITDA” shall mean, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income for such period (without duplication), (a) Interest Expense, (b) income tax expense, (c) depreciation and amortization, (d) extraordinary losses (or less gains), net of related tax effects, (e) other non-cash charges or losses (or less gains or income) for which no cash outlay (or cash receipt) is foreseeable, (f) “cold mill” maintenance outage costs in an aggregate amount of up to $7,500,000 for the term of this Agreement (it being understood that such add-back shall only be permitted in connection with one such outage until all of the Notes have been repaid in full) but only to the extent that (i) the aggregate amount of such costs for such period exceeds the actual expense allocable to such outage during such period and (ii) any such resulting add-back is applied to reduce EBITDA in the future periods to which such expenses actually relate on a dollar for dollar basis and (g) expenses and fees incurred to consummate the transactions contemplated by the Transaction Documents in an aggregate amount for all periods not exceeding $13,500,000. For purposes of calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio, (i) EBITDA shall be deemed to be: $38,877,600 for the fiscal quarter ending September 30, 2007, $39,298,700 for the fiscal quarter ending December 31, 2007 and $33,475,400 for the fiscal quarter ending March 31, 2008 and (ii) EBITDA for the period from April 1, 2008 to the date of closing shall be determined in a manner consistent with clause (i) above.

“Environmental Claims” shall mean all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.

“Environmental Laws” shall mean all present or future federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative or judicial orders, consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to any matter arising out of or relating to public health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the

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presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission, release, threatened release, control or cleanup of any Hazardous Substance.

“Environmental Liability” shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Parent, the Company or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Substances, (c) exposure to any Hazardous Substances, (d) the release or threatened release of any Hazardous Substances into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean any corporation which is a member of the same controlled group of corporations as the Parent or the Company within the meaning of section 414(b) of the Code, or any trade or business which is under common control with the Company within the meaning of section 414(c) of the Code.

“Event of Default” shall mean any of the events specified in paragraph 7A, provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act.

“Excess Cash Flow” shall mean, for any period, (a) EBITDA for such period, minus (b) scheduled repayments of principal of the Term Loans (as defined in the Credit Agreement) made during such period, minus (c) voluntary prepayments of the Term Loans (as defined in the Credit Agreement) during such period, minus (d) scheduled or voluntary prepayments of the Notes during such period, minus (e) cash payments made in such period with respect to Capital Expenditures (to the extent such cash payments are unfinanced), minus (f) all income taxes paid in cash by the Company and the Guarantors during such period, minus (g) cash Interest Expense of the Company and the Guarantors during such period, minus (h) any cash losses (and plus any cash gains) from extraordinary items to the extent excluded from the calculation of EBITDA, minus (i) any increase in Adjusted Working Capital for such period.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Existing Credit Agreement” shall have the same meaning given in paragraph 3J hereof

“Extraordinary Receipt” shall mean any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments.

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“FILOT Lease” shall mean, collectively, (i) the lease agreement to be entered into on or before the date of closing between Charleston County, South Carolina and KapStone Charleston Kraft LLC and (ii) the lease agreement to be entered into on or before the date of closing between Charleston County, South Carolina and Cogen South LLC.

“Fixed Charge Coverage Ratio” shall mean, as of the last day of any fiscal quarter, for the period of four consecutive fiscal quarters ending in such date, the ratio of (a) the total for such period of (i) EBITDA minus (ii) the sum of income taxes paid in cash by the Parent and its Subsidiaries minus (iii) cash dividends paid during such period minus (iv) all unfinanced Capital Expenditures to (b) the sum for such period of (i) cash Interest Expense plus (ii) required payments of principal of Funded Debt (including the Notes and the Term Loans (as defined in the Credit Agreement) but excluding the Revolving Credit Loans (as defined in the Credit Agreement) and the Intercompany Subordinated Debt); provided, with respect to each of clauses (a)(ii), (a)(iii), (a)(iv), (b)(i) and (b)(ii) above, for any fiscal quarter ending during the first three full fiscal quarters following the date of closing, the relevant amount shall be determined not by taking the actual amount for such four consecutive fiscal quarter period but instead by dividing (x) the actual amount of such item from the date of closing to such fiscal quarter end by (y) the number of days from (and including) the date of closing to (and including) such fiscal quarter end and multiplying the quotient by 365.

“Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.

“Funded Debt” shall mean, as to any Person, all Debt for borrowed money of such Person that matures more than one year from the date of its creation (or is renewable or extendible, at the option of such Person, to a date more than one year from such date).

“Governmental Authority” shall mean the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Hedging Obligation” shall mean, with respect to any Person, any liability of such Person under any Swap Contract.

“Guarantor” shall mean the Parent and each Domestic Subsidiary of the Company in existence as of the date of closing and each other Person which may from time to time execute a Guaranty Agreement.

“Guaranty Agreement” and “Guaranty Agreements” shall have the same meaning given in paragraph 3A (iii) hereof.

“including” shall mean, unless the context clearly requires otherwise, “including without limitation”, whether or not so stated.

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“Institutional Investor” shall mean any insurance company, commercial, investment or merchant bank, finance company, mutual fund, registered money or asset manager, savings and loan association, credit union, registered investment advisor, pension fund, investment company, licensed broker or dealer, “qualified institutional buyer” (as such term is defined under Rule 144A promulgated under the Securities Act) or “accredited investor” (as such term is defined in Regulation D promulgated under the Securities Act).

“Intercompany Subordinated Debt” shall mean unsecured Debt of the Company to Parent in respect of the loan made by Parent to the Company pursuant to the Intercompany Subordinated Note.

“Intercompany Subordinated Note” shall mean that certain Subordinated Promissory Note dated as of the date of closing by the Company in favor of Parent.

“Intercompany Subordination Agreement” shall mean that certain Subordination and Intercreditor Agreement dated as of the date hereof by and among Parent, Company, the Bank Agent and the holders of the Notes, as amended, restated or otherwise modified from time to time pursuant to the terms thereof.

“Intercreditor Agreement” shall have the meaning given in paragraph 3A(ii) hereof.

“Interest Expense” shall mean for any period the consolidated interest expense of the Parent and its Subsidiaries for such period (including all imputed interest on Capital Leases).

“International Paper Purchase Agreement” shall mean that certain Purchase Agreement dated as of June 23, 2006 among the Parent, the Company and International Paper Company, as amended from time to time.

“Investment” shall mean, with respect to any Person, any investment in another Person, whether by acquisition of any Debt or Capital Security, by making any loan or advance, by becoming obligated with respect to a Contingent Liability in respect of obligations of such other Person (other than travel and similar advances to employees in the ordinary course of business) or by making an Acquisition.

“Kraft Acquisition” shall have the meaning given  in paragraph 3K.

“Kraft Acquisition Documents” shall have the meaning given  in paragraph 3K.

“Lien” shall mean, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person (including an interest in respect of a Capital Lease) which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

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“Material Adverse Effect” shall mean (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business or properties of the Company and the Guarantors taken as a whole, (b) a material impairment of the ability of the Company or any Guarantor to perform any of its respective obligations under this Agreement the Notes or any other Transaction Document or (c) a material adverse effect upon any substantial portion of the collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against the Company or any Guarantor of any Transaction Document.

“Material Contract” shall mean, with respect to any Person, (a) each contract or other agreement, written or oral, to which such Person is a party involving aggregate consideration payable to or by such Person of $10,000,000 or more and (b) any other contract, agreement, permit or license, written or oral, to which such Person is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect.

“Mead Purchase Agreement” shall have the meaning given in paragraph 3K hereof.

“Moody’s” shall mean Moody’s Investors Service, Inc. and any successor thereto.

“Mortgage” and “Mortgages” shall have the meaning given in paragraph 3A(v) hereof.

“Multiemployer Plan” shall mean any Plan which is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).

“Net Cash Proceeds” shall mean:

(a)           with respect to any Asset Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance or by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Company or any Guarantor pursuant to such Asset Disposition net of (i) the direct costs relating to such sale, transfer or other disposition (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Company to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to such Asset Disposition (other than the Senior Debt);

(b)           with respect to any issuance or exercise of Capital Securities (including, without limitation, the Warrants), the aggregate cash proceeds received by the Company or any Guarantor pursuant to such issuance or exercise, net of the direct costs relating to such issuance or exercise (including sales and underwriters’ commissions); and

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(c)           with respect to any issuance of Debt, the aggregate cash proceeds received by the Parent, the Company or any other Subsidiary pursuant to such issuance, net of the direct costs of such issuance (including up-front, underwriters’ and placement fees).

“Notes” shall have the meaning given in paragraph 1 hereof.

“Off-Balance Sheet Liabilities” shall mean, with respect to any Person as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with respect to any asset securitization or similar transaction (including any accounts receivable purchase facility) (i) the unrecovered investment of purchasers or transferees of assets so transferred and (ii) any other payment, recourse, repurchase, hold harmless, indemnity or similar obligation of such Person or any of its Subsidiaries in respect of assets transferred or payments made in respect thereof, other than limited recourse provisions that are customary for transactions of such type and that neither (x) have the effect of limiting the loss or credit risk of such purchasers or transferees with respect to payment or performance by the obligors of the assets so transferred nor (y) impair the characterization of the transaction as a true sale under applicable Laws (including Debtor Relief Laws); or (b) the monetary obligations under any financing lease (excluding any operating lease) or so-called “synthetic,” tax retention or off-balance sheet lease transaction which, upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness; or (c) the monetary obligations under any sale and leaseback transaction which does not create a liability on the consolidated balance sheet of such Person and its Subsidiaries; or (d) any other monetary obligation arising with respect to any other transaction which (i) upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness or (ii) is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries (for purposes of this clause (d), any transaction structured to provide tax deductibility as interest expense of any dividend, coupon or other periodic payment will be deemed to be the functional equivalent of  a borrowing).

“Officer’s Certificate” shall mean a certificate signed in the name of the Parent or the Company, as applicable, by its President, one of its Vice Presidents or its Treasurer.

“Operating Lease” shall mean any lease of (or other agreement conveying the right to use) any real or personal property by the Company or any Guarantor, as lessee, other than any Capital Lease and obligations in respect of the FILOT Lease.

“Organization Documents” shall mean, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or

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organization and, if applicable, any certificate or articles of formation or organization of such entity.

“PBGC” shall mean the Pension Benefit Guaranty Corporation, or any successor or replacement entity thereto under ERISA.

“Person” shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization and a government or any department or agency thereof.

“Permitted Acquisition” shall mean any Proposed Acquisition which is either (a) approved in writing by the Required Holders or (b) which satisfies each of the following conditions:

(i)            Other than Debt permitted under paragraph 6B, neither the Parent, nor the Company nor any other Subsidiary shall incur or assume any Debt or other liabilities in connection with such Proposed Acquisition except for ordinary course trade payables and accrued expenses. No earn-out or similar payment obligations shall be incurred in connection with such Proposed Acquisition unless approved in writing by the Required Holders ;

(ii)           Before and after giving effect to such Proposed Acquisition, no Default or Event of Default shall have occurred and be continuing;

(iii)          The aggregate amount payable in connection with, and other consideration for (in each case, including all transaction costs and all Debt, liabilities and Contingent Liabilities incurred or assumed in connection therewith or otherwise reflected in a consolidated balance sheet of the Parent and such acquired Person) such Proposed Acquisition and all other Permitted Acquisitions under clause (b) of this definition shall not exceed $60,000,000;

(iv)          After giving effect to such Proposed Acquisition, the Parent shall be in compliance on a pro forma basis with the financial covenants set forth in paragraph 6A, recomputed for the most recent fiscal quarter for which financial statements have been delivered;

(v)           Upon consummation of such Proposed Acquisition, the Collateral Agent shall have a perfected first priority Lien upon all assets acquired in connection therewith, subject only to Permitted Liens;

(vi)          Not less than twenty (20) Business Days prior to consummating such Proposed Acquisition, the Company shall deliver to the holders of the Notes an acquisition summary with respect to such Proposed Acquisition, such summary to include (A) a reasonably detailed description of the business to be acquired (including financial information) and operating results (including financial statements in form and substance reasonably satisfactory to the Required Holders), (B) the terms and conditions, including economic terms, of the Proposed Acquisition, and (C) pro forma financial projections for

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the Parent and its Subsidiaries for the four fiscal quarters following the date of such Proposed Acquisition, together with a calculation of the Parent’s compliance on a Pro Forma Basis with the financial covenants set forth in paragraph 6A for such period, in each case in form and substance reasonably satisfactory to the Required Holders;

(vii)         The holders of the Notes shall have been furnished with copies of the Company’s business, legal and environmental due diligence with respect to the proposed business and assets to be acquired, with results reasonably satisfactory to the Required Holders; and

(viii)        Prior to consummating such Proposed Acquisition, the Company shall provide the holders of the Notes with all acquisition documents relating thereto and such other information (including officer’s certificates and opinions of counsel) as the Required Holders shall reasonably request in order to confirm that the conditions set forth herein have been satisfied.

“Permitted Lien” shall mean a Lien expressly permitted hereunder pursuant to paragraph 6C.

“Permitted Parent Dividends” shall mean the dividend the Company is permitted to pay to the Parent in an aggregate amount not to exceed (a) (i) from the date of closing through the fiscal year ending December 31, 2009, 50% of Cumulative Available Excess Cash Flow and (ii) thereafter, 100% of Cumulative Available Excess Cash Flow plus (b) an aggregate amount of up to $500,000 in connection with the redemption of the Warrants pursuant to the terms thereof and in connection with the obligations of the Parent pursuant to the Underwriting Agreement, if applicable.

“Plan” shall mean any “employee pension benefit plan” (as such term is defined in section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any ERISA Affiliate.

“Pro Forma Basis” shall mean, with respect to any determination for any period and any Pro Forma Transaction, that such determination shall be made by giving pro forma effect to each such Pro Forma Transaction, as if each such Pro Forma Transaction had been consummated on the first day of such period.

“Pro Forma Transaction” shall mean any transaction consummated as part of any Permitted Acquisition, together with each other transaction relating thereto and consummated in connection therewith, including any incurrence or repayment of Debt.

“Proposed Acquisition” shall mean (a) any proposed acquisition that is consensual and approved by the board of directors of such Proposed Acquisition Target, of all or substantially all of the assets or Capital Securities of any Proposed Acquisition Target by the Company or any Subsidiary of the Company or (b) any proposed merger of any Proposed Acquisition Target with or into the Company or any Subsidiary of the Company (and, in the case of a merger with the Company, with the Company being the surviving corporation).

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“Proposed Acquisition Target” shall mean any Person or any brand, line of business, division, branch, operating division or other unit operation of any Person.

“Proposed Prepayment Date” shall have the meaning given in paragraph 4E(4) hereof.

“Prudential” shall mean The Prudential Insurance Company of America.

“Purchasers” shall have the meaning given in the introductory paragraph hereof.

“Ratable Portion” shall mean, as of any date of determination, with respect to the Notes of any holder of the Notes that has accepted an offer to prepay the Notes upon a Senior Debt Prepayment Event pursuant to paragraph 4E, an amount equal to the product of (a) the Net Cash Proceeds required under the Credit Agreement to be applied to the prepayment of any Senior Debt in connection with such Senior Debt Prepayment Event multiplied by (b) a fraction, the numerator of which is (x) the then aggregate outstanding principal amount of the Notes held by such holder (y) the denominator of which is the then aggregate outstanding principal amount of all Senior Debt to which such Net Cash Proceeds are so required to be applied.

“Related Agreements” shall mean the Kraft Acquisition Documents and all agreements and instruments entered into or delivered in connection therewith, including without limitation all supply agreements and transitional services agreements with Seller.

“Related Transactions” shall mean the transactions contemplated by the Related Agreements.

“Reportable Event” shall mean a reportable event as defined in Section 4043 of ERISA and the regulations issued thereunder as to which the PBGC has not waived the notification requirement of Section 4043(a), or the failure of a Plan to meet the minimum funding standards of Section 412 of the Code (without regard to whether the Plan is a plan described in Section 4021(a)(2) of ERISA) or under Section 302 of ERISA.

“Required Holder(s)” shall mean the holder or holders of more than 50% of the aggregate principal amount of the Notes from time to time outstanding.

“Responsible Officer” shall mean the chief executive officer, chief operating officer, chief financial officer or chief accounting officer of the Company or any Guarantor or any other officer of the Parent or the Company or any Guarantor involved principally in its financial administration or its controllership function.

“S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

“SCANA Side Letters” shall mean those certain letter agreements dated as of April 3, 2008 and April 4, 2008, among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, SCANA Corporation, South Carolina Electric and Gas Company, Cogen South L.L.C., the Parent and Oak Acquisition LLC.

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“Securities Account Control Agreements” shall have the meaning given in the Security Agreement.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Security Agreement” and “Security Agreements” shall have the meaning given in paragraph 3A(iv) hereof.

“Seller” shall mean a collective reference to MeadWestvaco Corporation and MeadWestvaco South Carolina LLC.

“Senior Debt” shall mean the Notes and the “Loans” (as defined in the Credit Agreement).

“Senior Debt Prepayment Event” shall mean any event giving rise to the requirement to make a prepayment of Senior Debt pursuant to Section 2.05(b)(i), (ii), (iii), (iv), (v) or (vi) of the Credit Agreement as in effect on the date of closing.

“Significant Holder” shall mean (i) each Purchaser, so long as such Purchaser or any of its Affiliates shall hold (or be committed under this Agreement to purchase) any Note, or (ii) any other Person which, together with its Affiliates, is the holder of at least 5% of the aggregate principal amount of the Notes from time to time outstanding.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Parent.  For the avoidance of doubt, any reference to a “Subsidiary” of the Parent shall include the Company.

“Swap Contract” shall mean (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules,

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a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Synthetic Lease Obligation” shall mean the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).  In no event shall any Operating Lease or any FILOT Lease be construed as a Synthetic Lease Obligation.

“Teachers” shall mean Teachers Insurance and Annuity Association of America.

“Termination Event” shall mean, with respect to a Plan that is subject to Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Company or any ERISA Affiliate from such Plan during a plan year in which the Company or any ERISA Affiliate was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA, (c) the termination of such Plan, the filing of a notice of intent to terminate the Plan or the treatment of an amendment of such Plan as a termination under Section 4041 of ERISA, (d) the institution by the PBGC of proceedings to terminate such Plan or (e) any event or condition that might constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, such Plan.

“Total Debt” shall mean all Debt of the Parent and its Subsidiaries, determined on a consolidated basis, excluding (a) contingent obligations in respect of Contingent Liabilities (except to the extent constituting Contingent Liabilities in respect of Debt of a Person other than the Company or any Guarantor or in respect of Letters of Credit (as defined in the Credit Agreement)), (b) Hedging Obligations, (c) Debt of the Parent to Subsidiaries and Debt of Subsidiaries to the Parent or to other Subsidiaries and (d) the Earn-Out Obligations.

“Total Leverage Ratio” shall mean, as of the last day of any fiscal quarter, the ratio of (a) Total Debt as of such day to (b) EBITDA for the period of four consecutive fiscal quarters ending on such day.

“Total Plan Liability” shall mean, at any time, the present value of all vested and unvested accrued benefits under all Pension Plans, determined as of the then most recent valuation date for each Plan, using PBGC actuarial assumptions for single employer plan terminations.

“Transaction Documents” shall mean this Agreement, the Notes, the Intercreditor Agreement, the Guaranty Agreements, the Collateral Documents, the Intercompany Note Subordination Agreement and the other agreements, documents, certificates and instruments now or hereafter executed or delivered by the Company or any Subsidiary or Affiliate in connection with this Agreement.

“Transferee” shall mean any direct or indirect transferee of all or any part of any Note purchased by any Purchaser under this Agreement.

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“UCC” shall mean the Uniform Commercial Code as in effect in the State of Illinois; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, “UCC” shall mean the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

“Underwriting Agreement” shall mean the Underwriting Agreement dated on or about August 15, 2005 between Stone Arcade Acquisition Corporation, Morgan Joseph & Co., Inc., as Representative, and the other Underwriters identified therein, as in effect on the date of closing.

“Unfunded Liability” shall mean the amount (if any) by which the present value of all vested and unvested accrued benefits under all Plans exceeds the fair market value of all assets allocable to those benefits, all determined as of the then most recent valuation date for each Plan, using PBGC actuarial assumptions for single employer plan terminations.

“USA Patriot Act” shall mean United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

“Warrants” shall mean those certain warrants to purchase 40,000,000 shares of common stock of the Parent at an exercise price of $5.00 per share dated on or about August 15, 2005.

“Wholly-Owned Subsidiary” shall mean any Subsidiary of the Company all of the outstanding capital stock or other equity interests of every class of which is owned by the Company or another Wholly-Owned Subsidiary of the Company.

10C.       Accounting Principles, Terms and Determinations.  All references in this Agreement to “generally accepted accounting principles” or “GAAP” shall be deemed to refer to generally accepted accounting principles in effect in the United States at the time of application thereof. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all unaudited financial statements and certificates and reports as to financial matters required to be furnished hereunder shall be prepared, in accordance with generally accepted accounting principles, applied on a basis consistent with the most recent audited consolidated financial statements of the Company and its Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such statements have been so delivered, the most recent audited financial statements referred to in clause (i) of paragraph 8B.  Notwithstanding the foregoing, if at any time any change in GAAP or in accounting practices as permitted under paragraph 6N hereof would affect the computation of any financial ratio or requirement set forth in any Transaction Document, and either the Company or the Required Holders shall so request, the holders of the Notes and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or accounting practices (subject to the approval of the Required Holders); provided that, until so amended, (i) such ratio or requirement shall continue

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to be computed in accordance with GAAP or past accounting practices prior to such change therein and (ii) the Company shall provide to the holders of the Notes financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP or accounting practices, as appropriate.  Any reference herein to any specific citation, section or form of law, statute, rule or regulation shall refer to such new, replacement or analogous citation, section or form should such citation, section or form be modified, amended or replaced.  All references herein to consolidated financial statements of the Parent and its Subsidiaries or to the determination of any amount for the Parent and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Parent is required to consolidate pursuant to FASB Interpretation No. 46 — Consolidation of Variable Interest Entities: an interpretation of ARB No. 51 (January 2003) as if such variable interest entity were a Subsidiary as defined herein.

11.          MISCELLANEOUS.

11A.       Note Payments.  The Company agrees that, so long as any Purchaser shall hold any Note, it will make payments of principal of, interest on and any Yield-Maintenance Amount payable with respect to such Note, which comply with the terms of this Agreement, by wire transfer of immediately available funds for credit (not later than 12:00 noon, New York City time, on the date due) to such Purchaser’s account or accounts as specified in the Purchaser Schedule attached hereto, or such other account or accounts in the United States as such Purchaser may from time to time designate in writing, notwithstanding any contrary provision herein or in any Note with respect to the place of payment.  Each Purchaser agrees that, before disposing of any Note, such Purchaser will make a notation thereon (or on a schedule attached thereto) of all principal payments previously made thereon and of the date to which interest thereon has been paid.  The Company agrees to afford the benefits of this paragraph 11A to any Transferee which shall have made the same agreement as each Purchaser has made in this paragraph 11A.  No holder shall be required to present or surrender any Note or make any notation thereon, except that upon the written request of the Company made concurrently with or reasonably promptly after the payment or prepayment in full of any Note, the applicable holder shall surrender such Note for cancellation, reasonably promptly after such request, to the Company at its principal office.

11B.       Expenses.  Whether or not the transactions contemplated hereby shall be consummated, the Company shall pay, and save each Purchaser and any Transferee harmless against liability for the payment of, all out-of-pocket expenses arising in connection with such transactions, including:

(i)            (a) all stamp and documentary taxes and similar charges, (b) costs of obtaining a private placement number from Standard and Poor’s Ratings Group for the Notes and (c) fees and expenses of brokers, agents, dealers, investment banks or other intermediaries or placement agents, in each case as a result of the execution and delivery of this Agreement or the other Transaction Documents or the issuance of the Notes;

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(ii)           document production and duplication charges and the reasonable fees and expenses of any special counsel engaged by such Purchaser or such Transferee in connection with (a) this Agreement, any of the other Transaction Documents and the transactions contemplated hereby or thereby and (b) any subsequent proposed waiver, amendment or modification of, or proposed consent under, this Agreement or any other Transaction Document, whether or not such proposed waiver, amendment, modification or consent shall be effected or granted;

(iii)          the costs and expenses, including attorneys’ and financial advisory fees, incurred by such Purchaser or such Transferee in enforcing (or determining whether or how to enforce or cause the Collateral Agent to enforce) any rights under this Agreement, the Notes or any other Transaction Document (including, without limitation, to protect, collect, lease, sell, take possession of, release or liquidate any of the Collateral) or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or any other Transaction Document or the transactions contemplated hereby or thereby or by reason of your or such Transferee’s having acquired any Note, including without limitation costs and expenses incurred in any workout, restructuring or renegotiation proceeding or bankruptcy case;

(iv)          all costs and expenses, including without limitation reasonable attorneys’ fees, preparing, recording and filing all financing statements, instruments and other documents to create, perfect and fully preserve and protect the Liens granted in the Collateral Documents and the rights of the holders of the Notes or of the Collateral Agent for the benefit of the holders of the Notes; and

(v)           any judgment, liability, claim, order, decree, cost, fee, expense, action or obligation resulting from the consummation of the transactions contemplated hereby, including the use of the proceeds of the Notes by the Company, except to the extent resulting from the gross negligence or willful misconduct of the holders of the Notes.

The Company also will promptly pay or reimburse each Purchaser or holder of a Note (upon demand, in accordance with each such Purchaser’s or holder’s written instruction) for all fees and costs paid or payable by such Purchaser or holder to the Securities Valuation Office of the National Association of Insurance Commissioners in connection with the initial filing of this Agreement and all related documents and financial information, and all subsequent annual and interim filings of documents and financial information related to this Agreement, with such Securities Valuation Office or any successor organization acceding to the authority thereof.

The obligations of the Company under this paragraph 11B shall survive the transfer of any Note or portion thereof or interest therein by any Purchaser or Transferee and the payment of any Note.

11C.       Consent to Amendments.  This Agreement may be amended, and the Parent and Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Parent and the Company shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s) except that, without the written consent of the holder or holders of all Notes at the time outstanding, no amendment to this

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Agreement shall change the maturity of any Note, or change the principal of, or the rate, method of computation  or time of payment of interest on or any Yield-Maintenance Amount payable with respect to any Note, or affect the time, amount or allocation of any  prepayments, or change the proportion of the principal amount of the Notes required with respect to any consent, amendment, waiver or declaration.  Each holder of any Note at the time or thereafter outstanding shall be bound by any consent authorized by this paragraph 11C, whether or not such Note shall have been marked to indicate such consent, but any Notes issued thereafter may bear a notation referring to any such consent.  No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of any Note.  Without limiting the generality of the foregoing, no negotiations or discussions in which any holder of any Note may engage regarding any possible amendments, consents or waivers with respect to this Agreement or any other Transaction Document shall constitute a waiver of any Default or Event of Default, any term of this Agreement or any other Transaction Documents or any rights of any such holder under this Agreement or any other Transaction Document.  As used herein and in the Notes, the term “this Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

11D.       Form, Registration, Transfer and Exchange of Notes; Lost Notes.  The Notes are issuable as registered notes without coupons in denominations of at least $100,000, except as may be necessary to (i) reflect any principal amount not evenly divisible by $100,000 or (ii) enable the registration of transfer by a holder of its entire holding of Notes; provided, however, that no such minimum denomination shall apply to Notes issued upon transfer by any holder of the Notes to Prudential or any of Prudential’s Affiliates or to any other entity or group of Affiliates with respect to which the Notes so issued or transferred shall be managed by a single entity.  The Company shall keep at its principal office a register in which the Company shall provide for the registration of Notes and of transfers of Notes.  Upon surrender for registration of transfer of any Note at the principal office of the Company, the Company shall, at its expense, execute and deliver one or more new Notes of like tenor and of a like aggregate principal amount, registered in the name of such transferee or transferees.  At the option of the holder of any Note, such Note may be exchanged for other Notes of like tenor and of any authorized denominations, of a like aggregate principal amount, upon surrender of the Note to be exchanged at the principal office of the Company.  Whenever any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver the Notes which the holder making the exchange is entitled to receive.  Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the holder of such Note or such holder’s attorney duly authorized in writing.  Any Note or Notes issued in exchange for any Note or upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest shall result from any such transfer or exchange.  Upon receipt of written notice from the holder of any Note of the loss, theft, destruction or mutilation of such Note and, in the case of any such loss, theft or destruction, upon receipt of such holder’s unsecured indemnity agreement, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.

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11E.        Persons Deemed Owners; Participations.  Prior to due presentment for registration of transfer, the Company may treat the Person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of, interest on and any Yield-Maintenance Amount payable with respect to such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary.  Subject to the preceding sentence, the holder of any Note may from time to time grant participations in such Note to any Person on such terms and conditions as may be determined by such holder in its sole and absolute discretion, but the Company shall be entitled to deal directly with such holder notwithstanding the sale of any such participation.

11F.        Survival of Representations and Warranties; Entire Agreement.  All representations and warranties contained herein or in any other Transaction Documents or made in writing by or on behalf of the Company or any Guarantor in connection herewith or therewith shall survive the execution and delivery of this Agreement, the other Transaction Documents and the Notes, the transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of any Purchaser or any Transferee.  Subject to the preceding sentence, this Agreement, the other Transaction Documents and the Notes embody the entire agreement and understanding between the Purchasers, the Parent and the Company with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter.

11G.       Successors and Assigns.  All covenants and other agreements in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including, without limitation, any Transferee) whether so expressed or not.

11H.       Independence of Covenants.  All covenants hereunder and in the other Transaction Documents shall be given independent effect so that if a particular action or condition is prohibited by any one of such covenants, the fact that it would be permitted by an exception to, or otherwise be in compliance within the limitations of,  another covenant shall not (i) avoid the occurrence of a Default or Event of Default if such action is taken or such condition exists or (ii) in any way prejudice an attempt by the holder of any Note to prohibit through equitable action or otherwise the taking of any action by the Parent or any Subsidiary which would result in a Default or Event of Default.

11I.         Notices.  All written communications provided for hereunder shall be sent by first class mail or nationwide overnight delivery service (with charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the address specified for such communications in the Purchaser Schedule attached hereto, or at such other address as such Purchaser shall have specified to the Company in writing, (ii) if to any other holder of any Note, addressed to such other holder at such address as such other holder shall have specified to the Company in writing or, if any such other holder shall not have so specified an address to the Company, then addressed to such other holder in care of the last holder of such Note which shall have so specified an address to the Company, and (iii) if to the Parent or the Company, addressed to it at 1101 Skokie Boulevard, Suite 300, Northbrook, Illinois, 60062, Attention: Andrea K. Tarbox, or

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at such other address as the Company shall have specified to the holder of each Note in writing; provided, however, that any such communication to the Company may also, at the option of the holder of any Note, be delivered by any other means either to the Company at its address specified above or to any officer of the Company.

11J.        Payments Due on Non-Business Days.  Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of, interest on or Yield-Maintenance Amount payable with respect to any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day.

11K.       Satisfaction Requirement.  If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to any Purchaser, to any holder of a Note or to the Required Holder(s), the determination of such satisfaction shall be made by such Purchaser, such holder or the Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or Persons making such determination.

11L.        GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).

11M.       SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS IN COOK COUNTY, ILLINOIS, OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARENT AND THE COMPANY HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.  EACH OF THE PARENT AND THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN PARAGRAPH 11I OR TO CT CORPORATION SYSTEM AT 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS  60604, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.  EACH OF THE PARENT AND THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO

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COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PARENT AND/OR THE COMPANY IN ANY OTHER JURISDICTION.  EACH OF THE PARENT AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS BROUGHT IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT THE PARENT OR THE COMPANY HAS OR MAY HEREAFTER ACQUIRE IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE WITH RESPECT TO ITSELF OR ITS PROPERTY), EACH OF THE PARENT AND THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.  EACH OF THE PARENT AND THE COMPANY AND EACH PURCHASER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

11N.       Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

11O.       Descriptive Headings; Advice of Counsel; Interpretation; Time of the Essence.  The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.  Each party to this Agreement represents to the other parties to this Agreement that such party has been represented by counsel in connection with this Agreement and the other Transaction Documents, that such party has discussed this Agreement and the other Transaction Documents with its counsel and that any and all issues with respect to this Agreement and the other Transaction Documents have been resolved as set forth herein and therein.  No provision of this Agreement or any other Transaction Document shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured, drafted or dictated such provision.  Time is of the essence in the performance of this Agreement and the other Transaction Documents.

11P.        Counterparts; Facsimile or Electronic Signatures.  This Agreement may be executed in any number of counterparts (or counterpart signature pages), each of which counterparts shall be an original but all of which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or

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electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

11Q.       Severalty of Obligations.  The sales of Notes to the Purchasers are to be several sales, and the obligations of the Purchasers under this Agreement are several obligations.  No failure by any Purchaser to perform its obligations under this Agreement shall relieve any other Purchaser or the Company of any of its obligations hereunder, and no Purchaser shall be responsible for the obligations of, or any action taken or omitted by, any other Purchaser hereunder.

11R.       Independent Investigation.  Each Purchaser represents to and agrees with each other Purchaser that it has made its own independent investigation of the condition (financial and otherwise), prospects and affairs of the Parent and its Subsidiaries in connection with its purchase of the Notes hereunder and has made and shall continue to make its own appraisal of the creditworthiness of the Company.  No holder of Notes shall have any duties or responsibility to any other holder of Notes, either initially or on a continuing basis, to make any such investigation or appraisal or to provide any credit or other information with respect thereto.  No holder of Notes is acting as agent or in any other fiduciary capacity on behalf of any other holder of Notes.

11S.        Directly or Indirectly.  Where any provision in this Agreement refers to actions to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person.

11T.        Confidential Information.  For the purposes of this paragraph 11T, “Confidential Information” means information delivered to any Purchaser by or on behalf of the Parent or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Parent or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any person acting on such Purchaser’s behalf, (c) otherwise becomes known to such Purchaser other than through disclosure by the Parent or any Subsidiary or (d) constitutes financial statements delivered to such Purchaser under paragraph 5A that are otherwise publicly available, provided that financial statements posted to a website to satisfy the delivery requirements of paragraph 5A shall not be deemed to be publicly available unless such financial statements, on such website or otherwise, are publicly available.  Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, officers, employees, attorneys, trustees and affiliates (to the extent such disclosure reasonably relates to the administration of such Purchasers’ investments), (ii) its financial advisors, agents and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this paragraph 11T, (iii) any other holder of any securities of the Company or the Parent (if such holder has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of

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this paragraph 11T), (iv) any Institutional Investor to which it sells or offers to sell any securities of the Company or the Parent or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this paragraph 11T), (v) any Person from which it offers to purchase any security of the Company or the Parent (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this paragraph 11T), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the National Association of Insurance Commissioners or the Securities Valuation Office or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser’s investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser’s Notes, this Agreement or any other Transaction Document.  Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this paragraph 11T as though it were a party to this Agreement.  On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this paragraph 11T.

11U.        Transaction References.  Each of the Parent and the Company agrees that Prudential Financial Management, Inc. or any of its Affiliates may (a) refer to its role in originating the purchase of the Notes from the Company, as well as the identity of the Parent and the Company and the aggregate principal amount and issue date of the Notes, on its internet site or in marketing materials, press releases, published “tombstone” announcements or any other print or electronic medium and (b) display the Parent’s and/or the Company’s corporate logo in conjunction with any such reference.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK.  SIGNATURES ON THE FOLLOWING PAGE.]

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11V.       Binding Agreement.  When this Agreement is executed and delivered by the Company, the Parent and each of the Purchasers it shall become a binding agreement between the Company, the Parent and each of the Purchasers.

Very truly yours,
KAPSTONE PAPER AND PACKAGING CORPORATION
By:		/s/ Roger W. Stone
		Name:	Roger W. Stone
		Title:	Chairman and CEO
KAPSTONE KRAFT PAPER CORPORATION
By:	/s/ Roger W. Stone
	Name:		Roger W. Stone
	Title:		CEO

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The foregoing Agreement is
hereby accepted as of the
date first above written.

THE PRUDENTIAL INSURANCE COMPANY   OF AMERICA
By:	/s/ G. Anthony Coletta
		Vice President

PURCHASER SCHEDULE

		Aggregate Principal Amount of Notes to be Purchased		Note Denomination(s)
	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA	$	40,000,000.00	$	20,000,000.00
				$	20,000,000.00
(1)	All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:
	Account Name: Prudential Managed Portfolio Account No.: P86188 (please do not include spaces) (in the case of payments on account of one of the Notes originally issued in the principal amount of $20,000,000.00)
	Account Name: Privest Plus Account No.: P86288 (please do not include spaces) (in the case of payments on account of the other Note originally issued in the principal amount of $20,000,000.00)
	JPMorgan Chase Bank New York, NY ABA No.: 021-000-021
	Each such wire transfer shall set forth the name of the Company, a reference to “8.30% Senior Secured Notes due July 1, 2015, Security No. INV11062, PPN 48563# AA2” and the due date and application (as among principal, interest and Yield-Maintenance Amount) of the payment being made.
(2)	Address for all notices relating to payments:
	The Prudential Insurance Company of America c/o Investment Operations Group Gateway Center Two, 10th Floor 100 Mulberry Street Newark, NJ 07102-4077

1

	Attention: Manager, Billings and Collections
(3)	Address for all other communications and notices:
	The Prudential Insurance Company of America c/o Prudential Capital Group Two Prudential Plaza 180 North Stetson, Suite 5600 Chicago, IL 60601-6716
	Attention: Managing Director
(4)	Recipient of telephonic prepayment notices:
	Manager, Trade Management Group
	Telephone: (973) 367-3141
	Facsimile: (888) 889-3832
(5)	Address for Delivery of Notes and Closing Sets:
	Send physical security by nationwide overnight delivery service to:
	Prudential Capital Group Two Prudential Plaza 180 North Stetson, Suite 5600 Chicago, IL 60601-6716
	Attention: Wiley S. Adams
	Telephone: (312) 540-4204
(6)	Tax Identification No.: 22-1211670

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EXHIBIT A

[FORM OF NOTE]

KAPSTONE KRAFT PAPER CORPORATION

8.30% SENIOR SECURED NOTE DUE JULY 1, 2015

No.        
$           [Date]
PPN 48563# AA2

FOR VALUE RECEIVED, the undersigned, KAPSTONE KRAFT PAPER CORPORATION, a corporation organized and existing under the laws of the State of Delaware (herein called the “Company”), hereby promises to pay to                                                                                           , or registered assigns, the principal sum of                                                        DOLLARS on July 1, 2015, with interest (computed on the basis of a 360-day year—30-day month) (a) on the unpaid balance thereof at the rate of 8.30% per annum (or, during any period when an Event of Default shall be in existence, at the election of the Required Holder(s) at the Default Rate (as defined below)) from the date hereof, payable quarterly on the first day of October, January, April and July in each year, commencing with the October 1, January 1, April 1 or July 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) on any overdue payment (including any overdue prepayment) of principal, any overdue payment of Yield-Maintenance Amount (as defined in the Agreement) and, to the extent permitted by applicable law, any overdue payment of interest, payable quarterly as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the Default Rate.  The “Default Rate” shall mean a rate per annum from time to time equal to the greater of (i) 10.30% or (ii) 2.00% over the rate of interest publicly announced by JPMorgan Chase Bank, National Association, from time to time as its “prime rate”.

Payments of principal of, interest on and any Yield-Maintenance Amount payable with respect to this Note are to be made at the main office of JPMorgan Chase Bank, National Association, in New York City or at such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America.

This Note is one of a series of Senior Secured Notes (herein called the “Notes”) issued pursuant to a Note Purchase Agreement, dated as of July 1, 2008 (herein called the “Agreement”), among the Company, Kapstone Paper and Packaging Corporation, a Delaware corporation, and the original purchasers of the Notes named in the Purchaser Schedule attached thereto and is entitled to the benefits thereof.

This Note is a registered Note and, as provided in the Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name

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of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company shall not be affected by any notice to the contrary.

The Company agrees to make required prepayments of principal on the dates and in the amounts specified in the Agreement.  This Note is also subject to optional prepayment, in whole or from time to time in part, on the terms specified in the Agreement.

This Note is secured by, and entitled to the benefits of, the Collateral Documents and is guaranteed pursuant to one or more Guaranty Agreements executed by certain guarantors.  Reference is made to the Collateral Documents for a statement concerning the terms and conditions governing the collateral security for the obligations of the Company hereunder and reference is made to such Guaranty Agreements for a statement concerning the terms and conditions governing such guarantee of the obligations of the Company hereunder.

The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration (except to the extent required in the Agreement), protest and diligence in collecting in connection with this Note, whether now or hereafter required by applicable law.

In case an Event of Default shall occur and be continuing, the principal of this Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Agreement.

Capitalized terms used herein which are defined in the Agreement and not otherwise defined herein shall have the meanings as defined in the Agreement.

THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF ILLINOIS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS NOTE TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH THE LAWS OF ANY OTHER JURISDICTION).

KAPSTONE KRAFT PAPER CORPORATION
By:
	Title:

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EXHIBIT B

[FORM OF DISBURSEMENT DIRECTION LETTER]

[On Company Letterhead - place on one page]

July 1, 2008

The Prudential Insurance Company of America
c/o Prudential Capital Group
Two Prudential Plaza
Chicago, Illinois 60601

Re:          8.30% Senior Secured Notes due July 1, 2015 (the “Notes”)

Ladies and Gentlemen:

Reference is made to that certain Note Purchase Agreement (the “Note Agreement”), dated July 1, 2008, among Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”), Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”), and you.  Capitalized terms used herein shall have the meanings assigned to such terms in the Note Agreement.

You are hereby irrevocably authorized and directed to disburse the $40,000,000 purchase price of the Notes by wire transfer of immediately available funds to [bank name and address], ABA #                  , for credit to the account of the                         , account no.                        .

Disbursement when so made shall constitute payment in full of the purchase price of the Notes and shall be without liability of any kind whatsoever to you.

Very truly yours,
KAPSTONE KRAFT PAPER CORPORATION
By:
	Title:

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EXHIBIT C

[FORM OF GUARANTY AGREEMENT]

GUARANTY AGREEMENT

This GUARANTY AGREEMENT (the “Guaranty”), dated as of July 1, 2008, is made by the guarantors named in the Guarantor Schedule attached hereto and each guarantor that may become a party to this Guaranty by executing a joinder hereto (herein referred to, individually, as a “Guarantor” and, collectively, as “Guarantors”), in favor of the holders of the Notes (as defined below) from time to time (the “Holders”).

WITNESSETH:

WHEREAS, Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”) and Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”), have entered into that certain Note Purchase Agreement dated as of July 1, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the “Note Agreement”) among the Company, the Parent, and the Purchasers named on the Purchaser Schedule attached thereto, pursuant to which the Company issued and sold and the Company’s 8.30% Senior Secured Notes due July 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Notes”); and

WHEREAS, the Company is a direct Wholly-Owned Subsidiary of the Parent,  each Guarantor other than the Parent (each such Guarantor a “Subsidiary Guarantor”) is a direct or indirect Wholly-Owned Subsidiary of the Company and each Guarantor derives substantial value and benefit from the issuance of the Notes pursuant to the Note Agreement; and

WHEREAS, as a condition to the obligation of the Purchasers to purchase the Notes under the Note Agreement, each Purchaser has required that the Guarantors execute and deliver this Guaranty for the benefit of the Holders.

NOW THEREFORE, for value received, to satisfy one of the conditions precedent to the effectiveness of the Note Agreement, to induce the Purchasers to purchase the Notes under the Note Agreement, for the reasons set forth above and set forth in the Note Agreement, for and in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Guarantor, intending to be legally bound, does hereby covenant and agree as follows:

1.             DEFINITIONS; RECITALS.  Capitalized terms that are used in this Guaranty and not defined in this Guaranty shall have the meaning ascribed to them in the Note Agreement.  The recitals in this Guaranty are incorporated into this Guaranty.

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2.             THE GUARANTY.

2A.          Guaranty of Payment and Performance of Obligations.  Each Guarantor, jointly and severally with each other Guarantor, absolutely, unconditionally and irrevocably guarantees the full and prompt payment in United States currency when due (whether at maturity, a stated prepayment date or earlier by reason of acceleration or otherwise) and at all times thereafter, and the due and punctual performance, of all of the indebtedness, obligations and liabilities existing on the date hereof or arising from time to time hereafter, whether direct or indirect, joint or several, actual, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, of the Company to any Holder under or in respect of the Note Agreement, the Notes, the other Transaction Documents or any other agreements, documents, certificates and instruments now or hereafter executed or delivered by the Company, any Guarantor or any other guarantor in connection with the Note Agreement, including, without limitation, the principal of and interest (including, without limitation, interest accruing before, during or after any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding, and, if interest ceases to accrue by operation of law by reason of any such proceeding, interest which otherwise would have accrued in the absence of such proceeding, whether or not allowed as a claim in such proceeding) on the Notes and any Yield-Maintenance Amount with respect to any of the Notes (collectively, the “Guarantied Obligations”).  This is a continuing guaranty of payment and performance and not of collection.  Notwithstanding the foregoing, the aggregate amount of any Subsidiary Guarantor’s liability under this Guaranty shall not exceed the maximum amount that such Subsidiary Guarantor can guaranty without violating, or causing this Guaranty or such Subsidiary  Guarantor’s obligations under this Guaranty to be void, voidable or otherwise rendered unenforceable under, any fraudulent conveyance or fraudulent transfer law, including Section 548(a)(2) of the Bankruptcy Code.  Each Guarantor hereby agrees to pay and to indemnify and save each Holder harmless from and against any damage, loss, cost or expense (including attorneys’ fees and expenses) which such Holder may incur or be subject to as a consequence of endeavoring to enforce this Guaranty or to collect all or any part of the Guarantied Obligations from, or in pursuing any action against the Company or any other Guarantor or enforcing any rights of any Holder in any security for the Guarantied Obligations or the liabilities of any Guarantor hereunder, including, without limitation the Collateral, and any taxes, fees or penalties which may be paid or payable in connection therewith.  Notwithstanding any provision of this Guaranty, all covenants, obligations, waivers and agreements of the Guarantors under this Guaranty shall be joint and several.

Upon an Event of Default, any Holder may, at its sole election and without notice, proceed directly and at once against any Guarantor to seek and enforce performance of, and to collect and recover, the Guarantied Obligations, or any portion thereof, without first proceeding against the Company, any other Guarantor, any other guarantor of the Guarantied Obligations or any other Person or the Collateral, or any other security for the Guarantied Obligations or for the liability of any such other Person or any Guarantor hereunder.  Each Holder shall have the exclusive right to determine the application of payments and credits, if any, from any Guarantor, the Company or from any other Person on account of the Guarantied Obligations or otherwise.  This Guaranty and all covenants and agreements of each Guarantor contained herein shall

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continue in full force and effect and shall not be discharged until such a time as all of the Guarantied Obligations shall be indefeasibly paid in full in cash.

2B.          Obligations Unconditional.  The obligations of each Guarantor under this Guaranty shall be continuing, absolute and unconditional, irrespective of (i) the invalidity or unenforceability of the Note Agreement, the Notes, the other Transaction Documents or any other agreements, documents, certificates and instruments now or hereafter executed or delivered by the Company, any other Guarantor or any other Person in connection with the Note Agreement or any other Transaction Document or any provision thereof; (ii) the absence of any attempt by any Holder to collect the Guarantied Obligations or any portion thereof from the Company, any other Guarantor, any other guarantor of any portion of the Guarantied Obligations or any other Person or other action to enforce the same; (iii) any action taken by any Holder whether or not authorized by this Guaranty; (iv) any failure by any Holder or the Collateral Agent to acquire, perfect or maintain any security interest or lien in, or take any steps to preserve its rights to, the Collateral or any other security for the Guarantied Obligations or any portion thereof or for the liability of such Guarantor hereunder or the liability of any other Guarantor or any other Person or any or all of the Guarantied Obligations; (v) any defense arising by reason of any disability or other defense (other than a defense of payment, unless the payment on which such defense is based was or is subsequently invalidated, declared to be fraudulent or preferential, otherwise avoided and/or required to be repaid to the Company or any Guarantor, as the case may be, or the estate of any such party, a trustee, receiver or any other Person under any bankruptcy law, state or federal law, common law or equitable cause, in which case there shall be no defense of payment with respect to such payment) of the Company or any other Person liable on the Guarantied Obligations or any portion thereof; (vi) any Holder’s election, in any proceeding instituted under Chapter 11 of Title 11 of the Federal Bankruptcy Code (11 U.S.C. §101 et seq.) (the “Bankruptcy Code”), of the application of Section 1111(b)(2) of the Bankruptcy Code; (vii) any borrowing or grant of a security interest to any Holder or the Collateral Agent by the Company as debtor-in-possession, or extension of credit, under Section 364 of the Bankruptcy Code; (viii) the disallowance or avoidance of all or any portion of any Holder’s claim(s) for repayment of the Guarantied Obligations under the Bankruptcy Code or any similar state law or the avoidance, invalidity or unenforceability of any Lien securing the Guarantied Obligations or the liability of any Guarantor hereunder or under any of the other Transaction Documents or of the Company or any other guarantor of all or any part of the Guarantied Obligations; (ix) any amendment to, waiver or modification of, or consent, extension, indulgence or other action or inaction under or in respect of the Note Agreement, the Notes, the other Transaction Documents or any other agreements, documents, certificates and instruments now or hereafter executed or delivered by the Company or any Guarantor or any other guarantor in connection with the Note Agreement (including, without limitation, the issuance of Notes from time to time under the Note Agreement and any increase in the interest rate on the Notes); (x) any change in any provision of any applicable law or regulation; (xi) any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, binding on or affecting any Guarantor, the Company or any other guarantor or any of their assets; (xii) the articles of incorporation, certificate of formation or other formation document, or the by-laws, limited liability company agreement, partnership agreement or similar formation documents of any Guarantor, the Company or any other guarantor; (xiii) any mortgage, indenture, lease, contract, or other agreement (including without limitation any agreement with stockholders, partners or members of such Guarantor, as applicable), instrument or undertaking

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to which any Guarantor or the Company is a party or which purports to be binding on or affect any such Person or any of its assets; (xiv) any bankruptcy, insolvency, readjustment, composition, liquidation or similar proceeding with respect to the Company, any Guarantor or any other guarantor of all or any portion of any Guarantied Obligations or any such Person’s property and any failure by any Holder to file or enforce a claim against any Guarantor or any such other Person in any such proceeding; (xv) any failure on the part of the Company for any reason to comply with or perform any of the terms of any other agreement with any Guarantor; or (xvi) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.

2C.          Obligations Unimpaired.  Each Holder is authorized, without demand or notice, which demand and notice are hereby waived, and without discharging or otherwise affecting the obligations of any Guarantor hereunder (which shall remain absolute and unconditional notwithstanding any such action or omission to act), from time to time to (i) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, the Guarantied Obligations or any portion thereof, or otherwise modify, amend or change the terms of the Note Agreement, the Notes, any other Transaction Documents or any other agreements, documents, certificates and instruments now or hereafter executed or delivered by the Company. any Guarantor or any other guarantor of all or any of the Guarantied Obligations in connection with the Note Agreement; (ii) accept partial payments on the Guarantied Obligations; (iii) take and hold security for the Guarantied Obligations or any portion thereof or any other liabilities of the Company, the obligations of any Guarantor under this Guaranty and the obligations under any other guaranties and sureties of all or any of the Guarantied Obligations, and exchange, enforce, waive, release, sell, transfer, assign, abandon, fail to perfect, subordinate or otherwise deal with any such security (including, without limitation, the Collateral); (iv) apply such security and direct the order or manner of sale thereof as any Holder may determine in its sole discretion; (v) settle, release, compromise, collect or otherwise liquidate the Guarantied Obligations or any portion thereof and any security therefor or guaranty thereof in any manner; (vi) extend additional loans, credit and financial accommodations to the Company or any other Guarantor and otherwise create additional Guarantied Obligations, including, without limitation, by the purchase of Notes from time to time under the Note Agreement; (vii) waive strict compliance with the terms of the Note Agreement, the Notes, any other Transaction Document or any other agreements, documents, certificates and instruments now or hereafter executed or delivered by the Company, any Guarantor or any other guarantor of all or any of the Guarantied Obligations in connection with the Note Agreement and otherwise forbear from asserting any Holder’s rights and remedies thereunder; (viii) take and hold additional guaranties or sureties and enforce or forbear from enforcing any guaranty or surety of any other guarantor or surety of the Guarantied Obligations, any portion thereof or release or otherwise take any action (or omit to take any action) with respect to any such guarantor or surety; (ix) assign this Guaranty in part or in whole in connection with any assignment of the Guarantied Obligations or any portion thereof; (x) exercise or refrain from exercising any rights against the Company or any Guarantor; and (xi) apply any sums, by whomsoever paid or however realized, to the payment of the Guarantied Obligations as any Holder in its sole discretion may determine.

2D.          Waivers of Guarantors.  Each Guarantor waives for the benefit of the Holders:

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(i)            any right to require any Holder, as a condition of payment or performance by such Guarantor or otherwise to (a) proceed against the Company, any  Guarantor, any other guarantor of the Guarantied Obligations or any other Person, (b) proceed against or exhaust any security given to or held by any Holder or the Collateral Agent in connection with the Guarantied Obligations or any other guaranty, or (c) pursue any other remedy available to any Holder whatsoever;

(ii)           any defense arising by reason of (a) the incapacity, lack of authority or any disability or other defense of the Company, including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto, (b) the cessation of the liability of the Company from any cause other than indefeasible payment in full of the Guarantied Obligations in cash or (c) any act or omission of any Holder or the Collateral Agent or any other Person which directly or indirectly, by operation of law or otherwise, results in or aids the discharge or release of the Company or any security given to or held by any Holder or the Collateral Agent in connection with the Guarantied Obligations or any other guaranty;

(iii)          any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal;

(iv)          any defense based upon any Holder’s errors or omissions in the administration of the Guarantied Obligations;

(v)           (a) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of such Guarantor’s obligations hereunder, (b) the benefit of any statute of limitations affecting the Guarantied Obligations or such Guarantor’s liability hereunder or the enforcement hereof, (c) any rights to set-offs, recoupments and counterclaims, and (d) promptness, diligence and any requirement that any Holder or the Collateral Agent protect, maintain, secure, perfect or insure any Lien or any property subject thereto;

(vi)          notices (a) of nonperformance or dishonor, (b) of acceptance of this Guaranty by any Holder or by such Guarantor, (c) of default in respect of the Guarantied Obligations or any other guaranty, (d) of the existence, creation or incurrence of new or additional indebtedness, arising either from additional loans extended to the Company or otherwise, including without limitation, as a result of the issuance of any Notes, (e) that the principal amount, or any portion thereof, and/or any interest on any document or instrument evidencing all or any part of the Guarantied Obligations is due, (f) of any and all proceedings to collect from the Company, any Guarantor or any other guarantor of all or any part of the Guarantied Obligations, or from anyone else, (g) of exchange, sale, surrender or other handling of any security or collateral given to any Holder or the Collateral Agent to secure payment of the Guarantied Obligations or any guaranty therefor, (h) of renewal, extension or modification of any of the Guarantied Obligations, (i) of assignment, sale or other transfer of any Note to a Transferee, or (j) of any of the matters referred to in paragraph 2B and any right to consent to any thereof;

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(vii)         presentment, demand for payment or performance and protest and notice of protest with respect to the Guarantied Obligations or any guaranty with respect thereto; and

(viii)        any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty.

Each Guarantor agrees that neither any Holder nor the Collateral Agent shall be under any obligation to marshall any assets in favor of such Guarantor or against or in payment of any or all of the Guarantied Obligations.

No Guarantor will exercise any rights which it may have acquired by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, or accept any payment on account of such subrogation rights, or any rights of exoneration, reimbursement or indemnity or contribution or any rights or recourse to any security for the Guarantied Obligations or this Guaranty unless at the time of such Guarantor’s exercise of any such right there shall have been performed and indefeasibly paid in full in cash all of the Guarantied Obligations.

2E.          Revival.  Each Guarantor agrees that, if any payment made by the Company or any other Person is applied to the Guarantied Obligations and is at any time annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of Collateral or any other security are required to be returned by any Holder to the Company, its estate, trustee, receiver or any other Person, including, without limitation, any Guarantor, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, such Guarantor’s liability hereunder (and any lien, security interest or other collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made, or, if prior thereto this Guaranty shall have been canceled or surrendered (and if any lien, security interest or other collateral securing such Guarantor’s liability hereunder shall have been released or terminated by virtue of such cancellation or surrender), this Guaranty (and such lien, security interest or other collateral) shall be reinstated and returned in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of any Guarantor in respect of the amount of such payment (or any lien, security interest or other collateral securing such obligation).

2F.          Obligation to Keep Informed.  Each Guarantor shall be responsible for keeping itself informed of the financial condition of the Company and any other Persons primarily or secondarily liable on the Guarantied Obligations or any portion thereof, and of all other circumstances bearing upon the risk of nonpayment of the Guarantied Obligations or any portion thereof, and each Guarantor agrees that no Holder shall have any duty to advise such Guarantor of information known to such Holder regarding such condition or any such circumstance.  If any Holder, in its discretion, undertakes at any time or from time to time to provide any such information to any Guarantor, no Holder shall be under any obligation (i) to undertake any investigation, whether or not a part of its regular business routine, (ii) to disclose any information which such Holder wishes to maintain confidential, or (iii) to make any other or future disclosures of such information or any other information to any Guarantor.

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2G.         Bankruptcy.  If any Event of Default specified in clauses (viii), (ix) or (x) of paragraph 7A of the Note Agreement shall occur and be continuing, then each Guarantor agrees to immediately pay to the Holders the full outstanding amount of the Guarantied Obligations without notice.

3.             REPRESENTATIONS AND WARRANTIES.

Each Guarantor represents, covenants and warrants as follows:

3A.          Organization.  Such Guarantor is duly organized and existing in good standing under the laws of its state of formation and is qualified to do business and in good standing in every jurisdiction where the ownership of its property or the nature of the business conducted by it makes such qualification necessary and in which the failure to be so qualified could be reasonably likely to result in a material adverse effect.

3B.          Power and Authority.  Such Guarantor and each Subsidiary of such Guarantor has all requisite power to conduct its business as currently conducted and as currently proposed to be conducted.  Such Guarantor has all requisite power to execute, deliver and perform its obligations under this Guaranty and the other Transaction Documents to which it is a party.  The execution, delivery and performance of this Guaranty and the other Transaction Documents to which it is a party have been duly authorized by all requisite action and this Guaranty and the other Transaction Documents to which it is a party have been duly executed and delivered by authorized officers of such Guarantor and are valid obligations of such Guarantor, legally binding upon and enforceable against such Guarantor in accordance with their terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

3C.          Conflicting Agreements and Other Matters.  The execution and delivery of this Guaranty and the other Transaction Documents to which it is a party, the offering, issuance and sale of the Notes, and the fulfillment of or the compliance with the terms and provisions hereof will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the properties or assets of such Guarantor or any of its Subsidiaries pursuant to, the certificate of incorporation or certificate of formation or similar formation document, the by-laws, partnership agreement, limited liability company agreement or similar organizational document of such Guarantor or any of its Subsidiaries, any award of any arbitrator or any agreement (including any agreement with stockholders, members or partners of such Guarantor or Persons with direct or indirect ownership interests in stockholders, members or partners of such Guarantor), instrument, order, judgment, decree, statute, law, rule or regulation to which such Guarantor or any of its Subsidiaries is subject.  Neither such Guarantor nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing any Debt of such Guarantor or such Subsidiary, any agreement relating thereto or any other contract or agreement (including its charter, bylaws, partnership agreement or operating agreement) which limits the amount of, or otherwise imposes restrictions on the incurring of,

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obligations of such Guarantor of the type to be evidenced by this Guaranty, other than the Credit Agreement.

3D.          ERISA.  The execution and delivery of this Guaranty will be exempt from, or will not involve any transaction which is subject to, the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.

3E.          Governmental Consent.  Neither the nature of such Guarantor or of any Subsidiary of such Guarantor nor any of their respective businesses or properties, nor any relationship between such Guarantor or any Subsidiary of such Guarantor and any other Person, nor any circumstance in connection with the execution, delivery and performance of this Guaranty, nor the offering, issuance, sale or delivery of the Notes is such as to require any authorization, consent, approval, exemption or other action by or notice to or filing with any court or administrative or governmental body (excluding routine filings after the closing date with the Securities and Exchange Commission and/or state Blue Sky authorities and filings and recordings necessary to perfect the Liens in the Collateral intended to be created by the Collateral Documents).

3F.          Regulatory Status.  Neither such Guarantor nor any Subsidiary of such Guarantor is (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company”, within the meaning of the Energy Policy Act of 2005, as amended, or (iii) a “public utility” within the meaning of the Federal Power Act, as amended.

3G.          Actions by the Guarantor and its Subsidiaries.  Each Guarantor covenants that it will not take any action that would directly or indirectly result in an Event of Default or Default.

4.             MISCELLANEOUS.

4A.          Successors, Assigns and Participants.  This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of each Holder and their respective successors, transferees and assigns; all references herein to each Guarantor shall be deemed to include its successors and assigns, and all references herein to any Holder shall be deemed to include their respective successors and assigns.  This Guaranty shall be enforceable by each Holder and any of Holder’s successors, assigns and participants, and any such successors and assigns shall have the same rights and benefits with respect to each Guarantor under this Guaranty as such Holder hereunder.

4B.          Consent to Amendments.  This Guaranty may be amended, and each Guarantor may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if such Guarantor shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s) of the Notes, except that, without the written

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consent of all of the Holders, (i) no amendment to or waiver of the provisions of this Guaranty shall change or affect the provisions of this paragraph 4B insofar as such provisions relate to proportions of the principal amount of the Notes, or the rights of any individual Holder, required with respect to any consent, (ii) no Guarantor shall be released from this Guaranty, and (iii) no amendment, consent or waiver with respect to paragraph 2A or the definition of “Guarantied Obligations” (except to add additional obligations of the Companies) shall be effective.  Each Holder at the time or thereafter outstanding shall be bound by any consent authorized by this paragraph 4B, whether or not the Notes held by such Holder shall have been marked to indicate such consent, but any Notes issued thereafter may bear a notation referring to any such consent.  No course of dealing between any Guarantor and any Holder, nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any Holder.  As used herein, the term “this Guaranty” and references thereto shall mean this Guaranty as it may from time to time be amended or supplemented.  Notwithstanding the foregoing, this Guaranty may be amended by the addition of additional Guarantors pursuant to a Guaranty Joinder in the form of Exhibit A hereto without any consent by any Guarantor or any Holder.

4C.          Survival of Representations and Warranties; Entire Agreement.  All representations and warranties contained herein or made in writing by or on behalf of each Guarantor in connection herewith shall survive the execution and delivery of this Guaranty, the transfer by any Holder of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of any Holder or any Transferee.  Subject to the two preceding sentences, this Guaranty and the other Transaction Documents embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to the subject matter hereof.

4D.          Notices.  All written communications provided for hereunder shall be sent by first class mail or telegraphic notice or nationwide overnight delivery service (with charges prepaid) or by hand delivery or telecopy and addressed:

(i)in the case of any Guarantor, to:

c/o Kapstone Kraft Paper Corporation

1101 Skokie Boulevard, Suite 300

Northbrook, Illinois  60062

Attention:  Andrea K. Tarbox

Phone:  (847) 239-8812
Fax:  (847) 919-3833

(ii)in the case of any Holder, to the address specified for notices to such Holder under the Note Agreement;

or, in either case, at such other address as shall be designated by such Person in a written notice to the other parties hereto.

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4E.          Descriptive Headings; Advice of Counsel; Interpretation.  The descriptive headings of the several sections of this Guaranty are inserted for convenience only and do not constitute a part of this Guaranty.  Each Guarantor represents to the Holders that such Guarantor has been represented by counsel in connection with this Guaranty, that such Guarantor has discussed this Guaranty with its counsel and that any and all issues with respect to this Guaranty have been resolved as set forth herein.  No provision of this Guaranty shall be construed against or interpreted to the disadvantage of any Holder by any court or other governmental or judicial authority by reason of such Holder having or being deemed to have structured, drafted or dictated such provision.

4F.          Satisfaction Requirement.  If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Guaranty required to be satisfactory to any Holder or the Required Holder(s) of the Notes, the determination of such satisfaction shall be made by such Holder or such Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or Persons making such determination.

4G.          Governing Law.  THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS GUARANTY TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).

4H.          Counterparts; Facsimile Signatures.  This Guaranty may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same agreement.  It shall not be necessary in making proof of this Guaranty to produce or account for more than one such counterpart.  Delivery of an executed counterpart of a signature page to this Guaranty by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Guaranty.

4I.           Counsel’s Opinion.  Each Guarantor requests directs the counsel referred to in paragraph 3C of the Note Agreement to deliver the opinion referred to in such paragraph.

4J.          SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS IN COOK COUNTY, ILLINOIS, OR OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.  EACH GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN PARAGRAPH 4D(i),

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SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.  EACH GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY GUARANTOR IN ANY OTHER JURISDICTION.  EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GUARANTOR HAS OR MAY HEREAFTER ACQUIRE IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.  EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED THEREBY.

4K.          Independence of Covenants.  All covenants hereunder shall be given independent effect so that if a particular action or condition is prohibited by any one of such covenants, the fact that it would be permitted by an exception to, or otherwise be in compliance within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or such condition exists.

4L.          Severability.  Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

4M.         Contribution with Respect to Guaranty Obligations.  At all times when there is more than one Guarantor party hereto, each Guarantor party hereto agrees as follows:

(i)                 To the extent any Guarantor shall make a payment of all or any of the Guarantied Obligations (a “Guarantor Payment”) that exceeds the amount that such Guarantor would otherwise have paid, taking into account all other Guarantor Payments then previously or concurrently made by any other Guarantor, if each Guarantor had paid the aggregate Guarantied Obligations satisfied by all such Guarantor Payments in the same proportion that such Guarantor’s Allocable Amount (as determined immediately

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prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of all Guarantors (as determined immediately prior to such Guarantor Payment), then, after the Guarantied Obligations shall be indefeasibly paid in full in cash and no Holder shall have any commitment under the Note Agreement, such Guarantor shall be entitled to receive contribution and indemnification payments from and be reimbursed by each other Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

(ii)                As of any date of determination, the “Allocable Amount” of any Guarantor shall be equal to the maximum amount of the claim that could then be recovered from such Guarantor under this Section 4M without rendering such claim void, voidable or otherwise unenforceable under, any fraudulent conveyance or fraudulent transfer law, including Section 548 of the Bankruptcy Code.

(iii)               This Section 4M is intended only to define the relative rights of Guarantors, and nothing in this Section 4M is intended to or shall impair the obligations of Guarantors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with this Guaranty.

(iv)               The rights of contribution and indemnification hereunder shall constitute assets of the Guarantor to which such contribution and indemnification is owing.

(v)                The rights of the indemnifying Guarantors against other Guarantors under this Section 4M shall be exercisable once the Guarantied Obligations shall be indefeasibly paid in full in cash and no Holder shall have any commitment under the Note Agreement.

[signature pages follow]

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty Agreement to be duly executed as of the date first above written.

KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation
By:
	Title:
KAPSTONE CHARLESTON KRAFT LLC,
a Delaware limited liability company
By:
	Title:
COGEN SOUTH LLC, a Delaware limited liability company
By:
	Title:

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GUARANTOR SCHEDULE

KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation

KAPSTONE CHARLESTON KRAFT LLC, a Delaware limited liability company

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EXHIBIT A

[FORM OF JOINDER AGREEMENT TO GUARANTY AGREEMENT]

JOINDER AGREEMENT NO.       TO GUARANTY AGREEMENT

RE: KAPSTONE KRAFT PAPER CORPORATION

This Joinder Agreement is made as of                        , in favor of the Holders (as such term is defined in the Guaranty, as hereinafter defined).

A.            Reference is made to the Guaranty Agreement made as of July 1, 2008 (as such guarantee may be supplemented, amended, restated or consolidated from time to time, the “Guaranty”) by certain Persons in favor of Prudential and the Holders, under which such Persons have guaranteed to Prudential and the Holders the due payment and performance by Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”) of the Guarantied Obligations (as defined in the Guaranty).

B.            Capitalized terms used but not otherwise defined in this Joinder Agreement have the respective meanings given to such terms in the Guaranty, including the definitions of terms incorporated in the Guaranty by reference to other agreements.

C.            Section 4B of the Guaranty provides that additional Persons may from time to time after the date of the Guaranty become Guarantors under the Guaranty by executing and delivering to the Holders a supplemental agreement to the Guaranty in the form of this Joinder Agreement.

For valuable consideration, each of the undersigned (each a “New Guarantor”) severally (and not jointly, or jointly and severally) agrees as follows:

1.             Each of the New Guarantors has received a copy of, and has reviewed, the Guaranty and the Transaction Documents in existence on the date of this Joinder Agreement and is executing and delivering this Joinder Agreement to the Holders pursuant to paragraph 4B of the Guaranty.

2.             Effective from and after the date this Joinder Agreement is executed and delivered to the Holders by any one of the New Guarantors (and irrespective of whether this Joinder Agreement has been executed and delivered by any other Person), such New Guarantor is, and shall be deemed for all purposes to be, a Guarantor under the Guaranty with the same force and effect, and subject to the same agreements, representations, guarantees, indemnities, liabilities and obligations, as if such New Guarantor was, effective as of the date of this Joinder Agreement, an original signatory to the Guaranty as a Guarantor.  In furtherance of the foregoing, each of the New Guarantors jointly and severally guarantees to the Holders in accordance with the provisions of the Guaranty the due and punctual payment and performance in full of each of the Guarantied Obligations as each such Guarantied Obligation becomes due from time to time (whether because of maturity, default, demand, acceleration or otherwise) and understands, agrees and confirms that the Holders may enforce the Guaranty and this Joinder Agreement against such New Guarantor for the benefit of the Holders up to the full amount of                                                                                

C-15

the Guarantied Obligations without proceeding against any other Guarantor, the Company, any other Person, or any collateral securing the Guarantied Obligations.  The terms and provisions of the Guaranty are incorporated by reference in this Joinder Agreement.

3.             Upon this Joinder Agreement bearing the signature of any Person claiming to have authority to bind any New Guarantor coming into the hands of any Holder, and irrespective of whether this Joinder Agreement or the Guaranty has been executed by any other Person, this Joinder Agreement will be deemed to be finally and irrevocably executed and delivered by, and be effective and binding on, and enforceable against, such New Guarantor free from any promise or condition affecting or limiting the liabilities of such New Guarantor and such New Guarantor shall be, and shall be deemed for all purposes to be, a Guarantor under the Guaranty.  No statement, representation, agreement or promise by any officer, employee or agent of any Holder forms any part of this Joinder Agreement or the Guaranty or has induced the making of this Joinder Agreement or the Guaranty by any of the New Guarantors or in any way affects any of the obligations or liabilities of any of the New Guarantors in respect of the Guarantied Obligations.

4.             This Joinder Agreement may be executed in counterparts.  Each executed counterpart shall be deemed to be an original and all counterparts taken together shall constitute one and the same Joinder Agreement.  Delivery of an executed counterpart of a signature page to this Joinder Agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Joinder Agreement.

5.             This Joinder Agreement is a contract made under, and will for all purposes be governed by and interpreted and enforced according to, the internal laws of the State of Illinois excluding any conflict of laws rule or principle which might refer these matters to the laws of another jurisdiction.

6.             This Joinder Agreement and the Guaranty shall be binding upon each of the New Guarantors and the successors of each of the New Guarantors.   None of the New Guarantors may assign any of its obligations or liabilities in respect of the Guarantied Obligations.

IN WITNESS OF WHICH this Joinder Agreement has been duly executed and delivered by each of the New Guarantors as of the date indicated on the first page of this Joinder Agreement.

[NEW GUARANTOR]

By:

Name:

Title:

C-16

EXHIBIT D

[FORM OF OPINION OF COMPANY’S AND GUARANTORS’ COUNSEL]

[Letterhead of Sonnenschein Nath & Rosenthal LLP]

July 1, 2008

The Prudential Insurance Company of America
c/o Prudential Capital Group
Two Prudential Plaza, Suite 5600
Chicago, Illinois 60601

Ladies and Gentlemen:

We have acted as counsel for Kapstone Kraft Paper Corporation, a Delaware corporation (the “Company”) and Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”) in connection with the Note Purchase Agreement, dated as of  July 1, 2008, among the Parent, the Company and you (the “Note Agreement”), pursuant to which the Company has issued to you today the 8.30% Senior Secured Notes due July 1, 2015 of the Company in the aggregate principal amount of $40,000,000.  All terms used herein that are defined in the Note Agreement have the respective meanings specified in the Note Agreement.  This letter is being delivered to you in satisfaction of the condition set forth in paragraph 3C of the Note Agreement and with the understanding that you are purchasing the Notes in reliance on the opinions expressed herein.

In this connection, we have examined such certificates of public officials, certificates of officers of the Company and copies certified to our satisfaction of corporate documents and records of the Company and of other papers, and have made such other investigations, as we have deemed relevant and necessary as a basis for our opinion hereinafter set forth.  We have relied upon such certificates of public officials and of officers of the Company with respect to the accuracy of material factual matters contained therein which were not independently established; nothing, however, has come to our attention to cause us to believe that any such factual matters are untrue.  With respect to the opinion expressed in paragraph 3 below, we have also relied upon the representation made by each of you in paragraph 9A of the Note Agreement.

Based on the foregoing, it is our opinion that:

1.             The Parent, the Company and each other Subsidiary is a corporation duly organized and validly existing in good standing under the laws of the State of its organization. The Parent, the Company and each other Subsidiary is duly qualified to transact business and is in good standing in each jurisdiction where the ownership of property by it or the nature of the business conducted by it makes such qualification necessary. The Parent, the Company and each

D-1-1

other Subsidiary has all requisite corporate power to conduct its business as currently conducted and as currently proposed to be conducted.

2.             The Parent, the Company and each other Subsidiary has all requisite corporate power to execute, deliver and perform its obligations under the Note Agreement, the Notes and the other Transaction Documents to which it is a party.  The Note Agreement, the Notes and the other Transaction Documents have been duly authorized by all requisite corporate action on the part of the Parent, the Company and each other Subsidiary which is a party thereto and duly executed and delivered by authorized officers of the Parent, the Company and each such other Subsidiary, and are valid obligations of the Parent, the Company and each such other Subsidiary, legally binding upon and enforceable against the Parent, the Company and each such other Subsidiary in accordance with their respective terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

3.             It is not necessary in connection with the offering, issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreement to register the Notes under the Securities Act or to qualify an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended.

4.             The extension, arranging and obtaining of the credit represented by the Notes do not result in any violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

5.             The execution and delivery of the Note Agreement, the Notes and the other Transaction Documents, the offering, issuance and sale of the Notes and fulfillment of and compliance with the respective provisions of the Note Agreement, the Notes and the other Transaction Documents do not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien (other than the Liens in the Collateral under the Collateral Documents) upon any of the properties or assets of the Parent or any of its Subsidiaries pursuant to, or require any authorization, consent, approval, exemption or other action by or notice to or filing with any court, administrative or governmental body or other Person (other than routine filings after the date hereof with the Securities and Exchange Commission and/or state Blue Sky authorities and other than the filings and recordings to perfect the Liens in the Collateral intended to be created by the Collateral Documents) pursuant to, the charter or by-laws of the Parent or any of its Subsidiaries, any applicable law (including any securities or Blue Sky law), statute, rule or regulation or (insofar as is known to us after having made due inquiry with respect thereto) any agreement (including, without limitation, any agreement listed in Schedule 8G to the Note Agreement), instrument, order, judgment or decree to which the Parent or any of its Subsidiaries is a party or otherwise subject.

6.             Neither the Parent nor the Company is (a) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or an “investment adviser” within the meaning of the Investment Advisers Act of 1940, as amended, (b) a “holding company” of a “public utility

D-1-2

company” of an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 2005, or (c) a “public utility” within the meaning of the Federal Power Act, as amended.

7.             The Security Agreement creates in favor of the Collateral Agent for the benefit of the holders of the Notes a valid and enforceable security interest in the Collateral described therein to the extent that the Uniform Commercial Code as currently in effect in the States of Illinois, Delaware or                              (the “UCCs”) is applicable thereto (the “Security Interest”).  The financing statements listed on Attachment A hereto (the “Financing Statements”) are in proper form for filing in the offices listed on Attachment A.  The Financing Statements have been duly filed in such offices and such filing creates a valid and duly perfected security interest in favor of the Collateral Agent for the benefit of the holders of the Notes in those items and types of the Collateral described in the Security Agreement in which a security interest may be created and perfected under the UCCs by the filing of a financing statement.  No filing or recording, other than the filing of the Financing Statements in the offices described on Attachment A hereto, is necessary for the perfection of the Security Interest to the extent the filing of a financing statement under the UCCs is effective to perfect the Security Interest.  For the purposes of rendering our opinion in this paragraph 7 with respect to other than the UCC as in effect in the State of                             , we have, with your permission, reviewed and relied solely upon the UCCs in the States of                           ,                           ,                                      and                              as reported in the Secured Transactions Guide, Commerce Clearing House (            ), as updated through                             , without reference to case law or other interpretations of such UCCs or any other laws of such States.

8.             Assuming that (a) the Collateral Agent at all times relevant possesses the certificates representing the Pledged Equity (as defined in the Security Agreement), and (b) each of the Collateral Agent, the Bank and you is entering into the Loan Documents (as defined in the Credit Agreement) and Transaction Documents to which it is a party in good faith and without notice of any adverse claim to the Pledged Equity or knowledge that the Pledged Equity are subject to a security interest other than that created by the Security Agreement, the Collateral Agent holds a perfected pledge of and perfected security interest in the Pledged Equity subject to no lien or adverse claim.

[Add opinions relating to other security interests, such as Mortgages and account control agreement, as applicable.]

9.             To our knowledge, there are no actions, suits or proceedings pending or threatened against or affecting the Parent or any of its Subsidiaries or any property of the Parent or any of its Subsidiaries in any court or before any arbitrator of any kind or before or by any governmental authority either (i) with respect to the Note Agreement, the Notes or the other Transaction Documents, or (ii) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

We acknowledge that the Company and each Guarantor has requested that this opinion letter be rendered to each of you and to any Transferee, that this opinion letter is rendered with the intention that each of you and any Transferee may rely on this opinion letter, and that each of you and any Transferee may rely on this opinion letter.

D-1-3

Very truly yours,

D-1-4

EXHIBIT D-2

[FORM OF OPINION OF COMPANY’S AND GUARANTORS’ LOCAL COUNSEL]

[See attached]

D-2-1

SCHEDULES

SCHEDULE 3A	—	EXCLUDED ESTOPPEL AND CONSENT AGREEMENTS
SCHEDULE 3H	—	MATERIAL ADVERSE EFFECT
SCHEDULE 6B(f)	—	EXISTING DEBT
SCHEDULE 6B(g)	—	DEBT TO BE REPAID
SCHEDULE 6C	—	EXISTING LIENS
SCHEDULE 6I	—	UNCONDITIONAL PURCHASE OBLIGATIONS
SCHEDULE 6L	—	INVESTMENTS
SCHEDULE 6R	—	HOLDING COMPANY CONTRACTS
SCHEDULE 8A(1)	—	SUBSIDIARIES
SCHEDUL 8C	—	ACTONS PENDING
SCHEDULE 8F	—	TAXES
SCHEDULE 8G	—	LIST OF AGREEMENTS RESTRICTING INDEBTEDNESS
SCHEDULE 8K	—	FILINGS AND RECORDINGS
SCHEDULE 8Q	—	INFORMATION REGARDING THE PARENT AND SUBSIDIARIES
SCHEDULE 8T	—	LABOR MATTERS
SCHEDULE 8V	—	CASUALTY
SCHEDULE 8W	—	MATERIAL CONTRACTS

[To be provided by the Company]

1

Schedule 3A

Excluded Estoppel and Consent Agreements

Location of Leased Property	Landlord’s Name and Address
KapStone Paper and Packaging Corporation1101 Skokie Blvd., Suite 300Northbrook, IL 60062	PCS Administration (USA), Inc.1101 Skokie Blvd., Suite 400Northbrook, IL 60062
KapStone Kraft Paper Corporation300 S. Edgar StreetFordyce, AR 71742	City of Fordyce, ArkansasCity Hall, 101 South MainFordyce, AR 71742Attention: Mayor

Schedule 3H

Material Adverse Effect

1.On January 8, 2008, an electrical fire occurred in ECR 82.  The fire was extinguished quickly, but resulted in loss of power resulting in approximately 8 hours of down time at the waste and water treatment plants.  The Business will incur additional costs in 2008 to repair the resulting damage.  The current estimate to repair damage in connection with the assets acquired under the Mead Purchase Agreement is approximately $5,300,000, of which approximately $2,600,000 shall be paid by Sellers through the working capital adjustment under such agreement.

6B(f)

Existing Debt

(i)	All Contingent Liabilities arising under the Purchase Agreement dated as of June 23, 2006, by and between International Paper Company, Stone Arcade Acquisition Corporation, and KapStone Kraft Paper Corporation (as amended).
(ii)	Contingent Liabilities arising under the Asset Purchase Agreement dated as of April 4, 2008 (as amended), among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC (as amended), together with the Additional Documents as defined therein.
(iii)	Contingent Liabilities arising under the FILOT Agreement dated on or about July 1, 2008, among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone Charleston Kraft LC, KapStone Paper and Packaging Corporation and Cogen South L.L.C.
(iv)	Contingent Liabilities under the Underwriting Agreement dated on or about August 15, 2005, among Stone Arcade Acquisition Corporation, Morgan Joseph & Co., Inc., as Representative, and the other Underwriters identified therein.
(v)	Contingent Liabilities under Warrant Agreement dated on or about August 15, 2005, by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.
(vi)	The debt (other than Debt to be Repaid) reflected on KapStone Paper and Packaging Corporation’s most recent audited financial statements as of December 31, 2007.
(vii)	Contingent Liabilities arising under the contracts identified on Schedule 5.25 which is hereby incorporated by reference herein.
(viii)	Debt secured by Liens listed on Schedule 6C.

Schedule 6B(g)

Debt To Be Repaid

1.Credit Agreement dated as of January 2, 2007 among KapStone Kraft Paper Corporation, the Lenders identified therein and LaSalle Bank National Association, as Administrative Agent.(1)

2.     Obligations in respect of the following filing:

The Bank of New York, as Agent, as successor in interest to NationsBank, N.A., as Agent - assignment(2) 52386358

52419902 8/2/05

8/4/05 All rights, title and interests in Cogen South LLCAssignment to The Bank of New York, N.A.

(1) To be repaid and terminated on Commitment Effective Date as provided in payoff letter.

(2) To be assigned to the Borrower on the Commitment Effective Date and terminated in connection herewith.

Schedule 6C

Existing Liens

1.The following Liens:

KapStone Paper and Packaging Corporation

Secured Party	Filing Number	Filing  Date	Collateral
Astenjohnson, Inc.	70412469	2/1/07	Goods and Inventory on consignment and proceeds thereof

KapStone Kraft Paper Corporation

Secured Party	Filing Number	Filing  Date	Collateral
General Electric Capital Corporation	73536439	9/19/07	Equipment: 2002 Hyster S100XM Cushioned Diesel Lift Truck, serial number E004V02027Z
Minority Alliance Capital, LLC	80434348	2/5/08	Equipment: Yale Model GLC080VXNGSF084, serial numbers E818V02224E and E818VO2227E
First Independence Bank	80533339	2/13/08	Equipment: New Yale Model GLC080VXNGSF084, serial numbers: E818V02224E and E818V02227E
Leasenet Group LLC	80663003	2/25/08	Equipment described in Schedule KS-003 to Master Equipment Lease KS-01 dated May 5, 2007. UCC filed for informational purposes only.
Minority Alliance Capital, LLC	80665669	2/25/08	Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and E818VO2357E
First Independence Bank	81375326	4/21/08	Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and E818VO2357E

MeadWestvaco Corporation

Secured Party	Filing Number	Filing Date	Collateral
Atel Leasing Corporation	41875824	7/6/04	Equipment and Related Software under Lease Agreement No. MEAD1 Precautionary filing
- partial assignment	503363193	2/2/05	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund X, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund XI, LLC
- partial assignment	41875824	5/8/07	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/8/07	Assignment to Atel Capital Equipment Fund X, LLC
- amendment	41875824	3/14/08	Amended Debtor’s address
- partial assignment	41875824	5/19/08	Assignment to Atel Capital Equipment Fund X, LLC
Eplus Group, Inc.	51580548	5/23/05	Equipment on Schedule 371 of an Equipment Lease Agreement, dated 1/28/92Filed for informational purposes only
Banc of America Leasing & Capital, LLC	61267731	4/16/07	Equipment: Case 41 Skid Steer Loader*Precautionary lease notice filing
Banc of America Leasing & Capital, LLC	63425691	9/15/06	Equipment subject to schedule no. 017 to Lease Agreement, dated 8/3/06*Precautionary lease notice filing

1.Lien pursuant to Sublease Agreement by and between Royal Bank of Scotland and KapStone Charleston Kraft LLC.

2.Lien pursuant to Sublease Agreement by and between Bank of America and KapStone Charleston Kraft LLC.

3.Lien pursuant to Lease Agreement by and between PHH Vehicle Management Services, LLC and KapStone Paper and Packaging Corporation.

4.Lien pursuant to Railroad Equipment Lease Agreement by and between Wells Fargo and KapStone Charleston Kraft LLC.

Schedule 6I

Unconditional Purchase Obligations

1.Long-Term Fiber Supply Agreement dated on or about July 1, 2008 by and between MeadWestvaco Forestry, LLC and KapStone Charleston Kraft LLC.

Schedule 6L

Investments

None.

Schedule 6R

Holding Company Contracts

1.Lease Agreement dated as of January 1, 1997 by and between the City of Fordyce, Arkansas and International Paper Company.

2.Registration Rights Agreement dated on or about August 15, 2005 by and among Stone Arcade Acquisition Corporation, Roger W. Stone, Matthew Kaplan, Jonathan R. Furer, John M. Chapman and Muhit U. Rhaman  (each an “Initial Stockholder” and collectively the “Initial Stockholders”).

3.Letter Agreement dated on or about August 15, 2005 by and between Stone-Kaplan Investments LLC and Stone Arcade Acquisition Corporation regarding administrative support.

4.Investment Management Trust Agreement dated on or about  August 15, 2005 by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

5.Letter Agreements among Stone Arcade Acquisition Corporation, Morgan Joseph & Co. Inc. and each of the Initial Stockholders dated on or about August 15, 2005.

6.Purchase Agreement dated as of June 23, 2006 by and between International Paper Company, Stone Arcade Acquisition Corporation and KapStone Kraft Paper Corporation.

7.Inter-Company Loan Agreement dated as of January 2, 2007 by and between KapStone Paper and Packaging Corporation and KapStone Kraft Paper Corporation.

8.Asset Purchase Agreement dated April 4, 2008 among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC.

9.KapStone Paper and Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as amended April 10, 2008.

10.Indemnity Agreement dated on or about July 1, 2008 among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone Charleston Kraft LLC, KapStone Paper and Packaging Corporation and Cogen South L.L.C. re: FILOT Arrangement.

11.KapStone Paper and Packaging Corporation’s Guaranty of Service Agreement dated February 2, 2005 by and between Cogen South, L.L.C. and South Carolina Electric & Gas Company.

12.KapStone Paper and Packaging Corporation’s Guaranty of Purchase and Supply Agreement dated January 1, 2008 by and between KapStone Charleston Kraft LLC and Old World Industries, Inc.

Schedule 8A(1)

Subsidiaries

1.KapStone Paper and Packaging Corporation:

a.KapStone Kraft Paper Corporation, a Delaware corporation and wholly-owned subsidiary.

1.KapStone Kraft Paper Corporation:

a.KapStone Charleston Kraft LLC, a Delaware limited liability company and wholly-owned subsidiary.

b.KapStone Asia Limited, a Hong Kong limited liability company and wholly-owned subsidiary.

c.KapStone Europe SPRL, a Belgium limited liability company.  KapStone Kraft Paper Corporation holds a 99% interest in KapStone Europe SPRL.

2.KapStone Charleston Kraft LLC:

a.KapStone Europe SPRL, a Belgium limited liability company.  KapStone Charleston Kraft LLC holds a 1% interest in KapStone Europe SPRL.

b.Cogen South L.L.C., a Delaware limited liability company and wholly-owned subsidiary.(1)

(1) Cogen South L.L.C. will become a Subsidiary after funding of the Notes and upon consummation of the Kraft Acquisition.

Schedule 8C

Actions Pending

None

Schedule 8F

Taxes

1.The October 2006 South Carolina sales and use tax return for Cogen South L.L.C. was filed late as a result of an error by the group to which the tax return filing process had been outsourced.  (This was the first month that the outsourcing engagement was in place.)  A notice sent by South Carolina regarding this issue was resolved in 2007.  Penalties and interest ($37.17) were paid by the outsourcing firm.

2.Certain Fee-in-Lieu of Tax (“FILOT”) schedules of assets submitted to the South Carolina Department of Revenue contained errors, the net result of which appears to have been the overreporting of assets held by approximately $400,000.  Additionally, within the classification of assets between Seller’s Chemicals Business and North Charleston Mill facilities, certain transfers and administrative assets were not reflected, and certain assets were reported twice.  As a consequence of this, assets associated with the North Charleston Mill facility were overstated by approximately $10 million and assets associated with the Chemicals Business facility were understated by approximately $10 million; since both facilities are comprehended under the FILOT Arrangements, a misclassification of assets between the facilities does not affect total assets reported with respect to the particular FILOT Arrangement.  Finally, certain dispositions of assets were not reflected on the FILOT schedules of assets for the Chemicals Business facility, the North Charleston Mill and for Cogen South L.L.C..  Modified reports are being prepared and will be filed with the South Carolina Department of Revenue, which has been consulted regarding the appropriate reporting.  It is expected that the cumulative tax effect of these matters will be minor.

Schedule 8G

List of Agreements Restricting Indebtedness

1.Credit Agreement dated as of June 12, 2008, among KapStone Kraft Paper Corporation, KapStone Paper and Packaging Corporation, the Lenders identified therein and Bank of America, N.A.

Schedule 8K

Filings and Recordings(1)

Grantor	Filing Requirement or Other Action	Filing Office
KapStone Kraft Paper Corporation	Filing of UCC-1 Financing Statement	Delaware Secretary of State
KapStone Paper and Packaging Corporation	Filing of UCC-1 Financing Statement	Delaware Secretary of State
KapStone Charleston Kraft LLC	Filing of UCC-1 Financing Statement	Delaware Secretary of State
KapStone Kraft Paper Corporation	Control Agreement with PNC Bank, National Association	Not applicable
KapStone Paper and Packaging Corporation	Possession of Certificated Securities	Not applicable
KapStone Kraft Paper Corporation	Possession of Certificated Securities	Not applicable
KapStone Kraft Paper Corporation	Filing of Notice of Grant of Security Interest in Patents	United States Patent and Trademark Office
KapStone Kraft Paper Corporation	Filing of Notice of Grant of Security Interest in Trademarks	United States Patent and Trademark Office
KapStone Charleston Kraft LLC	Possession of Bond	Not applicable

(1) This schedule does not address (a) real property, (b) collateral subject to a certificate of title law or (c) foreign intellectual property, filing and recordings in connection with which shall be as determined by the Collateral Agent.

Schedule 8Q

Information Regarding the Parent and the Subsidiaries

(i)Organizational Information

1.Schedule 8A(1) is incorporated herein by reference.

2.Organizational Identification Numbers

a.KapStone Paper and Packaging Corporation: 3955792

b.KapStone Kraft Paper Corporation: 4165052

c.KapStone Charleston Kraft LLC: 4525470

d.KapStone Asia Limited: 39430822-000-06-08-1

e.KapStone Europe SPRL: [to be provided]

f.Cogen South L.L.C.:2589777

(ii)Unregistered Orgaizations

1.KapStone Europe SPRL:
c/o Arendt & Medernach
Rue D’Arlon 92
1040 Brussels,
Belgium

2.KapStone Asia Limited:
Level 28
Three Pacific Place
1 Queen’s Road East
Hong Kong

(iii)Real Property(1)

Location	Leased/Owned	Landlord’s Name and Address
KapStone Paper and Packaging Corporation 1101 Skokie Blvd., Suite 300 Northbrook, IL 60062	Leased	PCS Administration (USA), Inc. 1101 Skokie Blvd., Ste. 400 Northbrook, IL 60062
KapStone Kraft Paper Corporation 100 Gaston Road Roanoke Rapids, NC 27870	Owned
KapStone Kraft Paper Corporation Airstrip Property (as defined in Attachment 1 to Schedule 8Q)	Owned
KapStone Kraft Paper Corporation 300 S. Edgar Street Fordyce, AR 71742 (“Fordyce Property”)	Leased	City of Fordyce, Arkansas City Hall, 101 S. Main Fordyce, AR 71742
KapStone Charleston Kraft LLC(2) 5600 Virginia Avenue North Charleston, SC 29406	Owned
KapStone Charleston Kraft LLC 309 N. Maple Street Summerville, SC 29483	Owned
KapStone Charleston Kraft LLC 707 Whitehead Road Elgin, SC 29045	Owned
KapStone Charleston Kraft LLC 1382 Elm Street Hampton, SC 29924	Owned
KapStone Charleston Kraft LLC 28026 U.S. Highway 76 Kinards, SC 29355	Owned

(1) For purposed of Paragraph 8E, neither Parent, Company nor any of their Subsidiaries makes any representation or warranty with respect to the state of title of the Fordyce Property, the Beech Hill Chip Mill or the Badham Chip Mill.

(2) KapStone Charleston Kraft LLC does not own the entire property located at this address.  Pursuant to the Kraft Acquisition, excluded is all the real property primarily related to or primarily used by MeadWestvaco Corporation and its Subsidiaries in the Seller’s Chemicals Business.  KapStone Charleston Kraft LLC also leases the Berkeley County portion of the property which is in the process of being subdivided from the Retained Park Property (as defined in Attachment 1 to Schedule 8Q).  The Express Map for this location required to be delivered pursuant to Section 4.02(a)(iv) of the Credit Agreement will be delivered to the Collateral Agent within 7 days of the Closing Date.

KapStone Charleston Kraft LLC Harvey Tract Landfill Highway 16 Summerville, SC 29483	Owned
KapStone Charleston Kraft LLC(3) 665 Chip Mill RoadAndrews, SC 29510	Leased
KapStone Charleston Kraft LLC 391 Rosom Hill Extension Ridgeville, SC 29472 (“Beech Hill Chip Mill”)	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLC(4) 665 Chip Mill Road Andrews, SC 29510	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLC 107 Motel Drive St. George, SC 29477	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLC 7 miles west of Givans Town and 4 miles west of Givans Ferry Bridge Badham, SC (“Badham Chip Mill”)	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLC Water Leases Tracts 21-24 Tract 17 Charleston, SC	Leased	Commissioners of Public Works of the City of Charleston, SC PO Box B Charleston, SC 29402

(3) KapStone Charleston Kraft LLC owns the imporovements only, consisting of the chip mill facility and related improvements (excluding the approximately 2,200 square foot office building owned by MW Forestry, LLC, and leased to KapStone Charleston Kraft LLC).

(4) KapStone Charleston Kraft LLC owns only the improvements and leases the ground site and the office building.

(iv)Intellectual Property

1.     KAPSTONE CHARLESTON KRAFT LLC U.S. PATENTS

Issued Patents

Description	Patent No.	Issued
Alkaline Scrubber for Condensate Stripper off-gasses	5450892	9/19/95
Postforming Decorative Laminates	5443902	8/22/95
Postforming Decorative Laminates	5837376	11/17/98

Pending Applications

Description	Patent No.	Issued
Method of Releasing Laminated Materials	11386954	3/22/06
A New Way To Produce Phenolic Treated Kraft Paper	60957264	8/22/07
Sound Attenuating Floor Systems	60971283	9/9/07
Structural Sheathing with Integrating Water Drainage Channels	60984764	11/2/07
Building Panels Reinforced with Paperboard	61020844	1/14/08
Improved Coefficient of Friction for Paper Overlaid OSB for Roofing and Wall Sheathing Applications	61004066	4/11/08

2.     KAPSTONE CHARLESTON KRAFT LLC FOREIGN PATENTS

Issued Patents

Description	Country	Patent No.	Issued
Postforming Decorative Laminates	Canada	2153035	12/16/03
Postforming Decorative Laminates	Brazil	PI95030488	1/2/07
Postforming Decorative Laminates	Finland	117749	2/15/07
Postforming Decorative Laminates	Germany	EP0740020	7/30/03
Postforming Decorative Laminates	Italy	EP0740020	7/30/03
Postforming Decorative Laminates	Japan	2774949	4/24/98
Postforming Decorative Laminates	Mexico	215805	8/15/03
Postforming Decorative Laminates	Spain	EP0740020	7/30/03
Postforming Decorative Laminates	Sweden	EP0740020	7/30/03

Pending Applications

Description	Country	Patent No.	Issued
Method of Releasing Laminated Materials	Canada	2465484	1/11/02
Method of Releasing Laminated Materials	EPO	02707418.6	1/11/02
Method of Releasing Laminated Materials	Japan	2003544262	1/11/02
Method of Releasing Laminated Materials	South Korea	1020047007267	1/11/02
Postforming Decorative Laminates	Indonesia	P951251	6/30/95

3.KAPSTONE KRAFT PAPER CORPORATION U.S. TRADEMARKS

Registered Marks

Mark	Registration No.	Registration Date
GATORHIDE	2134345	2/3/98
RIDE RITE	1045454	8/3/76

4.KAPSTONE KRAFT PAPER CORPORATION FOREIGN TRADEMARKS

Mark	Country	Registration No.	Registration Date
RIDE RITE	European Community	153155	6/15/98
RIDE RITE	France	201221	10/24/75
RIDE RITE	United Kingdom	B1054243	10/31/75

5.KAPSTONE CHARLESTON KRAFT LLC U.S. TRADEMARKS

Registered Marks

Mark	Registration No.	Registration Date
CORFORM	2114324	11/18/97
DURASORB	1474154	1/26/88
KRAFTPAK	1178128	11/17/81

Pending Application

Mark	Registration No.	Registration Date
HIPEX	77283609	9/19/07

6.KAPSTONE CHARLESTON KRAFT LLC FOREIGN TRADEMARK

Pending Application

Mark	Country	Registration No.	Registration Date
HIPEX	Canada	136692	10/10/07

Schedule 8T

Labor Matters

(i)Labor Agreement between International Paper Ride Rite Fordyce and Paper, Allied-Industrial, Chemical and Energy Workers International Union and Local 5-368.

(ii)Letter Agreement between Harry Johnson and International Paper Company dated December 10, 2004.

(iii)Letter Agreement between Paul Evans and International Paper Company dated March 21, 2006.

(iv)Agreement between Ideal Technical Services and Jesse Windred Whiddon, Jr., dated August 20, 2001.

(v)Agreement between KapStone Kraft Paper Corporation and United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-International and Service Workers Union, AFL-CIO, CLC, Local 9-425 effective February 1, 2007.

(vi)Staffing Agreement between Employers Staffing of America, Inc., and International Paper dated September 13, 2005.

(vii)Labor Agreement effective July 2, 2006, by and between the Charleston, South Carolina, plant of MeadWestvaco and the International Association of Machinists and Aerospace Workers and its Charleston Lodge No. 183.

(viii)Labor Agreement effective July 2, 2006, by and between the Charleston, South Carolina plant of MeadWestvaco and the Local Union No. 1753 of the International Brotherhood of Electrical Workers.

(ix)Labor Agreement effective July 2, 2006, by and between the Charleston, South Carolina, plant of MeadWestvaco and the Paper, Allied-Industrial, Chemical and Energy Workers International Union and its Local Unions 3-0508 and 3-1435.

Schedule 8V

Casualty

1.On January 8, 2008, an electrical fire occurred in ECR 82.  The fire was extinguished quickly, but resulted in loss of power resulting in approximately 8 hours of down time at the waste and water treatment plants.  The Business will incur additional costs in 2008 to repair the resulting damage.  The current estimate to repair damage in connection with the assets acquired under the Mead Purchase Agreement is approximately $5,300,000, of which approximately $2,600,000 shall be paid by Sellers through the working capital adjustment under such agreement.

2.In April 2008, a smelt water explosion in the Recovery Boiler caused the boiler and a paper machine to shut down for 6 days.  All damages have been repaired and both machines are now operating normally.

Schedule 8W

Material Contracts

Roanoke Rapids

Customer	Address	Term of Contract
Graphic Packaging	450 East North Avenue Carol Stream, IL 60188	Expires 12/11/08
Exopack	3070 Southport Road Spartanburg, SC 29302	Expires 12/31/08
Hood Packaging	25 Woodgreen Place Madison, MS 39110	Expires 8/31/09
Ampac	18 Neil Court Oceanside, NY 11572	Expires 12/31/08
Bancroft Bag	425 Bancroft blvd West Monroe, LA 71292	Expires 3/31/09
Arizona Chemical Company	4600 Touchton Road East, Suite 500 Jacksonville, FL	Expires 1/1/26

Supplier	Address	Term of contract
CSXT	Jacksonville, FL	Expires June 30, 2008
Dominion Power	Portsmouth VA	Expires 01-07 unless renewed
PPG	Pittsburgh, PA	Expires 1/31/09
West Fraser Timber	1900 Exeter Rd., Suite 105 Germantown, TN 38138	13.5 years remaining on a 15 year contract
Broad Arrow Timber Company	15 Piedmont Center, Suite 1250 Atlanta, GA 30350	13.5 years remaining on a 15 year contract*

[*Additional 5 years are in place for ROFO on thinnings.  This is not included in the aggregated purchase customer-supplier contracts.]

Charleston

Supplier	Address	Term of Contract
CSXT — Coal inbound only	500 Water Street - J865 Jacksonville, FL 32202	November 1, 2005 to December 31, 2010
Old World Trading — caustic soda	4065 Commercial Avenue Northbrook, IL 60062	January 1, 2008 to December 31, 2009
SCE&G — electric power — E9096103	SCE&G Columbia, SC 29218	January 1, 1999 to December 31, 2018
Hess Corporation— fuel oil	1 Hess Plaza Woodbridge, NJ 07095	August 9, 2006 to August 31, 2008
Nalco Chemical Co	1601 W. Diehl Road Naperville, IL 60563	August 1, 2003 to December 31, 2008
Massey Industrial Sales - coal	4 North Fourth Street Richmond, VA	January 1, 2008 to December 31, 2009
Godfrey Lumber Company, Inc.	P.O. Box 615 Statesville, NC 28687	Start 1-6-08 and ends 1-5-11. 3-year agreement
Williams Brothers Trucking, Inc.	P.O. Box 188 Hazlehurst, GA 31539	Start 11-14-05 and ends 11-14-15. 10-year agreement
National City Leasing	101 South 5th Street Louisville, KY 40202	Start Dec-1995 and ends December 2015. 20-year lease
MeadWestvaco Forestry, LLC	P.O. Box 118005 Charleston, SC 29423-8005	Start July 1, 2008 and ends July 1, 2023. 15-year agreement
Key Container	P.O. Box 2370 21 Campbell Street Pawtucket, RI 02861-2370	September 1, 2006 through September 1, 2011
New England Woodenware	205 School Street Gardner, MA 01440	July 1, 2007 through July 1, 2012

Purchase Agreement dated as of June 23, 2006, by and between International Paper Company, Stone Arcade Acquisition Corporation and KapStone Kraft Paper Corporation (as amended).

Asset Purchase Agreement dated as of April 4, 2008, among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC (as amended).

Registration Rights Agreement dated on or about August 15, 2005, by and among Stone Arcade Acquisition Corporation, Roger W. Stone, Matthew Kaplan, Jonathan R. Furer, John M. Chapman and Muhit U. Rahman  (each an “Initial Stockholder” and collectively the “Initial Stockholders”).

Letter Agreement dated on or about August 15, 2005, by and between Stone-Kaplan Investments LLC and Stone Arcade Acquisition Corporation regarding administrative support.

Investment Management Trust Agreement dated on or about  August 15, 2005, by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

Letter Agreements among Stone Arcade Acquisition Corporation, Morgan Joseph & Co. Inc. and each of the Initial Stockholders dated on or about August 15, 2005.

Inter-Company Loan Agreement dated as of January 2, 2007, by and between KapStone Paper and Packaging Corporation and KapStone Kraft Paper Corporation.

KapStone Paper and Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as amended April 10, 2008.

Pulpwood Supply Agreement dated as of January 1, 2007, between International Paper Company and KapStone Kraft Paper Corporation;

Residual Chip Agreement dated as of January 1, 2007, between International Paper Company and KapStone Kraft Paper Corporation.

Reciprocal Plant Operating Agreement dated on or about July 1, 2008, between KapStone Charleston Kraft LLC and MeadWestvaco South Carolina LLC.

Air Permit Modeling Agreement dated on or about July 1, 2008, among KapStone Charleston Kraft LLC, Cogen South L.L.C. and MeadWestvaco South Carolina LLC.

Long-Term Fiber Supply Agreement dated on or about July 1, 2008, by and between MeadWestvaco Forestry, LLC and KapStone Charleston Kraft LLC.

Amended and Restated Lease Agreement dated as of December 1, 1998, by and between Charleston County, South Carolina and Cogen South L.L.C.

Amended and Restated Lease Agreement dated as of July 1, 2008, by and between Charleston County, South Carolina and KapStone Charleston Kraft LLC.

Generator Site Sublease dated as of June 1, 1996, between South Carolina Electric & Gas Company and Cogen South L.L.C.

Shaft Horsepower Agreement dated as of June 1, 1996, between Cogen South L.L.C. and South Carolina Electric & Gas Company.

Service Agreement dated February 2, 2005, by and between Cogen South, L.L.C. and South Carolina Electric & Gas Company.

Contract for Electric Service dated June 11, 2008, between KapStone Charleston Kraft LLC and South Carolina Electric & Gas Company.

EX-10.7

Exhibit 10.7

Execution Copy

[Published CUSIP Number:         ]

CREDIT AGREEMENT

Dated as of June 12, 2008

among

KAPSTONE KRAFT PAPER CORPORATION,

as the Borrower,

KAPSTONE PAPER AND PACKAGING CORPORATION,

as the Parent,

THE SUBSIDIARIES OF THE BORROWER IDENTIFIED HEREIN,

as Guarantors,

BANK OF AMERICA, N.A.,

as Administrative Agent, Swing Line Lender and L/C Issuer,

and

THE OTHER LENDERS PARTY HERETO

Arranged By:

BANC OF AMERICA SECURITIES LLC,

as Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

Section		Page
ARTICLE I	DEFINITIONS AND ACCOUNTING TERMS	1
1.01	Defined Terms	1
1.02	Other Interpretive Provisions	32
1.03	Accounting Terms	32
1.04	Rounding	33
1.05	Times of Day	33
1.06	Letter of Credit Amounts	33
ARTICLE II	THE COMMITMENTS AND CREDIT EXTENSIONS	33
2.01	Term Loans and Revolving Credit Loans	34
2.02	Borrowings, Conversions and Continuations of Loans	35
2.03	Letters of Credit	37
2.04	Swing Line Loans	47
2.05	Prepayments	50
2.06	Termination or Reduction of Commitments	54
2.07	Repayment of Loans	55
2.08	Interest	58
2.09	Fees	58
2.10	Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate	59
2.11	Evidence of Debt	60
2.12	Payments Generally; Administrative Agent’s Clawback	61
2.13	Sharing of Payments by Lenders	63
ARTICLE III	TAXES, YIELD PROTECTION AND ILLEGALITY	64
3.01	Taxes	64
3.02	Illegality	68
3.03	Inability to Determine Rates	68
3.04	Increased Costs; Reserves on Eurodollar Rate Loans	68
3.05	Compensation for Losses	70
3.06	Mitigation Obligations; Replacement of Lenders	71
3.07	Survival	71
ARTICLE IV	CONDITIONS PRECEDENT TO CREDIT EXTENSIONS	71
4.01	Conditions to Closing Date	71
4.02	Conditions to Commitment Effective Date	72
4.03	Conditions to all Credit Extensions	79
ARTICLE V	REPRESENTATIONS AND WARRANTIES	80
5.01	Organization	80
5.02	Authorization; No Conflict	80
5.03	Validity and Binding Nature	81
5.04	Financial Condition	81
5.05	No Material Adverse Change	81
5.06	Litigation and Contingent Liabilities	81
5.07	Ownership of Properties; Liens	81
5.08	Equity Ownership; Subsidiaries	81
5.09	Pension Plans	82

5.10	Investment Company Act	82
5.11	Regulation U	83
5.12	Taxes	83
5.13	Solvency, etc.	83
5.14	Environmental Matters	83
5.15	Insurance	84
5.16	Real Property	84
5.17	Information	84
5.18	Intellectual Property	84
5.19	Burdensome Obligations	84
5.20	Labor Matters	85
5.21	No Default	85
5.22	Related Agreements, etc.	85
5.23	Casualty, Etc.	86
5.24	Collateral Documents	86
5.25	Material Contracts	86
ARTICLE VI	AFFIRMATIVE COVENANTS	86
6.01	Reports, Certificates and Other Information	86
6.02	Certificates; Other Information	87
6.03	Books, Records and Inspections	90
6.04	Maintenance of Property; Insurance	91
6.05	Compliance with Laws; Payment of Taxes and Liabilities	92
6.06	Maintenance of Existence, etc.	92
6.07	Use of Proceeds	92
6.08	Employee Benefit Plans	92
6.09	Environmental Matters	93
6.10	Further Assurances	93
6.11	Deposit Accounts	94
6.12	Compliance with Terms of Leaseholds	94
6.13	Material Contracts	94
6.14	Kraft Acquisition Documents	94
6.15	Amendments to Private Placement Notes or Private Placement Note Purchase Agreement	95
ARTICLE VII	NEGATIVE COVENANTS	95
7.01	Debt	95
7.02	Liens	97
7.03	Operating Leases	98
7.04	Restricted Payments	99
7.05	Mergers, Consolidations, Acquisitions, Sales	99
7.06	Modification of Organization Documents	100
7.07	Transactions with Affiliates	100
7.08	Unconditional Purchase Obligations	100
7.09	Inconsistent Agreements	100
7.10	Business Activities; Issuance of Equity	101
7.11	Investments	101
7.12	Restriction of Amendments to Certain Documents	102

7.13	Accounting Changes; Fiscal Year	102
7.14	Financial Covenants	102
7.15	Prepayments, Etc. of Debt	102
7.16	Amendment, Etc. of Debt	102
7.17	Use of Proceeds	103
7.18	Holding Company	103
ARTICLE VIII	EVENTS OF DEFAULT AND REMEDIES	103
8.01	Events of Default	103
8.02	Remedies Upon Event of Default	106
ARTICLE IX	ADMINISTRATIVE AGENT	107
9.01	Appointment and Authority	107
9.02	Rights as a Lender	108
9.03	Exculpatory Provisions	108
9.04	Reliance by Administrative Agent	109
9.05	Delegation of Duties	109
9.06	Resignation of Administrative Agent	110
9.07	Non-Reliance on Administrative Agent and Other Lenders	111
9.08	No Other Duties, Etc.	111
9.09	Administrative Agent May File Proofs of Claim	111
9.10	Collateral and Guaranty Matters	112
9.11	Secured Cash Management Agreements and Secured Hedge Agreements	112
9.12	Lenders’ Enforcement Rights	113
ARTICLE X	GUARANTY	113
10.01	The Guaranty	113
10.02	Obligations Unconditional	114
10.03	Reinstatement	115
10.04	Certain Additional Waivers	115
10.05	Remedies	115
10.06	Rights of Contribution	115
10.07	Guarantee of Payment; Continuing Guarantee	116
ARTICLE XI	MISCELLANENOUS	116
11.01	Amendments, Etc.	116
11.02	Notices; Effectiveness; Electronic Communications	119
11.03	No Waiver; Cumulative Remedies	121
11.04	Expenses; Indemnity; Damage Waiver	121
11.05	Payments Set Aside	123
11.06	Successors and Assigns	124
11.07	Treatment of Certain Information; Confidentiality	128
11.08	Right of Setoff	129
11.09	Interest Rate Limitation	130
11.10	Counterparts; Integration; Effectiveness	130
11.11	Survival of Representations and Warranties	130
11.12	Severability	130
11.13	Replacement of Lenders	131
11.14	Governing Law; Jurisdiction; Etc.	131
11.15	Waiver of Jury Trial	132

11.16	No Advisory or Fiduciary Responsibility	133
11.17	Electronic Execution of Assignments and Certain Other Documents	133
11.18	USA PATRIOT Act Notice	134
11.19	Intercreditor Agreement	134
SIGNATURES		135

SCHEDULES

1.01	Existing Letters of Credit
2.01	Commitments and Applicable Percentages
4.02(a)	Excluded Estoppel and Consent Agreements
4.02(b)	Material Adverse Effect
5.02	Consents; No Conflict
5.05	Changes in Business
5.06	Litigation and Contingent Liabilities
5.07	Ownership of Properties; Liens
5.08	Ownership of Loan Parties and Subsidiaries
5.12	Taxes
5.16	Real Property
5.20	Labor Matters
5.23	Casualty, Etc.
5.25	Material Contracts
7.01	Existing Debt
7.01(g)	Debt To Be Repaid
7.02	Existing Liens
7.08	Unconditional Purchase Obligations
7.11	Investments
7.18	Holding Company Contracts
11.02	Administrative Agent’s Office, Certain Addresses for Notices

EXHIBITS

Form of

A	Committed Loan Notice
B	Swing Line Loan Notice
C-1	Term A Note
C-2	Term B Note
C-3	Revolving Credit Note
D	Compliance Certificate
E-1	Assignment and Assumption
E-2	Administrative Questionnaire
F	Security Agreement
G	Mortgage
H	Secured Lender Party Designation Notice

CREDIT AGREEMENT

This CREDIT AGREEMENT is entered into as of June 12, 2008 among KAPSTONE KRAFT PAPER CORPORATION, a Delaware corporation (the “Borrower”), KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation (the “Parent”), certain subsidiaries of the Borrower identified on the signature pages hereto as guarantors and such other subsidiaries of the Borrower as may from time to time become party hereto (together with the Parent, the “Guarantors”), the lenders from time to time party hereto (the “Lenders”) and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

PRELIMINARY STATEMENTS:

The Borrower has requested that the Lenders provide term loan facilities and a revolving credit facility, and the Lenders have indicated their willingness to lend and the L/C Issuer has indicated its willingness to issue letters of credit, in each case, on the terms and subject to the conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.01Defined Terms.

As used in this Agreement, the following terms shall have the meanings set forth below:

“Account Debtor” has the meaning set forth in the Security Agreement.

“Account or Accounts” has the meaning set forth in the UCC.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the Capital Securities of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).

“Adjusted Working Capital” means the remainder of: (a) (i) the consolidated current assets of the Borrower and its Subsidiaries minus (ii) the amount of cash and cash equivalents included in such consolidated current assets; minus (b) (i) consolidated current liabilities of the Borrower and its Subsidiaries minus (ii) the amount of short-term Debt (including current maturities of long-term Debt) of the Borrower and its Subsidiaries included in such consolidated current liabilities.

“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 11.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in substantially the form of Exhibit E-2 or any other form approved by the Administrative Agent.

“Affiliate” means, 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.

“Aggregate Commitments” means the Commitments of all the Lenders.

“Agreement” means this Credit Agreement.

“Applicable Percentage” means with respect to any Lender at any time (a) with respect to such Lender’s portion of the outstanding Term A Loan at any time, the percentage (carried out to the ninth decimal place) of the outstanding principal amount of the Term A Loan held by such Lender at such time, (b) with respect to such Lender’s portion of the outstanding Term B Loan at any time, the percentage (carried out to the ninth decimal place) of the outstanding principal amount of the Term B Loan held by such Lender at such time and (c) with respect to the Revolving Credit Facility, the percentage (carried out to the ninth decimal place) of the Revolving Credit Facility represented by such Lender’s Revolving Credit Commitment at such time.  If the commitment of each Lender to make Revolving Credit Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, or if the Revolving Credit Commitments have expired, then the Applicable Percentage of each Lender in respect of the Revolving Credit Facility shall be determined based on the Applicable Percentage of such Lender in respect of the Revolving Credit Facility most recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each Lender in respect of each Facility is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

“Applicable Rate” means (a) in respect of the Term A Loan and the Revolving Credit Facility the applicable percentage per annum set forth below determined by reference to the Total Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a):

2

Applicable Rate

Pricing Level	Total Leverage Ratio	Eurodollar Rate Loans		Letter of Credit Fee		Base Rate Loans		UnusedFee
I	> 3.00x but < 4.00x	3.00	%	3.00	%	1.50	%	0.50	%
II	> 2.50x but < 3.00x	2.625	%	2.625	%	1.125	%	0.50	%
III	> 2.00x but < 2.50x	2.25	%	2.25	%	0.75	%	0.50	%
IV	> 1.50x but < 2.00x	1.875	%	1.875	%	0.375	%	0.50	%
V	< 1.50x	1.50	%	1.50	%	0.00	%	0.375	%

and (b) in respect of the Term B Loan, 2.00% per annum for Base Rate Loans and 3.50% per annum for Eurodollar Rate Loans.

Any increase or decrease in the Applicable Rate resulting from a change in the Total Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a); provided, however, that (a) if a Compliance Certificate is not delivered when due in accordance with such Section, then Pricing Level I shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and (b) the Applicable Rate in effect on the Commitment Effective Date and for the first six (6) months after the Commitment Effective Date shall be determined based upon Pricing Level I.

Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b).

“Applicable Revolving Credit Percentage” means with respect to any Lender at any time, such Lender’s Applicable Percentage in respect of the Revolving Credit Facility at such time.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Arranger” means Banc of America Securities LLC, in its capacity as sole lead arranger and sole book manager.

“Asset Disposition” means the sale, lease, assignment or other transfer for value (each, a “Disposition”) by any Loan Party to any Person (other than a Loan Party) of any asset or right of such Loan Party (including, the loss, destruction or damage of any portion thereof or any actual or threatened (in writing to any Loan Party) condemnation, confiscation, requisition, seizure or taking thereof) other than (a) the sale or lease of inventory in the ordinary course of business and (b) other Dispositions in any Fiscal Year the Net Proceeds of which do not in the aggregate exceed $5,000,000.

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

3

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.

“Audited Financial Statements” means the audited consolidated balance sheet of (a) the Parent and its Subsidiaries for the Fiscal Years ended December 31, 2005, December 31, 2006 and December 31, 2007 and (b) the Target for the Fiscal Years ended December 31, 2005, December 31, 2006 and December 31, 2007, in each case along with the related consolidated statements of income or operations, shareholders’ equity and cash flows for such Fiscal Years, including the notes thereto.

“Availability Period” means, in respect of the Revolving Credit Facility, the period from and including the Commitment Effective Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Revolving Credit Commitments pursuant to Section 2.06, and (c) the date of termination of the commitment of each Lender to make Revolving Credit Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

“Bank of America” means Bank of America, N.A. and its successors.

“Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.”  The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s 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 announced 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.

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

“BONY Documents” means (a) Acknowledgment of Assignment of Indebtedness and Related Liens dated contemporaneously with the Commitment Effective Date, executed by The Bank of New York and addressed to the Seller, Cogen South L.L.C. and Oak Acquisition, LLC, (b) Assignment of Mortgage and Assignment of Rents and Assignment and Security Agreement dated contemporaneously with the Commitment Effective Date, executed by The Bank of New York for the benefit of Oak Acquisition, LLC, (c) the Resignation of Agent/Appointment of New Agent letter dated contemporaneously with the Commitment Effective Date, executed by The Bank of New York and addressed to the Seller, Cogen South L.L.C. and Oak Acquisition, LLC, and (d) the Letter Agreement relating to the assignment of Collateral from the Bank of New York to Oak Acquisition, LLC.

“Borrower” has the meaning specified in the introductory paragraph hereto.

“Borrower Materials” has the meaning specified in Section 6.02.

4

“Borrowing” means a borrowing consisting of simultaneous Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

“Business” has the meaning given such term in the Mead Purchase Agreement.

“Business Day” means 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, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

“Capital Expenditures” means all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of the Borrower, including expenditures in respect of Capital Leases, but excluding any such expenditures for which the Borrower has been reimbursed by the Seller pursuant to the Kraft Acquisition Documents and expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced.

“Capital Lease” means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person.

“Capital Securities” means, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the Closing Date, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership, interests in a trust, interests in other unincorporated organizations, warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests) or any other equivalent of such ownership interest.

“Cash Collateralize” has the meaning specified in Section 2.03(g).

“Cash Equivalent Investment” means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least A-l by S&P or P-l by Moody’s, (c) any certificate of deposit, time deposit or banker’s acceptance, maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by any Lender or its holding company (or by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital

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and surplus and undivided profits of not less than $500,000,000), (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c) ) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder and (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements, and (f) other short term liquid investments approved in writing by the Administrative Agent.

“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, credit card processing, purchase card, ACH transactions, electronic funds transfer and other cash management arrangements.

“Cash Management Bank” means any Person that, at the time it enters into a Cash Management Agreement, is a Lender or an Affiliate of a Lender (even if such Person thereafter ceases to be a Lender or such Person’s Affiliate ceases to be a Lender) and has delivered a Secured Lender Party Designation Notice to the Administrative Agent on or before the date on which such determination is being made.

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

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (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” means the occurrence of any of the following events: (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all Capital Securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than 35% of the Capital Securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent 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); provided that the acquisition by any one or more Exempt Persons (as defined below) (acting singly or in concert) of the “beneficial ownership” of 35% or more of the Capital Securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent 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) shall not be a Change of Control; (b) a majority of the members of the Board

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of Directors of Parent shall cease to be Continuing Members (as defined below); (c) Parent shall cease to own and control 100% of each class of the outstanding Capital Securities of the Borrower; (d) the Borrower shall cease to, directly or indirectly, own and control 100% of each class of the outstanding Capital Securities of each Subsidiary; or (e) all of Roger W. Stone (or a replacement reasonably satisfactory to the Required Lenders), Matthew Kaplan (or a replacement reasonably satisfactory to the Required Lenders) and Timothy Keneally (or a replacement reasonably satisfactory to the Required Lenders) shall cease at any time to be employed full time by the Parent in a position at least equivalent to their current respective positions; provided, however, such an event under this clause (e) shall not constitute a Change of Control for up to 135 days if the Parent is diligently working to replace such Person(s) with a reasonably qualified candidate (or candidates) to perform the same or similar duties as such Person(s).  For purposes of the foregoing, (x) “Continuing Member” means a member of the Board of Directors of Parent who either (i) was a member of Parent’s Board of Directors on the day before the Closing Date and has been such continuously thereafter or (ii) became a member of such Board of Directors after the day before the Closing Date and whose election or nomination for election by the stockholders of Parent was approved by a vote of the majority of the Continuing Members then members of Parent’s Board of Directors and (y) “Exempt Person” means each member of the class consisting of:  (i) Roger Stone, (ii) Matthew Kaplan and (iii) so long as voting control is retained by such Person, any spouse, lineal descendant, parent or sibling of such Person, or any trust or similar estate planning entity controlled by such Person or whose beneficiaries or owners are solely comprised of such Person’s spouse, lineal descendant, parent or sibling.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 11.01.

“Code” means the Internal Revenue Code of 1986.

“Cogen Junior Notes” means the subordinated promissory note from Cogen JV to the Borrower dated October 22, 2001 in the original principal amount of $9,500,000 and the subordinated promissory note from Cogen JV to the Borrower dated December 31, 2004 in the original principal amount of $57,500,000.

“Cogen JV” means Cogen South LLC, a Delaware limited liability company.

“Cogen Loan Agreement” shall mean that certain Amended and Restated Construction and Term Loan Agreement of Cogen JV dated as of December 15, 1996, as amended or assigned, and all documents executed in connection therewith.

“Cogen Notes” means the Cogen Senior Notes and the Cogen Junior Notes.

“Cogen Senior Notes” means all indebtedness outstanding under the Cogen Loan Agreement, including those certain Replacement Promissory Notes dated as of December 31, 1998 executed by Cogen JV in favor of the Borrower in the principal amounts of $50,000,000 and $8,039,721.92, respectively.

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“Collateral” means all of the “Collateral” and “Mortgaged Property” referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Collateral Agent for the benefit of the Secured Parties.

“Collateral Agent” has the meaning specified in the Security Agreement.

“Collateral Documents” means, collectively, the Security Agreement; any Deposit Account Control Agreement; the Mortgages; each other mortgage, collateral assignment, security agreement, pledge agreement or other similar agreement delivered to the Administrative Agent pursuant to Section 6.10; and each other agreement, instrument or document that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

“Commitment” means, as to each Lender, the Revolving Credit Commitment of such Lender and/or the Term Loan Commitment of such Lender.

“Commitment Effective Date” means the first date all the conditions precedent in Section 4.02 are satisfied or waived in accordance with Section 11.01.

“Committed Loan Notice” means a notice of (a) a Borrowing of (i) Revolving Credit Loans or (ii) the Term A Loan or (iii) the Term B Loan, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

“Consolidated Net Income” means, with respect to the Parent and its Subsidiaries for any period, the net income (or loss) of the Parent and its Subsidiaries for such period, excluding any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations.

“Contingent Liability” means, with respect to any Person, each obligation and liability of such Person and all such obligations and liabilities of such Person incurred pursuant to any agreement, undertaking or arrangement by which such Person: (a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection), including any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (b) guarantees the payment of dividends or other distributions upon the Capital Securities of any other Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor, (ii) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, working capital or

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other financial condition of any other Person, or (iii) to make payment to any other Person other than for value received; (d) agrees to lease property or to purchase securities, property or services from such other Person with the purpose or intent of assuring the owner of such indebtedness or obligation of the ability of such other Person to make payment of the indebtedness or obligation; (e) induces the issuance of any letter of credit for the benefit of such other Person; or (f) undertakes or agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability which is in the form of a guaranty of Debt shall (subject to the limitation set forth below and any other limitation set forth herein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or other liability guaranteed or supported thereby.  The amount of any Contingent Liability which is not in the form of a guaranty of Debt shall be equal to the reasonably anticipated maximum amount of such Contingent Liability as determined by such Person in good faith.

“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 meanings correlative thereto.

“Controlled Group” means each Loan Party, each of its Domestic Subsidiaries and all other members of a controlled group of corporations, all members of a controlled group of trades or businesses (whether or not incorporated) under common control and all members of an affiliated service group which, together with any Loan Party or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

“Credit Extension” means each of the following:  (a) a Borrowing and (b) an L/C Credit Extension.

“Cumulative Available Excess Cash Flow” means, as of any date of determination, the sum of Available Excess Cash Flow (as defined below) for each of the Fiscal Years ended prior to such date of determination for which audited financial statements of the Parent and its Subsidiaries have been delivered to the Administrative Agent in accordance with Section 6.01(a) of this Credit Agreement (commencing with the 2008 Fiscal Year). “Available Excess Cash Flow” means (a) with respect to the 2008 Fiscal Year, 50% of Excess Cash Flow for the period commencing the Commitment Effective Date through the end of such Fiscal Year, (b) with respect to the 2009 Fiscal Year, 50% of Excess Cash Flow for such Fiscal Year and (c) with respect to the 2010 Fiscal Year and each Fiscal Year thereafter, (i) if as of such date of determination the Total Leverage Ratio is greater than or equal to 2.0:1.0, 50% of Excess Cash Flow for such Fiscal Year and (ii) if as of such date of determination the Total Leverage Ratio is less than 2.0:1.0, 100% of Excess Cash Flow for such Fiscal Year.

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business but including the Earn-Out

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Obligations), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person; provided that if such Person has not assumed or otherwise become liable for such indebtedness, such indebtedness shall be measured at the fair market value of such property securing such indebtedness at the time of determination, (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for the account of such Person (including the Letters of Credit), (f) all Hedging Obligations of such Person, (g) all Contingent Liabilities of such Person, (h) all Debt of any partnership of which such Person is a general partner, (i) the principal portion of all obligations of such Person under Synthetic Lease Obligations and other Off-Balance Sheet Liabilities (excluding Operating Leases to the extent they would otherwise be included) and (j) any Capital Securities or other equity instrument, whether or not mandatorily redeemable, that under GAAP is characterized as debt, whether pursuant to financial accounting standards board issuance No. 150 or otherwise.

“Debt to be Repaid” means Debt listed on Schedule 7.01(g) .

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Term Loans, Revolving Credit Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

“Deposit Account Control Agreement” shall mean an agreement, among a Loan Party, a depository institution, and the Collateral Agent, which agreement is in a form acceptable to the Collateral Agent and which provides the Collateral Agent with “control” (as such term is used in Article 9 of the Uniform Commercial Code) over the deposit account(s) described therein, as the same may be amended, modified, extended, restated, replaced, or supplemented from time to time.

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“Discretionary L/C Issuer” has the meaning specified in Section 2.03(b)(v).

“Dollar” and “$” mean lawful money of the United States.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States.

Earn-Out Obligations means the Borrower’s payment obligations under Sections 1.11 and 1.12 of the International Paper Purchase Agreement.

“EBITDA” means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income for such period (without duplication), (a) Interest Expense, (b) income tax expense, (c) depreciation and amortization, (d) extraordinary losses (or less gains), net of related tax effects, (e) other non-cash charges or losses (or less gains or income) for which no cash outlay (or cash receipt) is foreseeable, (f) “cold mill” maintenance outage costs in an aggregate amount of up to $7,500,000 for the term of this Agreement (it being understood that such add-back shall only be permitted in connection with one such outage during the term of this Agreement) but only to the extent that (i) the aggregate amount of such costs for such period exceeds the actual expense allocable to such outage during such period and (ii) any such resulting add-back is applied to reduce EBITDA in the future periods to which such expenses actually relate on a Dollar for Dollar basis and (g) expenses and fees incurred to consummate the transactions contemplated by the Loan Documents in an aggregate amount for all periods not exceeding $13,500,000. For purposes of calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio, (i) EBITDA shall be deemed to be: $38,877,600 for the Fiscal Quarter ending September 30, 2007, $39,298,700 for the Fiscal Quarter ending December 31, 2007 and $33,475,400 for the Fiscal Quarter ending March 31, 2008 and (ii) EBITDA for the period from April 1, 2008 to the Closing Date shall be determined in a manner consistent with clause (i) above.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 11.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 11.06(b)(iii)).

“Environmental Claims” means all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.

“Environmental Laws” means all present or future federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative or judicial orders, consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to any matter arising out of or relating to public health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission, release, threatened release, control or cleanup of any Hazardous Substance.

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“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Substances, (c) exposure to any Hazardous Substances, (d) the release or threatened release of any Hazardous Substances into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate (“LIBOR”), as published by Reuters (or other commercially available source providing quotations of LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period (or three business days prior to the commencement of such Interest Period if banks in London, England were not open and dealing in offshore Dollars on such second preceding business day), for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period (or three business days prior to the commencement of such Interest Period if banks in London, England were not open and dealing in offshore Dollars on such second preceding business day).

“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the Eurodollar Rate.

“Event of Default” has the meaning specified in Section 8.01.

“Excess Cash Flow” means, for any period, (a) EBITDA for such period, minus (b) scheduled repayments of principal of the Term Loans made during such period, minus (c) voluntary prepayments of the Term Loans pursuant to Section 2.05(a) during such period, minus (d) cash payments made in such period with respect to Capital Expenditures (to the extent such cash payments are unfinanced), minus (e) all income taxes paid in cash by the Loan Parties during such period, minus (f) cash Interest Expense of the Loan Parties during such period, minus (g) any cash losses (and plus any cash gains) from extraordinary items to the extent excluded from the calculation of EBITDA, minus (h) any increase in Adjusted Working Capital for such period.

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“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (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, 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 the Borrower is located, (c) any backup withholding tax that is required by the Code to be withheld from amounts payable to a Lender that has failed to comply with clause (A) of Section 3.01(e)(ii), and (d) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any United States withholding tax that (i) is required to be imposed on amounts payable to such Foreign Lender pursuant to the Laws in force at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with clause (B) of Section 3.01(e)(ii), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a)(ii) or (iii).

“Existing Credit Agreement” means that certain Credit Agreement dated as of January 2, 2007 among the Borrower, the Administrative Agent and a syndicate of lenders, as in effect on the date hereof and as amended or otherwise modified.

“Existing Letters of Credit” means each of the letters of credit described by date of issuance, amount, purpose and the date of expiry on Schedule 1.01 hereto.

“Expiration Date” has the meaning specified in Section 4.02.

“Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments.

“Facility” means each of the Term A Loan, the Term B Loan and the Revolving Credit Facility, as the context may require; and “Facilities” means all three.

“Federal Funds Rate” means, for any day, the 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 on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole

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multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

“Fee Letter” means the letter agreement, dated April 4, 2008, among the Borrower, the Administrative Agent and the Arranger.

“FILOT Lease” means, collectively, (i) the lease agreement to be entered into on or before the Commitment Effective Date between Charleston County, South Carolina and KapStone Charleston Kraft LLC and (ii) the lease agreement to be entered into on or before the Commitment Effective Date between Charleston County, South Carolina and Cogen South LLC.

“Fiscal Quarter” means a fiscal quarter of a Fiscal Year.

“Fiscal Year” means the fiscal year of the Parent and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year. References to a Fiscal Year with a number corresponding to any calendar year (e.g., “Fiscal Year 2008”) refer to the Fiscal Year ending on December 31 of such calendar year.

“Fixed Charge Coverage Ratio” means, as of the last day of any Fiscal Quarter, for the period of four consecutive Fiscal Quarters ending in such date, the ratio of (a) the total for such period of (i) EBITDA minus (ii) the sum of income taxes paid in cash by the Loan Parties minus (iii) cash dividends paid during such period minus (iv) all unfinanced Capital Expenditures to (b) the sum for such period of (i) cash Interest Expense plus (ii) required payments of principal of Funded Debt (including the Term Loans but excluding the Revolving Credit Loans and the Intercompany Subordinated Debt); provided, with respect to each of clauses (a)(ii), (a)(iii), (a)(iv), (b)(i) and (b)(ii) above, for any Fiscal Quarter ending during the first three full Fiscal Quarters following the Commitment Effective Date, the relevant amount shall be determined not by taking the actual amount for such four consecutive Fiscal Quarter period but instead by dividing (x) the actual amount of such item from the Commitment Effective Date to such Fiscal Quarter end by (y) the number of days from (and including) the Commitment Effective Date to (and including) such Fiscal Quarter end and multiplying the quotient by 365.

“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes (including such a Lender when acting in the capacity of the L/C Issuer).  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

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“Funded Debt” means, as to any Person, all Debt for borrowed money of such Person that matures more than one year from the date of its creation (or is renewable or extendible, at the option of such Person, to a date more than one year from such date).

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guaranty” means the Guaranty made by the Guarantors under Article X in favor of the Secured Lender Parties, together with each joinder agreement delivered pursuant to Section 6.10.

“Guarantors” has the meaning specified in the introductory paragraph hereto.

“Hazardous Substances” means (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, dielectric fluid containing levels of polychlorinated biphenyls, radon gas, mold, oil and pesticides; (b) any chemicals, materials, pollutant or substances defined as or included in the definition of “hazardous substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous substances”, “restricted hazardous waste”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, the exposure to, or release of which is prohibited, limited or regulated by any Governmental Authority or for which any duty or standard of care is imposed pursuant to, any Environmental Law.

“Hedge Bank” means any Person that, at the time it enters into a Secured Hedge Agreement, is a Lender or an Affiliate of a Lender (even if such Person thereafter ceases to be a Lender or such Person’s Affiliate ceases to be a Lender) and has delivered a Secured Lender Party Designation Notice to the Administrative Agent on or before the date on which such determination is being made.

“Hedging Obligation” means, with respect to any Person, any liability of such Person under any Swap Contract.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitee” has the meaning specified in Section 11.04(b).

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“Information” has the meaning specified in Section 11.07.

“Intercompany Subordinated Debt” means unsecured Debt of the Borrower to Parent in respect of the loan made by Parent to the Borrower pursuant to the Intercompany Subordinated Note.

“Intercompany Subordinated Note” means that certain Subordinated Promissory Note dated as of the Closing Date by the Borrower in favor of Parent.

“Intercompany Subordination Agreement” means that certain Subordination and Intercreditor Agreement dated as of the date hereof by and among Parent, Borrower and Administrative Agent, as amended, restated or otherwise modified from time to time pursuant to the terms thereof.

“Intercreditor Agreement” means that certain intercreditor agreement by and among (i) the Collateral Agent, (ii) the Administrative Agent on behalf of the Secured Lender Parties, (iii) the Private Placement Noteholders and (iv) the Loan Parties, as amended, modified, supplemented or restated from time to time.

“Interest Expense” means for any period the consolidated interest expense of the Parent and its Subsidiaries for such period (including all imputed interest on Capital Leases).

“Interest Payment Date” means, (a) as to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date of the Facility under which such Loan was made; provided, however, that if any Interest Period for a Eurodollar Rate 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 or Swing Line Loan, the last day of each calendar quarter and the Maturity Date of the Facility under which such Loan was made (with Swing Line Loans being deemed made under the Revolving Credit Facility for purposes of this definition).  If any payment to be made by the Borrower shall come due on a day other than a Business Day, such payment shall be made on the next following Business Day in accordance with Section 2.12(a).

“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Committed Loan Notice; provided that:

(a)any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(b)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar

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month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(c)no Interest Period shall extend beyond the Maturity Date of the Facility under which such Loan was made.

“Interim Financial Statements” means the unaudited consolidated balance sheet of the Parent and its Subsidiaries for each Fiscal Quarter ending prior to the Commitment Effective Date beginning with the Fiscal Quarter ended March 31, 2008, and the related consolidated statements of income or operations and cash flows of the Parent and its Subsidiaries for such Fiscal Quarter periods, including the notes thereto.

“International Paper Purchase Agreement” means that certain Purchase Agreement dated as of June 23, 2006 among the Parent, the Borrower and International Paper Company, as amended from time to time.

“Inventory” is defined in the Security Agreement.

“Investment” means, with respect to any Person, any investment in another Person, whether by acquisition of any Debt or Capital Security, by making any loan or advance, by becoming obligated with respect to a Contingent Liability in respect of obligations of such other Person (other than travel and similar advances to employees in the ordinary course of business) or by making an Acquisition.

“IRS” means the United States Internal Revenue Service.

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).

“Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary) or in favor of the L/C Issuer and relating to such Letter of Credit.

“Kraft Acquisition” shall mean the acquisition by the Borrower of the Target pursuant to the Kraft Acquisition Documents.

“Kraft Acquisition Documents” has the meaning set forth in Section 4.02(xi)(A).

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and

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permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Revolving Credit Percentage.

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing of Revolving Credit Loans.

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

“L/C Issuer” means (a) with respect to any Letters of Credit (other than the Existing Letters of Credit), Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder, (b) with respect to each Existing Letter of Credit, the Lender identified on Schedule 1.01 as the issuer of such Existing Letter of Credit and (c) any Discretionary L/C Issuer.

“L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

“L/C Side Letter” means the letter agreement, dated as of the Closing Date, among the Borrower and the Administrative Agent.

“Lender” has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line Lender.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

“Letter of Credit” means any standby letter of credit issued hereunder and shall include the Existing Letters of Credit.

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

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“Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date then in effect for the Revolving Credit Facility (or, if such day is not a Business Day, the next preceding Business Day).

“Letter of Credit Fee” has the meaning specified in Section 2.03(i).

“Letter of Credit Sublimit” means an amount equal to $20,000,000.  The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Facility.

“Lien” means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person (including an interest in respect of a Capital Lease) which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

“Loan” means an extension of credit by a Lender to the Borrower under Article II in the form of a Term A Loan, a Term B Loan, a Revolving Credit Loan or a Swing Line Loan.

“Loan Documents” means, collectively, (a) this Agreement, (b) the Fee Letter and (c) to the extent executed and delivered, (i) the Notes, (ii) the Collateral Documents, (iii) the Intercreditor Agreement, (iv) each Issuer Document, (v) each Secured Hedge Agreement, (vi) the L/C Side Letter, (vii) each Secured Cash Management Agreement and (viii) the Intercompany Subordination Agreement; provided that for purposes of the definition of “Material Adverse Effect” and Articles IV through IX, “Loan Documents” shall not include Secured Hedge Agreements or Secured Cash Management Agreements.

“Loan Parties” means, collectively the Borrower, the Parent and each other Guarantor.

“Margin Stock” means any “margin stock” as defined in Regulation U.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any of the Obligations under any Loan Document or (c) a material adverse effect upon any substantial portion of the collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document.

“Material Contract” means, with respect to any Person, (a) each contract or other agreement, written or oral, to which such Person is a party involving aggregate consideration payable to or by such Person of $10,000,000 or more and (b) any other contract, agreement, permit or license, written or oral, to which such Person is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect.

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“Maturity Date” means the earlier of (a) (i) with respect to the Revolving Credit Facility and the Term A Loan, June 12, 2013 and (ii) with respect to the Term B Loan, June 12, 2015 and (b) the date which is ninety (90) days prior to the date on which any of the Earn-Out Obligations will become (or are reasonably expected to become) due and owing under the International Paper Purchase Agreement (the “Springing Maturity Date”); provided that the Springing Maturity Date shall not apply (and only the Maturity Date referenced in clause (a) above shall apply) if (A) the Total Leverage Ratio as of the end of the Fiscal Quarter most recently preceding the Springing Maturity Date for which a Compliance Certificate has been received is less than 2.0 to 1.0, calculated for purposes hereof on a pro forma basis after giving effect to the amount of Indebtedness, as estimated by the Borrower in its reasonable good faith judgment, which has been incurred or is to be incurred by any Loan Party or Subsidiary thereof to enable the Borrower to satisfy the Earn-Out Obligations, (B) no Default or Event of Default shall exist on the Springing Maturity Date and (C) the chief financial officer of the Borrower shall have delivered to the Administrative Agent, at least five (5) Business Days prior to the Springing Maturity Date (but no more than seven (7) Business Days prior thereto), a certificate in a form acceptable to the Administrative Agent certifying (x) to the date of the Springing Maturity Date, (y) to the satisfaction of the requirement in clause (A) above, and including or attaching calculations for such Total Leverage Ratio on a pro forma basis, and (z) that no Default or Event of Default then exists.

“Mead Purchase Agreement” has the meaning set forth in Section 4.02(xi)(A).

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Mortgage” has the meaning specified in Section 4.02(a)(iv).

“Mortgage Policy” has the meaning specified in Section 4.02(a)(iv)(B).

“Multiemployer Pension Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any other member of the Controlled Group may have any liability.

“Net Cash Proceeds” means:

(a)with respect to any Asset Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance or by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by any Loan Party pursuant to such Asset Disposition net of (i) the direct costs relating to such sale, transfer or other disposition (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Borrower to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to such Asset Disposition (other than the Senior Debt);

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(b)with respect to any issuance or exercise of Capital Securities (including, without limitation, the Warrants), the aggregate cash proceeds received by any Loan Party pursuant to such issuance or exercise, net of the direct costs relating to such issuance or exercise (including sales and underwriters’ commissions); and

(c)with respect to any issuance of Debt, the aggregate cash proceeds received by any Loan Party pursuant to such issuance, net of the direct costs of such issuance (including up-front, underwriters’ and placement fees).

“Note” means a Term A Note, a Term B Note or a Revolving Credit Note, as the context may require.

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“OFAC” has the meaning specified in Section 6.05.

“Off-Balance Sheet Liabilities” means, with respect to any Person as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with respect to any asset securitization or similar transaction (including any accounts receivable purchase facility) (i) the unrecovered investment of purchasers or transferees of assets so transferred and (ii) any other payment, recourse, repurchase, hold harmless, indemnity or similar obligation of such Person or any of its Subsidiaries in respect of assets transferred or payments made in respect thereof, other than limited recourse provisions that are customary for transactions of such type and that neither (x) have the effect of limiting the loss or credit risk of such purchasers or transferees with respect to payment or performance by the obligors of the assets so transferred nor (y) impair the characterization of the transaction as a true sale under applicable Laws (including Debtor Relief Laws); or (b) the monetary obligations under any financing lease (excluding any operating lease) or so-called “synthetic,” tax retention or off-balance sheet lease transaction which, upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness; or (c) the monetary obligations under any sale and leaseback transaction which does not create a liability on the consolidated balance sheet of such Person and its Subsidiaries; or (d) any other monetary obligation arising with respect to any other transaction which (i) upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness or (ii) is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries (for purposes of this clause (d), any transaction structured to provide tax deductibility as interest

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expense of any dividend, coupon or other periodic payment will be deemed to be the functional equivalent of  a borrowing).

“Operating Lease” means any lease of (or other agreement conveying the right to use) any real or personal property by any Loan Party, as lessee, other than any Capital Lease and obligations in respect of the FILOT Lease.

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Outstanding Amount” means (a) with respect to the Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of the Term Loans, Revolving Credit Loans and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.

“Parent” has the meaning specified in the introductory paragraph hereto.

“Participant” has the meaning specified in Section 11.06(d).

“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

“Pension Plan” means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA or the minimum funding standards of ERISA (other than a Multiemployer Pension Plan), and as to which any Loan Party or any of its Domestic Subsidiaries or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

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“Permitted Acquisition” means any Proposed Acquisition which is either (a) approved in writing by the Required Lenders or (b) which satisfies each of the following conditions:

(i)Other than Debt permitted under Section 7.01, none of the Loan Parties shall incur or assume any Debt or other liabilities in connection with such Proposed Acquisition except for ordinary course trade payables and accrued expenses. No earn-out or similar payment obligations shall be incurred in connection with such Proposed Acquisition unless approved in writing by the Administrative Agent;

(ii)Before and after giving effect to such Proposed Acquisition, no Unmatured Default or Event of Default shall have occurred and be continuing;

(iii)The aggregate amount payable in connection with, and other consideration for (in each case, including all transaction costs and all Debt, liabilities and Contingent Liabilities incurred or assumed in connection therewith or otherwise reflected in a consolidated balance sheet of the Borrower and such acquired Person) such Proposed Acquisition and all other Permitted Acquisitions under clause (b) of this definition shall not exceed $60,000,000;

(iv)After giving effect to such Proposed Acquisition, the Borrower shall be in compliance on a pro forma basis with the financial covenants set forth in Section 7.14, recomputed for the most recent Fiscal Quarter for which financial statements have been delivered;

(v)Upon consummation of such Proposed Acquisition, the Collateral Agent, on behalf of the Secured Parties, shall have a perfected first priority Lien upon all assets acquired in connection therewith, subject only to Permitted Liens;

(vi)Not less than twenty (20) Business Days prior to consummating such Proposed Acquisition, the Borrower shall deliver to the Administrative Agent an acquisition summary with respect to such Proposed Acquisition, such summary to include (A) a reasonably detailed description of the business to be acquired (including financial information) and operating results (including financial statements in form and substance reasonably satisfactory to the Administrative Agent), (B) the terms and conditions, including economic terms, of the Proposed Acquisition, and (C) pro forma financial projections for the Loan Parties for the four Fiscal Quarters following the date of such Proposed Acquisition, together with a calculation of the Borrower’s compliance on a Pro Forma Basis with the financial covenants set forth in Section 7.14 for such period, in each case in form and substance reasonably satisfactory to the Administrative Agent;

(vii)The Administrative Agent shall have been furnished with copies of the Borrower’s business, legal and environmental due diligence with respect to the proposed business and assets to be acquired, with results reasonably satisfactory to the Administrative Agent; and

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(viii)Prior to consummating such Proposed Acquisition, the Borrower shall provide the Administrative Agent with all acquisition documents relating thereto and such other information (including officer’s certificates and opinions of counsel) as the Administrative Agent shall reasonably request in order to confirm that the conditions set forth herein have been satisfied.

“Permitted Lien” means a Lien expressly permitted hereunder pursuant to Section 7.02.

“Permitted Parent Dividends” means the dividend the Borrower is permitted to pay to the Parent in an aggregate amount not to exceed (a) (i) from the Closing Date through the Fiscal Year ending December 31, 2009, 50% of Cumulative Available Excess Cash Flow and (ii) thereafter, 100% of Cumulative Available Excess Cash Flow plus (b) an aggregate amount of up to $500,000 in connection with the redemption of the Warrants pursuant to the terms thereof and in connection with the obligations of the Parent pursuant to the Underwriting Agreement, if applicable.

“Person” means any natural person, corporation, partnership, trust, limited liability company, association, Governmental Authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

“Platform” has the meaning specified in Section 6.02.

“Pledged Debt” has the meaning specified in Section 1(b) of the Security Agreement.

“Pledged Equity” has the meaning specified in Section 1(b) of the Security Agreement.

“Private Placement Noteholders” means the holders from time to time of the Private Placement Notes.

“Private Placement Note Purchase Agreement” means that certain Note Purchase Agreement among the Borrower, the other Loan Parties and the Private Placement Noteholders dated on or about the Commitment Effective Date (as may be amended, supplemented or restated from time to time in accordance with the Intercreditor Agreement).

“Private Placement Notes” means the Senior Notes due 2015 issued pursuant to the terms of the Private Placement Note Purchase Agreement in the aggregate initial principal amount of $40,000,000.

“Pro Forma Basis” means, with respect to any determination for any period and any Pro Forma Transaction, that such determination shall be made by giving pro forma effect to each such Pro Forma Transaction, as if each such Pro Forma Transaction had been consummated on the first day of such period.

“Pro Forma Transaction” means any transaction consummated as part of any Permitted Acquisition, together with each other transaction relating thereto and consummated in connection therewith, including any incurrence or repayment of Debt.

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“Proposed Acquisition” means (a) any proposed acquisition that is consensual and approved by the board of directors of such Proposed Acquisition Target, of all or substantially all of the assets or Capital Securities of any Proposed Acquisition Target by the Borrower or any Subsidiary of the Borrower or (b) any proposed merger of any Proposed Acquisition Target with or into the Borrower or any Subsidiary of the Borrower (and, in the case of a merger with the Borrower, with the Borrower being the surviving corporation).

“Proposed Acquisition Target” means any Person or any brand, line of business, division, branch, operating division or other unit operation of any Person.

“Public Lender” has the meaning specified in Section 6.02.

“Ratable Portion” shall mean, as of any date of determination, an amount equal to the product of (a) the Net Cash Proceeds being applied to the payment or prepayment of Senior Debt pursuant to any of Sections 2.06(b)(i) through (vi) of this Agreement multiplied by (b) a fraction, the numerator of which is (x) with respect to an offer to prepay the Private Placement Notes, the then aggregate outstanding principal amount of the Private Placement Notes and/or (y) with respect to a prepayment of the Loans, the then aggregate outstanding principal amount of the Loans and the denominator of which is the then aggregate outstanding principal amount of all Senior Debt.

“Reduction Amount” has the meaning set forth in Section 2.05(b)(ix).

“Regulation D” means Regulation D of the FRB.

“Regulation U” means Regulation U of the FRB.

“Register” has the meaning specified in Section 11.06(c).

“Related Agreements” means the Kraft Acquisition Documents and all agreements and instruments entered into or delivered in connection therewith, including without limitation all supply agreements and transitional services agreements with Seller.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.

“Related Transactions” means the transactions contemplated by the Related Agreements.

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued thereunder as to which the PBGC has not waived the notification requirement of Section 4043(a), or the failure of a Pension Plan to meet the minimum funding standards of Section 412 of the Code (without regard to whether the Pension Plan is a plan described in Section 4021(a)(2) of ERISA) or under Section 302 of ERISA.

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“Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

“Required Lenders” means, as of any date of determination, Lenders holding more than 50% of the sum of the (a) Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition) and (b) aggregate unused Revolving Credit Commitments; provided that the unused Revolving Credit Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

“Required Revolving Lenders” means, as of any date of determination, Lenders holding more than 50% of the sum of the (a) Total Revolving Credit Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition) and (b) aggregate unused Revolving Credit Commitments; provided that the unused Revolving Credit Commitment of, and the portion of the Total Revolving Credit Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders.

“Required Term A Loan Lenders” means, as of any date of determination, Lenders holding more than 50% of the Term A Loan on such date; provided that the portion of the Term A Loan held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Term A Loan Lenders.

“Required Term B Loan Lenders” means, as of any date of determination, Lenders holding more than 50% of the Term B Loan on such date; provided that the portion of the Term B Loan held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Term B Loan Lenders.

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party and any other officer of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Revolving Credit Commitment” means, as to each Lender, its obligation to (a) make Revolving Credit Loans to the Borrower pursuant to Section 2.01(b), (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Revolving Credit Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Lender becomes a party

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hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

“Revolving Credit Facility” means, at any time, the aggregate amount of the Lenders’ Revolving Credit Commitments at such time.  The initial amount of the Revolving Credit Facility in effect on the Closing Date is ONE HUNDRED MILLION DOLLARS ($100,000,000).

“Revolving Credit Loan” has the meaning specified in Section 2.01(b).

“Revolving Credit Note” means a promissory note made by the Borrower in favor of a Lender evidencing Revolving Credit Loans or Swing Line Loans, as the case may be, made by such Lender, substantially in the form of Exhibit C-3.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

“SCANA Side Letters” means those certain letter agreements dated as of April 3, 2008 and April 4, 2008, among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, SCANA Corporation, South Carolina Electric and Gas Company, Cogen South L.L.C., the Parent and Oak Acquisition LLC.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Secured Cash Management Agreement” means any Cash Management Agreement that is entered into by and between any Loan Party and any Cash Management Bank.

“Secured Hedge Agreement” means any Swap Contract permitted under Article VI or VII that is entered into by and between any Loan Party and any Hedge Bank.

“Secured Lender Parties” means, collectively, the Administrative Agent, the Lenders, the L/C Issuer, the Hedge Banks, the Cash Management Banks, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, and the other Persons the Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents (other than the Private Placement Noteholders).

“Secured Lender Party Designation Notice” means in connection with any Secured Cash Management Agreement or any Secured Hedge Agreement, a notice of secured party designation delivered by the Cash Management Bank or Hedge Bank, as applicable, to the Administrative Agent substantially in the form of Exhibit H.

“Secured Party” has the meaning specified in the Security Agreement.

“Security Agreement” has the meaning specified in Section 4.02(a)(iii).

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“Seller” means a collective reference to MeadWestvaco Corporation and MeadWestvaco South Carolina LLC.

“Senior Debt” means a collective reference to (a) the obligations of the Loan Parties under the Private Placement Note Purchase Agreement and the Private Placement Notes and (b) the Obligations hereunder.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person 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 an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

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“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

“Swing Line Lender” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

“Swing Line Loan” has the meaning specified in Section 2.04(a).

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.

“Swing Line Sublimit” means an amount equal to the lesser of (a) $10,000,000 and (b) the Revolving Credit Facility.  The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Facility.

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).  In no event shall any Operating Lease or any FILOT Lease be construed as a Synthetic Lease Obligation.

“Target” means all or substantially all of the assets purchased from the Seller which constitute the “Purchased Assets” as such term us defined in the Mead Purchase Agreement.

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

“Teachers” means Teachers Insurance and Annuity Association of America.

“Term A Loan” has the meaning specified in Section 2.01(a)(i).

“Term A Loan Commitment” means, as to each Lender, its obligation to make its portion of the Term A Loan to the Borrower on the Commitment Effective Date pursuant to Section 2.01(a)(i), in the principal amount set forth opposite such Lender’s name on Schedule 2.01. The aggregate principal amount of the Term A Loan Commitments of all of the Lenders as in effect on the Closing Date is THREE HUNDRED NINETY MILLION DOLLARS ($390,000,000).

“Term A Note” means a promissory note made by the Borrower in favor of a Lender evidencing Term A Loans made by such Lender, substantially in the form of Exhibit C-1.

“Term B Loan” means the Term B-1 Loan and/or the Term B-2 Loan, as applicable.

“Term B-1 Loan” has the meaning specified in Section 2.01(a)(ii).

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“Term B-2 Loan” has the meaning specified in Section 2.01(a)(iii).

“Term B Loan Commitment” means the Term B-1 Loan Commitment and/or the Term B-2 Loan Commitment, as applicable.

“Term B-1 Loan Commitment” means, as to each Lender, its obligation to make its portion of the Term B-1 Loan to the Borrower on the Commitment Effective Date pursuant to Section 2.01(a)(ii), in the principal amount set forth opposite such Lender’s name on Schedule 2.01. The aggregate principal amount of the Term B-1 Loan Commitments of all of the Lenders as in effect on the Closing Date is TWENTY FIVE MILLION DOLLARS ($25,000,000).

“Term B-2 Loan Commitment” means, as to each Lender, its obligation to make its portion of the Term B-2 Loan to the Borrower on the Commitment Effective Date pursuant to Section 2.01(a)(iii), in the principal amount set forth opposite such Lender’s name on Schedule 2.01. The aggregate principal amount of the Term B-2 Loan Commitments of all of the Lenders as in effect on the Closing Date is FORTY MILLION DOLLARS ($40,000,000), provided, however, that such Term B-2 Loan Commitments may be reduced on or prior to the Commitment Effective Date in accordance with Section 2.01(a)(iii).

“Term B Note” means a promissory note made by the Borrower in favor of a Lender evidencing Term B Loans made by such Lender, substantially in the form of Exhibit C-2.

“Term Loan” means the Term A Loan and/or the Term B Loan, as applicable.

“Term Loan Commitment” means the Term A Loan Commitment and/or the Term B Loan Commitment, as applicable.

“Termination Event” means, with respect to a Pension Plan that is subject to Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of Borrower or any other member of the Controlled Group from such Pension Plan during a plan year in which Borrower or any other member of the Controlled Group was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA, (c) the termination of such Pension Plan, the filing of a notice of intent to terminate the Pension Plan or the treatment of an amendment of such Pension Plan as a termination under Section 4041 of ERISA, (d) the institution by the PBGC of proceedings to terminate such Pension Plan or (e) any event or condition that might constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, such Pension Plan.

“Ticking Fee” has the meaning specified in Section 2.09(b).

“Total Debt” means all Debt of the Parent and its Subsidiaries, determined on a consolidated basis, excluding (a) contingent obligations in respect of Contingent Liabilities (except to the extent constituting Contingent Liabilities in respect of Debt of a Person other than any Loan Party or in respect of Letters of Credit), (b) Hedging Obligations, (c) Debt of the Parent to Subsidiaries and Debt of Subsidiaries to the Parent or to other Subsidiaries and (d) the Earn-Out Obligations.

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“Total Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (a) Total Debt as of such day to (b) EBITDA for the period of four consecutive Fiscal Quarters ending on such day.

“Total Revolving Credit Outstandings” means the aggregate Outstanding Amount of all Revolving Credit Loans, Swing Line Loans and L/C Obligations.

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

“Total Plan Liability” means, at any time, the present value of all vested and unvested accrued benefits under all Pension Plans, determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

“UCC” means the Uniform Commercial Code as in effect in the State of Illinois; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

“Underwriting Agreement” means the Underwriting Agreement dated on or about August 15, 2005 between Stone Arcade Acquisition Corporation, Morgan Joseph & Co., Inc., as Representative, and the other Underwriters identified therein, as in effect on the Closing Date.

“Unfunded Liability” means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Pension Plans exceeds the fair market value of all assets allocable to those benefits, all determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.

“United States” and “U.S.” mean the United States of America.

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

“Unused Fee” has the meaning specified in Section 2.09(a).

“Warrants” means those certain warrants to purchase 40,000,000 shares of common stock of the Parent at an exercise price of $5.00 per share dated on or about August 15, 2005.

“Wholly-Owned Subsidiary” means, as to any Person, a Subsidiary all of the Capital Securities of which (except directors’ qualifying Capital Securities) are at the time directly or indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such Person.

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1.02Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Preliminary Statements, Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

1.03Accounting Terms.

(a)Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

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(b)Changes in GAAP or Accounting Practices.  If at any time any change in GAAP or in accounting practices as permitted under Section 7.13 hereof would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or accounting practices (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP or past accounting practices prior to such change therein and (ii) the Borrower shall provide to the Administrative 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 ratio or requirement made before and after giving effect to such change in GAAP or accounting practices, as appropriate.

(c)Consolidation of Variable Interest Entities.  All references herein to consolidated financial statements of the Parent and its Subsidiaries or to the determination of any amount for the Parent and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Parent is required to consolidate pursuant to FASB Interpretation No. 46 — Consolidation of Variable Interest Entities: an interpretation of ARB No. 51 (January 2003) as if such variable interest entity were a Subsidiary as defined herein.

1.04Rounding.  Any financial ratios required to be maintained by the Parent or the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

1.05Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).

1.06Letter of Credit Amounts.  Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

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ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

2.01Term Loans and Revolving Credit Loans.

(a)The Term Loans.

(i)Term A Loan.  Subject to the terms and conditions set forth herein, each Lender severally agrees to make its portion of a term loan (the “Term A Loan”) to the Borrower on the Commitment Effective Date in an amount not to exceed such Lender’s Term A Loan Commitment.  Amounts borrowed under this Section 2.01(a)(i) and repaid or prepaid may not be reborrowed.  The Term A Loan may be a Base Rate Loan or Eurodollar Rate Loan, as further provided herein; provided, however, all Borrowings made on the Commitment Effective Date shall be made as Base Rate Loans unless the Administrative Agent shall have received an appropriate funding indemnity letter executed by the Borrower and reasonably acceptable to the Administrative Agent at least three (3) Business Days prior to the Commitment Effective Date.

(ii)Term B-1 Loan.  Subject to the terms and conditions set forth herein, each Lender severally agrees to make its portion of a term loan (the “Term B-1 Loan”) to the Borrower on the Commitment Effective Date in an amount not to exceed such Lender’s Term B-1 Loan Commitment.  Amounts borrowed under this Section 2.01(a)(ii) and repaid or prepaid may not be reborrowed.  The Term B-1 Loan may be a Base Rate Loan or Eurodollar Rate Loan, as further provided herein; provided, however, all Borrowings made on the Commitment Effective Date shall be made as Base Rate Loans unless the Administrative Agent shall have received an appropriate funding indemnity letter executed by the Borrower and reasonably acceptable to the Administrative Agent at least three (3) Business Days prior to the Commitment Effective Date.

(iii)Term B-2 Loan.  Subject to the last sentence of this clause (iii) and the other terms and conditions set forth herein, each Lender severally agrees to make its portion of a term loan (the “Term B-2 Loan”) to the Borrower on the Commitment Effective Date in an amount not to exceed such Lender’s Term B-2 Loan Commitment.  Amounts borrowed under this Section 2.01(a)(iii) and repaid or prepaid may not be reborrowed.  The Term B-2 Loan may be a Base Rate Loan or Eurodollar Rate Loan, as further provided herein; provided, however, all Borrowings made on the Commitment Effective Date shall be made as Base Rate Loans unless the Administrative Agent shall have received an appropriate funding indemnity letter executed by the Borrower and reasonably acceptable to the Administrative Agent at least three (3) Business Days prior to the Commitment Effective Date.  It is understood and agreed that in accordance with Section 2.06(b)(ii)(B), the aggregate Term B-2 Loan Commitment shall be permanently reduced on a Dollar for Dollar basis in an amount equal to the aggregate principal amount of the Private Placement Notes issued pursuant to the Private Placement Note Purchase Agreement on or prior to the Commitment Effective Date.

(b)The Revolving Credit Loans.  Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “Revolving Credit

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Loan”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Commitment; provided, however, that after giving effect to any Revolving Credit Borrowing, (i) the Total Revolving Credit Outstandings shall not exceed the Revolving Credit Facility, and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit Commitment.  Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b).  Revolving Credit Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, all Borrowings made on the Commitment Effective Date shall be made as Base Rate Loans unless the Administrative Agent shall have received an appropriate funding indemnity letter executed by the Borrower and reasonably acceptable to the Administrative Agent at least three (3) Business Days prior to the Commitment Effective Date.

2.02Borrowings, Conversions and Continuations of Loans.

(a)Each Borrowing, each conversion of Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Administrative Agent not later than 10:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of, Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans.  Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof.  Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof.  Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto.  If the Borrower fails to specify a Type of a Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective

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as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.  If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary herein, a Swing Line Loan may not be converted to a Eurodollar Rate Loan.

(b)Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage under the applicable Facility of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in Section 2.02(a).  In the case of a Borrowing, each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 12:00 noon on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.03 (and, if such Borrowing is the initial Credit Extension, Section 4.01 and 4.02), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date a Committed Loan Notice with respect to a Revolving Credit Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Revolving Credit Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrower as provided above.

(c)Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan.  During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

(d)The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

(e)After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than twelve Interest Periods in effect in the aggregate with respect to all Revolving Loans and Term Loans.

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2.03Letters of Credit.

(a)The Letter of Credit Commitment.

(i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Commitment Effective Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower or its Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Revolving Credit Outstandings shall not exceed the Revolving Credit Facility, (y) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Commitment Effective Date shall be subject to and governed by the terms and conditions hereof.

(ii)The L/C Issuer shall not issue any Letter of Credit if:

(A)subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Revolving Lenders have approved such expiry date; or

(B)the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders that have Revolving Credit Commitments have approved such expiry date.

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(iii)The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

(A)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;

(B)the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;

(C)except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $100,000;

(D)such Letter of Credit is to be denominated in a currency other than Dollars; or

(E)a default of any Lender’s obligations to fund under Section 2.03(c) exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the L/C Issuer’s risk with respect to such Lender.

(iv)The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.

(v)The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(vi)The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the

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Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

(b)Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

(i)Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower.  Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 10:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer:  (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as the L/C Issuer may require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (1) the Letter of Credit to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as the L/C Issuer may require.  Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may reasonably require.

(ii)Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof.  Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained

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in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices.  Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Applicable Revolving Credit Percentage times the amount of such Letter of Credit.

(iii)If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Revolving Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

(iv)Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

(v)Any Lender with a Revolving Credit Commitment (in such capacity, a “Discretionary L/C Issuer”) may from time to time, at the written request of the Borrower (with a copy to the Administrative Agent) and with the

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consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), and in such Lender’s sole discretion, agree to issue one or more Letters of Credit for the account of the Borrower or its Subsidiaries on the same terms and conditions in all respects as are applicable to the Letters of Credit issued by the L/C Issuer hereunder by executing and delivering to the Administrative Agent a written agreement to such effect, among (and in form and substance satisfactory to) the Borrower, the Administrative Agent and such Discretionary L/C Issuer.  With respect to each of the Letters of Credit issued (or to be issued) thereby, each of the Discretionary L/C Issuers shall have all of the same rights and obligations under and in respect of this Agreement and the other Loan Documents, and shall be entitled to all of the same benefits (including, without limitation, the rights, obligations and benefits set forth in Sections 2.03, 9.07 and 11.01), as are afforded to the L/C Issuer hereunder and thereunder.  The Administrative Agent shall promptly notify each of the Lenders with a Revolving Credit Commitment of the appointment of any Discretionary L/C Issuer.  Each Discretionary L/C Issuer shall provide to the Administrative Agent, on a monthly basis, a report that details the activity with respect to each Letter of Credit issued by such Discretionary L/C Issuer (including an indication of the maximum amount then in effect with respect to each such Letter of Credit).

(c)Drawings and Reimbursements; Funding of Participations.

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof.  Not later than 10:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing.  If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable Revolving Credit Percentage thereof.  In such event, the Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Revolving Credit Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice).  Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(ii)Each Lender (including any Lender acting as L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative

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Agent’s Office in an amount equal to its Applicable Revolving Credit Percentage of the Unreimbursed Amount not later than 12:00 noon on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount.  The Administrative Agent shall remit the funds so received to the L/C Issuer.

(iii)With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.  In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

(iv)Until each Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Revolving Credit Percentage of such amount shall be solely for the account of the L/C Issuer.

(v)Each Lender’s obligation to make Revolving Credit Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice ).  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

(vi)If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which

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such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Revolving Loan included in the relevant Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be.  A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall be conclusive absent manifest error.

(d)Repayment of Participations.

(i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Revolving Credit Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.

(ii)If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 11.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Revolving Credit Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

(e)Obligations Absolute.  The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i)any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

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(ii)the existence of any claim, counterclaim, setoff, defense or other right that any Loan Party or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

(iii)any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv)any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

(v)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any Subsidiary.

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will promptly notify the L/C Issuer.  The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

(f)Role of L/C Issuer.  Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Revolving Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The

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Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

(g)Cash Collateral.  Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations.  Sections 2.05 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder.  For purposes of this Section 2.03, Section 2.05 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders).  Derivatives of such term have corresponding meanings.  The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America.  If at any time the Administrative Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount over (y) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent determines to be free and clear of any such right and claim.  Upon the drawing of any

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Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the L/C Issuer.

(h)Applicability of ISP.  Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), the rules of the ISP shall apply to each Letter of Credit.

(i)Letter of Credit Fees.  The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Revolving Credit Percentage a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Rate times the daily amount available to be drawn under such Letter of Credit.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand and (ii) computed on a quarterly basis in arrears.  If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each standby Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary contained herein, upon the request of the Required Revolving Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

(j)Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.  The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each Letter of Credit, at the rate per annum specified in the L/C Side Letter, computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears.  Such fronting fee shall be due and payable on the tenth Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

(k)Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

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(l)Letters of Credit Issued for Subsidiaries.  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit.  The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

2.04Swing Line Loans.

(a)The Swing Line.  Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, to make loans (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Revolving Credit Percentage of the Outstanding Amount of Revolving Credit Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Revolving Credit Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Revolving Credit Outstandings shall not exceed the Revolving Credit Facility at such time, and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender at such time, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all L/C Obligations at such time, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Swing Line Loans at such time shall not exceed such Lender’s Revolving Credit Commitment, and provided further that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only at a rate based on the Base Rate.  Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Revolving Credit Percentage times the amount of such Swing Line Loan.

(b)Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 12:00 noon on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the

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Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to 1:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 2:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower.

(c)Refinancing of Swing Line Loans.

(i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Loan in an amount equal to such Lender’s Applicable Revolving Credit Percentage of the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Revolving Credit Facility and the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent.  Each Lender shall make an amount equal to its Applicable Revolving Credit Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 12:00 noon on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount.  The Administrative Agent shall remit the funds so received to the Swing Line Lender.

(ii)If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit  Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

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(iii)If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or funded participation in the relevant Swing Line Loan, as the case may be.  A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

(iv)Each Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

(d)Repayment of Participations.

(i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Revolving Credit Percentage thereof in the same funds as those received by the Swing Line Lender.

(ii)If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 11.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Revolving Credit Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned,

49

at a rate per annum equal to the Federal Funds Rate.  The Administrative Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

(e)Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans.  Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Applicable Revolving Credit Percentage of any Swing Line Loan, interest in respect of such Applicable Revolving Credit Percentage shall be solely for the account of the Swing Line Lender.

(f)Payments Directly to Swing Line Lender.  The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

2.05Prepayments.

(a)Optional.

(i)Subject to the last sentence of this Section 2.05(a)(i), the Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay the Term Loans and Revolving Credit Loans in whole or in part without premium or penalty; provided that (A) such notice must be received by the Administrative Agent not later than 10:00 a.m. (1) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (2) on the date of prepayment of Base Rate Loans; (B) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof; and (C) any prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s ratable portion of such prepayment (based on such Lender’s Applicable Percentage in respect of the relevant Facility).  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.  Each prepayment of the outstanding Term Loans pursuant to this Section 2.05(a) shall be applied (x) ratably to the Term A Loan and the Term B Loan and (y) to the principal repayment installments thereof on a pro-rata basis, and each such prepayment shall be paid to the Lenders in

50

accordance with their respective Applicable Percentages in respect of each of the relevant Facilities.

(ii)The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (A) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 12:00 noon on the date of the prepayment, and (B) any such prepayment shall be in a minimum principal amount of $100,000.  Each such notice shall specify the date and amount of such prepayment.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

(b)Mandatory.

(i)Within ninety (90) days after the end of each Fiscal Year commencing with the Fiscal Year ending December 31, 2008, the Borrower shall prepay an aggregate principal amount of Senior Debt equal to 50% of Excess Cash Flow for such Fiscal Year; provided, however with respect to Fiscal Year 2008, Excess Cash Flow shall be computed for the period commencing with the Commitment Effective Date through the last day of such Fiscal Year; and further provided, however, if the Total Leverage Ratio as of the last day of such Fiscal Year is less than 2.0 to 1.0, then the Borrower shall not be required to make a prepayment pursuant to this Section 2.05(b)(i) for such Fiscal Year.

(ii)If any Loan Party or any of its Subsidiaries disposes of any property in connection with an Asset Disposition which results in the realization by such Person of Net Cash Proceeds, the Borrower shall prepay an aggregate principal amount of Senior Debt equal to 100% of such Net Cash Proceeds immediately upon receipt thereof by such Person (such prepayments to be applied as set forth in clauses (vii) and (ix) below); provided, however, that, with respect to any Net Cash Proceeds realized under an Asset Disposition described in this Section 2.05(b)(ii), at the election of the Borrower (as notified by the Borrower to the Administrative Agent on or prior to the date of such Asset Disposition), and so long as no Default shall have occurred and be continuing, such Loan Party or such Subsidiary may reinvest all or any portion of such Net Cash Proceeds in operating assets performing the same or a similar function or otherwise used in the business of such Loan Party or such Subsidiary so long as within 180 days after the receipt of such Net Cash Proceeds, such purchase shall have been consummated (as certified by the Borrower in writing to the Administrative Agent); and provided further, however, that any Net Cash Proceeds not so reinvested (or subject to a definitive agreement to be reinvested) shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.05(b)(ii) immediately upon the earlier of the occurrence of a Default or the expiration of such 180 day period.

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(iii)Upon the sale or issuance by any Loan Party or any of its Subsidiaries of any of its Capital Securities (other than any sales or issuances of Capital Securities to another Loan Party or in connection with a Permitted Acquisition) or the exercise by any Person of any convertible Capital Securities issued by a Loan Party (other than the Warrants), the Borrower shall prepay an aggregate principal amount of Senior Debt equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary (such prepayments to be applied as set forth in clauses (vii) and (ix) below).

(iv)Upon the incurrence or issuance by any Loan Party or any of its Subsidiaries of any Debt (other than Debt permitted under Sections 7.01 (a) — (i) and (k)), the Borrower shall prepay an aggregate principal amount of Senior Debt equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary (such prepayments to be applied as set forth in clauses (vii) and (ix) below).

(v)Immediately upon the receipt by any Loan Party or any Subsidiary of Net Cash Proceeds from the exercise of any Warrants, the Borrower shall prepay an aggregate principal amount of Senior Debt equal to (A) 100% of such Net Cash Proceeds if the Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter for which a Compliance Certificate has been received is equal to or greater than 2.50:1.0, (B) 75% of such Net Cash Proceeds if the Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter for which a Compliance Certificate has been received is less than 2.50:1.0 but equal to or greater than 2.0:1.0 and (C) 50% of such Net Cash Proceeds if the Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter for which a Compliance Certificate has been received is less than 2.0:1.0 but equal to or greater than 1.50:1.0; provided, however, that if the Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter for which a Compliance Certificate has been received is less than 1.50:1.0, then the Borrower shall not be required to make a prepayment pursuant to this Section 2.05(b)(v).

(vi)Upon any Extraordinary Receipt received by or paid to or for the account of any Loan Party or any of its Subsidiaries, and not otherwise included in clauses (ii), (iii), (iv) or (v) of this Section 2.05(b), the Borrower shall prepay an aggregate principal amount of Senior Debt equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary (such prepayments to be applied as set forth in clauses (vii) and (ix) below); provided, however, that with respect to any proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments, at the election of the Borrower (as notified by the Borrower to the Administrative Agent on or prior to the date of receipt of such insurance proceeds, condemnation awards or indemnity payments), and so long as no Default shall have occurred and be continuing, such Loan Party or such Subsidiary may apply

52

within 180 days after the receipt of such cash proceeds to replace or repair the equipment, fixed assets or real property in respect of which such cash proceeds were received; and provided, further, however, that any cash proceeds not so applied shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.05(b)(v).

(vii)Each prepayment of Senior Debt pursuant to the foregoing provisions of this Section 2.05(b) shall be applied to the outstanding Loans; provided, however, the Borrower shall offer to prepay a Ratable Portion of the Private Placement Notes with any such prepayment amount pursuant to the terms of the Private Placement Note Purchase Agreement and, to the extent accepted by the Private Placement Noteholders, prepay the applicable Private Placement Notes so long as at least a Ratable Portion of the outstanding Loans is prepaid contemporaneously with such prepayment of Private Placement Notes; in each case accompanied by a certificate of a Responsible Officer of the Borrower demonstrating the calculation of such prepayment amount and applied, first, to the Term A Loan and the Term B Loan (ratably to the remaining principal amortization payments) and, second, to the Revolving Credit Facility in the manner set forth in clause (ix) of this Section 2.05(b).

(viii)If for any reason the Total Revolving Credit Outstandings at any time exceed the Revolving Credit Facility at such time, the Borrower shall immediately prepay Revolving Credit Loans, Swing Line Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations (other than the L/C Borrowings) in an aggregate amount equal to such excess.

(ix)Prepayments of the Revolving Credit Facility made pursuant to this Section 2.05(b), first, shall be applied ratably to the L/C Borrowings and the Swing Line Loans, second, shall be applied ratably to the outstanding Revolving Credit Loans, and, third, shall be used to Cash Collateralize the remaining L/C Obligations; and, in the case of prepayments of the Revolving Credit Facility required pursuant to clause (i), (ii), (iii), (iv) or (v) of this Section 2.05(b), the amount remaining, if any, after the prepayment in full of all L/C Borrowings, Swing Line Loans and Revolving Credit Loans outstanding at such time and the Cash Collateralization of the remaining L/C Obligations in full (the sum of such prepayment amounts, cash collateralization amounts and remaining amount being, collectively, the “Reduction Amount”) may be retained by the Borrower for use in the ordinary course of its business, and the Revolving Credit Facility shall be automatically and permanently reduced by the Reduction Amount as set forth in Section 2.06(b)(iv).  Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the L/C Issuer or the Lenders, as applicable.

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2.06Termination or Reduction of Commitments.

(a)Optional.  The Borrower may, upon notice to the Administrative Agent, terminate the Revolving Credit Facility, the Letter of Credit Sublimit or the Swing Line Sublimit, or from time to time permanently reduce the Revolving Credit Facility, the Letter of Credit Sublimit or the Swing Line Sublimit; provided that (i) any such notice shall be received by the Administrative Agent not later than 10:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof and (iii) the Borrower shall not terminate or reduce (A) the Revolving Credit Facility if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolving Credit Outstandings would exceed the Revolving Credit Facility, (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit, or (C) the Swing Line Sublimit if, after giving effect thereto and to any concurrent prepayments hereunder, the Outstanding Amount of Swing Line Loans would exceed the Letter of Credit Sublimit.

(b)Mandatory.

(i) The aggregate Term A Loan Commitments shall be automatically and permanently reduced to zeroon the date of the Borrowing of the Term A Loan.

(ii)(A)The aggregate Term B-1 Loan Commitments shall be automatically and permanently reduced to zeroon the date of the Borrowing of the Term B-1 Loan.

(B)The aggregate Term B-2 Loan Commitments shall be automatically and permanently reduced (x) to zero on the earlier of (i) the date of funding of the Private Placement Notes pursuant to the Private Placement Note Purchase Agreement; provided that, such Private Placement Notes are funded in an amount equal to $40,000,000 and (ii) the date of the Borrowing of the Term B-2 Loan and (y) to the extent the Private Placement Notes are funded in an amount less than $40,000,000, the aggregate Term B-2 Loan Commitments shall be automatically and permanently reduced in an amount equal to the aggregate principal amount of the Private Placement Notes.

(iii)The Revolving Credit Facility shall be automatically and permanently reduced on each date on which the prepayment of Revolving Credit Loans outstanding thereunder is required to be made pursuant to Section 2.05(b)(i), (ii), (iii), (iv) or (v) by an amount equal to the applicable Reduction Amount.

(iv)If after giving effect to any reduction or termination of Revolving Credit Commitments under this Section 2.06, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the Revolving Credit Facility at such time, the Letter of Credit Sublimit or the Swing Line Sublimit, as the case may be, shall be automatically reduced by the amount of such excess.

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(c)Application of Commitment Reductions; Payment of Fees.  The Administrative Agent will promptly notify the Lenders of any termination or reduction of the Letter of Credit Sublimit, Swing Line Sublimit or the Revolving Credit Commitment under this Section 2.06.  Upon any reduction of the Revolving Credit Commitments, the Revolving Credit Commitment of each Lender shall be reduced by such Lender’s Applicable Revolving Credit Percentage of such reduction amount.  All fees in respect of the Revolving Credit Facility accrued until the effective date of any termination of the Revolving Credit Facility shall be paid on the effective date of such termination.

2.07Repayment of Loans.

(a)Term A Loan.  The Borrower shall repay the outstanding principal amount of the Term A Loan on the following dates in the respective amounts set forth opposite such dates (which amounts shall be reduced as a result of the application of prepayments hereunder ratably to the remaining principal amortization payments):

Payment Dates	Principal Amortization Payment
September 30, 2008	$	7,312,500
December 31, 2008	$	7,312,500
March 31, 2009	$	7,312,500
June 30, 2009	$	7,312,500
September 30, 2009	$	9,750,000
December 31, 2009	$	9,750,000
March 31, 2010	$	9,750,000
June 30, 2010	$	9,750,000
September 30, 2010	$	12,187,500
December 31, 2010	$	12,187,500
March 31, 2011	$	12,187,500
June 30, 2011	$	12,187,500
September 30, 2011	$	12,187,500
December 31, 2011	$	12,187,500
March 31, 2012	$	12,187,500
June 30, 2012	$	12,187,500
September 30, 2012	$	12,187,500
December 31, 2012	$	12,187,500
March 31, 2013	$	12,187,500
Maturity Date	$	187,687,500

provided, however, that the final principal repayment installment of the Term A Loan shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of the Term A Loan outstanding on such date.

(b)Term B-1 Loan.  The Borrower shall repay the outstanding principal amount of the Term B-1 Loan on the following dates in the respective amounts set forth

55

opposite such dates (which amounts shall be reduced as a result of the application of prepayments hereunder ratably to the remaining principal amortization payments):

Payment Dates	Principal Amortization Payment
September 30, 2008	$	468,750
December 31, 2008	$	468,750
March 31, 2009	$	468,750
June 30, 2009	$	468,750
September 30, 2009	$	625,000
December 31, 2009	$	625,000
March 31, 2010	$	625,000
June 30, 2010	$	625,000
September 30, 2010	$	781,250
December 31, 2010	$	781,250
March 31, 2011	$	781,250
June 30, 2011	$	781,250
September 30, 2011	$	781,250
December 31, 2011	$	781,250
March 31, 2012	$	781,250
June 30, 2012	$	781,250
September 30, 2012	$	781,250
December 31, 2012	$	781,250
March 31, 2013	$	781,250
June 30, 2013	$	781,250
September 30, 2013	$	781,250
December 31, 2013	$	781,250
March 31, 2014	$	781,250
June 30, 2014	$	781,250
September 30, 2014	$	781,250
December 31, 2014	$	781,250
March 31, 2015	$	781,250
Maturity Date	$	5,781,250

provided, however, that the final principal repayment installment of the Term B-1 Loan shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of the Term B-1 Loan outstanding on such date.

(c)Term B-2 Loan.  The Borrower shall repay the outstanding principal amount of the Term B-2 Loan on the following dates in the respective percentages set forth opposite such dates (which amounts shall be reduced as a result of the application of prepayments hereunder ratably to the remaining principal amortization payments):

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Payment Dates	Principal Amortization Payment
September 30, 2008	1.875000000	%
December 31, 2008	1.875000000	%
March 31, 2009	1.875000000	%
June 30, 2009	1.875000000	%
September 30, 2009	2.500000000	%
December 31, 2009	2.500000000	%
March 31, 2010	2.500000000	%
June 30, 2010	2.500000000	%
September 30, 2010	3.125000000	%
December 31, 2010	3.125000000	%
March 31, 2011	3.125000000	%
June 30, 2011	3.125000000	%
September 30, 2011	3.125000000	%
December 31, 2011	3.125000000	%
March 31, 2012	3.125000000	%
June 30, 2012	3.125000000	%
September 30, 2012	3.125000000	%
December 31, 2012	3.125000000	%
March 31, 2013	3.125000000	%
June 30, 2013	3.125000000	%
September 30, 2013	3.125000000	%
December 31, 2013	3.125000000	%
March 31, 2014	3.125000000	%
June 30, 2014	3.125000000	%
September 30, 2014	3.125000000	%
December 31, 2014	3.125000000	%
March 31, 2015	3.125000000	%
Maturity Date	23.125000000	%

provided, however, that the final principal repayment installment of the Term B-2 Loan shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of the Term B-2 Loan outstanding on such date.

(d)Revolving Credit Loans.  The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of all Revolving Credit Loans outstanding on such date.

(e)Swing Line Loans.  The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date on which the Swing Line Lender demands repayment of such Swing Line Loan and (ii) the Maturity Date.

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2.08Interest.

(a)Subject to the provisions of Section 2.08(b), (i) each Eurodollar Rate Loan under a Facility shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate for such Facility; and (ii) each Base Rate Loan under a Facility shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for such Facility; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to (A) the Base Rate plus the Applicable Rate for the Revolving Credit Facility or (B) if applicable, such other rate as agreed to by the Borrower and the Swing Line Lender.

(b)(i)If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(ii)If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(iii)Upon the request of the Required Lenders, while any other Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.  Notwithstanding the foregoing, upon the occurrence of an Event of Default under Sections 8.01(a) or 8.01(d), such increase shall occur automatically.

(iv)Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c)Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

2.09Fees.  In addition to certain fees described in Sections 2.03(i) and (j):

(a)Unused Fee.  The Borrower shall pay to the Administrative Agent for the account of each Lender with a Revolving Credit Commitment in accordance with its pro rata share thereof (i.e., according to such Lender’s Applicable Revolving Credit Percentage) an unused commitment fee (the “Unused Fee”) for the period commencing

58

on the Commitment Effective Date in an amount equal the product of (i) the Applicable Rate times (ii) the actual daily amount by which the Revolving Credit Facility exceeds the sum of (x) the Outstanding Amount of Revolving Loans plus (y) the Outstanding Amount of L/C Obligations.  The Unused Fee shall accrue at all times during the Availability Period with respect to the Revolving Credit Commitments, including at any time after the Commitment Effective Date during which one or more of the applicable conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter, commencing with the first such date to occur after the Commitment Effective Date, and on the Maturity Date.  The Unused Fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Percentage during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Percentage separately for each period during such quarter that such Applicable Percentage was in effect.  For purposes hereof, (i) L/C Obligations shall be counted toward and considered as usage of the Revolving Credit Facility and (ii) Swing Line Loans shall not be counted toward or be considered as usage of the Revolving Credit Facility.

(b)Ticking Fee.  The Borrower shall pay to the Administrative Agent for the account of each Lender with respect to such Lender’s Commitments, a ticking fee equal to 0.50% per annum times the total principal amount of its aggregate Commitments (the “Ticking Fee”).  The Ticking Fee shall accrue at all times from the Closing Date until the earliest of (i) the Commitment Effective Date, (ii) the Expiration Date and (iii) the termination of the Commitments hereunder, and shall be due and payable in arrears on such date.

(c)Other Fees.

(i)The Borrower shall pay to the Arranger and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

(ii)The Borrower shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

2.10Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate.

(a)All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same

59

day on which it is made shall, subject to Section 2.12(a), bear interest for one day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

(b)If, as a result of any restatement of or other adjustment to the financial statements of the Parent or for any other reason, the Borrower, Parent or the Lenders determine that (i) the Total Leverage Ratio as calculated by the Parent as of any applicable date was inaccurate and (ii) a proper calculation of the Total Leverage Ratio would have resulted in higher pricing for such period, the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders or the L/C Issuer, as the case may be, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, automatically and without further action by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period.  This paragraph shall not limit the rights of the Administrative Agent, any Lender or the L/C Issuer, as the case may be, under Section 2.03(c)(iii), 2.03(i) or 2.08(b) or under Article VIII.  The Borrower’s obligations under this paragraph shall survive the termination of the Aggregate Commitments and the repayment of all other Obligations hereunder.

2.11Evidence of Debt.

(a)The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

(b)In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and

60

records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

2.12Payments Generally; Administrative Agent’s Clawback.

(a)General.  All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 1:00 p.m. on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Applicable Percentage in respect of the relevant Facility (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent after 1:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected on computing interest or fees, as the case may be.

(b)(i)Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 11:00 a.m. on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing.  Any payment by the

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Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

(ii)Payments by Borrower; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have received notice from the Borrower prior to the time at which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to such Lenders or the L/C Issuer, as the case may be, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

(c)Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(d)Obligations of Lenders Several.  The obligations of the Lenders hereunder to make the Term Loans and Revolving Credit Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 11.04(c) are several and not joint.  The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 11.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 11.04(c).

(e)Funding Source.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

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(f)Insufficient Funds.  If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, L/C Borrowings, interest and fees then due hereunder, such funds shall be applied (i) first, toward payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, toward payment of principal and L/C Borrowings then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and L/C Borrowings then due to such parties.

2.13Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of (a) Obligations in respect of any the Facilities due and payable to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender at such time to (ii) the aggregate amount of the Obligations in respect of the Facilities due and payable to all Lenders hereunder and under the other Loan Documents at such time) of payments on account of the Obligations in respect of the Facilities due and payable to all Lenders hereunder and under the other Loan Documents at such time obtained by all the Lenders at such time or (b) Obligations in respect of any of the Facilities owing (but not due and payable) to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing (but not due and payable) to such Lender at such time to (ii) the aggregate amount of the Obligations in respect of the Facilities owing (but not due and payable) to all Lenders hereunder and under the other Loan Parties at such time) of payment on account of the Obligations in respect of the Facilities owing (but not due and payable) to all Lenders hereunder and under the other Loan Documents at such time obtained by all of the Lenders at such time then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of Obligations in respect of the Facilities then due and payable to the Lenders or owing (but not due and payable) to the Lenders, as the case may be, provided that:

(i)if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(ii)the provisions of this Section shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (B) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant.

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Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

3.01Taxes.

(a)Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.

(i)Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall to the extent permitted by applicable Laws be made free and clear of and without reduction or withholding for any Taxes.  If, however, applicable Laws require the Borrower or the Administrative Agent to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower or the Administrative Agent, as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.

(ii)If the Borrower or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.

(b)Payment of Other Taxes by the Borrower.  Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Laws.

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(c)Tax Indemnifications.

(i)Without limiting the provisions of subsection (a) or (b) above, the Borrower shall, and does hereby, indemnify the Administrative Agent, each Lender and the L/C Issuer, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) withheld or deducted by the Borrower or the Administrative Agent or paid by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  The Borrower shall also, and does hereby, indemnify the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or the L/C Issuer for any reason fails to pay indefeasibly to the Administrative Agent as required by clause (ii) of this subsection.  A certificate as to the amount of any such payment or liability delivered to the Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error.

(ii)Without limiting the provisions of subsection (a) or (b) above, each Lender and the L/C Issuer shall, and does hereby, indemnify the Borrower and the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, against any and all Taxes and any and all related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for the Borrower or the Administrative Agent) incurred by or asserted against the Borrower or the Administrative Agent by any Governmental Authority as a result of the failure by such Lender or the L/C Issuer, as the case may be, to deliver, or as a result of the inaccuracy, inadequacy or deficiency of, any documentation required to be delivered by such Lender or the L/C Issuer, as the case may be, to the Borrower or the Administrative Agent pursuant to subsection (e).  Each Lender and the L/C Issuer hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii).  The agreements in this clause (ii) shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender or the L/C Issuer, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all other Obligations.

(d)Evidence of Payments.  Upon request by the Borrower or the Administrative Agent, as the case may be, after any payment of Taxes by the Borrower or the Administrative Agent to a Governmental Authority as provided in this Section 3.01, the Borrower shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return

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required by Law to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Administrative Agent, as the case may be.

(e)Status of Lenders; Tax Documentation.

(i)Each Lender shall deliver to the Borrower and to the Administrative Agent, at the time or times prescribed by applicable Laws or when reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable Laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit the Borrower or the Administrative Agent, as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) such Lender’s entitlement to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Lender by the Borrower pursuant to this Agreement or otherwise to establish such Lender’s status for withholding tax purposes in the applicable jurisdiction.

(ii)Without limiting the generality of the foregoing, if the Borrower is resident for tax purposes in the United States,

(A)any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent executed originals of IRS Form W-9 or such other documentation or information prescribed by applicable Laws or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent, as the case may be, to determine whether or not such Lender is subject to backup withholding or information reporting requirements; and

(B)each Foreign Lender that is entitled under the Code or any applicable treaty to an exemption from or reduction of withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

(I)executed originals of IRS Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

(II)executed originals of IRS Form W-8ECI,

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(III)executed originals of IRS Form W-8IMY and all required supporting documentation,

(IV)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) executed originals of IRS Form W-8BEN, or

(V)executed originals of any other form prescribed by applicable Laws as a basis for claiming exemption from or a reduction in United States Federal withholding tax together with such supplementary documentation as may be prescribed by applicable Laws to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made.

(iii)Each Lender shall promptly (A) notify the Borrower and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws of any jurisdiction that the Borrower or the Administrative Agent make any withholding or deduction for taxes from amounts payable to such Lender.

(f)Treatment of Certain Refunds.  Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be.  If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses incurred by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent,

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such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

3.02Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

3.03Inability to Determine Rates.  If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender.  Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

3.04Increased Costs; Reserves on Eurodollar Rate Loans.

(a)Increased Costs Generally.  If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any

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Lender (except any reserve requirement contemplated by Section 3.04(e)) or the L/C Issuer;

(ii)subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer); or

(iii)impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

(b)Capital Requirements.  If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

(c)Certificates for Reimbursement.  A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest

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error.  The Borrower shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)Delay in Requests.  Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

(e)Reserves on Eurodollar Rate Loans.  The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

3.05Compensation for Losses.  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

(a)any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

(b)any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or

(c)any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 11.13;

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate

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the deposits from which such funds were obtained.  The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

3.06Mitigation Obligations; Replacement of Lenders.

(a)Designation of a Different Lending Office.  If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender, the L/C Issuer or any Governmental Authority for the account of any Lender or the L/C Issuer pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender or the L/C Issuer shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or the L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender or the L/C Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or the L/C Issuer, as the case may be.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the L/C Issuer in connection with any such designation or assignment.

(b)Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 11.13.

3.07Survival.  All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder and resignation of the Administrative Agent.

ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

4.01Conditions to Closing Date.  The occurrence of the Closing Date is subject to satisfaction of the following conditions precedent:

(a)The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified,

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each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

(i)Credit Agreement.  Executed counterparts of this Agreement (including exhibits and schedules (which schedules shall reflect the business of the Loan Parties as of the Closing Date)), sufficient in number for distribution to the Administrative Agent and the Borrower; and

(ii)Corporate Documents.

(A)Such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party; and

(B)Such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

(iii)Other.  Such other customary documents, agreements, certificates or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or any Lender reasonably may require.

Without limiting the generality of the provisions of the last paragraph of Section 9.03, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

4.02Conditions to Commitment Effective Date.

Each of the occurrence of the Commitment Effective Date and the obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent on or before August 29, 2008 (the “Expiration Date”):

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(a)The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Commitment Effective Date (or, in the case of certificates of governmental officials, a recent date before the Commitment Effective Date) and each in form and substance satisfactory to the Administrative Agent:

(i)Credit Agreement Schedules.  The final schedules to this Agreement, updated to reflect the consummation of the Mead Purchase Agreement and the business of the Loan Parties as of the Commitment Effective Date, in form and substance satisfactory to the Administrative Agent.

(ii)Notes.  One or more Notes, as applicable, executed by the Borrower in favor of each Lender requesting Notes.

(iii)Personal Property Collateral Documents.  A pledge and security agreement, in substantially the form of Exhibit F (together with each other pledge and security agreement delivered pursuant to Section 6.10, in each case as amended, the “Security Agreement”), duly executed by each Loan Party, together with:

(A)certificates representing the Pledged Equity referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank,

(B)proper Financing Statements in form appropriate for filing under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Security Agreement, covering the Collateral described in the Security Agreement,

(C)completed requests for information, dated on or before the date of the initial Credit Extension, listing all effective financing statements filed in the jurisdictions referred to in clause (B) above that name any Loan Party or the Target as debtor, together with copies of such other financing statements,

(D)evidence of the completion of all other actions, recordings and filings of or with respect to the Security Agreement that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created thereby,

(E)the Deposit Account Control Agreements and the Securities Account Control Agreements, in each case as defined in the Security Agreement and duly executed by the appropriate parties, and

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(F)evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Security Agreement has been taken (including receipt of duly executed payoff letters, UCC-3 termination statements and landlords’ and bailees’ waiver and consent agreements).

(iv)Real Property Collateral Documents.  Deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages and leasehold deeds of trust, in substantially the form of Exhibit G (with such changes as may be satisfactory to the Administrative Agent and its counsel to account for local law matters) and covering the properties listed on Schedule 5.16 (together with the Assignments of Leases and Rents referred to therein and each other mortgage delivered pursuant to Section 6.10, in each case as amended, the “Mortgages”), duly executed by the appropriate Loan Party, together with:

(A)evidence that counterparts of the Mortgages have been duly executed, acknowledged and delivered and are in form suitable for filing or recording in all filing or recording offices that the Administrative Agent may deem necessary or desirable in order to create a valid first and subsisting Lien on the property described therein in favor of the Collateral Agent for the benefit of the Secured Parties and that all filing, documentary, stamp, intangible and recording taxes and fees have been paid,

(B)fully paid American Land Title Association Lender’s Extended Coverage title insurance policies or binder therefore (the “Mortgage Policies”), with endorsements and in amounts acceptable to the Administrative Agent, issued, coinsured and reinsured by title insurers acceptable to the Administrative Agent, insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only those encumbrances specifically permitted under each respective Mortgage and other Liens permitted under the Loan Documents, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents, for mechanics’ and materialmen’s Liens and for zoning of the applicable property) and such coinsurance and direct access reinsurance as the Administrative Agent may deem necessary or desirable,

(C)Express Map form surveys, for which all necessary fees (where applicable) have been paid, and dated no more than 30 days before the day of the initial Credit Extension, and which shall be in form sufficient to delete any standard “survey exception” which would otherwise be contained in the related Mortgage Policy, certified to the Administrative Agent and the issuer of the Mortgage Policies in a manner satisfactory to the Administrative Agent by a land surveyor duly registered and licensed in the States in which the property described in such surveys

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is located and acceptable to the Administrative Agent, showing all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects acceptable to the Administrative Agent,

(D)engineering, soils and other reports (including environmental audits and corresponding reliance letters) as to the properties described in the Mortgages, from professional firms acceptable to the Administrative Agent,

(E)except as set forth on Schedule 4.02(a), estoppel and consent agreements executed by each of the lessors of the leased real properties listed on Schedule 5.16, along with (1) a memorandum of lease in recordable form with respect to such leasehold interest, executed and acknowledged by the owner of the affected real property, as lessor, or (2) evidence that the applicable lease with respect to such leasehold interest or a memorandum thereof has been recorded in all places necessary or desirable, in the Administrative Agent’s reasonable judgment, to give constructive notice to third-party purchasers of such leasehold interest, or (3) if such leasehold interest was acquired or subleased from the holder of a recorded leasehold interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form satisfactory to the Administrative Agent,

(F)evidence of the insurance required by the terms of the Mortgages, and

(G)evidence that all other action that the Administrative Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken.

(v)Corporate Documents.

(A)Such additional certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party; and

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(B)Such additional documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

(vi)Legal Opinions.

(A)a favorable opinion of Sonnenschein Nath & Rosenthal LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request;

(B)a favorable opinion of Ellis Lawhorne & Sims, P.A., local counsel to the Loan Parties in South Carolina, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request; and

(C)a favorable opinion of Seller’s counsel, delivered in connection with the Kraft Acquisition which opinion is either (A) addressed to the Administrative Agent and the Lenders or (B) accompanied by a reliance letter from such counsel addressed to the Administrative Agent and the Lenders that expressly states that the Administrative Agent and the Lenders may rely on such opinion.

(vii)Governmental and Third Party Approvals.  Certificate signed by a Responsible Officer of the Borrower certifying that all governmental and third party approvals necessary in connection with the Kraft Acquisition, the financing contemplated hereby and the continuing operations of the Loan Parties have been obtained and are in full force and effect, and all applicable waiting periods have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Kraft Acquisition or the financing thereof contemplated hereunder, except for such governmental and third party approvals the failure to obtain could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(viii)Closing Officer’s Certificate.  A certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfiedand (B) that except as disclosed on Schedule 4.02(b) there has been no event or circumstance since December 31, 2007 that has had or could be reasonably expected to have, either individually or

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in the aggregate, a Material Adverse Effect (as such term is defined in the Mead Purchase Agreement).

(ix)Financial Information.

(A)The Audited Financial Statements and the Interim Financial Statements;

(B)projected income statements, balance sheets and cash flow statements prepared by the Borrower on a Pro Forma Basis and giving effect to the Kraft Acquisition, the Loans contemplated hereby and the use of proceeds therefrom, on a quarterly basis for the Fiscal Year ending December 31, 2008 and on an annual basis for each Fiscal Year thereafter;

(C)a pro forma consolidated balance sheet of the Parent and its Subsidiaries as of the date of the most recent consolidated balance sheet delivered pursuant to clause (xiii) above, adjusted to give effect to the consummation of the Kraft Acquisition and the Loans contemplated hereby as if such transactions had occurred on such date, and which is consistent in all material respects with the sources and uses of cash for the Kraft Acquisition previously described to the Administrative Agent and the forecasts previously provided to the Administrative Agent; and

(D)an officer’s certificate prepared by the chief financial officer of the Borrower as to the financial condition, solvency and related matters of the Borrower and its Subsidiaries, after giving effect to the Kraft Acquisition, the Loans to be made on the Commitment Effective Date and the other transactions contemplated by the Loan Documents, in form and substance reasonably satisfactory to the Administrative Agent.

(x)Insurance.  Evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect, together with the certificates of insurance, naming the Administrative Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies maintained with respect to the assets and properties of the Loan Parties that constitutes Collateral.

(xi)Kraft Acquisition.

(A)Evidence that the Kraft Acquisition shall have been or shall concurrently be consummated in accordance with applicable law and on the terms and conditions set forth in that certain Asset Purchase Agreement dated as of April 4, 2008 among the Sellers, the Parent and Oak Acquisition LLC (the “Mead Purchase Agreement”) submitted to the Administrative Agent, and no provision of the Mead Purchase Agreement or the other documentation relating to the Kraft Acquisition (collectively,

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the “Kraft Acquisition Documents”) shall have been waived, amended, supplemented or otherwise modified in any material respect without the approval of the Administrative Agent.

(B)A copy, certified by a Responsible Officer of the Borrower as true and complete, of each Acquisition Document as originally executed and delivered, together with all exhibits and schedules thereto, and evidence that the sum of (A) the aggregate purchase price of the Kraft Acquisition, (B) the amount required to refinance the Existing Credit Agreement and (C) related fees and expenses shall not exceed $551 million.

(C)A copy, certified by a Responsible Officer of the Borrower as true and complete, of (i) the assignment agreement relating to the assignment of the Cogen Notes from Teachers to the Seller (the “Note Assignment”), (ii) the acknowledgement signed by Teachers relating to the Note Assignment, (iii) the BONY documents and (iv) the SCANA Side Letters, each on terms and conditions satisfactory to the Administrative Agent.

(xii)Capitalization.  The pro forma capitalization and structure of the Loan Parties (excluding any change in ownership of the Parent involving a non-material shareholder) after giving effect to the Kraft Acquisition as disclosed in the Mead Purchase Agreement shall not have been modified in any material respect without the approval of the Administrative Agent.

(xiii)Debt.  Evidence that the Loan Parties shall have no Debt other than the Debt incurred pursuant to the Facilities and other Debt permitted pursuant to Section 7.01.

(xiv)Existing Credit Agreement.  Evidence that the Existing Credit Agreement has been, or concurrently with the Commitment Effective Date is being, terminated and all Liens securing obligations under the Existing Credit Agreement have been, or concurrently with the Commitment Effective Date are being, released.

(xv)Intercompany Subordinated Note.  A copy, certified by a Responsible Officer of the Borrower as true and complete, of the Intercompany Subordinated Note.

(xvi)Intercreditor Agreement.  To the extent the Private Placement Notes are to be funded pursuant to the Private Placement Note Purchase Agreement on the Commitment Effective Date, executed counterparts of the Intercreditor Agreement, sufficient in number for distribution to the Administrative Agent, the Borrower and the Private Placement Noteholders.

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(xvii)Private Placement Notes.  To the extent the Private Placement Notes are to be funded pursuant to the Private Placement Note Purchase Agreement on the Commitment Effective Date, executed counterparts of the Private Placement Note Purchase Agreement and Private Placement Notes, and evidence that the Borrower has received, or will receive simultaneously on the Commitment Effective Date, proceeds of the Private Placement Notes in a principal amount of not less than $40,000,000.

(xviii)Other.  Such other customary documents, agreements, certificates or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or any Lender reasonably may require.

(b)Fees and Expenses.

(i)(A) All fees and expenses required to be paid to the Administrative Agent and the Arranger on or before the Commitment Effective Date shall have been paid and (B) all fees and expenses required to be paid to the Lenders on or before the Commitment Effective Date shall have been paid.

(ii)Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the Commitment Effective Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).

4.03Conditions to all Credit Extensions.  The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:

(a)The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (except to the extent already qualified by materiality pursuant to the terms thereof) on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (except to the extent already qualified by materiality pursuant to the terms thereof) as of such earlier date, and except that for purposes of this Section 4.03, the representations and warranties contained in Sections 5.05(a) shall be deemed to refer to the most recent statements furnished pursuant to Sections 6.01(a) and (b), respectively.

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(b)No Default or Event of Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

(c)The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

To induce the Administrative Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loans and issue and participate in Letters of Credit hereunder, each Loan Party represents and warrants to the Administrative Agent and the Lenders that, both before and after giving effect to the Related Transactions:

5.01Organization.  Each Loan Party and its Subsidiaries is validly existing and in good standing under the laws of its jurisdiction of organization; and each Loan Party and its Subsidiaries is duly qualified to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, except for such jurisdictions where the failure to so qualify would not have a Material Adverse Effect.

5.02Authorization; No Conflict.  Each Loan Party is duly authorized to execute and deliver each Loan Document to which it is a party, the Borrower is duly authorized to borrow monies hereunder and each Loan Party is duly authorized to perform its Obligations under each Loan Document to which it is a party. Except as set forth on Schedule 5.02, the execution, delivery and performance by each Loan Party of each Loan Document to which it is a party, and the borrowings by the Borrower hereunder, do not and will not (a) require any consent or approval of any governmental agency or authority (other than any consent or approval which has been obtained and is in full force and effect), (b) conflict with (i) any provision of Law, (ii) the charter, by-laws or other organizational documents of any Loan Party or (iii) assuming, solely with respect to the Existing Credit Agreement, the satisfaction of the condition to the Commitment Effective Date contained in Section 4.02(a)(xiv), any agreement, indenture, instrument or other document material to the business of any Loan Party, or any judgment, order or decree, which is binding upon any Loan Party or any of their respective properties or (c) require, or result in, the creation or imposition of any Lien on any asset of any Loan Party (other than Liens in favor of the Collateral Agent created pursuant to the Collateral Documents).

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5.03Validity and Binding Nature.  Each of this Agreement and each other Loan Document to which any Loan Party is a party is the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity.

5.04Financial Condition.  The Audited Financial Statements and the Interim Financial Statements, copies of each of which have been delivered to each Lender, were prepared in accordance with GAAP (subject, in the case of such Interim Financial Statements, to the absence of footnotes and to normal year-end adjustments) and present fairly in all material respects the consolidated financial condition of the Business as at such dates and the results of its operations for the periods then ended.

5.05No Material Adverse Change.  Since December 31, 2007, there has been no material adverse change in the Business or, after giving effect to the Related Transactions, in the financial condition, operations, assets, business or properties of the Loan Parties and their Subsidiaries taken as a whole except as set forth on Schedule 5.05.

5.06Litigation and Contingent Liabilities.  No litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to the Borrower’s knowledge, threatened against any Loan Party or its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, except as set forth in Schedule 5.06.  Other than any liability incident to such litigation or proceedings, no Loan Party nor any of its Subsidiaries has any material contingent liabilities not listed on Schedule 5.06 or permitted by Section 7.01.

5.07Ownership of Properties; Liens.  Except as disclosed on Schedule 5.07, each Loan Party and its Subsidiaries owns good and, in the case of real property, marketable title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges and claims (including infringement claims with respect to patents, trademarks, service marks, copyrights and the like) except as permitted by Section 7.02.

5.08Equity Ownership; Subsidiaries.  All issued and outstanding Capital Securities of the Borrower and its Subsidiaries are duly authorized and validly issued, fully paid, non-assessable, and free and clear of all Liens other than those in favor of the Collateral Agent, and such securities were issued in compliance with all applicable state and federal laws concerning the issuance of securities, except where the failure to so comply would not have a Material Adverse Effect.  Schedule 5.08 sets forth the authorized Capital Securities of each Loan Party (other than the Parent) as of the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date). All of the issued and outstanding Capital Securities of the Borrower are owned by Parent, and all of the issued and outstanding Capital Securities of each Wholly-Owned Subsidiary are, directly or indirectly, owned by the Borrower.  Except as set forth on Schedule 5.08, other than the Warrants and the Underwriting Agreement, there are no pre-emptive or other outstanding rights, options, warrants,

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conversion rights or other similar agreements or understandings for the purchase or acquisition of any Capital Securities of any Loan Party or its Subsidiaries.

5.09Pension Plans.

(a)The Unfunded Liability of all Pension Plans does not in the aggregate exceed the greater of (i) twenty percent of the Total Plan Liability for all such Pension Plans and (ii) $5,000,000.  Each Pension Plan complies in all material respects with all applicable requirements of law and regulations. No contribution failure under Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan has occurred with respect to any Pension Plan, sufficient to give rise to a Lien under Section 302(f) of ERISA, or otherwise to have a Material Adverse Effect.  There are no pending or, to the knowledge of Borrower, threatened, claims, actions, investigations or lawsuits against any Pension Plan, any fiduciary of any Pension Plan, or Borrower or other any member of the Controlled Group with respect to a Pension Plan or a Multiemployer Pension Plan which could reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any other member of the Controlled Group has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Pension Plan or Multiemployer Pension Plan which could reasonably be expected to have a Material Adverse Effect. Within the past five years, neither the Borrower nor any other member of the Controlled Group has engaged in a transaction which resulted in a Pension Plan with an Unfunded Liability being transferred out of the Controlled Group, which could reasonably be expected to have a Material Adverse Effect.  No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan, which could reasonably be expected to have a Material Adverse Effect.

(b)All contributions (if any) have been made to any Multiemployer Pension Plan that are required to be made by the Borrower or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable law; neither the Borrower nor any other member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Pension Plan, incurred any material withdrawal liability with respect to any such plan or received notice of any material claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan; and neither the Borrower nor any other member of the Controlled Group has received any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

5.10Investment Company Act.  No Loan Party nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” within the meaning of the Investment Company Act of 1940.

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5.11Regulation U.  The Borrower is not engaged principally, or as one of its material activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.

5.12Taxes.  Except as disclosed on Schedule 5.12, each Loan Party and its Subsidiaries has timely filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges due and payable with respect to such return, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.  The Loan Parties and their Subsidiaries have made adequate reserves on their books and records in accordance with GAAP for all taxes that have accrued but which are not yet due and payable. No Loan Party nor any of its Subsidiaries has participated in any transaction that relates to a year of the taxpayer (which is still open under the applicable statute of limitations) which is a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2) (irrespective of the date when the transaction was entered into).

5.13Solvency, etc.  On the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date), and immediately prior to and after giving effect to the issuance of each Letter of Credit and each borrowing hereunder and the use of the proceeds thereof, with respect to each Loan Party, individually, (a) the fair value of its assets is greater than the amount of its liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated in accordance with GAAP, (b) the present fair saleable value of its assets is not less than the amount that will be required to pay the probable liability on its debts as they become absolute and matured, (c) it is able to pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business, (d) it does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature and (e) it is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which its property would constitute unreasonably small capital.

5.14Environmental Matters.  The on-going operations of each Loan Party and its Subsidiaries comply in all respects with all Environmental Laws, except such non-compliance which could not (if enforced in accordance with applicable law) reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. Each Loan Party and its Subsidiaries has obtained, and maintained in good standing, all licenses, permits, authorizations, registrations and other approvals required under any Environmental Law and required for their respective ordinary course operations, and each Loan Party and its Subsidiaries is in compliance with all terms and conditions thereof, except, in each case, where the failure to do so could not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. No Loan Party nor any of its Subsidiaries or any of its properties or operations is subject to, or reasonably anticipates the issuance of, any written order from or agreement with any Federal, state or local Governmental Authority, nor subject to any judicial or docketed administrative or other proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Substance, in each case that could reasonably be expected to result in a Material Adverse Effect.  There are no Hazardous Substances or other conditions or circumstances

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existing with respect to any property, arising from operations prior to the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date), or relating to any waste disposal, of any Loan Party or its Subsidiaries that would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.  No Loan Party nor any of its Subsidiaries has any underground storage tanks that are not properly registered or permitted under applicable Environmental Laws or that at any time have released, leaked, disposed of or otherwise discharged Hazardous Substances in each case that could reasonably be expected to result in a Material Adverse Effect.

5.15Insurance.  Each Loan Party and its Subsidiaries and their properties are, to such Loan Party’s knowledge, insured with financially sound and reputable insurance companies which are not Affiliates of the Loan Parties or their Subsidiaries, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Loan Parties or such Subsidiaries operate.

5.16Real Property.  Set forth on Schedule 5.16 is a complete and accurate list, as of the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date), of the address of all real property owned or leased by any Loan Party, together with, in the case of leased property, the name and mailing address of the lessor of such property.

5.17Information.  All written information heretofore or contemporaneously herewith furnished by any Loan Party or its Subsidiaries to the Administrative Agent or any Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of any Loan Party or its Subsidiaries to the Administrative Agent or any Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances under which made (it being recognized by the Administrative Agent and the Lenders that any projections and forecasts provided by the Borrower are based on good faith estimates and assumptions believed by the Borrower to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may materially differ from projected or forecasted results).

5.18Intellectual Property.  Each Loan Party and its Subsidiaries owns and possesses or has a license or other right to use all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights as are necessary for the conduct of the businesses of the Loan Parties and their Subsidiaries, without any infringement upon rights of others which could reasonably be expected to have a Material Adverse Effect.

5.19Burdensome Obligations.  No Loan Party nor any of its Subsidiaries is a party to any agreement or contract or subject to any restriction contained in its organizational documents which could reasonably be expected to have a Material Adverse Effect.

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5.20         Labor Matters.  Except as set forth on Schedule 5.20, no Loan Party nor any of its Subsidiaries is subject to any labor or collective bargaining agreement. There are no existing or threatened strikes, lockouts or other labor disputes involving any Loan Party that singly or in the aggregate could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Loan Parties and their Subsidiaries are not in material violation of the Fair Labor Standards Act or any other applicable law, rule or regulation dealing with such matters.

5.21         No Default.  No Default or Event of Default exists or would result from the incurrence by any Loan Party of any Debt hereunder or under any other Loan Document.

5.22         Related Agreements, etc.

(a)          The Borrower has heretofore furnished the Administrative Agent a true and correct copy of the Related Agreements;

(b)         Each Loan Party and, to the Borrower’s knowledge, each other party to the Related Agreements, has duly taken all necessary corporate, partnership or other organizational action to authorize the execution, delivery and performance of the Related Agreements and the consummation of transactions contemplated thereby;

(c)          The Related Transactions will comply in all material respects with all applicable legal requirements, and all necessary governmental, regulatory, creditor, shareholder, partner and other material consents, approvals and exemptions required to be obtained by the Loan Parties and, to the Borrower’s knowledge, each other party to the Related Agreements in connection with the Related Transactions will be, prior to consummation of the Related Transactions, duly obtained and will be in full force and effect. As of the date of the Related Agreements, all applicable waiting periods with respect to the Related Transactions will have expired without any action being taken by any competent Governmental Auuthority which restrains, prevents or imposes material adverse conditions upon the consummation of the Related Transactions;

(d)         The execution and delivery of the Related Agreements did not, and the consummation of the Related Transactions will not, violate any statute or regulation of the United States (including any securities law) or of any state or other applicable jurisdiction, or any order, judgment or decree of any court or governmental body binding on any Loan Party or, to the Borrower’s knowledge, any other party to the Related Agreements, or result in a breach of, or constitute a default under, any material agreement, indenture, instrument or other document, or any judgment, order or decree, to which any Loan Party is a party or by which any Loan Party is bound or, to the Borrower’s knowledge, to which any other party to the Related Agreements is a party or by which any such party is bound; and

(e)          No statement or representation made in the Related Agreements by any Loan Party or, to the Borrower’s knowledge, any other Person, contains any untrue

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statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading.

5.23         Casualty, Etc.  Except as set forth on Schedule 5.23, neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.24         Collateral Documents.  The provisions of the Collateral Documents are effective to create in favor of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 7.02) on all right, title and interest of the respective Loan Parties in the Collateral described therein.  Except for filings completed prior to the Commitment Effective Date and as contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect or protect such Liens.

5.25         Material Contracts.  Schedule 5.25 lists, as of the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date), each Material Contract to which any Loan Party is a party, by which either of them or their respective properties is bound or to which either of them is subject.  As of the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date), except as set forth on Schedule 5.25, (a) each Material Contract is in full force and effect and is enforceable by the respective Loan Party or Loan Parties in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, statutes or rules of general application affecting the enforcement of creditor’s rights or general principles of equity, and (b) no Loan Party, nor, to the knowledge of the Loan Parties, any other party thereto, is in breach of or default under any Material Contract in any material respect or has given notice of termination or cancellation of any Material Contract.

ARTICLE VI

AFFIRMATIVE COVENANTS

Until the expiration or termination of the Commitments and thereafter until all Obligations hereunder and under the other Loan Documents are paid in full and all Letters of Credit have been terminated or Cash Collateralized, each Loan Party agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will:

6.01         Reports, Certificates and Other Information.  Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

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(a)          Annual Report.  Promptly when available and in any event within 90 days after the close of each Fiscal Year: (i) a copy of the annual audit report of the Parent and its Subsidiaries for such Fiscal Year, including therein consolidated balance sheets and statements of earnings and cash flows of the Parent and its Subsidiaries as at the end of such Fiscal Year, certified without adverse reference to going concern value and without qualification by independent auditors of recognized standing selected by the Borrower and reasonably acceptable to the Administrative Agent, together with a comparison with the budget for such Fiscal Year and a comparison with the previous Fiscal Year; and (ii) a consolidating balance sheet of the Parent and its Subsidiaries as of the end of such Fiscal Year and consolidating statement of earnings and cash flows for the Parent and its Subsidiaries for such Fiscal Year, certified as true and correct in all material respects in accordance with GAAP by a Responsible Officer of the Parent. Any comparisons delivered in accordance with this Section 6.01(a) with respect to any period preceding the Commitment Effective Date shall be made with respect to the Business for such period;

(b)         Interim Reports.  (i) Promptly when available and in any event within 45 days after the end of each Fiscal Quarter, consolidated and consolidating balance sheets of the Parent and its Subsidiaries as of the end of such Fiscal Quarter, together with consolidated and consolidating statements of earnings and cash flows for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for such period of the current Fiscal Year, certified as true and correct in all material respects in accordance with GAAP by a Responsible Officer of the Parent; and (ii) promptly when available and in any event within 30 days after the end of each month, consolidated and consolidating balance sheets of the Parent and its Subsidiaries as of the end of such month, together with consolidated and consolidating statements of earnings and a consolidated statement of cash flows for such month and for the period beginning with the first day of such Fiscal Year and ending on the last day of such month, together with a comparison with the corresponding period of the previous Fiscal Year. Any comparisons delivered in accordance with this Section 6.01(b) with respect to any period preceding the Commitment Effective Date shall be made with respect to the Business for such period;

6.02         Certificates; Other Information.  Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

(a)          Compliance Certificates.  Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 6.01(a) and each set of quarterly statements pursuant to Section 6.01(b), a duly completed compliance certificate in the form of Exhibit D, with appropriate insertions, dated the date of such annual report or such quarterly statements and signed by a Responsible Officer of the Parent, containing (i) a computation of each of the financial ratios and restrictions set forth in Section 7.14 and to the effect that such officer has not become aware of any Default or Event of Default that has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it and (ii) a written statement of the Parent’s

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management setting forth a discussion of the Parent’s financial condition, changes in financial condition and results of operations.

(b)         Reports to the SEC and to Shareholders.  Promptly upon the filing or sending thereof, copies of all regular, periodic or special reports of any Loan Party or its Subsidiaries filed with the SEC; copies of all registration statements of any Loan Party filed with the SEC (other than on Form S-8); and copies of all proxy statements or other communications made to security holders generally.

(c)          Notice of Default, Litigation and ERISA Matters.  Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Parent or the Subsidiary affected thereby with respect thereto:

(i)            the occurrence of a Default or Event of Default;

(ii)           any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Borrower to the Administrative Agent which has been instituted or, to the knowledge of the Borrower, is threatened against any Loan Party or their Subsidiaries or to which any of the properties of any thereof is subject which might reasonably be expected to have a Material Adverse Effect;

(iii)          the institution of any steps by any member of the Controlled Group or any other Person to terminate any Pension Plan, or the failure of any member of the Controlled Group to make a required contribution to any Pension Plan (if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan or Multiemployer Pension Plan which could result in the incurrence by any member of the Controlled Group of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Pension Plan), or any material increase in the contingent liability of the Borrower with respect to any post-retirement welfare benefit plan or other employee benefit plan of the Borrower or another member of the Controlled Group, or any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent but only to the extent that the event(s) described in this subsection individually or in the aggregate might reasonably be expected to have a Material Adverse Effect;

(iv)          any cancellation or material change in any material insurance maintained by any Loan Party or its Subsidiaries; or

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(v)           any other event (including (i) any violation of any Environmental Law or the assertion of any Environmental Claim or (ii) the enactment or effectiveness of any law, rule or regulation) which might reasonably be expected to have a Material Adverse Effect.

(d)         Management Reports.  Promptly upon receipt thereof, copies of all detailed financial and management reports submitted to the Parent or the Borrower by independent accountants in connection with each annual or interim audit made by such auditors of the books of the Parent or the Borrower;

(e)          Projections.  As soon as practicable, and in any event not later than 45 days after the commencement of each Fiscal Year, financial projections for the Parent and its Subsidiaries for such Fiscal Year (including quarterly operating and cash flow budgets) prepared in a manner consistent with the projections delivered by the Parent to the Administrative Agent prior to the Commitment Effective Date or otherwise in a manner reasonably satisfactory to the Administrative Agent, accompanied by a certificate of a Responsible Officer of the Parent on behalf of the Parent to the effect that (a) such projections were prepared by the Parent in good faith, (b) the Parent has a reasonable basis for the assumptions contained in such projections and (c) such projections have been prepared in accordance with such assumptions;

(f)          Related Transactions.  Promptly following receipt, copies of any material notices (including notices of default or acceleration) received in connection with the Related Transactions; and

(g)         Other Information.  Promptly from time to time, such other information concerning the Loan Parties as the Administrative Agent may reasonably request.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(b) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 11.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that:  (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a) to the Administrative Agent.  Except for such Compliance Certificates, the Administrative Agent shall have no obligation to

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request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to the Borrower or its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities.  The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 11.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information;” and (z) the Administrative Agent and the Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform that is not designated “Public Side Information.”  Notwithstanding the foregoing, the Borrower shall be under no Obligation to mark any Borrower Materials “PUBLIC”.

6.03         Books, Records and Inspections.  Keep, and cause each other Loan Party and its Subsidiaries to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause each other Loan Party and its Subsidiaries to permit, the Administrative Agent or any Lender (so long as such Lender’s visit or inspection is made concurrently with Administrative Agent) or any representative thereof to inspect the properties and operations of the Loan Parties and their Subsidiaries; and permit, and cause each other Loan Party and its Subsidiaries to permit, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), the Administrative Agent or any Lender (so long as such Lender’s visit or inspection is made concurrently with Administrative Agent) or any representative thereof to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and the Borrower hereby authorizes such independent auditors to discuss such financial matters with any Lender or the Administrative Agent or any representative thereof), and to examine (and, at the expense of the Loan Parties, photocopy extracts from) any of its books or other records; and permit, and cause each other Loan Party and its Subsidiaries to permit, the Administrative Agent and its representatives to inspect the Inventory and other tangible assets of the Loan Parties and

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their Subsidiaries, to perform appraisals of the equipment of the Loan Parties and their Subsidiaries, and to inspect, audit, check and make copies of and extracts from the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to Inventory, Accounts and any other collateral. All such inspections or audits by the Administrative Agent shall be at the Borrower’s expense; provided that following the Closing Date and so long as no Event of Default has occurred and is continuing, the Borrower shall only be required to reimburse the Administrative Agent for the cost of (1) two inspections in any Fiscal Year and (ii) one appraisal in any Fiscal Year.

6.04         Maintenance of Property; Insurance.

(a)          Keep, and cause each other Loan Party and its Subsidiaries to keep, all property useful and necessary in the business of the Loan Parties and their Subsidiaries in good working order and condition, ordinary wear and tear excepted.

(b)         Maintain, and cause each other Loan Party and its Subsidiaries to maintain, with responsible insurance companies, such insurance coverage as may be required by any law or governmental regulation or court decree or order applicable to it and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated, and, upon request of the Administrative Agent, furnish to the Administrative Agent a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Loan Parties and their Subsidiaries. The Borrower shall cause each issuer of an insurance policy to provide the Administrative Agent with an endorsement (i) showing the Collateral Agent as loss payee with respect to each policy of property or casualty insurance and naming the Collateral Agent as an additional insured with respect to each policy of liability insurance, (ii) providing that 30 days’ notice will be given to the Collateral Agent prior to any cancellation of, material reduction or change in coverage provided by or other material modification to such policy and (iii) reasonably acceptable in all other respects to the Administrative Agent. Each Loan Party shall execute and deliver to the Collateral Agent a collateral assignment, in form and substance satisfactory to the Administrative Agent, of each business interruption insurance policy maintained by such Loan Party.

(c)          Unless the Borrower provides the Administrative Agent with evidence of the insurance coverage required by this agreement, the Administrative Agent may, following written notice to the Borrower, purchase insurance at the Borrower’s expense to protect the Collateral Agent’s and the Lenders’ interests in the Collateral. This insurance may, but need not, protect any Loan Party’s interests. The coverage that the Administrative Agent purchases may not pay any claim that is made against any Loan Party in connection with the Collateral. The Borrower may later cancel any insurance purchased by the Administrative Agent, but only after providing the Administrative Agent with evidence that the company has obtained insurance as required by this Agreement. If the Administrative Agent purchases insurance for the Collateral, the Borrower will be responsible for the costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be

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added to the principal amount of the Loans owing hereunder. The costs of the insurance may be more than the cost of the insurance the Loan Parties may be able to obtain on their own.

6.05         Compliance with Laws; Payment of Taxes and Liabilities.

(i) Comply, and cause each other Loan Party and its Subsidiaries to comply, in all material respects with all applicable Laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where failure to comply could not reasonably be expected to have a Material Adverse Effect, (ii) without limiting clause (a)(i) above, ensure, and cause each other Loan Party and its Subsidiaries to ensure, that no person who owns a controlling interest in or otherwise controls a Loan Party or its Subsidiaries is or shall be (A) listed on the Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets Control (“OFAC”), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (B) a person designated under Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders, (iii) without limiting clause (a)(i) above, comply, and cause each other Loan Party and its Subsidiaries to comply, with all applicable Bank Secrecy Act (“BSA”) and anti-money laundering laws and regulations, and (iv) pay, and cause each other Loan Party and its Subsidiaries to pay, prior to delinquency, all taxes and other governmental charges against it or any collateral, as well as claims of any kind which, if unpaid, could become a Lien on any of its property; provided that the foregoing shall not require any Loan Party or its Subsidiaries to pay any such tax or charge so long as it shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves with respect thereto in accordance with GAAP and, in the case of a claim which could become a Lien on any collateral, such contest proceedings shall stay the foreclosure of such Lien or the sale of any portion of the collateral to satisfy such claim.

6.06         Maintenance of Existence, etc.  Maintain and preserve, and (subject to Section 7.05 or 7.06) cause each other Loan Party and its Subsidiaries to maintain and preserve, (a) its existence and good standing in the jurisdiction of its organization and (b) its qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (other than such jurisdictions in which the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect).

6.07         Use of Proceeds.  Use the proceeds of the Loans, and the Letters of Credit, solely to finance the Related Transactions, to refinance certain existing Debt of the Loan Parties and their Subsidiaries (including Debt under the Existing Credit Agreement), for working capital purposes, for Capital Expenditures and for other general business purposes; and not use or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of “purchasing or carrying” any Margin Stock.

6.08         Employee Benefit Plans.

(a)           Maintain, and cause each other member of the Controlled Group to maintain, each Pension Plan in compliance with all applicable requirements of law and

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regulations except where the failure to maintain could not reasonably be expected to have a Material Adverse Effect;

(b)         Make, and cause each other member of the Controlled Group to make, on a timely basis, all required contributions to any Multiemployer Pension Plan; and

(c)          Not, and not permit any other member of the Controlled Group to (i) seek a waiver of the minimum funding standards of ERISA, (ii) terminate or withdraw from any Pension Plan or Multiemployer Pension Plan or (iii) take any other action with respect to any Pension Plan that would reasonably be expected to entitle the PBGC to terminate, impose liability in respect of, or cause a trustee to be appointed to administer, any Pension Plan, unless the actions or events described in clauses (i), (ii) and (iii) individually or in the aggregate would not have a Material Adverse Effect.

6.09         Environmental Matters.  If any release or threatened release or other disposal of Hazardous Substances shall occur or shall have occurred on any real property or any other assets of any Loan Party or its Subsidiaries, the Borrower shall, or shall cause the applicable Loan Party or applicable Subsidiary to, cause the prompt containment and removal of such Hazardous Substances and the remediation of such real property or other assets as necessary to comply with all Environmental Laws and to preserve the value of such real property or other assets except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, the Borrower shall, and shall cause each other Loan Party and each Subsidiary to, comply with any Federal or state judicial or administrative order requiring the performance at any real property of any Loan Party or any Subsidiary of activities in response to the release or threatened release of a Hazardous Substance, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. To the extent that the transportation of Hazardous Substances is permitted by this Agreement, the Borrower shall, and shall cause its Subsidiaries to, dispose of such Hazardous Substances, or of any other wastes, only at licensed disposal facilities operating in material compliance with Environmental Laws.

6.10         Further Assurances.

(a)          (i) notify the Administrative Agent promptly upon the formation or acquisition of any direct or indirect Domestic Subsidiary or Foreign Subsidiary and (ii) take, and cause each other Loan Party to take, such actions as are necessary or as the Administrative Agent or the Required Lenders may reasonably request from time to time to ensure that the Obligations of each Loan Party under the Loan Documents are secured by substantially all of the assets of the Parent, the Borrower and each Domestic Subsidiary of the Parent (as well as all Capital Securities of the Borrower and each direct or indirect Domestic Subsidiary and 65% of all Capital Securities of each direct Foreign Subsidiary) and guaranteed by each Domestic Subsidiary of the Borrower (including, upon the acquisition or creation thereof, Cogen JV and any other Domestic Subsidiary acquired or created after the Closing Date), in each case as the Administrative Agent may determine, including (a) the execution and delivery of guaranties, security agreements, pledge agreements, mortgages, deeds of trust, financing statements and other documents,

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and the filing or recording of any of the foregoing and (b) the delivery of certificated securities and other Collateral with respect to which perfection is obtained by possession.

(b)         Cause all collections from Accounts to be either (i) subject to a Deposit Account Control Agreement or (ii) directed to a bank account maintained with the Administrative Agent and cause each financial institution (other than the Administrative Agent) at which the Parent, the Borrower or any Subsidiary of the Borrower maintains any deposit account or other similar account (other than petty cash accounts or payroll accounts as long as such payroll accounts are maintained as zero balance accounts) to deliver to the Administrative Agent a writing, in form and substance satisfactory to the Administrative Agent, (A) acknowledging and consenting to the security interest of the Collateral Agent in such account and all cash, checks, drafts and other instruments or writings for the payment of money from time to time therein, (B) confirming such financial institution’s agreement to follow the instructions of the Collateral Agent with respect to all such cash, checks, drafts and other instruments or writings for the payment of money following receipt from the Collateral Agent of notice of the occurrence of any Default or Event of Default and (C) waiving all rights of setoff and banker’s lien on all items held in any such account (other than with respect to payment of fees and expenses for account services).

6.11         Deposit Accounts.  Unless the Administrative Agent otherwise consents in writing, in order to facilitate the Administrative Agent’s and the Lenders’ maintenance and monitoring of their security interests in the collateral, not maintain any principal deposit accounts with any bank or financial institution other than the Administrative Agent unless such deposit account is subject to a Deposit Account Control Agreement.

6.12         Compliance with Terms of Leaseholds.  Make all payments and otherwise perform all obligations in respect of all leases of real property to which any Loan Party or any Subsidiary is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

6.13         Material Contracts.  Perform and observe all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect (except in connection with the termination or replacement of such Material Contracts in the ordinary course of business), enforce each such Material Contract in accordance with its terms, except, in any case, where the failure to do so, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

6.14         Kraft Acquisition Documents.  With respect to each of the Kraft Acquisition Documents, (i) all representations made by any Loan Party or its Subsidiaries in the Kraft Acquisition Documents are complete, true and correct in all material respects as of the Closing Date; (ii) the execution and delivery by any Loan Party or its Subsidiaries of the Kraft

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Acquisition Documents and the consummation of the transactions therein contemplated or the compliance with the provisions thereof will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Loan Party or its Subsidiaries or any of the provisions of the organizational documents of any Loan Party or its Subsidiaries or any of the provisions of any indenture, agreement, document, instrument or undertaking to which any Loan Party or its Subsidiaries is a party or subject, or by which any Loan Party or its Subsidiaries or any property of any Loan Party or its Subsidiaries is bound, or conflict with or constitute a default thereunder or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, agreement, document, instrument or undertaking, except to the extent such violation, conflict or default would not reasonably be likely to result in a Material Adverse Effect; (iii) no material order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental, regulatory, administrative or public body or authority, or any subdivision thereof, or any other Person is required to authorize, or is required in connection with, the execution, delivery or performance of, or the legality, validity, binding effect or enforceability of, any of the Kraft Acquisition Documents except those which have already been obtained or given; and (iv) upon the effectiveness of this Agreement, all conditions to effectiveness of the Mead Purchase Agreement have been satisfied.

6.15         Amendments to Private Placement Notes or Private Placement Note Purchase Agreement.  If either the Private Placement Notes or the Private Placement Note Purchase Agreement is amended after the Commitment Effective Date to change (in a manner that is more restrictive to the Loan Parties) any financial covenant, negative covenant or event of default as it exists on the Commitment Effective Date, or any such section or other provision of such document is amended to include any additional financial covenants, negative covenants or events of default that are not set forth in (or that are more restrictive than those set forth in) this Agreement, then the Loan Parties shall offer to amend this Agreement and/or the other Loan Documents, as applicable (and, upon the request of the Administrative Agent or the Required Lenders, the Loan Parties shall execute appropriate amendment documents) to reflect corresponding changes.

ARTICLE VII

NEGATIVE COVENANTS

Until the expiration or termination of the Commitments and thereafter until all Obligations hereunder and under the other Loan Documents are paid in full and all Letters of Credit have been terminated or Cash Collateralized, each Loan Party agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will:

7.01         Debt.  Not, and not permit any other Loan Party or its Subsidiaries to, create, incur, assume or suffer to exist any Debt, except:

(a)          Obligations under this Agreement and the other Loan Documents;

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(b)         Debt secured by Liens permitted by Section 7.02(d), and extensions, renewals and refinancings thereof; provided that the aggregate amount of all such Debt at any time outstanding shall not exceed $5,000,000;

(c)          Debt (other than the Intercompany Subordinated Debt) of the Borrower to any Guarantor or of any Guarantor to the Borrower; provided that to the extent requested in writing by the Administrative Agent such Debt shall be evidenced by a demand note in form and substance reasonably satisfactory to the Administrative Agent and pledged and delivered to the Collateral Agent pursuant to the Collateral Documents as additional collateral security for the Obligations, and the obligations under such demand note shall be subordinated to the Obligations of the Borrower hereunder in a manner reasonably satisfactory to the Administrative Agent;

(d)         the Earn-Out Obligations;

(e)          Hedging Obligations incurred for bona fide hedging purposes and not for speculation, and Debt in respect of Cash Management Agreements;

(f)          Debt outstanding on the date hereof and listed on Schedule 7.01 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Debt is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and (ii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Debt, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Debt being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Debt does not exceed the then applicable market interest rate;

(g)         the Debt to be Repaid (so long as such Debt is repaid on the Commitment Effective Date with the proceeds of the initial Loans hereunder);

(h)         Contingent Liabilities arising with respect to indemnification obligations in favor of (i) sellers in connection with acquisitions or (ii) purchasers in connection with dispositions, in each case permitted under Section 7.05;

(i)           Intercompany Subordinated Debt in an aggregate outstanding principal amount not at any time exceeding $87,000,000 (plus accrued paid-in-kind interest);

(j)           Contingent Liabilities in respect of guarantees of any Loan Party in respect of Debt or other obligations otherwise permitted hereunder and to the extent such

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Debt is required to be subordinated such Contingent Liabilities will be equally subordinated;

(k)          subject to the terms of the Intercreditor Agreement (to the extent applicable) and so long as (i) the Intercreditor Agreement has been fully executed and delivered and is acceptable in form and substance to the Administrative Agent and (ii) the Term B-2 Loan (if it has been funded prior to the issuance of the Private Placement Notes) is repaid on a Dollar for Dollar basis in an amount equal to the aggregate principal amount the Private Placement Notes, Debt pursuant to the Private Placement Notes and Private Placement Note Purchase Agreement in an aggregate outstanding principal amount not at any time exceeding $40,000,000 and any refinancings, refundings, renewals or extensions thereof to the extent permitted under the Intercreditor Agreement (to the extent applicable);

(l)           unsecured Debt and Debt secured by Liens permitted under Section 7.02(h), in addition to the Debt listed above, collectively, in an aggregate outstanding principal amount not at any time exceeding $20,000,000 so long as (A) no Event of Default or Unmatured Default has occurred and is continuing on the date of any such Debt is incurred or would result therefrom, and (B) after giving effect to such Debt, Borrower is in compliance on a pro forma basis with the financial covenants set forth in Section 7.14 as of the last day of the most recent Fiscal Quarter for which a Compliance Certificate has been delivered; and

(m)         other unsecured Debt, in addition to the Debt listed above, in an aggregate outstanding principal amount not at any time exceeding $30,000,000 so long as (a) such Debt is subordinated to the Obligations, and pursuant to documentation, on terms satisfactory to the Administrative Agent, (B) no Event of Default or Unmatured Default has occurred and is continuing on the date of any such Debt is incurred or would result therefrom, and (C) after giving effect to such Debt, Borrower is in compliance on a pro forma basis with the financial covenants set forth in Section 7.14 as of the last day of the most recent Fiscal Quarter for which a Compliance Certificate has been delivered.

7.02         Liens.  Not, and not permit any other Loan Party or its Subsidiaries to create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except:

(a)          Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves;

(b)         Liens arising in the ordinary course of business (such as (i) Liens of landlords, carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (ii) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in

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good faith by appropriate proceedings and not involving any advances or borrowed money or the deferred purchase price of property or services and, in each case, for which it maintains adequate reserves;

(c)          Liens described on Schedule 7.02 as of the Closing Date (or, if the Commitment Effective Date has occurred or is occurring simultaneously, the Commitment Effective Date);

(d)         subject to the limitation set forth in Section 7.01(b), (i) Liens arising in connection with Capital Leases (and attaching only to the property being leased), (ii) Liens existing on property at the time of the acquisition thereof by any Loan Party (and not created in contemplation of such acquisition) and (iii) Liens that constitute purchase money security interests on any property securing debt incurred for the purpose of financing all or any part of the cost of acquiring such property, provided that any such Lien attaches to such property within 60 days of the acquisition thereof and attaches solely to the property so acquired;

(e)          attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding $5,000,000 arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings;

(f)          easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of any Loan Party;

(g)         Liens arising under the Loan Documents, which also may secure, subject to the terms of the Intercreditor Agreement (to the extent applicable), the Private Placement Notes to the extent permitted under Section 7.01(k) and related obligations;

(h)         Liens on the property of a Person existing at the time such Person becomes a Subsidiary of a Loan Party in a transaction permitted hereunder; provided, however, that any such Lien may not extend to any other property of any Loan Party or any other Subsidiary that is not a Subsidiary of such Person; provided, further, that any such Lien was not created in anticipation of or in connection with the transaction or series of transactions pursuant to which such Person became a Subsidiary of a Loan Party; and

(i)           the replacement, extension or renewal of any Lien permitted by clause (c) above upon or in the same property subject thereto arising out of the extension, renewal or replacement of the Debt secured thereby (without increase in the amount thereof).

7.03         Operating Leases.  Not permit the aggregate amount of all rental payments under Operating Leases made (or scheduled to be made) by the Loan Parties and their Subsidiaries (on a consolidated basis) to exceed $5,000,000 in any Fiscal Year.

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7.04         Restricted Payments.  Not, and not permit any other Loan Party or its Subsidiaries to make any distribution to any holders of its Capital Securities, purchase or redeem any of its Capital Securities, pay any management fees or similar fees or expenses to any of its equityholders or any Affiliate thereof, make any redemption, prepayment, defeasance, repurchase or any other payment in respect of any Intercompany Subordinated Debt or set aside funds for any of the foregoing. Notwithstanding the foregoing:

(a)          the Borrower may reimburse Parent for out-of-pocket costs and expenses incurred by Parent on behalf of or for the benefit of the Borrower, and for fees charged by Parent to the Borrower, in an aggregate amount not to exceed $4,000,000 during any Fiscal Year.

(b)         subject to the Intercompany Subordination Agreement, the Borrower may make payments in kind of scheduled interest on the Intercompany Subordinated Note at the non-default rate of interest set forth in the Intercompany Subordinated Note;

(c)          any Subsidiary may pay dividends or make other distributions to the Borrower or to a domestic Wholly-Owned Subsidiary;

(d)         so long as the Borrower files a consolidated income tax return with Parent, the Borrower may make distributions to Parent to permit Parent to pay federal and state income taxes then due and owing; provided that the amount of such distribution shall not be greater, nor the receipt by the Borrower of tax benefits less, than they would have been had the Borrower not filed a consolidated return with Parent;

(e)          Borrower may make, and Parent may distribute to its shareholders, the Permitted Parent Dividends and other cash distributions to Parent from time to time so long as (A) no Event of Default or Unmatured Default has occurred and is continuing on the date of any such distribution or would result therefrom, (B) after giving effect to any such distribution (and any Debt incurred to fund such distribution), Borrower is in compliance on a pro forma basis with the financial covenants set forth in Section 7.14 as of the last day of the most recent Fiscal Quarter for which a Compliance Certificate has been delivered, and (C) after giving effect to any such distribution, the aggregate amount of all such distributions made following the Commitment Effective Date shall not exceed Cumulative Available Excess Cash Flow as of the date of such distribution; and

(f)          the Parent may satisfy its obligations in connection with the Warrants and the Underwriting Agreement.

7.05         Mergers, Consolidations, Acquisitions, Sales.  Not, and not permit any other Loan Party or its Subsidiaries to:

(a)          be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or any Capital Securities of any class of, or any partnership or joint venture interest in, any other Person other than in connection with a Permitted Acquisition,

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(b)         sell, transfer, convey or lease all or any substantial part of its assets or Capital Securities (including the sale of Capital Securities of any Subsidiary) except for the disposition of assets no longer useful or used in connection with such Loan Party’s business, sales of inventory in the ordinary course of business and obsolete or worn-out equipment, or

(c)          sell or assign with or without recourse any receivables, except for (i) any such merger, consolidation, sale, transfer, conveyance, lease or assignment of or by any Wholly-Owned Subsidiary into the Borrower or into any other domestic Wholly-Owned Subsidiary; (ii) any such purchase or other acquisition by the Borrower or any domestic Wholly-Owned Subsidiary of the assets or Capital Securities of any Wholly-Owned Subsidiary; (iii) sales and dispositions of assets (including the Capital Securities of Subsidiaries) for at least fair market value (as determined by the Board of Directors of the Borrower) so long as the net book value of all assets sold or otherwise disposed of in any Fiscal Year does not exceed 10% of the net book value of the consolidated assets of the Loan Parties as of the last day of the preceding Fiscal Year.

7.06         Modification of Organization Documents.  Not permit any Organizational Documents of any Loan Party or its Subsidiaries to be amended or modified in any way which could reasonably be expected to adversely affect the interests of the Lenders; and not change, or allow any Loan Party to change, its state of formation or its organizational form upon less than 30 days’ prior notice to the Administrative Agent.

7.07         Transactions with Affiliates.  Not, and not permit any other Loan Party or its Subsidiaries to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates (other than the Loan Parties) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates; provided, that the transactions contemplated under the Intercompany Subordinated Note shall not be deemed violative of this Section 7.07.

7.08         Unconditional Purchase Obligations.  Except as set forth on Schedule 7.08 hereto, not, and not permit any other Loan Party or its Subsidiaries to, enter into or be a party to any contract for the purchase of materials, supplies or other property or services if such contract requires that payment be made by it regardless of whether delivery is ever made of such materials, supplies or other property or services.

7.09         Inconsistent Agreements.  Not, and not permit any other Loan Party or its Subsidiaries to, enter into any agreement containing any provision which would (a) be violated or breached by any borrowing by the Borrower hereunder or by the performance by any Loan Party of any of its Obligations hereunder or under any other Loan Document, (b) prohibit any Loan Party from granting to the Administrative Agent and the Lenders, a Lien on any of its assets or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make other distributions to the Borrower or any other Subsidiary, or pay any Debt owed to the Borrower or any other Subsidiary, (ii) make loans or advances to any Loan Party or (iii) transfer any of its assets or properties to any Loan Party,

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other than (A) customary restrictions and conditions contained in agreements relating to the sale of all or a substantial part of the assets of any Subsidiary pending such sale, provided that such restrictions and conditions apply only to the Subsidiary to be sold and such sale is permitted hereunder (B) restrictions or conditions imposed by any agreement relating to purchase money Debt, Capital Leases and other secured Debt permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Debt and (C) customary provisions in leases and other contracts restricting the assignment thereof.

7.10         Business Activities; Issuance of Equity.  Not, and not permit any other Loan Party or its Subsidiaries to, engage in any line of business other than the businesses engaged in on the date hereof and businesses reasonably related thereto. Not, and not permit any other Loan Party (other than the Parent) to, issue any Capital Securities other than any issuance by a Subsidiary to the Borrower or another Subsidiary in accordance with Section 7.04.

7.11         Investments.  Not, and not permit any other Loan Party or its Subsidiaries to, make or permit to exist any Investment in any other Person, except the following:

(a)          contributions by the Borrower to the capital of any Wholly-Owned Subsidiary, or by any Subsidiary to the capital of any other domestic Wholly-Owned Subsidiary, so long as the recipient of any such capital contribution has guaranteed the Obligations and such guaranty is secured by a pledge of all of its Capital Securities and substantially all of its real and personal property, in each case in accordance with Section 6.10;

(b)         Investments constituting Debt permitted by Section 7.01;

(c)          Contingent Liabilities constituting Debt permitted by Section 7.01 or Liens permitted by Section 7.02;

(d)         Cash Equivalent Investments;

(e)          bank deposits in the ordinary course of business and in connection with Cash Management Agreements; provided that any such deposits held in accounts which are maintained with any bank other than the Administrative Agent shall (A) be subject to a Deposit Account Control Agreement or other similar arrangement satisfactory to the Administrative Agent or (B) not at any time exceed $150,000;

(f)          Investments in securities of Account Debtors received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors;

(g)         Investments in Foreign Subsidiaries in an aggregate amount not to exceed $500,000 at any one time outstanding; and

(h)         Investments listed on Schedule 7.11 as of the Commitment Effective Date;

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provided that (x) any Investment which when made complies with the requirements of the definition of the term “Cash Equivalent Investment” may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (y) no Investment otherwise permitted by clause (b) or (c) shall be permitted to be made if, immediately before or after giving effect thereto, any Default or Event of Default exists.

7.12         Restriction of Amendments to Certain Documents.  Not amend or otherwise modify, or waive any rights under, the Related Agreements if, in any case, such amendment, modification or waiver could be adverse to the interests of the Lenders. Without limiting the generality of the foregoing, the Borrower shall not amend the International Paper Purchase Agreement in any manner which would accelerate the payment of the Earn-Out Obligations and the Borrower shall not prepay the Earn-Out Obligations.

7.13         Accounting Changes; Fiscal Year.  Not make any change in (a) accounting policies or reporting practices, except as permitted  by GAAP, or (b) Fiscal Year.

7.14         Financial Covenants.

(a)          Total Leverage Ratio.  Not permit the Total Leverage Ratio as of the end of any Fiscal Quarter of the Parent set forth below to be greater than the ratio corresponding to such Fiscal Quarter:

Calendar Year	March 31	June 30	September 30	December 31
2008	N/A	4.00:1.00	4.00:1.00	3.75:1.00
2009	3.50:1.00	3.50:1.00	3.50:1.00	3.00:1.00
Thereafter	3.00:1.00	3.00:1.00	3.00:1.00	3.00:1.00

(b)         Fixed Charge Coverage Ratio.  Not permit the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter of the Parent to be less than (i) from the Closing Date to and including the Fiscal Quarter ending September 30, 2011, 1.10:1.00 and (ii) commencing with the Fiscal Quarter ending December 31, 2011 and thereafter, 1.15:1.00.

7.15         Prepayments, Etc. of Debt.  Not prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except (a) the prepayment of the Credit Extensions in accordance with the terms of this Agreement, (b) regularly scheduled or required repayments or redemptions of Debt set forth in Schedule 7.01 and refinancings and refundings of such Debt in compliance with Section 7.01(c) and (c) with respect to the Private Placement Notes, (i) scheduled principal amortization payments, (ii) mandatory prepayments and (iii) so long as no Default or Event of Default has occurred or is continuing, optional prepayments, in each case, in accordance with the terms of this Agreement and the Intercreditor Agreement (to the extent applicable).

7.16         Amendment, Etc. of Debt.  Not amend, modify or change in any manner any term or condition of (a) any Debt set forth in Schedule 7.01, except for (i) any refinancing, refunding, renewal or extension thereof permitted by Section 7.01(c), (ii) in connection with Contingent

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Liabilities arising with respect to indemnification obligations, any modification or amendment that does not increase the amount or accelerate the time of payment of any such Debt and (iii) any other amendment or modification if,  taken as a whole, such amendment or modification would not (w) be adverse in any material respect to the Loan Parties, (x) shorten the final maturity or average life to maturity, (y) require any payment to be made sooner than originally scheduled or (z) increase the interest rate applicable thereto or (b) the Private Placement Notes or the Private Placement Note Purchase Agreement, except to the extent permitted under the Intercreditor Agreement (to the extent applicable) and in accordance with Section 6.15 hereof.

7.17         Use of Proceeds.  Not use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

7.18         Holding Company.  In the case of the Parent, not engage in any business or activity other than (a) the ownership of all outstanding Capital Securities of the Borrower, (b) maintaining its corporate existence, (c) formation and ownership of direct or indirect Subsidiaries, (d) the issuance of Equity Interests (subject to compliance with the applicable terms of this Agreement), (e) participating in tax, accounting and other administrative activities as the parent of the consolidated group of companies, including the Loan Parties (including execution and delivery of contracts and agreements in the ordinary course of business in connection therewith), (f) the execution and delivery of the Loan Documents to which it is a party and the performance of its obligations thereunder, (g) fulfilling its obligations as an issuer of publicly traded securities and an entity subject to (i) regulation by the SEC and (ii) applicable securities laws and NASDAQ rules, (h) acting as the lender under the Intercompany Subordinated Note, (i) the performance of its obligations under the applicable contracts set forth on Schedule 7.18, (j) the performance of its obligations under the Warrants and the Underwriting Agreement, (k) guarantees of Loan Party obligations in the ordinary course of business and (l) activities incidental to the businesses or activities described in clauses (a) through (k) of this Section.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

8.01         Events of Default.  Any of the following shall constitute an Event of Default:

(a)          Non-Payment of the Loans, etc.  Default in the payment when due of the principal of any Loan; or default, and continuance thereof for three days, in the payment when due of any interest, fee, reimbursement obligation with respect to any Letter of Credit or other amount payable by the Borrower hereunder or under any other Loan Document; or

(b)         Non-Payment of Other Debt.  Except for Contingent Liabilities arising with respect to indemnification obligations of any Loan Party or its Subsidiaries being

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contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary maintains adequate reserves, any default shall occur under the terms applicable to (i) Debt under the Private Placement Notes and the Private Placement Note Purchase Agreement or (ii) any other Debt of any Loan Party or its Subsidiaries in an aggregate amount (for all such Debt so affected and including undrawn committed or available amounts and amounts owing to all creditors under any combined or syndicated credit arrangement) exceeding $5,000,000 and, in either case, such default shall (a) consist of the failure to pay such Debt when due, whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable (or require any Loan Party or its Subsidiaries to purchase or redeem such Debt or post cash collateral in respect thereof) prior to its expressed maturity; or

(c)          Other Material Obligations.  Default in the payment when due, or in the performance or observance of, any material obligation of, or condition agreed to by, any Loan Party or its Subsidiaries with respect to any material purchase or lease of goods or services where such default, singly or in the aggregate with all other such defaults, could reasonably be expected to have a Material Adverse Effect; or

(d)         Bankruptcy, Insolvency, etc.  Any Loan Party or its Subsidiaries becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or any Loan Party or its Subsidiaries applies for, consents to, or the Parent acquiesces in the appointment of a trustee, receiver or other custodian for such Person or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for any Loan Party or its Subsidiaries or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect of any Loan Party or its Subsidiaries, and if such case or proceeding is not commenced by such Person, it is consented to or acquiesced in by such Person, or remains for 60 days undismissed; or any Loan Party or its Subsidiaries takes any action to authorize, or in furtherance of, any of the foregoing; or

(e)          Non-Compliance with Loan Documents.  (i) Failure by any Loan Party to comply with or to perform any covenant set forth in Sections 6.03, 6.07 or 6.05 or Article VII; (ii) failure by any Loan Party to comply with or to perform any covenant set forth in Sections 6.01(a), 6.01(b), 6.02(a), 6.02(c)(i), 6.02(d) or 6.02(e) and such default shall continue unremedied for a period of at least 5 Business Days; or (iii) failure by any Loan Party to comply with or to perform any other provision of this Agreement or any other Loan Document (and not constituting an Event of Default under any other provision of this Section 8.01) and continuance of such failure described in this clause (iii) for 30 days after the earlier of notice to the Administrative Agent or knowledge of such failure by a Responsible Officer of the Borrower; or

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(f)          Representations; Warranties.  Any representation or warranty made by any Loan Party herein or in any other Loan Document is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by any Loan Party to the Administrative Agent or any Lender in connection herewith is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or

(g)         Pension Plans.  (i) Any Person institutes steps to terminate a Pension Plan if as a result of such termination the Borrower or any member of the Controlled Group could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $5,000,000; (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) the Unfunded Liability exceeds twenty percent of the Total Plan Liability, or (iv) there shall occur any withdrawal or partial withdrawal from a Multiemployer Pension Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Pension Plans as a result of such withdrawal (including any outstanding withdrawal liability that the Borrower or any member of the Controlled Group have incurred on the date of such withdrawal) exceeds $5,000,000; or

(h)         Judgments.  One or more judgments or orders for the payment of money (not paid or fully covered by insurance maintained in accordance with the requirements of this Agreement and as to which the relevant insurance company has acknowledged coverage) aggregating in excess of $5,000,000 shall be rendered against any or all Loan Parties and their Subsidiaries and either (a) enforcement proceedings shall have been commenced by any creditor upon any such judgments or orders or (b) there shall be any period of thirty (30) consecutive days during which a stay of enforcement of any such judgments or orders, by reason of a pending appeal, bond or otherwise, shall not be in effect; or

(i)           Invalidity of Loan Documents.  Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or the Collateral Agent shall not have or shall cease to have a valid and perfected first priority Lien in any material part of the Collateral purported to be covered by the Collateral Documents; or

(j)           Invalidity of Subordination Provisions, etc.  Any subordination provision in the Intercompany Subordination Agreement shall cease to be in full force and effect, or any Loan Party shall contest in any manner the validity, binding nature or enforceability of any such provision; or

(k)          Change of Control.  A Change of Control shall occur.

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8.02         Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, (i) in connection with clause (a) below following the Commitment Effective Date, the Required Revolving Lenders and (ii) otherwise, the Required Lenders, take any or all of the following actions:

(a)          declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

(b)         declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

(c)          require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

(d)         exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies available to it, the Lenders and the L/C Issuer under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

8.03         Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of

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counsel to the respective Lenders and the L/C Issuer and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

Third, to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans and L/C Borrowings and fees, premiums and scheduled periodic payments, and any interest accrued thereon, due under any Swap Contract between any Loan Party and any Lender, or any Affiliate of a Lender, to the extent such Swap Contract is permitted by Section 7.01(e), ratably among the Lenders (and, in the case of such Swap Contracts, Hedge Banks) and the L/C Issuer in proportion to the respective amounts described in this clause Third held by them;

Fourth, to (a) payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, (b) payment of breakage, termination or other payments, and any interest accrued thereon, due under any Swap Contract between any Loan Party and any Lender, or any Hedge Bank, to the extent such Swap Contract is permitted by Section 8.03(d), (c) payments of amounts due under any Cash Management Agreement between any Loan Party and any Lender, or any Hedge Bank and (d) Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit, ratably among the Lenders (and, in the case of such Swap Contracts, Hedge Banks) and the L/C Issuer in proportion to the respective amounts described in this clause Fourth held by them; and

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fourth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

ARTICLE IX

ADMINISTRATIVE AGENT

9.01         Appointment and Authority.

(a)          Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are solely for the benefit of the

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Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

(b)         The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders (in its capacities as a Lender, Swing Line Lender (if applicable), potential Hedge Bank and potential Cash Management Bank) and the L/C Issuer hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article IX and Article XI (including Section 11.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

9.02         Rights as a Lender.  The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Loan Party or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

9.03         Exculpatory Provisions.  The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, the Administrative Agent:

(a)          shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

(b)         shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

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(c)          shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Loan Party or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the L/C Issuer.

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Collateral Documents, (v) the value or the sufficiency of any Collateral, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

9.04         Reliance by Administrative Agent.  The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  The Administrative Agent may consult with legal counsel (who may be counsel for the Loan Parties), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

9.05         Delegation of Duties.  The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent.  The Administrative

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Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

9.06         Resignation of Administrative Agent.  The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (a) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Secured Lender Parties or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (b) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section).  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 11.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, (i) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer and Swing Line Lender, (ii) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (iii) the successor L/C Issuer shall issue letters of credit in substitution for the

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Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.

9.07         Non-Reliance on Administrative Agent and Other Lenders.  Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

9.08         No Other Duties, Etc.  Anything herein to the contrary notwithstanding, none of the Bookrunners or Arrangers listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C Issuer hereunder.

9.09         Administrative Agent May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

(a)          to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(i) and (j), 2.09 and 11.04) allowed in such judicial proceeding; and

(b)         to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances

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of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 11.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer or in any such proceeding.

9.10         Collateral and Guaranty Matters.  The Lenders and the L/C Issuer irrevocably authorize the Administrative Agent or the Collateral Agent, as applicable,

(a)          to release any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent, as applicable, under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the L/C Issuer shall have been made), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii)  if approved, authorized or ratified in writing in accordance with Section 11.01;

(b)         to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder; and

(c)          to subordinate any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent, as applicable, under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.02(i).

Upon request by the Administrative Agent or Collateral Agent, as applicable, at any time, the Required Lenders will confirm in writing the Administrative Agent’s or Collateral Agent’s, as applicable, authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10.  In each case as specified in this Section 9.10, the Administrative Agent or the Collateral Agent, as applicable, will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

9.11         Secured Cash Management Agreements and Secured Hedge Agreements.  No Cash Management Bank or Hedge Bank that obtains the benefits of Section 8.03, any Guaranty or any Collateral by virtue of the provisions hereof or any Collateral by virtue of the provisions hereof or of any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in

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respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents.  Notwithstanding any other provision of this Article IX to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements unless the Administrative Agent has received written notice of such Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.

9.12         Lenders’ Enforcement Rights.  Anything contained in any of the Loan Documents to the contrary notwithstanding, Borrower, Administrative Agent and each Secured Lender Party hereby agree that (i) no Secured Lender Party shall have any right individually to realize upon any of the Collateral or to enforce the Guaranty, it being understood and agreed that all powers, rights and remedies hereunder and under the Collateral Documents may be exercised solely by Administrative Agent or the Collateral Agent, as applicable, on behalf of the Secured Lender Parties in accordance with the terms hereof and thereof and (ii) in the event of a foreclosure by the Administrative Agent or the Collateral Agent, as applicable, on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or the Collateral Agent, as applicable, or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Administrative Agent or the Collateral Agent, as applicable, as agent for and representative of Secured Lender Parties (but not any Lender or Lenders in its or their respective individual capacities unless Required Lenders shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Administrative Agent or the Collateral Agent, as applicable, at such sale or other disposition.

ARTICLE X

GUARANTY

10.01       The Guaranty.  Each of the Guarantors hereby jointly and severally guarantees to each Lender, Hedge Bank, Cash Management Bank and the Administrative Agent as hereinafter provided, as primary obligor and not as surety, the prompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof.  The Guarantors hereby further agree that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal.

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Notwithstanding any provision to the contrary contained herein or in any other of the Loan Documents, Swap Contracts or Cash Management Agreements, the obligations of each Guarantor under this Agreement and the other Loan Documents shall not exceed an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under applicable Debtor Relief Laws.

10.02       Obligations Unconditional.  The obligations of the Guarantors under Section 10.01 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Loan Documents, Swap Contracts or Cash Management Agreements, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 10.02 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances.  Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor for amounts paid under this Article X until such time as the Obligations have been paid in full and the Commitments have expired or terminated.  Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder, which shall remain absolute and unconditional as described above:

(a)          at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived;

(b)         any of the acts mentioned in any of the provisions of any of the Loan Documents, any Swap Contract or Cash Management Agreement between any Loan Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Loan Documents, such Swap Contracts or such Cash Management Agreements shall be done or omitted;

(c)          the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Loan Documents, any Swap Contract or Cash Management Agreement between any Loan Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Loan Documents, such Swap Contracts or such Cash Management Agreements shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with;

(d)         any Lien granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Obligations shall fail to attach or be perfected; or

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(e)           any of the Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor).

With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Loan Documents, any Swap Contract or any Cash Management Agreement between any Loan Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Loan Documents, such Swap Contracts or such Cash Management Agreements, or against any other Person under any other guarantee of, or security for, any of the Obligations.

10.03       Reinstatement.  The obligations of the Guarantors under this Article X shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, the fees, charges and disbursements of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

10.04       Certain Additional Waivers.  Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Obligations, except through the exercise of rights of subrogation pursuant to Section 10.02 and through the exercise of rights of contribution pursuant to Section 10.06.

10.05       Remedies.  The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.02) for purposes of Section 10.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Obligations being deemed to have become automatically due and payable), the Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 10.01.  The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Collateral Documents and that the Lenders may exercise their remedies thereunder in accordance with the terms thereof.

10.06       Rights of Contribution.  The Guarantors agree among themselves that, in connection with payments made hereunder, each Guarantor shall have contribution rights against the other Guarantors as permitted under applicable law.  Such contribution rights shall be

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subordinate and subject in right of payment to the obligations of such Guarantors under the Loan Documents and no Guarantor shall exercise such rights of contribution until all Obligations have been paid in full and the Commitments have terminated.

10.07       Guarantee of Payment; Continuing Guarantee.  The guarantee in this Article X is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Obligations whenever arising.

ARTICLE XI

MISCELLANENOUS

11.01       Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

(a)           waive any condition set forth in Section 4.01, 4.02 (other than Section 4.02(b)(i)(A) or 4.02(b)(ii)), or, in the case of the initial Credit Extension, Section 4.03, without the written consent of each Lender;

(b)           extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

(c)           postpone any date fixed by this Agreement or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under such other Loan Document without the written consent of each Lender entitled to such payment;

(d)           reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the proviso to this Section 11.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender entitled to such amount; provided, however, that only the consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

(e)           change (i) Section 8.02 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender or (ii) Section

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2.06(c) in a manner that would alter the pro rata sharing of Commitment reductions without the consent of each Lender with a Revolving Credit Commitment or (iii) the order of application of any reduction in the Commitments or any prepayment of Loans among the Facilities from the application thereof set forth in the applicable provisions of Section 2.05(b) or 2.06(b), respectively, in any manner that materially and adversely affects the Lenders under a Facility without the written consent of (i) if such Facility is the Term A Loan, the Required Term A Loan Lenders, (ii) if such Facility is the Term B Loan, the Required Term B Loan Lenders and (iii)  if such Facility is the Revolving Credit Facility, the Required Revolving Lenders;

(f)            change (i) any provision of this Section 11.01 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder (other than the definitions specified in clause (ii) of this Section 11.01(f)), without the written consent of each Lender or (ii) the definition of “Required Revolving Lenders,” “Required Term A Loan Lenders” or “Required Term B Loan Lenders” without the written consent of each Lender under the applicable Facility;

(g)           release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;

(h)           release all or substantially all of the value of the Guaranty, without the written consent of each Lender, except to the extent the release of any Subsidiary from the Guaranty is permitted pursuant to Section 9.10 (in which case such release may be made by the Administrative Agent acting alone);

(i)            impose any greater restriction on the ability of any Lender under a given Facility to assign any of its rights or obligations hereunder without the written consent of (i) if such Facility is the Term A Loan, the Required Term A Loan Lenders, (ii) if such Facility is the Term B Loan, the Required Term B Loan Lenders and (ii) if such Facility is the Revolving Credit Facility, the Required Revolving Lenders; or

(j)            prior to the termination of the Revolving Credit Commitments, unless also signed by Lenders (other than Defaulting Lenders) holding in the aggregate at least a majority of the Revolving Credit Commitments, (i) waive any Default for purposes of Section 4.03(b), (ii) amend, change, waive, discharge or terminate Sections 4.03 or 8.01 in a manner adverse to such Lenders or (iii) amend, change, waive, discharge or terminate this Section 11.01(j);

and provided, further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent

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shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iv) the Fee Letter and the L/C Side Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

If any Lender does not consent to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender and that has been approved by the Required Lenders, the Borrower may replace such non-consenting Lender in accordance with Section 11.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).

Notwithstanding the foregoing, (A) any provision of this Agreement may be amended by an agreement in writing entered into by the Loan Parties and the Administrative Agent with the express consent of the Required Lenders (calculated after giving effect to the Commitment terminations and repayments that will result from the effectiveness of such amendment) and, if its rights or obligations are affected thereby, the L/C Issuer if (i) by the terms of such agreement the Revolving Credit Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement, and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Lenders under one or more tranches but not under any other tranche may be effected by an agreement or agreements in writing entered into by the Borrower and the requisite percentage in interest of the affected tranche or tranches of Lenders that would be required to consent thereto under this Section 11.01 if such tranche or tranches of Lenders were the only tranche or tranches of Lenders hereunder at the time.

For the avoidance of doubt and notwithstanding any provision to the contrary contained in this Section 11.01, this Agreement may be amended (or amended and restated) with the written consent of the Loan Parties and the Required Lenders (i) to increase the aggregate Revolving Credit Commitments of the Lenders, (ii) to add one or more additional borrowing tranches to this Agreement and to provide for the ratable sharing of the benefits of this Agreement and the other Loan Documents with the other then outstanding Obligations in respect of the extensions of credit from time to time outstanding under such additional borrowing tranche(s) and the accrued interest and fees in respect thereof and (iii) to include appropriately the lenders under such additional borrowing tranches in any determination of the Required Lenders and/or to provide consent rights to such lenders under subsections (ii), (ii) and/or (iv) of Section 11.01(a) corresponding to the consent rights of the other Lenders thereunder.

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11.02       Notices; Effectiveness; Electronic Communications.

(a)           Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i)            if to any Loan Party, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 11.02; and

(ii)           if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices delivered through electronic communications to the extent provided in subsection (b) below shall be effective as provided in such subsection (b).

(b)           Electronic Communications.  Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

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(c)           The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

(d)           Change of Address, Etc.  Each of the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.  Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.

(e)           Reliance by Administrative Agent, L/C Issuer and Lenders.  The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan

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Notices) purportedly given by or on behalf of any Loan Party even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Loan Parties shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of a Loan Party.  All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

11.03       No Waiver; Cumulative Remedies.  No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders and the L/C Issuer; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 11.08 (subject to the terms of Section 2.13), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders

11.04       Expenses; Indemnity; Damage Waiver.

(a)           Costs and Expenses.  The Loan Parties shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in

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connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent, any Lender or the L/C Issuer, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b)           Indemnification by the Loan Parties.  The Loan Parties shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents (including in respect of any matters addressed in Section 3.01), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Substances on or from any property owned or operated by a Loan Party or any of its Subsidiaries, or any Environmental Liability related in any way to a Loan Party or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a

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claim brought by any Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

(c)           Reimbursement by Lenders.  To the extent that the Loan Parties for any reason fail to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by them to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of the foregoing, but without affecting the payment obligation of the Loan Parties with respect thereto, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or L/C Issuer in connection with such capacity.  The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).

(d)           Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable law, no Loan Party shall assert, and each Loan Party hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(e)           Payments.  All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

(f)            Survival.  The agreements in this Section shall survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

11.05       Payments Set Aside.  To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative

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Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

11.06       Successors and Assigns.

(a)           Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 11.06(b), (ii) by way of participation in accordance with the provisions of Section 11.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)           Assignments by Lenders.  Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) and the Loans (including for purposes of this Section 11.06(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i)            Minimum Amounts.

(A)          in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment under any Facility and the Loans at the time owing to it under such Facility or in the case of an assignment

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to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B)in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000, in the case of any assignment in respect of the Revolving Credit Facility, or $1,000,000, in the case of any assignment in respect of a Term Loan, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;

(ii)Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not (A) apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans or (B) prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis;

(iii)Required Consents.  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A)the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

(B)the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (1) any Term Loan Commitment or Revolving Credit Commitment if such assignment is to a Person that is not a Lender with a Commitment in respect of the applicable Facility, an Affiliate of such Lender or an Approved Fund with respect to such Lender or (2) a Term

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Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund;

(C)the consent of the L/C Issuer (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding); and

(D)the consent of the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the Revolving Credit Facility.

(iv)Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment.  The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v)No Assignment to Borrower.  No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi)No Assignment to Natural Persons.  No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05 and 11.04 with respect to facts and circumstances occurring prior to the effective date of such assignment.  Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.06(d).

(c)Register.  The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of

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the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.  The Administrative Agent shall use commercially reasonable efforts to record as promptly as practicable each Assignment and Assumption received in accordance with the terms of this Section 11.06.

(d)Participations.  Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 11.01 that affects such Participant.  Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.06(b).  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.

(e)Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender.

(f)Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure

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obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(g)[Reserved].

(h)Resignation as L/C Issuer or Swing Line Lender after Assignment.  Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Revolving Credit Commitment and Revolving Credit Loans pursuant to Section 11.06(b), Bank of America may, (i) upon 30 days’ notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Borrower, resign as Swing Line Lender.  In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be.  If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).  Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

11.07Treatment of Certain Information; Confidentiality.  Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, trustees, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same

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as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

For purposes of this Section, “Information” means all information received from any Loan Party or any Subsidiary thereof relating to any Loan Party or any Subsidiary thereof or their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by any Loan Party or any Subsidiary thereof, provided that, in the case of information received from a Loan Party or any such Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.

11.08Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

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11.09Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

11.10Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

11.11Survival of Representations and Warranties.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

11.12Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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11.13Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender, or if any Lender does not consent to a proposed amendment, waiver, discharge or termination with respect to any Loan Document that requires the consent of each Lender and that has been approved by the Required Lenders, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(a)the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 11.06(b);

(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(c)in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

(d)such assignment does not conflict with applicable Laws.

(e)in the case of any such assignment resulting from a Lender’s failure to consent to a proposed amendment, waiver, discharge or termination with respect to any Loan Document, the applicable amendment, modification and/or waiver of this Agreement that the Borrower has requested shall become effective upon giving effect to such assignment (and any related assignments required to be effected in connection therewith in accordance with this Section 11.13).

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

11.14Governing Law; Jurisdiction; Etc.

(a)GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.

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(b)SUBMISSION TO JURISDICTION.  THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOISSITTING IN COOK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF ILLINOIS, AND ANY APPELLATE COURTFROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FORRECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOISSTATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  THE BORROWER AND EACH OTHER LOAN PARTYIRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW

11.15Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY

132

OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

11.16No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of the Loan Parties acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Arranger are arm’s-length commercial transactions between the Loan Parties and their respective Affiliates, on the one hand, and the Administrative Agent and the Arranger, on the other hand, (B) each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Loan Parties is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent and the Arranger, each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Loan Parties or any of their respective Affiliates, or any other Person and (B) neither the Administrative Agent nor the Arranger has any obligation to the Loan Parties or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent and the Arranger and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and neither the Administrative Agent nor the Arranger has any obligation to disclose any of such interests to the Loan Parties and their respective Affiliates.  To the fullest extent permitted by law, each of the Loan Parties hereby waives and releases any claims that it may have against the Administrative Agent and the Arranger with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

11.17Electronic Execution of Assignments and Certain Other Documents.  The words “execution,” “signed,” “signature” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

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11.18USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the Act.  The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

11.19Intercreditor Agreement.  Each Lender hereby agrees that the Administrative Agent, on behalf of the Lenders and Secured Lender Parties, may, and is hereby authorized to, enter into the Intercreditor Agreement, which shall provide, among other things, for the pro rata sharing among the Secured Lender Parties and the Private Placement Noteholders of any proceeds received from Collateral, in connection with certain mandatory prepayment events and/or from the Guaranty hereunder and any corresponding guarantee provided to the Private Placement Noteholders.  Once the Intercreditor Agreement is executed by the Administrative Agent, each Lender that is or becomes a party to this Agreement from time to time and each other Secured Lender Party shall be bound by the terms thereof.  Without limiting the foregoing, each Lender from time to time party to this Agreement agrees, if requested, to execute a counterpart signature page or joinder agreement to such Intercreditor Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

BORROWER:	KAPSTONE KRAFT PAPER CORPORATION,
	a Delaware corporation
	By:	/s/ Roger W. Stone
	Name:	Roger W. Stone
	Title:	CEO

GUARANTORS:	KAPSTONE PAPER AND PACKAGING
	CORPORATION, a Delaware corporation
	By:	/s/ Roger W. Stone
	Name:	Roger W. Stone
	Title:	CEO

KAPSTONE CHARLESTON KRAFT LLC,
a Delaware limited liability company
By:	/s/ Roger W. Stone
Name:	Roger W. Stone
Title:	CEO

135

BANK OF AMERICA, N.A.,
as Administrative Agent
By:	/s/ Suzanne M. Paul
Name:	Suzanne M. Paul
Title:	Vice President

136

BANK OF AMERICA, N.A.,
as L/C Issuer and Swing Line Lender
By:	/s/ David Bacon
Name:	David Bacon
Title:	Vice President

137

CoBank, ACB, as a Lender
By:	/s/ Michael Tousignant
Name:	Michael Tousignant
Title:	Vice President

138

Northwest Farm Credit Services, PCA
as a Lender
By:	/s/ Jim D. Allen
Name:	Jim D. Allen
Title:	Senior Vice President

139

Farm Credit Services of America, PCA,
as a Lender
By:	/s/ Steven L. Moore
Name:	Steven L. Moore
Title:	Vice President

140

AgFirst Farm Credit Bank,
as a Lender
By:	/s/ Matt Jeffords
Name:	Matt Jeffords
Title:	Assistant Vice President

141

THE PRIVATE BANK,
as a Lender
By:	/s/ Manas N. Athanikar
Name:	Manas N. Athanikar
Title:	Associate Managing Director

142

BARCLAYS BANK PLC,
as a Lender
By:	/s/ Ann E. Sutton
Name:	Ann E. Sutton
Title:	Associate Director

143

Fifth Third Bank
as a Lender
By:	/s/ Charles Smith
Name:	Charles Smith
Title:	Vice President

144

COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., “RABOBANK NEDERLAND”, NEW YORK BRANCH,
as a Lender
By:	/s/ Michael L. Laurie
Name:	Michael L. Laurie
Title:	Executive Director
By:	/s/ Brett Delfino
Name:	Brett Delfino
Title:	Executive Director

145

SUNTRUST BANK
as a Lender
By:	/s/ Brad Staples
Name:	Brad Staples
Title:	Managing Director

146

TD Bank, N.A.,
as a Lender
By:	/s/ Susanna C. Satten
Name:	Susanna C. Satten
Title:	Assistant Vice President

147

AgStar Financial Services, PCA,
as a Lender
By:	/s/ Donald G. Lindeman
Name:	Donald G. Lindeman
Title:	Vice President

148

Allied Irish Banks, plc,
as a Lender
By:	/s/ Joanne Gibson
Name:	Joanne Gibson
Title:	Assistant Vice President
By:	/s/ Des Brennan
Name:	Des Brennan
Title:	Assistant Vice President

149

Caterpillar Financial Services Corporation
as a Lender
By:	/s/ Christopher C. Patterson
Name:	Christopher C. Patterson
Title:	Global Operations Manager-Capital Markets

150

THE NORTHERN TRUST COMPANY,
as a Lender
By:	/s/ Brandon Rolek
Name:	Brandon Rolek
Title:	Vice President

151

First Tennessee Bank National Association
as a Lender
By:	/s/ James H. Moore, Jr.
Name:	James H. Moore, Jr.
Title:	Senior Vice President

152

GreenStone Farm Credit Services ACA/FLCA
By:	/s/ Jeff Pavlik
Name:	Jeff Pavlik
Title:	Vice President

153

SCHEDULES TO

CREDIT AGREEMENT

Dated as of July 1, 2008

among

KAPSTONE KRAFT PAPER CORPORATION,

as the Borrower,

KAPSTONE PAPER AND PACKAGING CORPORATION,

as the Parent,

THE SUBSIDIARIES OF THE BORROWER IDENTIFIED HEREIN,

as Guarantors,

BANK OF AMERICA, N.A.,

as Administrative Agent, Swing Line Lender and L/C Issuer,

and

THE OTHER LENDERS PARTY HERETO

Arranged By:

BANC OF AMERICA SECURITIES LLC,

as Sole Lead Arranger and Sole Book Manager

1

NOTES TO SCHEDULES

1.The disclosures made in these Schedules are intended to provide information to the other parties to the Credit Agreement of even date herewith by and among Borrower, Parent, the Guarantors identified therein, Bank of America, N.A. and other parties identified therein as Lenders thereto (the “Agreement”).

2.Capitalized terms used in these Schedules but not defined herein shall have the meanings ascribed to such terms in the Agreement.

TABLE OF CONTENTS

Schedule 1.01	Existing Letters of Credit
Schedule 2.01	Commitments and Applicable Percentages
Schedule 4.02(a)	Excluded Estoppel and Consent Agreements
Schedule 4.02(b)	Material Adverse Effect
Schedule 5.02	No Conflict
Schedule 5.05	Changes in Business
Schedule 5.06	Litigation and Contingent Liabilities
Schedule 5.07	Ownership of Properties; Liens
Schedule 5.08	Ownership of Loan Parties and Subsidiaries
Schedule 5.12	Taxes
Schedule 5.16	Real Property
Schedule 5.20	Labor Matters
Schedule 5.23	Casualty, Etc.
Schedule 5.25	Material Contracts
Schedule 7.01	Existing Debt
Schedule 7.01(g)	Debt To Be Repaid
Schedule 7.02	Existing Liens
Schedule 7.08	Unconditional Purchase Obligations
Schedule 7.11	Investments
Schedule 7.18	Holding Company Contracts
Schedule 11.02	Administrative Agent’s Office, Certain Addresses for Notice

3

Schedule 1.01

Existing Letters of Credit

1.Amended Letter of Credit dated as of January 25, 2008, issued by LaSalle Bank National Association for the account of KapStone Kraft Paper Corporation in favor of Sentry Insurance as beneficiary in the amount of $350,000.00.

2.Letter of Credit dated as of January 9, 2008, issued by LaSalle Bank National Association for the account of KapStone Kraft Paper Corporation in favor of Potash Corporation as beneficiary in the amount of $300,000.00.

Schedule 2.01

Commitments and Applicable Percentages

COMMITMENTS
AND APPLICABLE PERCENTAGES

Lender	Term A Loan Commitment		Term B-1 Loan Commitment		Term B-2 Loan Commitment		Revolving Credit Commitment		Term A Loan Applicable Percentage		Term B-1 Loan Applicable Percentage		Term B-2 Loan Applicable Percentage		Revolving Credit Loan Applicable Percentage
Bank of America, N.A.	$	71,632,653.07	$	25,000,000	$	40,000,000	$	15,306,122.44	18.367346941	%	100.000000000	%	100.000000000	%	15.306122440	%
CoBank, ACB	$	54,122,448.98	N/A		N/A		$	13,877,551.02	13.877551021	%	N/A		N/A		13.877551020	%
Farm Credit Services of America, PCA	$	39,795,918.37	N/A		N/A		$	10,204,081.63	10.204081633	%	N/A		N/A		10.204081630	%
Agfirst Farm Credit Bank	$	31,040,816.33	N/A		N/A		$	7,959,183.67	7.959183674	%	N/A		N/A		7.959183670	%
The Private Bank	$	27,857,142.86	N/A		N/A		$	7,142,857.14	7.142857144	%	N/A		N/A		7.142857140	%
Barclays Bank PLC	$	26,265,306.12	N/A		N/A		$	6,734,693.88	6.734693877	%	N/A		N/A		6.734693880	%
Fifth Third Bank	$	23,877,551.02	N/A		N/A		$	6,122,448.98	6.122448979	%	N/A		N/A		6.122448980	%
Rabobank Nederland, New York Branch	$	19,897,959.18	N/A		N/A		$	5,102,040.82	5.102040815	%	N/A		N/A		5.102040820	%
Suntrust Bank	$	19,897,959.18	N/A		N/A		$	5,102,040.82	5.102040815	%	N/A		N/A		5.102040820	%
TD Bank, N.A.	$	15,918,367.35	N/A		N/A		$	4,081,632.65	4.081632650	%	N/A		N/A		4.081632650	%
AgStar Financial Services, PCA	$	11,938,775.51	N/A		N/A		$	3,061,224.49	3.061224490	%	N/A		N/A		3.061224490	%
Allied Irish Banks, plc	N/A		N/A		N/A		$	3,061,224.49	N/A		N/A		N/A		3.061224490	%
Caterpillar Financial Services Corporation	$	11,938,775.51	N/A		N/A		$	3,061,224.49	3.061224490	%	N/A		N/A		3.061224490	%
The Northern Trust Company	$	11,938,775.51	N/A		N/A		$	3,061,224.49	3.061224490	%	N/A		N/A		3.061224490	%
First Tennessee Bank National Association	$	7,959,183.67	N/A		N/A		$	2,040,816.33	2.040816326	%	N/A		N/A		2.040816330	%
GreenStone Farm Credit Services ACA/FLCA	$	7,959,183.67	N/A		N/A		$	2,040,816.33	2.040816326	%	N/A		N/A		2.040816330	%
Northwest Farm Credit Services, PCA	$	7,959,183.67	N/A		N/A		$	2,040,816.33	2.040816326	%	N/A		N/A		2.040816330	%
Total	$	390,000,000	$	25,000,000	$	40,000,000	$	100,000,000	100.000000000	%	100.000000000	%	100.000000000	%	100.000000000	%

Schedule 4.02(a)

Excluded Estoppel and Consent Agreements

Location of Leased Property	Landlord’s Name and Address
KapStone Paper and Packaging Corporation1101 Skokie Blvd., Suite 300Northbrook, IL 60062	PCS Administration (USA), Inc.1101 Skokie Blvd., Suite 400Northbrook, IL 60062
KapStone Kraft Paper Corporation300 S. Edgar StreetFordyce, AR 71742	City of Fordyce, ArkansasCity Hall, 101 South MainFordyce, AR 71742Attention: Mayor

Schedule 4.02(b)

Material Adverse Effect

1.On January 8, 2008, an electrical fire occurred in ECR 82.  The fire was extinguished quickly, but resulted in loss of power resulting in approximately 8 hours of down time at the waste and water treatment plants.  The Business will incur additional costs in 2008 to repair the resulting damage.  The current estimate to repair damage in connection with the assets acquired under the Mead Purchase Agreement is approximately $5,300,000, of which approximately $2,600,000 shall be paid by Sellers through the working capital adjustment under such agreement.

Schedule 5.02

No Conflict

None.

Schedule 5.05

Changes in Business

1.On January 8, 2008, an electrical fire occurred in ECR 82.  The fire was extinguished quickly, but resulted in loss of power resulting in approximately 8 hours of down time at the waste and water treatment plants.  The Business will incur additional costs in 2008 to repair the resulting damage.  The current estimate to repair damage in connection with the assets acquired under the Mead Purchase Agreement is approximately $5,300,000, of which approximately $2,600,000 shall be paid by Sellers through the working capital adjustment under such agreement.

2.In April 2008, a smelt water explosion in the Recovery Boiler caused the boiler and a paper machine to shut down for 6 days.  All damages have been repaired and both machines are now operating normally.

Schedule 5.06

Litigation and Contingent Liabilities

I.  LITIGATION

None.

II.  CONTINGENT LIABILITIES

1.All Contingent Liabilities arising under the Purchase Agreement dated as of June 23, 2006, by and between International Paper Company, Stone Arcade Acquisition Corporation, and KapStone Kraft Paper Corporation (as amended).

2.All Contingent Liabilities arising under the Asset Purchase Agreement dated as of April 4, 2008 (as amended), among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC (as amended), together with the Additional Documents as defined therein.

3.All Contingent Liabilities arising under the FILOT Agreement dated on or about July 1, 2008 among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone Charleston Kraft LC, KapStone Paper and Packaging Corporation and Cogen South L.L.C.

4.All Contingent Liabilities arising under the Underwriting Agreement dated on or about August 15, 2005, among Stone Arcade Acquisition Corporation, Morgan Joseph & Co., Inc., as Representative, and the other Underwriters identified therein.

5.All Contingent Liabilities arising under the Warrant Agreement dated on or about August 15, 2005 by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

6.The Contingent Liabilities reflected on KapStone Paper and Packaging Corporation’s most recent audited financial statements as of December 31, 2007.

7.Contingent Liabilities arising under the contracts identified on Schedule 5.25 which is hereby incorporated by reference herein.

Schedule 5.07

Ownership of Properties; Liens

I.  LIENS

KapStone Paper and Packaging Corporation

Secured Party	Filing Number	Filing Date	Collateral
Astenjohnson, Inc.	70412469	2/1/07	Goods and Inventory on consignment and proceeds thereof

KapStone Kraft Paper Corporation

Secured Party	Filing Number	Filing Date	Collateral
General Electric Capital Corporation	73536439	9/19/07	Equipment: 2002 Hyster S100XM Cushioned Diesel Lift Truck, serial number E004V02027Z
Minority Alliance Capital, LLC	80434348	2/5/08	Equipment: Yale Model GLC080VXNGSF084, serial numbers E818V02224E and E818VO2227E
First Independence Bank	80533339	2/13/08	Equipment: New Yale Model GLC080VXNGSF084, serial numbers: E818V02224E and E818V02227E
Leasenet Group LLC	80663003	2/25/08	Equipment described in Schedule KS-003 to Master Equipment Lease KS-01 dated May 5, 2007. UCC filed for informational purposes only.
Minority Alliance Capital, LLC	80665669	2/25/08	Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and E818VO2357E
First Independence Bank	81375326	4/21/08	Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and E818VO2357E

MeadWestvaco Corporation

Secured Party	Filing Number	Filing Date	Collateral
Atel Leasing Corporation	41875824	7/6/04	Equipment and Related Software under Lease Agreement No. MEAD1
			Precautionary filing
- partial assignment	503363193	2/2/05	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund X, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund XI, LLC
- partial assignment	41875824	5/8/07	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/8/07	Assignment to Atel Capital Equipment Fund X, LLC
- amendment	41875824	3/14/08	Amended Debtor’s address
- partial assignment	41875824	5/19/08	Assignment to Atel Capital Equipment Fund X, LLC
Eplus Group, Inc.	51580548	5/23/05	Equipment on Schedule 371 of an Equipment Lease Agreement, dated 1/28/92 Filed for informational purposes only
Banc of America Leasing & Capital, LLC	61267731	4/16/07	Equipment: Case 41 Skid Steer Loader *Precautionary lease notice filing
Banc of America Leasing & Capital, LLC	63425691	9/15/06	Equipment subject to schedule no. 017 to Lease Agreement, dated 8/3/06 *Precautionary lease notice filing

II.  OWNERSHIP OF PROPERTY

Real Property

*The following real property is not owned by any Loan Party or its Subsidiaries:

1.Location:

KapStone Paper and Packaging Corporation

1101 Skokie Blvd., Suite 300

Northbrook, IL 60062

12

Landlord’s Name:

PCS Administration (USA), Inc.

1101 Skokie Blvd., Suite 400

Northbrook, IL 60062

2.Location:

KapStone Kraft Paper Corporation**

300 S. Edgar Street

Fordyce, AR 71742

(“Fordyce Property”)

Landlord’s Name:

City of Fordyce, Arkansas

City hall, 101 South Main

Fordyce, AR 71742

3.Location:

KapStone Charleston Kraft LLC

107 Motel Drive

St. George, SC 29477

Landlord’s Name:

MeadWestvaco South Carolina, LLC

11013 West Broad Street

Glen Allen, VA 23060

4.Location:

KapStone Charleston Kraft LLC**

391 Rosom Hill Extension

Ridgeville, SC 29472

(“Beech Hill Chip Mill”)

Landlord’s Name:

MeadWestvaco Forestry, LLC

PO Box 118005

Charleston, SC 29423-8005

5.Location:

KapStone Charleston Kraft LLC

665 Chip Mill Road

Andrews, SC 29510

Landlord’s Name:

MeadWestvaco Forestry, LLC

PO Box 118005

Charleston, SC 29423-8005

6.Location:

KapStone Charleston Kraft LLC

7 miles west of Givans Town and 4 miles west of Givans Ferry Bridge

Badham, SC

(“Badham Chip Mill”)

13

Landlord’s Name:

MeadWestvaco Forestry, LLC

PO Box 118005

Charleston, SC 29423-8005

7.Water Leases located at Tracts 21-24 and Tract 17

Landlord’s Name:

Commissioners of Public Works of the City of Charleston

PO Box B

Charleston, SC 29402

8.Water Agreement dated on or about June 18, 1936, as amended by that certain Supplemental Agreement dated June 25, 1956, and as further amended by that certain 1966 Supplemental Agreement dated November     , 1966.

** None of the Loan Parties makes any representation with respect to the state of title of the Fordyce Property, the Beech Hill Chip Mill, [the Badham Chip Mill] or the Airstrip Property (as defined on Attachment 1 to Schedule 5.07).

14

Attachment 1 to Schedule 5.07

1.Description of Airstrip Property:

All that certain tract or parcel of land, together with all improvements thereon, lying and being situated in Gaston Township, Northampton County, North Carolina, containing approximately 29.29 acres, as shown and designated as Tract E on that ‘Plat Showing Property Being Conveyed to Champion International Corp. By W. J. Long, Jr., & June B. Long’, dated December 12, 1987, revised December 22, 1987, prepared by Burr & Associates, P.A., recorded in Map Book 23, Page 94, Northampton Public Registry; reference to said map is made for greater certainty of description.

2.     Definition of Retained Park Property:

That certain parcel of land of approximately 40 acres situated partially in North Charleston County, South Carolina and partially in Hanahan, Berkeley County, South Carolina and located near the intersection of Remount Road and North Rhett Avenue.

Schedule 5.08

Ownership of Loan Parties and Subsidiaries

Subsidiaries

1.KapStone Paper and Packaging Corporation:

a.KapStone Kraft Paper Corporation, a Delaware corporation and wholly-owned subsidiary.

2.KapStone Kraft Paper Corporation:

a.KapStone Charleston Kraft LLC, a Delaware limited liability company and wholly-owned subsidiary.

b.KapStone Asia Limited, a Hong Kong limited liability company and wholly-owned subsidiary.

c.KapStone Europe SPRL, a Belgium limited liability company.  KapStone Kraft Paper Corporation holds a 99% interest in KapStone Europe SRLP.

3.KapStone Charleston Kraft LLC:

a.KapStone Europe SPRL, a Belgium limited liability company.  KapStone Charleston Kraft LLC holds a 1% interest in KapStone Europe SRLP.

b.Cogen South L.L.C., a Delaware limited liability company and wholly-owned subsidiary.

Equity Ownership

1.Underwriting Agreement dated on or about August 15, 2005 among Stone Arcade Acquisition Corporation, Morgan Joseph & Co., Inc., as Representative, and the other Underwriters identified therein.

2.Warrant Agreement dated on or about August 15, 2005 by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

3.Pursuant to the KapStone Paper and Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as amended April 10, 2008, KapStone Paper and Packaging Corporation’s Compensation Committee approved the issuance of 631,050 stock options to its directors, executive officers and employees.  As of March 31, 2008, 631,050 stock options were outstanding.

4.Pursuant to the KapStone Paper and Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as amended April 10, 2008, KapStone Paper and Packaging’s Compensation Committee approved the issuance of 174,000 shares of restricted stock to its directors, executive officers and employees.  As of March 31, 2008, 174,000 shares of restricted stock were outstanding.

Schedule 5.12

Taxes

1.The October 2006 South Carolina sales and use tax return for Cogen South L.L.C. was filed late as a result of an error by the group to which the tax return filing process had been outsourced.  (This was the first month that the outsourcing engagement was in place.)  A notice sent by South Carolina regarding this issue was resolved in 2007.  Penalties and interest ($37.17) were paid by the outsourcing firm.

2.Certain Fee-in-Lieu of Tax (“FILOT”) schedules of assets submitted to the South Carolina Department of Revenue contained errors, the net result of which appears to have been the overreporting of assets held by approximately $400,000.  Additionally, within the classification of assets between Seller’s Chemicals Business and North Charleston Mill facilities, certain transfers and administrative assets were not reflected, and certain assets were reported twice.  As a consequence of this, assets associated with the North Charleston Mill facility were overstated by approximately $10 million and assets associated with the Chemicals Business facility were understated by approximately $10 million; since both facilities are comprehended under the FILOT Arrangements, a misclassification of assets between the facilities does not affect total assets reported with respect to the particular FILOT Arrangement.  Finally, certain dispositions of assets were not reflected on the FILOT schedules of assets for the Chemicals Business facility, the North Charleston Mill and for Cogen South L.L.C..  Modified reports are being prepared and will be filed with the South Carolina Department of Revenue, which has been consulted regarding the appropriate reporting.  It is expected that the cumulative tax effect of these matters will be minor.

17

Schedule 5.16

Real Property

Location	Leased/Owned	Landlord’s Name and Address
KapStone Paper and Packaging Corporation1101 Skokie Blvd., Suite 300Northbrook, IL 60062	Leased	PCS Administration (USA), Inc.1101 Skokie Blvd., Suite 400Northbrook, IL 60062
KapStone Kraft Paper Corporation100 Gaston RoadRoanoke Rapids, NC 27870	Owned
KapStone Kraft Paper CorporationAirstrip Property(1) (as defined in Attachment 1 to Schedule 5.07)	Owned
KapStone Kraft Paper Corporation(2)300 S. Edgar StreetFordyce, AR 71742(“Fordyce Property”)	Leased	City of Fordyce, ArkansasCity Hall, 101 South MainFordyce, AR 71742
KapStone Charleston Kraft LLC(3)5600 Virginia AvenueNorth Charleston, SC 29406	Owned
KapStone Charleston Kraft LLC309 N. Maple StreetSummerville, SC 29483	Owned
KapStone Charleston Kraft LLC707 Whitehead Road Elgin, SC 29045	Owned
KapStone Charleston Kraft LLC1382 Elm StreetHampton, SC 29924	Owned

(1) The Airstrip Property is of negligible value and not material to the business of the company, and therefore no real estate collateral documents (other than a mortgage) will be delivered pursuant to Section 4.02(a)(iv) of the Credit Agreement.

(2) The lease of the Fordyce Property is of negligible value and not material to the business of the company, and therefore no real estate collateral documents will be delivered pursuant to Section 4.02(a)(iv) of the Credit Agreement.

(3) KapStone Charleston Kraft LLC does not own the entire property located at this address.  Pursuant to the Kraft Acquisition, excluded is all the real property primarily related to or primarily used by MeadWestvaco Corporation and its Subsidiaries in the Sellers’ Chemicals Business.  Kapstone Charleston Kraft LLC also leases the Berkeley County portion of the property which is in the process of being subdivided from the Retained Park Property (as defined in Attachment 1 to Schedule 5.07).  The Express Map for this location required to be delivered pursuant to Section 4.02(a)(iv) of the Credit Agreement will be delivered to the Collateral Agent within 7 days of the Closing Date.

18

Location	Leased/Owned	Landlord’s Name and Address
KapStone Charleston Kraft LLC28026 U.S. Highway 76Kinards, SC 29355	Owned
KapStone Charleston Kraft LLCHarvey Tract LandfillHighway 16Summerville, SC 29483	Owned
KapStone Charleston Kraft LLC(4)665 Chip Mill RoadAndrews, SC 29510	Leased
KapStone Charleston Kraft LLC(5)391 Rosom Hill ExtensionRidgeville, SC 29472(“Beech Hill Chip Mill”)	Leased	MeadWestvaco Forestry, LLCPO Box 118005Charleston, SC 29423-8005
KapStone Charleston Kraft LLC(6)665 Chip Mill RoadAndrews, SC 29510	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLC107 Motel DriveSt. George, SC 29477	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLC(7)7 miles west of Givans Town and 4 miles west of Givans Ferry BridgeBadham, SC(“Badham Chip Mill”)	Leased	MeadWestvaco Forestry, LLC PO Box 118005 Charleston, SC 29423-8005
KapStone Charleston Kraft LLCWater LeasesTracts 21-24Tract 17Charleston, SC	Leased	Commissioners of Public Works of the City of Charleston, SCPO Box BCharleston, SC 29402

(4) KapStone Charleston Kraft LLC owns the improvements only, consisting of the chip mill facility and related improvements (excluding the approximately 2,200 square foot office building owned by MW Forestry, LLC and leased to KapStone Charleston Kraft LLC).

(5) It is anticipated that the Beech Hill Chip Mill will be closed shortly after the Commitment Effective Date and consolidated with the Badham Chip Mill, and therefore, no real estate collateral documents will be delivered pursuant to Section 4.02(a)(iv) of the Credit Agreement.

(6) KapStone Charleston Kraft LLC owns only the improvements and leases the ground site and the office building.

(7) [The real estate deliverables in connection with the Badham Chip Mill as required by Section 4.02(a)(iv) of the Credit Agreement will be delivered to the Collateral Agent on a post-closing basis.]

19

Schedule 5.20

Labor Matters

1.Labor Agreement between International Paper Ride Rite Fordyce and Paper, Allied-Industrial, Chemical and Energy Workers International Union and Local 5-368.

2.Letter Agreement between Harry Johnson and International Paper Company dated December 10, 2004.

3.Letter Agreement between Paul Evans and International Paper Company dated March 21, 2006.

4.Agreement between Ideal Technical Services and Jesse Windred Whiddon, Jr. dated August 20, 2001.

5.Agreement between KapStone Kraft Paper Corporation and  United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-International and Service Workers Union, AFL-CIO, CLC, Local 9-425 effective February 1, 2007.

6.Staffing Agreement between Employers Staffing of America, Inc. and International Paper dated September 13, 2005.

7.Labor Agreement effective July 2, 2006 by and between the Charleston, South Carolina plant of MeadWestvaco and the International Association of Machinists and Aerospace Workers and its Charleston Lodge No. 183.

8.Labor Agreement effective July 2, 2006 by and between the Charleston, South Carolina plant of MeadWestvaco and the Local Union No. 1753 of the International Brotherhood of Electrical Workers.

9.Labor Agreement effective July 2, 2006 by and between the Charleston, South Carolina plant of MeadWestvaco and the Paper, Allied-Industrial, Chemical and Energy Workers International Union and its Local Unions 3-0508 and 3-1435.

20

Schedule 5.23

Casualty, Etc.

1.On January 8, 2008, an electrical fire occurred in ECR 82.  The fire was extinguished quickly, but resulted in loss of power resulting in approximately 8 hours of down time at the waste and water treatment plants.  The Business will incur additional costs in 2008 to repair the resulting damage.  The current estimate to repair damage in connection with the assets acquired under the Mead Purchase Agreement is approximately $5,300,000, of which approximately $2,600,000 shall be paid by Sellers through the working capital adjustment under such agreement.

2.In April 2008, a smelt water explosion in the Recovery Boiler caused the boiler and a paper machine to shut down for 6 days.  All damages have been repaired and both machines are now operating normally.

21

Schedule 5.25

Material Contracts

Roanoke Rapids

Customer	Address	Term of Contract
Graphic Packaging	450 East North AvenueCarol Stream, IL 60188	Expires 12/11/08
Exopack	3070 Southport RoadSpartanburg, SC 29302	Expires 12/31/08
Hood Packaging	25 Woodgreen PlaceMadison, MS 39110	Expires 8/31/09
Ampac	18 Neil CourtOceanside, NY 11572	Expires 12/31/08
Bancroft Bag	425 Bancroft blvdWest Monroe, LA 71292	Expires 3/31/09
Arizona Chemical Company	4600 Touchton Road East, Suite 500Jacksonville, FL	Expires 1/1/26

Supplier	Address	Term of contract
CSXT	Jacksonville, FL	Expires June 30, 2008
Dominion Power	Portsmouth VA	Expires 01-07 unless renewed
PPG	Pittsburgh, PA	Expires 1/31/09
West Fraser Timber	1900 Exeter Rd., Suite 105Germantown, TN 38138	13.5 years remaining on a15 year contract
Broad Arrow Timber Company	15 Piedmont Center, Suite 1250Atlanta, GA 30350	13.5 years remaining on a15 year contract*

[*Additional 5 years are in place for ROFO on thinnings.  This is not included in the aggregated purchase customer-supplier contracts.]

22

Charleston

Supplier	Address	Term of Contract
CSXT — Coal inbound only	500 Water Street - J865 Jacksonville, FL 32202	November 1, 2005 to December 31, 2010
Old World Trading — caustic soda	4065 Commercial Avenue Northbrook, IL 60062	January 1, 2008 to December 31, 2009
SCE&G — electric power — E9096103	SCE&GColumbia, SC 29218	January 1, 1999 to December 31, 2018
Hess Corporation— fuel oil	1 Hess PlazaWoodbridge, NJ 07095	August 9, 2006 to August 31, 2008
Nalco Chemical Co	1601 W. Diehl RoadNaperville, IL 60563	August 1, 2003 to December 31, 2008
Massey Industrial Sales - coal	4 North Fourth Street Richmond, VA	January 1, 2008 to December 31, 2009
Godfrey Lumber Company, Inc.	P.O. Box 615Statesville, NC 28687	Start 1-6-08 and ends 1-5-11. 3-year agreement
Williams Brothers Trucking, Inc.	P.O. Box 188Hazlehurst, GA 31539	Start 11-14-05 and ends 11-14-15. 10-year agreement
National City Leasing	101 South 5th StreetLouisville, KY 40202	Start Dec-1995 and ends December 2015. 20-year lease
MeadWestvaco Forestry, LLC	P.O. Box 118005Charleston, SC 29423-8005	Start July 1, 2008 and ends July 1, 2023. 15-year agreement
Key Container	P.O. Box 237021 Campbell StreetPawtucket, RI 02861-2370	September 1, 2006 through September 1, 2011
New England Woodenware	205 School StreetGardner, MA 01440	July 1, 2007 through July 1, 2012

Purchase Agreement dated as of June 23, 2006, by and between International Paper Company, Stone Arcade Acquisition Corporation and KapStone Kraft Paper Corporation (as amended).

Asset Purchase Agreement dated as of April 4, 2008, among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC (as amended).

Registration Rights Agreement dated on or about August 15, 2005 by and among Stone Arcade Acquisition Corporation, Roger W. Stone, Matthew Kaplan, Jonathan R. Furer, John M. Chapman and Muhit U. Rhaman  (each an “Initial Stockholder” and collectively the “Initial Stockholders”).

Letter Agreement dated on or about August 15, 2005 by and between Stone-Kaplan Investments LLC and Stone Arcade Acquisition Corporation regarding administrative support.

Investment Management Trust Agreement dated on or about  August 15, 2005 by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

23

Letter Agreements among Stone Arcade Acquisition Corporation, Morgan Joseph & Co. Inc. and each of the Initial Stockholders dated on or about August 15, 2005.

Inter-Company Loan Agreement dated as of January 2, 2007 by and between KapStone Paper and Packaging Corporation and KapStone Kraft Paper Corporation.

KapStone Paper and Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as amended April 10, 2008.

Pulpwood Supply Agreement dated as of January 1, 2007, between International Paper Company and KapStone Kraft Paper Corporation;

Residual Chip Agreement dated as of January 1, 2007, between International Paper Company and KapStone Kraft Paper Corporation.

Reciprocal Plant Operating Agreement dated on or about July 1, 2008 between KapStone Charleston Kraft LLC and MeadWestvaco South Carolina LLC.

Air Permit Modeling Agreement dated on or about July 1, 2008, among KapStone Charleston Kraft LLC, Cogen South L.L.C. and MeadWestvaco South Carolina LLC.

Long-Term Fiber Supply Agreement dated on or about July 1, 2008 by and between MeadWestvaco Forestry, LLC and KapStone Charleston Kraft LLC.

Amended and Restated Lease Agreement dated as of December 1, 1998 by and between Charleston County, South Carolina and Cogen South L.L.C.

Amended and Restated Lease Agreement dated as of July 1, 2008 by and between Charleston County, South Carolina and KapStone Charleston Kraft LLC.

Generator Site Sublease dated as of June 1, 1996 between South Carolina Electric & Gas Company and Cogen South L.L.C.

Shaft Horsepower Agreement dated as of June 1, 1996 between Cogen South L.L.C. and South Carolina Electric & Gas Company.

Service Agreement dated February 2, 2005 by and between Cogen South, L.L.C. and South Carolina Electric & Gas Company.

Contract for Electric Service dated June 11, 2008 between KapStone Charleston Kraft LLC and South Carolina Electric & Gas Company.

24

Schedule 7.01

Existing Debt

1.All Contingent Liabilities arising under the Purchase Agreement dated as of June 23, 2006, by and between International Paper Company, Stone Arcade Acquisition Corporation, and KapStone Kraft Paper Corporation (as amended).

2.Contingent Liabilities arising under the Asset Purchase Agreement dated as of April 4, 2008 (as amended), among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC (as amended), together with the Additional Documents as defined therein.

3.Contingent Liabilities arising under the FILOT Agreement dated on or about July 1, 2008 among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone Charleston Kraft LC, KapStone Paper and Packaging Corporation and Cogen South L.L.C.

4.Contingent Liabilities under the Underwriting Agreement dated on or about August 15, 2005, among Stone Arcade Acquisition Corporation, Morgan Joseph & Co., Inc., as Representative, and the other Underwriters identified therein.

5.Contingent Liabilities under Warrant Agreement dated on or about August 15, 2005 by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

6.The debt (other than Debt to be Repaid) reflected on KapStone Paper and Packaging Corporation’s most recent audited financial statements as of December 31, 2007.

7.Contingent Liabilities arising under the contracts identified on Schedule 5.25 which is hereby incorporated by reference herein.

8.Debt secured by Liens listed on Schedule 7.02.

25

Schedule 7.01(g)

Debt To Be Repaid

1.Credit Agreement dated as of January 2, 2007 among KapStone Kraft Paper Corporation, the Lenders identified therein and LaSalle Bank National Association, as Administrative Agent.(1)

2.Obligations in respect of the following filing:

The Bank of New York, as Agent, as successor in interest to NationsBank, N.A., as Agent - assignment(2) 52386358

52419902 8/2/05

8/4/05 All rights, title and interests in Cogen South LLC

Assignment to The Bank of New York, N.A.

(1) To be repaid and terminated on Commitment Effective Date as provided in payoff letter.

(2) To be assigned to the Borrower on the Commitment Effective Date and terminated in connection herewith.

26

Schedule 7.02

Existing Liens

1.The following Liens:

KapStone Paper and Packaging Corporation

Secured Party	Filing Number	Filing Date	Collateral
Astenjohnson, Inc.	70412469	2/1/07	Goods and Inventory on consignment and proceeds thereof

KapStone Kraft Paper Corporation

Secured Party	Filing Number	Filing Date	Collateral
General Electric Capital Corporation	73536439	9/19/07	Equipment: 2002 Hyster S100XM Cushioned Diesel Lift Truck, serial number E004V02027Z
Minority Alliance Capital, LLC	80434348	2/5/08	Equipment: Yale Model GLC080VXNGSF084, serial numbers E818V02224E and E818VO2227E
First Independence Bank	80533339	2/13/08	Equipment: New Yale Model GLC080VXNGSF084, serial numbers: E818V02224E and E818V02227E
Leasenet Group LLC	80663003	2/25/08	Equipment described in Schedule KS-003 to Master Equipment Lease KS-01 dated May 5, 2007. UCC filed for informational purposes only.
Minority Alliance Capital, LLC	80665669	2/25/08	Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and E818VO2357E
First Independence Bank	81375326	4/21/08	Equipment: Yale Model GLC120VXNGSF085, serial numbers E818V02339E and E818VO2357E

27

MeadWestvaco Corporation

Secured Party	Filing Number	Filing Date	Collateral
Atel Leasing Corporation	41875824	7/6/04	Equipment and Related Software under Lease Agreement No. MEAD1 Precautionary filing
- partial assignment	503363193	2/2/05	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund X, LLC
- partial assignment	41875824	5/7/07	Assignment to Atel Capital Equipment Fund XI, LLC
- partial assignment	41875824	5/8/07	Assignment to Atel Capital Equipment Fund IX, LLC
- partial assignment	41875824	5/8/07	Assignment to Atel Capital Equipment Fund X, LLC
- amendment	41875824	3/14/08	Amended Debtor’s address
- partial assignment	41875824	5/19/08	Assignment to Atel Capital Equipment Fund X, LLC
Eplus Group, Inc.	51580548	5/23/05	Equipment on Schedule 371 of an Equipment Lease Agreement, dated 1/28/92 Filed for informational purposes only
Banc of America Leasing & Capital, LLC	61267731	4/16/07	Equipment: Case 41 Skid Steer Loader *Precautionary lease notice filing
Banc of America Leasing & Capital, LLC	63425691	9/15/06	Equipment subject to schedule no. 017 to Lease Agreement, dated 8/3/06 *Precautionary lease notice filing

2.Lien pursuant to Sublease Agreement by and between Royal Bank of Scotland and KapStone Charleston Kraft LLC.

3.Lien pursuant to Sublease Agreement by and between Bank of America and KapStone Charleston Kraft LLC.

4.Lien pursuant to Lease Agreement by and between PHH Vehicle Management Services, LLC and KapStone Paper and Packaging Corporation.

5.Lien pursuant to Railroad Equipment Lease Agreement by and between Wells Fargo and KapStone Charleston Kraft LLC.

28

Schedule 7.08

Unconditional Purchase Obligations

1.Long-Term Fiber Supply Agreement dated on or about July 1, 2008 by and between MeadWestvaco Forestry, LLC and KapStone Charleston Kraft LLC.

29

Schedule 7.11

Investments

None.

30

Schedule 7.18

Holding Company Contracts

1.Lease Agreement dated as of January 1, 1997 by and between the City of Fordyce, Arkansas and International Paper Company.

2.Registration Rights Agreement dated on or about August 15, 2005 by and among Stone Arcade Acquisition Corporation, Roger W. Stone, Matthew Kaplan, Jonathan R. Furer, John M. Chapman and Muhit U. Rhaman  (each an “Initial Stockholder” and collectively the “Initial Stockholders”).

3.Letter Agreement dated on or about August 15, 2005 by and between Stone-Kaplan Investments LLC and Stone Arcade Acquisition Corporation regarding administrative support.

4.Investment Management Trust Agreement dated on or about  August 15, 2005 by and between Stone Arcade Acquisition Corporation and Continental Stock Transfer & Trust Company.

5.Letter Agreements among Stone Arcade Acquisition Corporation, Morgan Joseph & Co. Inc. and each of the Initial Stockholders dated on or about August 15, 2005.

6.Purchase Agreement dated as of June 23, 2006 by and between International Paper Company, Stone Arcade Acquisition Corporation and KapStone Kraft Paper Corporation.

7.Inter-Company Loan Agreement dated as of January 2, 2007 by and between KapStone Paper and Packaging Corporation and KapStone Kraft Paper Corporation.

8.Asset Purchase Agreement dated April 4, 2008 among MeadWestvaco South Carolina, LLC, MeadWestvaco Corporation, KapStone Paper and Packaging Corporation and Oak Acquisition LLC.

9.KapStone Paper and Packaging Corporation 2006 Incentive Plan dated December 15, 2006, as amended April 10, 2008.

10.Indemnity Agreement dated on or about July 1, 2008 among MeadWestvaco Corporation, MeadWestvaco South Carolina LLC, KapStone Charleston Kraft LLC, KapStone Paper and Packaging Corporation and Cogen South L.L.C. re: FILOT Arrangement.

11.KapStone Paper and Packaging Corporation’s Guaranty of Service Agreement dated February 2, 2005 by and between Cogen South, L.L.C. and South Carolina Electric & Gas Company.

12.KapStone Paper and Packaging Corporation’s Guaranty of Purchase and Supply Agreement dated January 1, 2008 by and between KapStone Charleston Kraft LLC and Old World Industries, Inc.

31

Schedule 11.02

Administrative Agent’s Office, Certain Addresses for Notice

BORROWER:

KapStone Kraft Paper Corporation

1101 Skokie Blvd., STE 300
Northbrook, IL 60062

Attention:  Andrea K. Tarbox

Telephone:  847-239-8812

Telecopier:  847-919-3833

Electronic Mail:  Andrea.Tarbox@kapstonepaper.com

ADMINISTRATIVE AGENT:

Administrative Agent’s Office
(for payments and Requests for Credit Extensions):

Bank of America, N.A.

901 Main Street

Mail Code:  TX1-492-14-14

Dallas, TX  75202

Attention:  Denise Wolfenberger

Telephone:  214-209-3175

Telecopier:  214-290-8373

Electronic Mail:  denise.m.wolfenberger@bankofamerica.com

Account No.:  129-2000-883

Ref:  KapStone Kraft Paper Corporation

ABA# 026009593

Other Notices as Administrative Agent:

Bank of America, N.A.
Agency Management
231 S. LaSalle Street

Mail Code:  IL1-231-10-41
Chicago, IL  60697

Attention:   Suzanne M. Paul

Telephone:  312-923-1640

Telecopier:  877-206-8435

Electronic Mail:  suzanne.m.paul@bankofamerica.com

1

L/C ISSUER:

Bank of America, N.A., as L/C Issuer

Trade Operation

1000 W. Temple Street

Mail Code:  CA9-705-07-05

Los Angeles, CA  90012-1514

Attention:  Tai Anh Lu

Telephone:   213-481-7840

Telecopier:  213-580-8442

E-mail:  tai_anh.lu@bankofamerica.com

SWING LINE LENDER:

Bank of America, N.A.

901 Main Street

Mail Code:  TX1-492-14-14

Dallas, TX  75202

Attention:  Denise Wolfenberger

Telephone:  214-209-3175

Telecopier:  214-290-8373

Electronic Mail:  denise.wolfenberger@bankofamerica.com

Account No.:  129-2000-883

Ref:  KapStone Kraft Paper Corporation

ABA# 026009593

2

EXHIBIT A

FORM OF COMMITTED LOAN NOTICE

Date:                        ,            

To:Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Kapstone Kraft Paper Corporation, a Delaware corporation (the “Borrower”), Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”), the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The undersigned hereby requests (select one):

o  A Borrowing of Revolving Credit Loans

o  A conversion or continuation of [Revolving Credit][Term] Loans

1.	On                                                                     (a Business Day).
2.	In the amount of $
3.	Comprised of
		[Type of Loan requested]
4.	For Eurodollar Rate Loans: with an Interest Period of                  months.

[The Revolving Credit Borrowing requested herein complies with the proviso to the first sentence of Section 2.01(b) of the Agreement.](10)

(10)Include this sentence in the case of a Revolving Credit Borrowing.

A-1

The Borrower hereby represents and warrants that the conditions specified in Sections 4.03(a) and (b) shall be satisfied on and as of the date of the applicable Credit Extension.

KAPSTONE KRAFT PAPER CORPORATION,

a Delaware corporation

By:

Name:

Title:

A-2

EXHIBIT B

FORM OF SWING LINE LOAN NOTICE

Date:                        ,             

To:Bank of America, N.A., as Swing Line Lender
Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Kapstone Kraft Paper Corporation, a Delaware corporation (the “Borrower”), Kapstone Paper and Packaging Corporation, a Delaware corporation (the “Parent”), the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The undersigned hereby requests a Swing Line Loan:

1.	On                                                                     (a Business Day).
2.	In the amount of $                                            .

The Swing Line Borrowing requested herein complies with the requirements of the provisos to the first sentence of Section 2.04(a) of the Agreement.

The Borrower hereby represents and warrants that the conditions specified in Sections 4.03(a) and (b) shall be satisfied on and as of the date of the applicable Credit Extension.

KAPSTONE KRAFT PAPER CORPORATION,

a Delaware corporation

By:

Name:

Title:

B-1

EXHIBIT C-1

FORM OF TERM A NOTE

                      ,             

FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to                                            or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of the Term A Loan from time to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The Borrower promises to pay interest on the unpaid principal amount of the Term A Loan made by the Lender from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement.  All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office.  If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

This Term A Note is one of the Term A Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein.  This Term A Note is also entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Term A Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement.  The Term A Loan made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business.  The Lender may also attach schedules to this Term A Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Term A Note.

C-1-1

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

KAPSTONE KRAFT PAPER CORPORATION,

a Delaware corporation

By:

Name:

Title:

C-1-2

LOANS AND PAYMENTS WITH RESPECT THERETO

Date Type of
Loan Made Amount of
Loan Made End of
Interest
Period Amount of
Principal or
Interest Paid
This Date Outstanding
Principal
Balance This
Date Notation
Made By

C-1-3

EXHIBIT C-2

FORM OF TERM B NOTE

                      ,             

FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to                                            or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of the Term B Loan from time to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The Borrower promises to pay interest on the unpaid principal amount of the Term B Loan made by the Lender from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement.  All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office.  If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

This Term B Note is one of the Term B Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein.  This Term B Note is also entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Term B Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement.  The Term B Loan made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business.  The Lender may also attach schedules to this Term B Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Term B Note.

C-2-1

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

KAPSTONE KRAFT PAPER CORPORATION,

a Delaware corporation

By:

Name:

Title:

C-2-2

LOANS AND PAYMENTS WITH RESPECT THERETO

Date Type of
Loan Made Amount of
Loan Made End of
Interest
Period Amount of
Principal or
Interest Paid
This Date Outstanding
Principal
Balance This
Date Notation
Made By

C-2-3

EXHIBIT C-3

FORM OF REVOLVING CREDIT NOTE

                      ,             

FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to                                            or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Revolving Credit Loan from time to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Loan from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement.  All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office.  If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

This Revolving Credit Note is one of the Revolving Credit Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein.  This Revolving Credit Note is also entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Revolving Credit Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement.  Revolving Credit Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business.  The Lender may also attach schedules to this Revolving Credit Note and endorse thereon the date, amount and maturity of its Revolving Credit Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Revolving Credit Note.

C-3-1

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

KAPSTONE KRAFT PAPER CORPORATION,

a Delaware corporation

By:

Name:

Title:

C-3-2

LOANS AND PAYMENTS WITH RESPECT THERETO

Date Type of
Loan Made Amount of
Loan Made End of
Interest
Period Amount of
Principal or
Interest Paid
This Date Outstanding
Principal
Balance This
Date Notation
Made By

C-3-3

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                        ,             

To:Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among KAPSTONE KRAFT PAPER CORPORATION, a Delaware corporation (the “Borrower”), KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation (the “Parent”), the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                                           of the Parent, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Parent and the Borrower, and, after due and diligent investigation, that:

[Use following paragraph 1 for fiscal year-end financial statements]

1.The Borrower has delivered (i) the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Parent ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section and (ii) the consolidating balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year and the related consolidating statements of income or operations, shareholders’ equity and cash flows for such Fiscal Year.  Such consolidating statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Parent and its Subsidiaries].

[Use following paragraph 1 for fiscal quarter-end financial statements]

1.The Borrower has delivered the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Parent ended as of the above date.  Such consolidated financial statements fairly present the financial condition, results of operations and cash flows of the Parent and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes and such consolidating financial statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Parent and its Subsidiaries.

2.The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review

D-1

of the transactions and condition (financial or otherwise) of the Borrower and the Parent during the accounting period covered by such financial statements.

3.A review of the activities of the Borrower and the Parent during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period each of the Borrower and the Parent performed and observed all of its respective Obligations under the Loan Documents, and

[select one:]

[to the best knowledge of the undersigned, during such fiscal period the Borrower and the Parent performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing.]

—or—

[to the best knowledge of the undersigned, the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

4.The representations and warranties of the Borrower contained in Article V of the Agreement and all representations and warranties of any Loan Party that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct in all material respects (except to the extent already qualified by materiality pursuant to the terms thereof) on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection with which this Compliance Certificate is delivered.

5.The financial covenant analyses and information set forth on Schedules 1 and  2 attached hereto are true and accurate on and as of the date of this Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                      ,             .

KAPSTONE PAPER AND PACKAGING CORPORATION,

a Delaware corporation

By:

Name:

Title:

D-2

For the Quarter/Year ended                             ,          (“Statement Date”)

SCHEDULE 1
to the Compliance Certificate
($ in 000’s)

I.	Section 7.14(a) — Total Leverage Ratio.
	A.	Total Debt at Statement Date		$
	B.	EBITDA for the four Fiscal Quarter period ending on above date (“Subject Period”)(1):
		1	Consolidated Net Income for Subject Period:
		2	Interest Expense for Subject Period:
		3	Income tax expense for Subject Period:
		4	Depreciation and amortization expenses for Subject Period:
		5	Extraordinary losses (or less gains), net of related tax effects for Subject Period:
		6	Other non-cash charges or losses (or less gains or income) for which no cash outlay (or cash receipt) is foreseeable for Subject Period:
		7	“Cold mill” maintenance outage costs in an aggregate amount of up to $7,500,000 for the term of the Credit Agreement (it being understood that such add-back shall only be permitted in connection with one such outage during the term of the Credit Agreement) but only to the extent that (i) the aggregate amount of such costs for the Subject Period exceeds the actual expense allocable to such outage during the Subject Period and (ii) any such resulting add-back is applied to reduce EBITDA in the future periods to which such expenses actually relate on a Dollar for Dollar basis:

(1) For purposes of calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio, (i) EBITDA shall be deemed to be: $38,877,600 for the Fiscal Quarter ending September 30, 2007, $39,298,700 for the Fiscal Quarter ending December 31, 2007 and $33,475,400 for the Fiscal Quarter ending March 31, 2008 and (ii) EBITDA for the period from April 1, 2008 to the Closing Date shall be determined in a manner consistent with clause (i) of the definition thereof.

D-3

	8	Expenses and fees incurred in the Subject Period to consummate the transactions contemplated by the Loan Documents in an aggregate amount not exceeding $13,500,000:
	9	EBITDA (Lines I.B.1 + 2 + 3 + 4 + 5 + 6 + 7+8):	$
C.	Total Leverage Ratio (Line I.A ¸ Line I.B.9):		to 1

Maximum permitted:

Calendar Year	March 31	June 30	September 30	December 31
2008	N/A	4.00:1.00	4.00:1.00	3.75:1.00
2009	3.50:1.00	3.50:1.00	3.50:1.00	3.00:1.00
Thereafter	3.00:1.00	3.00:1.00	3.00:1.00	3.00:1.00

II.	Section 7.14(d) - Fixed Charge Coverage Ratio
	A.	EBITDA for Subject Period (Line I.B.9 above)(2):	$
	B.	The sum of income taxes paid in cash by the Loan Parties for Subject Period(3):	$
	C.	Cash dividends paid during Subject Period(3):	$
	D.	All unfinanced Capital Expenditures during Subject Period(3):	$
	E.	Cash Interest Expense for Subject Period(3):	$
	F.	Required payments of principal of Funded Debt (including the Term Loans but excluding the Revolving Credit Loans and the Intercompany Subordinated Debt) (3):	$

(2) For purposes of calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio, (i) EBITDA shall be deemed to be: $38,877,600 for the Fiscal Quarter ending September 30, 2007, $39,298,700 for the Fiscal Quarter ending December 31, 2007 and $33,475,400 for the Fiscal Quarter ending March 31, 2008 and (ii) EBITDA for the period from April 1, 2008 to the Closing Date shall be determined in a manner consistent with clause (i) of the definition thereof.

(3) For any Fiscal Quarter ending during the first three full Fiscal Quarters following the Commitment Effective Date, this amount shall be determined not by taking the actual amount for such four consecutive Fiscal Quarter period but instead by dividing (x) the actual amount of this item from the Commitment Effective Date to such Fiscal Quarter end by (y) the number of days from (and including) the Commitment Effective Date to (and including) such Fiscal Quarter end and multiplying the quotient by 365.

D-4

G. Fixed Charge Coverage Ratio (Line II.A - Line II.B — Line II.C - Line II.D) ¸ (Line II.E + Line II.F):

Minimum required:

Four Fiscal Quarters Ending	Minimum Consolidated Fixed Charge Coverage Ratio
Closing Date through September 30, 2011	1.10:1.00
Fiscal Quarter ending December 31, 2011 and each fiscal quarter thereafter	1.15:1.00

D-5

For the Quarter/Year ended                                       (“Statement Date”)

SCHEDULE 2
to the Compliance Certificate
($ in 000’s)

Consolidated EBITDA
(in accordance with the definition of EBITDA
as set forth in the Agreement)

EBITDA	Quarter Ended	Quarter Ended	Quarter Ended	Quarter Ended	Twelve Months Ended
Consolidated Net Income
+ Interest Expense
+ income taxes
+ depreciation expense
+ amortization expense
+ extraordinary losses (or less gains), net of related tax effects
+ other non-cash charges or losses (or less gains or income) for which no cash outlay (or cash receipt) is foreseeable
+ “cold mill” maintenance outage costs in an aggregate amount of up to $7,500,000 for the term of the Credit Agreement (it being understood that such add-back shall only be permitted in

D-6

connection with one such outage during the term of the Credit Agreement) but only to the extent that (i) the aggregate amount of such costs for such period exceeds the actual expense allocable to such outage during such period and (ii) any such resulting add-back is applied to reduce EBITDA in the future periods to which such expenses actually relate on a Dollar for Dollar basis

+ expenses and fees incurred to consummate the transactions contemplated by the Loan Documents in an aggregate amount for all periods not exceeding $13,500,000

= Consolidated EBITDA

D-7

EXHIBIT E-1

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each] Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each] Assignee identified in item 2 below ([the][each, an] “Assignee”).  [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] hereunder are several and not joint.]  Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including, without limitation, the Letters of Credit and the Swing Line Loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”).  Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

1.Assignor[s]:

2.Assignee[s]:

[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]

E-1-1

3.Borrower:Kapstone Kraft Paper Corporation, a Delaware corporation

4.Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement

5.Credit Agreement:Credit Agreement, dated as of June 12, 2008, among the Borrower, the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer, and Swing Line Lender

6.Assigned Interest:

Assignor[s]	Assignee[s]	FacilityAssigned	AggregateAmount ofCommitment/Loansfor all Lenders	Amount ofCommitment/ LoansAssigned	PercentageAssigned ofCommitment/Loans		CUSIPNumber
			$	$		%
			$	$		%
			$	$		%

[7.Trade Date:]

Effective Date:                                      , 20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]
By:
	Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
	Title:

E-1-2

[Consented to and](14) Accepted:
BANK OF AMERICA, N.A., as
Administrative Agent
By:
	Title:

[Consented to:](15)
KAPSTONE KRAFT PAPER CORPORATION
By:
	Title:

[Consented to:](6)
[OTHER]
By:
	Title:

(14) To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

(15) To be added only if the consent of the Borrower and/or other parties (e.g. Swing Line Lender, L/C Issuer) is required by the terms of the Credit Agreement.

E-1-3

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.Representations and Warranties.

1.1.Assignor.  [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2.Assignee.  [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 10.06(b)(iv) and (v) of the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b)(ii) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section      thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms

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all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.Payments.  From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3.General Provisions.  This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption.  This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of                                          [confirm that choice of law provision parallels the Credit Agreement].

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EXHIBIT E-2

FORM OF ADMINISTRATIVE QUESTIONNAIRE

1.     FAX ALONG WITH COMMITMENT LETTER TO:Taylor McLemore

FAX (704) 208.3021

I.  Borrower Name:        KapStone Kraft Paper Corporation

$                                               Type of Credit Facility                               

II. Legal Name of Lender of Record for Signature Page:

·      Signing Credit Agreement        o YES  o NO

·      Coming in via Assignment        o YES  o NO

III. Type of Lender:

(Bank, Asset Manager, Broker/Dealer, CLO/CDO, Finance Company, Hedge Fund, Insurance, Mutual Fund, Pension Fund, Other Regulated Investment Fund, Special Purpose Vehicle, Other — please specify)

IV. Domestic Address: V. Eurodollar Address:

VI.  Contact Information:

Syndicate level information (which may contain material non-public information about the Borrower and its related parties or their respective securities will be made available to the Credit Contact(s).  The Credit Contacts identified must be able to receive such information in accordance with his/her institution’s compliance procedures and applicable laws, including Federal and State securities laws.

	Credit Contact	Primary Operations Contact	Secondary Operations Contact
Name:
Title:
Address:
Telephone:
Facsimile:
E Mail Address:

Does Secondary Operations Contact need copy of notices?  o YES  o NO

	Letter of Credit Contact	Draft Documentation Contact	Legal Counsel
Name:
Title:

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Address:

Telephone:

Facsimile:

E Mail Address:

VII. Lender’s Standby Letter of Credit, Commercial Letter of Credit, and Bankers’ Acceptance Fed Wire Payment Instructions (if applicable):

Pay to:
	(Bank Name)
	(ABA #)
	(Account #)
	(Attention)

VIII. Lender’s Fed Wire Payment Instructions:

Pay to:
	(Bank Name)
	(ABA #)	(City/State)
	(Account #)	(Account Name)
	(Attention)

IX. Organizational Structure and Tax Status

Please refer to the enclosed withholding tax instructions below and then complete this section accordingly:

Lender Taxpayer Identification Number (TIN):                      -                      

Tax Withholding Form Delivered to Bank of America*:

o  W-9

o  W-8BEN

o  W-8ECI

o  W-8EXP

o  W-8IMY

NON–U.S. LENDER INSTITUTIONS

1. Corporations:

If your institution is incorporated outside of the United States for U.S. federal income tax purposes, and is the beneficial owner of the interest and other income it receives, you must complete one of the following three tax forms, as applicable to your institution: a.) Form W-8BEN (Certificate of Foreign Status of Beneficial Owner), b.)

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Form W-8ECI (Income Effectively Connected to a U.S. Trade or Business), or c.) Form W-8EXP (Certificate of Foreign Government or Governmental Agency).

A U.S. taxpayer identification number is required for any institution submitting a Form W-8 ECI.  It is also required on Form W-8BEN for certain institutions claiming the benefits of a tax treaty with the U.S.  Please refer to the instructions when completing the form applicable to your institution.  In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms.  An original tax form must be submitted.

2. Flow-Through Entities

If your institution is organized outside the U.S., and is classified for U.S. federal income tax purposes as either a Partnership, Trust, Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity, an original Form

W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. branches for United States Tax Withholding) must be completed by the intermediary together with a withholding statement.  Flow-through entities other than Qualified Intermediaries are required to include tax forms for each of the underlying beneficial owners.

Please refer to the instructions when completing this form.  In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms.  Original tax form(s) must be submitted.

U.S. LENDER INSTITUTIONS:

If your institution is incorporated or organized within the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification).  Please be advised that we require an original form W-9.

Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for your institution must be completed and returned on or prior to the date on which your institution becomes a lender under this Credit Agreement.  Failure to provide the proper tax form when requested will subject your institution to U.S. tax withholding.

*Additional guidance and instructions as to where to submit this documentation can be found at this link:

X. Bank of America Payment Instructions:

Pay to:	Bank of America, N.A.
	ABA # 026009593
	Dallas, TX
	Acct. # 129-2000-883
	Attn: Credit Services
	Ref: KapStone Kraft Paper Corporation
	Phone Advise: Denise Wolfenberger, 214-209-3175

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EXHIBIT F

FORM OF SECURITY AGREEMENT

THIS SECURITY AND PLEDGE AGREEMENT (this “Agreement”) is entered into as of July 1, 2008 among KAPSTONE KRAFT PAPER CORPORATION, a Delaware corporation (the “Borrower”), KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation (the “Parent”), the other parties identified as “Obligors” on the signature page hereto and such other parties that may become Obligors hereunder after the date hereof (together with the Borrower and the Parent, individually an “Obligor”, and collectively the “Obligors”) and BANK OF AMERICA, N.A., in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (defined below).

RECITALS

WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof (as amended, modified, extended, renewed or replaced from time to time, the “Credit Agreement”) among the Borrower, the Guarantors identified therein, the Lenders identified therein and Bank of America, N.A., as Administrative Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon the terms and subject to the conditions set forth therein;

WHEREAS, pursuant to that certain Note Purchase Agreement dated as of the date hereof (as amended, modified, extended, renewed or replaced from time to time, the “Note Agreement”) among the Borrower, the Parent and the Purchasers identified therein (the “Purchasers”), the Borrower has issued to the Purchasers its senior secured notes due July 1, 2015 (as amended, modified, extended, renewed or replaced from time to time, the “Private Placement Notes”) upon the terms and subject to the conditions set forth therein;

WHEREAS, the Parent and the other Obligors (other than the Borrower) have entered into that certain Guaranty Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise  modified from time to time, the “2008 Guaranty”) in favor of the holders of the Private Placement Notes (the “Noteholders”), pursuant to which the Guarantors (as defined in the Note Agreement) have guarantied all obligations of the Borrower and the Guarantors under the Note Agreement and the other Transaction Documents (as defined in the Note Agreement);

WHEREAS, the Collateral Agent has been appointed to act as the collateral agent for the Noteholders, the Administrative Agent and the Secured Lender Parties with respect to certain matters pursuant to the Intercreditor and Collateral Agency Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), by and among the Noteholders, the Administrative Agent and the Collateral Agent; and

WHEREAS, this Agreement is required by the terms of the Credit Agreement and the Note Agreement.

NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

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1.   Definitions.

(a)   Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Intercreditor Agreement, and if not defined therein, then the meanings ascribed to such terms in the Credit Agreement, and the following terms shall have the meanings set forth in the UCC (defined below):  Accession, Account, Adverse Claim, As-Extracted Collateral, Certificated Security, Chattel Paper, Commercial Tort Claim, Commingled Goods, Consumer Goods, Control, Deposit Account, Document, Electronic Chattel Paper, Equipment, Farm Products, Financial Asset, Fixtures, General Intangible, Goods, Instrument, Inventory, Investment Company Security, Investment Property, Letter-of-Credit Right, Manufactured Home, Money, Payment Intangible, Proceeds, Promissory Note, Securities Account, Securities Intermediary, Security Entitlement, Security, Software, Supporting Obligation and Tangible Chattel Paper and Uncertificated Security.

(b)   In addition, the following terms shall have the meanings set forth below:

“Collateral” has the meaning provided in Section 2 hereof.

“Copyright License” means any written agreement, naming any Obligor as licensor, granting any right under any Copyright.

“Copyrights” means (a) all registered United States copyrights in all Works, now existing or hereafter created or acquired, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Copyright Office, and (b) all renewals thereof.

“Deposit Account Control Agreement” has the meaning set forth in Section 3(c) hereof.

“Financing Documents” means the “Financing Documents” as defined in the Intercreditor Agreement.

“Patent License” means any agreement, whether written or oral, providing for the grant by or to an Obligor of any right to manufacture, use or sell any invention covered by a Patent.

“Patents” means (a) all letters patent of the United States or any other country and all reissues and extensions thereof, and (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof.

“Pledged Bonds” mean, collectively, (i) those certain State of South Carolina Charleston County Industrial Development Revenue Bonds, Series 1998 (Westvaco Corporation Project) issued pursuant to Charleston County Ordinance adopted October 20, 1998 and assigned by MeadWestvaco South Carolina LLC (“MWSC”) to KapStone Charleston Kraft LLC (“KSCK”) pursuant the terms of the Charleston County Ordinance adopted June 17, 2008 and by Assignment and Assumption of Agreements and Bonds and Release from Agreements dated as of July 1, 2008 by and among MVSC, KSCK and Charleston County in the principal amount of up to $420,000,000 and (ii) those certain State of South Carolina Charleston County Industrial Development Revenue Bonds, Series 1998 (Cogen South L.L.C. Project) in the principal amount of up to $160,000,000 issued pursuant to Charleston County Ordinance adopted October 20, 1998.

“Permitted Unpledged Account” means, with respect to any Obligor, any Deposit Account of such Obligor that is used solely as a payroll or employee benefit account or an operating expenses disbursement account, all of which Deposit Accounts are set forth opposite the name of such Obligor

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on Schedule 3(m) hereto on the date of this Agreement (or, in the case of any additional Obligors on the date such additional Obligor becomes a party to this Agreement) or are deposit accounts for such permitted purposes for which the Collateral Agent has received prior written notice of such addition (and, upon the receipt by the Collateral Agent of such notice, Schedule 3(m) hereto shall be deemed automatically amended to include the additional Permitted Unpledged Account).

“Pledged Deposit Account” means any Deposit Account of an Obligor, other than a Permitted Unpledged Account.

“Pledged Equity” means, with respect to each Obligor, (i) 100% of the issued and outstanding Equity Interests of each Domestic Subsidiary of the Borrower that is directly owned by such Obligor and (ii) 66% (or such greater percentage that, due to a change in an applicable Law after the date hereof, (A) could not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary as determined for United States federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary’s United States parent and (B) could not reasonably be expected to cause any material adverse tax consequences) of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary of the Borrower that is directly owned by such Obligor, including the Equity Interests of the Subsidiaries owned by such Obligor as set forth on Schedule 1(b) hereto, in each case together with the certificates (or other agreements or instruments), if any, representing such shares, and all options and other rights, contractual or otherwise, with respect thereto, including, but not limited to, the following:

(1)   subject to the limitation in clause (ii) above, all Equity Interests representing a dividend thereon, or representing a distribution or return of capital upon or in respect thereof, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder thereof, or otherwise in respect thereof; and

(2)   subject to the limitation in clause (ii) above, in the event of any consolidation or merger involving the issuer thereof and in which such issuer is not the surviving Person, all shares of each class of the Equity Interests of the successor Person formed by or resulting from such consolidation or merger, to the extent that such successor Person is a direct Subsidiary of an Obligor.

“Secured Obligations” means the “Senior Secured Obligations” as defined in the Intercreditor Agreement.

“Secured Parties” means the “Creditors” as defined in the Intercreditor Agreement.

“Securities Account Control Agreement” has the meaning set forth in Section 3(c) hereof.

“Trademark License” means any agreement, written or oral, providing for the grant by or to an Obligor of any right to use any Trademark.

“Trademarks” means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States,

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any state thereof or any other country or any political subdivision thereof, or otherwise and (b) all renewals thereof.

“UCC” means the Uniform Commercial Code as in effect from time to time in the state of Illinois except as such term may be used in connection with the perfection of the Collateral and then the applicable jurisdiction with respect to such affected Collateral shall apply.

“Work” means any work that is subject to copyright protection pursuant to Title 17 of the United States Code.

2.     Grant of Security Interest in the Collateral.  To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration, mandatory prepayment or otherwise, of the Secured Obligations, each Obligor hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a continuing security interest in, and a right to set off against, any and all right, title and interest of such Obligor in and to all of the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the “Collateral”):

(a) all Accounts;

(b) all Chattel Paper;

(c) those certain Commercial Tort Claims set forth on Schedule 2(c) hereto;

(d) all Copyrights;

(e) all Copyright Licenses;

(f) all Documents;

(g) all Equipment, including Equipment governed by the provisions of the FILOT Leases;

(h) all Fixtures;

(i) all General Intangibles, including any Obligor’s rights, title and interest as lessee with respect to the FILOT Leases;

(j) all Goods;

(k) all Instruments, including without limitation the Instruments evidencing the Indebtedness described on Schedule 2(k) and owing to such Obligor by the issuers named therein, and all interest, cash, Instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Instruments evidencing such Indebtedness;

(l) all Inventory;

(m) all Investment Property;

(n) all Letter-of-Credit Rights;

(o) all Money;

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(p) all Patents;

(q) all Patent Licenses;

(r) all Pledged Bonds;

(s) all Pledged Deposit Accounts;

(t) all Pledged Equity;

(u) all Software;

(v) all Supporting Obligations;

(w) all Trademarks;

(x) all Trademark Licenses; and

(y) all Accessions and all Proceeds of any and all of the foregoing.

Notwithstanding anything in this Section 2 to the contrary, the foregoing grant of a security interest shall not be deemed to grant a security interest in any of the property described below and the term Collateral shall exclude the property described below (such property being hereinafter referred to as “Specific Excluded Property”):

(I)            any property or rights described in clauses (a) through (y) above, to the extent that, under applicable Laws, the applicable Obligor is expressly prohibited from granting a security interest therein or applicable Laws provide for the involuntary forfeiture of the property in the event a security interest is granted therein without the consent of the appropriate Governmental Authority; provided, however, that if such prohibition or the condition requiring such consent relates only to the foreclosure of a security interest or the exercise of other rights and remedies upon a default but not to the granting of a security interest therein, then a security interest in such property shall be deemed to be granted by this Agreement subject to the condition that the consent of such Governmental Authority is obtained by the Collateral Agent prior to foreclosure or exercising its other rights or remedies hereunder as to which such consent is required, and

(II)           any property or rights described in clauses (a) through (y) above, to the extent that the terms and provisions of a written agreement, document or instrument in effect on the date hereof (or after the date hereof unless the relevant prohibition is prohibited under any Financing Document) creating or evidencing such property or any rights relating thereto expressly prohibit the granting of a security interest therein or condition the granting of a security interest therein on the consent of a third party whose consent has not been obtained or would cause, or allow a third party to cause, the forfeiture of such property upon the granting of a security interest therein (other than to the extent that any such requirement or restriction would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of Revised Article 9 of the UCC (or any successor provision or provisions)); provided, however, that if such prohibition or the condition requiring such consent relates only to the foreclosure of a security interest or the exercise of other rights or remedies upon a default, then a security interest in such property shall be deemed to be granted by this Agreement subject to the condition that the consent of such third party is obtained

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by the Collateral Agent prior to foreclosure or exercising of its other rights or remedies hereunder as to which such consent is required; and

(III)         prior to an Event of Default and, following an Event of Default unless otherwise requested by Agent, motor vehicles;

provided that,

(A)          In the event of the termination or elimination of any prohibition or the requirement for any consent contained in any applicable Law, agreement, document or instrument to the extent sufficient to permit any Specific Excluded Property to become Collateral hereunder, or upon the granting of any such consent, or waiving or terminating any requirement for such consent, a security interest in such Specific Excluded Property shall be automatically and simultaneously granted hereunder in such Specific Excluded Property, and the Specific Excluded Property automatically and simultaneously shall be deemed to be assigned and pledged to the Collateral Agent and shall be included as Collateral hereunder; and

(B)           the foregoing limitations on the security interests created hereby shall not apply (1) to the extent any such prohibition on the creation of a security interest is rendered ineffective under the UCC or other applicable Law or (2) to the extent such General Intangible, agreement, license, permit or other instrument was entered into with the sole intent of avoiding the requirement that a security interest be granted therein pursuant to this Agreement;

(C)           in no event shall the foregoing be construed to exclude from the security interests created by this Agreement any proceeds of any Specific Excluded Property of such Obligor, the monetary value of the goodwill or other General Intangibles relating thereto, or any Accounts or the right to payments that are due or become due to such Obligor under any such agreement or other instrument, in each case to the extent the same would otherwise constitute Collateral.

The Obligors and the Collateral Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interests created hereby in the Collateral constitute continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising and, in each case, are not to be construed as an assignment of any copyrights, patents, trademarks or any licenses therefor.

3.Representations and Warranties.  Each Obligor hereby represents and warrants to the Collateral Agent, for the benefit of the Secured Parties, that:

(a)           Ownership.  Each Obligor is the legal and beneficial owner of its Collateral and has the right to pledge, sell, assign or transfer the same.  Subject to any Liens permitted under the Credit Agreement or the Note Agreement, there exists no Adverse Claim with respect to the Pledged Equity of such Obligor.

(b)           Chief Executive Office; Books & Records; Legal Name; State of Organization.  As of the Commitment Effective Date, each Obligor’s chief executive office and principal place of business are (and for the prior four months have been) located at the locations set forth on Schedule 3(b) attached hereto, and, as of the Commitment Effective Date, each Obligor keeps its books and records at such applicable locations.  As of the Commitment Effective Date, each Obligor’s exact legal name is as shown in this Agreement and its location (within the meaning of Section 9-307 of the UCC) is (and for the prior four months has been) its state of organization as shown in this Agreement.  As of the Commitment Effective Date, no Obligor has in the past four months

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changed its name, been party to a merger, consolidation or other change in structure or used any tradename not disclosed on Schedule 3(b) attached hereto.

(c)           Security Interest/Priority.  This Agreement creates a valid security interest in favor of the Collateral Agent, for the benefit of the Secured Parties, in the Collateral of such Obligor and, when properly perfected by filing, shall constitute a valid and perfected, first priority security interest in such Collateral (including all uncertificated Pledged Equity consisting of partnership or limited liability company interests that do not constitute Securities), to the extent such security interest can be perfected by filing under the UCC, free and clear of all Liens except for Permitted Liens.  The taking possession by the Collateral Agent of the Certificated Securities (if any) evidencing the Pledged Equity and all other Instruments constituting Collateral will perfect and establish the first priority of the Collateral Agent’s security interest in all the Pledged Equity evidenced by such Certificated Securities and such Instruments.  With respect to any Collateral consisting of a Deposit Account, Securities Entitlement or held in a Securities Account, upon execution and delivery by the applicable Obligor, the applicable Depository Bank or Securities Intermediary, as applicable, and the Collateral Agent of an agreement granting control to the Collateral Agent over such Collateral (a “Deposit Account Control Agreement” or “Securities Account Control Agreement”, as applicable), in each case in form and substance reasonably satisfactory to the Collateral Agent, the Collateral Agent shall have a valid and perfected, first priority security interest in such Collateral substantially in form and substance reasonably satisfactory to the Collateral Agent.

(d)           Types of Collateral.  Unless the relevant Obligor has provided the Collateral Agent with 30 days prior written notice thereof, none of the Collateral consists of, or is the Proceeds of, As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes or standing timber that is to be cut and removed under a conveyance or contract for sale (other than with respect to an Obligor’s contractual right to obtain such standing timber owned by Seller pursuant to the long term fiber supply agreement and logger contracts in connection with transactions contemplated by the Mead Purchase Agreement).

(e)           Accounts.  (i) Each Account of the Obligors and the papers and documents relating thereto are genuine and in all material respects what they purport to be, (ii) each Account arises out of (A) a bona fide sale of goods sold and delivered by such Obligor (or is in the process of being delivered) or (B) services theretofore actually rendered by such Obligor to, the account debtor named therein, (iii) no Account of an Obligor is evidenced by any Instrument or Chattel Paper unless such Instrument or Chattel Paper, to the extent requested by the Collateral Agent, has been endorsed over and delivered to, or submitted to the control of, the Collateral Agent, (iv) unless the relevant Obligor has provided the Collateral Agent with 30 days prior written notice to the contrary, no surety bond has been required or given in connection with any Account of an Obligor or the contracts or purchase orders out of which they arose and (v) the right to receive payment under each Account is assignable.

(f)            Equipment and Inventory.  With respect to any Equipment and/or Inventory of an Obligor, each such Obligor has exclusive possession and control of such Equipment and Inventory of such Obligor except for (i) Equipment leased by such Obligor as a lessee, (ii) Equipment or Inventory in transit with common carriers, (iii) Equipment that has been temporarily sent off-site for the purposes of repair and maintenance or (iv) certain Equipment subject to that certain Reciprocal Plant Operating Agreement between the Borrower and MeadWestvaco Corporation, as in effect on the date hereof.  Unless the relevant Obligor has provided the Collateral Agent with ten (10) days prior written notice to the contrary, no Inventory of an Obligor with an aggregate value of $100,000 or more is held by a Person other than an Obligor pursuant to consignment, sale or return, sale on approval or similar arrangement.

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(g)           Authorization of Pledged Equity.  All Pledged Equity is duly authorized and validly issued, is fully paid and, to the extent applicable, nonassessable and is not subject to the preemptive rights of any Person.

(h)           No Other Equity Interests, Instruments, Etc.   As of the Commitment Effective Date, (i) no Obligor owns any Certificated Securities in any Subsidiary that are required to be pledged and delivered to the Collateral Agent hereunder except as set forth on Schedule 1(b) hereto, and (ii) no Obligor holds any Instruments, Documents or Tangible Chattel Paper required to be pledged and delivered to the Collateral Agent pursuant to Section 4(a)(i) of this Agreement other than as set forth on Schedule 3(h) hereto.  All such Certificated Securities, Instruments, Documents and Tangible Chattel Paper have been or shall be delivered to the Collateral Agent to the extent required to be so delivered pursuant to Section 3(e).

(i)            Partnership and Limited Liability Company Interests.  Subject to the proviso set forth below, none of the Subsidiary Equity consisting of partnership or limited liability company interests (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a security governed by Article 8 of the UCC, (iii) is an investment company security, (iv) is held in a securities account or (v) constitutes a “Security” or a “Financial Asset” as such terms are defined in Article 8 of the UCC; provided, however, that all Subsidiary Equity consisting of a partnership or limited liability company interest that constitutes a Security because the relevant limited liability company agreement or partnership agreement expressly provides that it is a Security pursuant to Section 8-103(c) of the UCC has been evidenced by a certificate and delivered to the Collateral Agent.

(j)            Contracts; Agreements; Licenses.  The Obligors have no material contracts, agreements or licenses which are non-assignable by their terms, or as a matter of law, or which prevent the granting of a security interest therein other than such contracts, agreements or licenses which are replaceable by the applicable Obligor in the ordinary course of business on terms, taken as a whole, that are substantially as favorable (or more favorable) to such Obligor.

(k)           Mergers, Etc.  Other than as set forth on Schedule 3(k) hereto, no Obligor has been party to a merger, consolidation or other change in structure or used any tradename in the prior five years.

(l)            Consents; Etc.  There are no restrictions in any Organization Document governing any Pledged Equity or any other document related thereto which would limit or restrict (i) the grant of a Lien pursuant to this Agreement on such Pledged Equity, (ii) the perfection of such Lien or (iii) the exercise of remedies in respect of such perfected Lien in the Pledged Equity as contemplated by this Agreement.  Except for (i) the filing or recording of UCC financing statements, (ii) the filing of appropriate notices with the United States Patent and Trademark Office and the United States Copyright Office, (iii) obtaining control to perfect the Liens created by this Agreement (to the extent required under Section 4(a) hereof), (iv) such actions as may be required by Laws affecting the offering and sale of securities, (v) such actions as may be required by applicable foreign Laws affecting the pledge of the Pledged Equity of Foreign Subsidiaries, (vi) consents, authorizations, filings or other actions which have been obtained or made and (vii) consents with respect to contracts which are either (x) not material to the business of the Obligors or (y) replaceable in the ordinary course of business, no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder, member or creditor of such Obligor), is required for (A) the grant by such Obligor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by such Obligor, (B) the perfection of such security interest (to the

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extent such security interest can be perfected by filing under the UCC, the granting of control (to the extent required under Section 4(a) hereof) or by filing an appropriate notice with the United States Patent and Trademark Office or the United States Copyright Office) or (C) the exercise by the Collateral Agent or the Secured Parties of the rights and remedies provided for in this Agreement.

(m)          Commercial Tort Claims.  As of the Commitment Effective Date, no Obligor has any Commercial Tort Claims with a value of $100,000 or more, other than as set forth on Schedule 2(c) hereto.

(n)           Copyrights, Patents and Trademarks.

(i)            Set forth on Schedule 3(n) is a list of each Copyright, Copyright License, Patent, Patent License, Trademark and Trademark License registered or pending registration with the United States Copyright Office or the United States Patent and Trademark Office and owned by each Loan Party.

(ii)           To the best of each Obligor’s knowledge, each Copyright, Patent and Trademark of such Obligor is valid, subsisting, unexpired, enforceable and has not been abandoned.

(iii)          To the best of each Obligor’s knowledge, no holding, decision or judgment has been rendered by any Governmental Authority that would limit, cancel or question the validity of any Copyright, Patent or Trademark of any Obligor.

(iv)          No action or proceeding is pending seeking to limit, cancel or question the validity of any Copyright, Patent or Trademark of any Obligor, or that, if adversely determined, could reasonably be expected to have a material adverse effect on the value of any material Copyright, Patent or Trademark of any Obligor.

(v)           All applications pertaining to the Copyrights, Patents and Trademarks of each Obligor have been duly and properly filed, and all registrations or letters pertaining to such Copyrights, Patents and Trademarks have been duly and properly filed and issued.

(vi)          No Obligor has made any assignment or agreement in conflict with the security interest in the Copyrights, Patents or Trademarks of any Obligor hereunder.

(o)           Exercising of Rights.  The exercise by the Collateral Agent of its rights and remedies hereunder will not violate any material contractual restriction or, to the knowledge of any Obligor, any Law or governmental regulation binding on or affecting an Obligor or any of its Property except for such violations as will not interfere with the principal benefits, rights and remedies provided for, and granted to, the Collateral Agent and the Secured Parties hereunder.

(p)           Deposit Accounts.  As of the Commitment Effective Date, set forth on Schedule 3(p) attached hereto is a list of all of the Deposit Accounts of the Obligors and an indication whether such Deposit Account is a Pledged Deposit Account or a Permitted Unpledged Account.

(q)           Securities Accounts.  As of the Commitment Effective Date, set forth on Schedule 3(p) attached hereto is a list of all of the Securities Accounts of the Obligors.

8.Covenants. Each Obligor covenants that until such time as the Secured Obligations arising under the Financing Documents have been paid in full and the Commitments have expired or been terminated, such Obligor shall:

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(a)           Instruments/Chattel Paper/Pledged Equity/Control.

(i)  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, or if any property constituting Collateral shall be stored or shipped subject to a Document, ensure that such Instrument, Tangible Chattel Paper or Document is either in the possession of such Obligor at all times or, if requested by the Collateral Agent to perfect its security interest in such Collateral, is delivered to the Collateral Agent duly endorsed in a manner satisfactory to the Collateral Agent.  Such Obligor shall ensure that any Collateral consisting of Tangible Chattel Paper is marked with a legend acceptable to the Collateral Agent indicating the Collateral Agent’s security interest in such Tangible Chattel Paper.    Without limiting the foregoing, all intercompany Indebtedness owed to an Obligor in excess of $100,000, individually or in the aggregate, must be evidenced by a promissory note, in a form reasonably satisfactory to the Collateral Agent, and delivered to the Collateral Agent.

(ii)  Deliver to the Collateral Agent promptly upon the receipt thereof by or on behalf of an Obligor, all certificates and instruments constituting Pledged Equity.  Prior to delivery to the Collateral Agent, all such certificates constituting Pledged Equity shall be held in trust by such Obligor for the benefit of the Collateral Agent pursuant hereto.  All such certificates representing Pledged Equity shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, substantially in the form provided in Exhibit 4(a)(ii) hereto.

(iii)  Execute and deliver all agreements, assignments, instruments or other documents as reasonably requested by the Collateral Agent for the purpose of obtaining and maintaining Control with respect to any Collateral consisting of (i) Deposit Accounts, (ii) Investment Property, (iii) Letter-of-Credit Rights and (iv) Electronic Chattel Paper including, without limitation, any Deposit Account Control Agreements or Securities Account Control Agreements.

(b)           Filing of Financing Statements, Notices, etc.  Authorize the Collateral Agent to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Collateral Agent may from time to time deem necessary or appropriate in order to perfect and maintain the security interest granted hereunder in accordance with the UCC (including authorization to describe the collateral as “all personal property” or “all assets”).  Each Obligor shall also execute and deliver to the Collateral Agent such agreements, assignments or instruments (including affidavits, notices, reaffirmations and amendments and restatements of existing documents, as the Collateral Agent may reasonably request) and do all such other things as the Collateral Agent may reasonably deem necessary or appropriate (i) to assure to the Collateral Agent its security interests hereunder are perfected and maintained, including (A) such instruments as the Collateral Agent may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with the UCC, (B) with regard to Copyrights, a Notice of Grant of Security Interest in Copyrights in the form of Schedule 4(b)(i), (C) with regard to Patents, a Notice of Grant of Security Interest in Patents for filing with the United States Patent and Trademark Office in the form of Schedule 4(b)(ii) hereto and (D) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of Schedule 4(b)(iii) hereto, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Collateral Agent of its rights and interests hereunder.  Furthermore, each Obligor also hereby irrevocably makes, constitutes and appoints the Collateral Agent, its

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nominee or any other person whom the Collateral Agent may designate, as such Obligor’s attorney in fact with full power and for the limited purpose to sign in the name of such Obligor any financing statements, or amendments and supplements to financing statements, renewal financing statements, notices or any similar documents which in the Collateral Agent’s reasonable discretion would be necessary or appropriate in order to perfect and maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable until such time as the Secured Obligations arising under the Financing Documents have been paid in full and the Commitments have expired or been terminated.  Each Obligor hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Collateral Agent without notice thereof to such Obligor wherever the Collateral Agent may in its sole discretion desire to file the same.  In the event for any reason the Law of any jurisdiction other than Illinois becomes or is applicable to the Collateral of any Obligor or any part thereof, or to any of the Secured Obligations, such Obligor agrees to execute and deliver all such instruments and to do all such other things as the Collateral Agent in its sole discretion reasonably deems necessary or appropriate to preserve, protect and enforce the security interest of the Collateral Agent under the Law of such other jurisdiction (and, if an Obligor shall fail to do so promptly upon the request of the Collateral Agent, then the Collateral Agent may execute any and all such requested documents on behalf of such Obligor pursuant to the power of attorney granted hereinabove).  Each Obligor agrees to mark its books and records to reflect the security interest of the Collateral Agent in the Collateral.

(c)           Pledged Deposit Accounts.

(i)            (A) Maintain Pledged Deposit Accounts only with the Collateral Agent or banks that have entered into a Deposit Account Control Agreement (each such bank, a “Depositary Bank”) and (B) Deposit in a Pledged Deposit Account all of its cash balances and the proceeds of all of the other Collateral received from time to time thereby other than cash balances necessary to pay salaries to and benefits to the employees of such Obligor and to pay other administrative and operating expenses incurred by such Obligor in the ordinary course of business, in each case to the extent that such payments are not prohibited by the terms of any Financing Document.

(ii)           Not add any bank as a Depositary Bank (other than in connection with a Permitted Unpledged Account) or add any Deposit Account as a Pledged Deposit Account to those set forth on Schedule 3(p) hereto, unless the Collateral Agent shall have received at least ten (10) days’ prior written notice of such addition and shall have received a Deposit Account Control Agreement or a supplement to an existing Deposit Account Control Agreement, covering such new Pledged Deposit Account and duly executed by such Depositary Bank and such Obligor (and, upon the receipt by Collateral Agent of any such Deposit Account Control Agreement or supplement to an existing Deposit Account Control Agreement, Schedule 3(p) shall be automatically amended to include the additional Pledged Deposit Account and, if applicable, the new Depositary Bank).

(iii)          Each of the Pledged Deposit Accounts shall be subject to applicable Laws (including, without limitation, such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking authority or Governmental Authority) as are in effect from time to time.

(iv)          So long as no Event of Default shall have occurred and be continuing or would occur as a result thereof, each of the Obligors may withdraw, and the Collateral Agent and each of the Secured Parties hereby authorize each of the Obligors and the Depositary Banks

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to have paid and released to any Permitted Unpledged Account or to any other Person designated by such Obligor, any amounts on deposit in their Pledged Deposit Accounts for the conduct of the business of such Obligor and its Subsidiaries in the ordinary course or otherwise expressly permitted under the terms of each of the Financing Documents.

(d)           Securities Accounts.  Not maintain any Securities Account other than those set forth on Schedule 3(p) hereto, unless the Collateral Agent shall have received at least ten (10) days’ prior written notice of such addition and shall have received a Securities Account Control Agreement or a supplement to an existing Securities Account Control Agreement, covering such new Securities Account and duly executed by the Securities Intermediary for such Securities Account and such Obligor (and, upon the receipt by the Collateral Agent of any such Securities Account Control Agreement or supplement to an existing Securities Account Control Agreement, Schedule 3(p) shall be automatically deemed amended to include the additional Securities Account and, if applicable, the new Securities Intermediary).

(e)           Defense of Title.  Warrant and defend title to and ownership of the Collateral (except as otherwise permitted under each of the Financing Documents) of such Obligor at its own expense against the claims and demands of all other parties claiming an interest therein, keep the Collateral free from all Liens, except for Liens permitted by each of the Financing Documents and not sell, exchange, transfer, assign, lease or otherwise dispose of the Collateral of such Obligor or any interest therein, except as permitted under each of the Financing Documents.

(f)            Collateral Held by Warehouseman, Bailee, etc.  If any Collateral with a value of $100,000 or more is at any time in the possession or control of a warehouseman, bailee or any agent or processor of such Obligor and the Collateral Agent so requests (i) notify such Person in writing of the Collateral Agent’s security interest therein, (ii) instruct such Person to hold all such Collateral for the Collateral Agent’s account and subject to the Collateral Agent’s instructions and (iii) use reasonable best efforts to obtain a written acknowledgment from such Person that it is holding such Collateral for the benefit of the Collateral Agent.

(g)           Treatment of Accounts.  Not grant or extend the time for payment of any Account, or compromise or settle any Account for less than the full amount thereof, or release any person or property, in whole or in part, from payment thereof, or allow any credit or discount thereon, other than as normal and customary in the ordinary course of an Obligor’s business.

(h)           Commercial Tort Claims.  (i) Promptly forward to the Collateral Agent an updated Schedule 2(c) listing any and all Commercial Tort Claims with a value of $100,000 or more by or in favor of such Obligor and (ii) execute and deliver such statements, documents and notices and do and cause to be done all such things as may be required by the Collateral Agent, or required by Law to create, preserve, perfect and maintain the Collateral Agent’s security interest in any Commercial Tort Claims initiated by or in favor of any Obligor.

(i)            Books and Records.  Mark its books and records (and shall cause the issuer of the Pledged Equity of such Obligor to mark its books and records) to reflect the security interest granted pursuant to this Agreement.

(j)            Nature of Collateral.  At all times maintain the Collateral as personal property and not affix any of the Collateral to any real property in a manner which would change its nature from personal property to real property or a Fixture to real property, unless the Collateral Agent shall have a perfected Lien on such Fixture or real property or shall have agreed otherwise.

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(k)           Issuance or Acquisition of Equity Interests.  Not without executing and delivering, or causing to be executed and delivered, to the Collateral Agent such agreements, documents and instruments as the Collateral Agent may reasonably require, issue or acquire any Pledged Equity consisting of an interest in a partnership or a limited liability company that (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an investment company security, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset.

(l)            Intellectual Property.

(i)            Not do any act or knowingly omit to do any act whereby any material Copyright may become invalidated and (A) not do any act, or knowingly omit to do any act, whereby any material Copyright may become injected into the public domain; (B) notify the Collateral Agent immediately if it knows that any material Copyright may become injected into the public domain or of any materially adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any court or tribunal in the United States or any other country) regarding an Obligor’s ownership of any such Copyright or its validity; (C) take all necessary steps as it shall deem appropriate under the circumstances, to maintain and pursue each application (and to obtain the relevant registration) of each material Copyright owned by an Obligor and to maintain each registration of each material Copyright owned by an Obligor including, without limitation, filing of applications for renewal where necessary; and (D) promptly notify the Collateral Agent of any material infringement of any material Copyright of an Obligor of which it becomes aware and take such actions as it shall reasonably deem appropriate under the circumstances to protect such Copyright, including, where appropriate, the bringing of suit for infringement, seeking injunctive relief and seeking to recover any and all damages for such infringement.

(ii)           Not make any assignment or agreement in conflict with the security interest in the Copyrights of each Obligor hereunder (except as permitted by each of the Financing Documents).

(iii)          (A) Continue to use each material Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under such Trademark, (C) employ such Trademark with the appropriate notice of registration, if applicable, (D) not adopt or use any mark that is confusingly similar or a colorable imitation of such Trademark unless the Collateral Agent, for the ratable benefit of the Secured Parties, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (E) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any such Trademark may become invalidated.

(iv)          Not do any act, or omit to do any act, whereby any material Patent may become abandoned or dedicated.

(v)           Notify the Collateral Agent and the Secured Parties immediately if it knows that any application or registration relating to any material Patent or Trademark may become abandoned or dedicated, or of any materially adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court or tribunal

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in any country) regarding such Obligor ownership of any Patent or Trademark or its right to register the same or to keep and maintain the same.

(vi)          Take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of each material Patent and Trademark, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability.

(vii)         Promptly notify the Collateral Agent and the Secured Parties after it learns that any material Patent or Trademark included in the Collateral is infringed, misappropriated or diluted by a third party and promptly sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or to take such other actions as it shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark.

(viii)        Not make any assignment or agreement in conflict with the security interest in the Patents or Trademarks of each Obligor hereunder (except as permitted by each of the Financing Documents).

Notwithstanding the foregoing, the Obligors may, in their reasonable business judgment, fail to maintain, pursue, preserve or protect any Copyright, Patent or Trademark which is not material to their businesses.

(m)          Insurance. Insure, repair and replace the Collateral of such Obligor as set forth in each of the Financing Documents.  All insurance proceeds paid in connection with any insurance providing coverage with respect to any Collateral shall be subject to the security interests of the Collateral Agent hereunder and shall be paid or applied in accordance with the terms of the Intercreditor Agreement.

(n)           Amendments.  Not make or consent to any amendment or other modification or waiver with respect to any of the Collateral of such Obligor or enter into any agreement or allow to exist any restriction with respect to any of the Collateral of such Obligor other than pursuant hereto or as may be permitted under the each of the Financing Documents, except for such amendments, modifications or waivers that would not be reasonably expected to be materially adverse to the interests of the Secured Parties.

9.Authorization to File Financing Statements.  Each Obligor hereby authorizes the Collateral Agent to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Collateral Agent may from time to time deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC (including authorization to describe the Collateral as “all personal property”, “all assets” or words of similar meaning).

10.Advances.  On failure of any Obligor to perform any of the covenants and agreements contained herein, the Collateral Agent may, at its sole option and in its sole discretion upon prior notice to the relevant Obligor, perform the same and in so doing may expend such sums as the Collateral Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Collateral Agent may make for the protection of the security hereof or which may be compelled to make by

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operation of Law.  All such sums and amounts so expended shall be repayable by the Obligors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at the Default Rate.  No such performance of any covenant or agreement by the Collateral Agent on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors of any Default or Event of Default.  The Collateral Agent may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by an Obligor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.

11.           Remedies.

(a)           General Remedies.  Upon the occurrence of an Event of Default and during continuation thereof, the Collateral Agent shall have, in addition to the rights and remedies provided herein, in any of the Financing Documents, in any other documents relating to the Secured Obligations, or by Law (including, but not limited to, levy of attachment, garnishment and the rights and remedies set forth in the UCC of the jurisdiction applicable to the affected Collateral), the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further, the Collateral Agent may, with or without judicial process or the aid and assistance of others, (i) enter on any premises on which any of the Collateral may be located and, without resistance or interference by the Obligors, take possession of the Collateral, (ii) dispose of any Collateral on any such premises, (iii) require the Obligors to assemble and make available to the Collateral Agent at the expense of the Obligors any Collateral at any place and time designated by the Collateral Agent which is reasonably convenient to both parties, (iv) remove any Collateral from any such premises for the purpose of effecting sale or other disposition thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law, all of which each of the Obligors hereby waives to the fullest extent permitted by Law, at any place and time or times, sell and deliver any or all Collateral held by or for it at public or private sale (which in the case of a private sale of Pledged Equity, shall be to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof), at any exchange or broker’s board or elsewhere, by one or more contracts, in one or more parcels, for Money, upon credit or otherwise, at such prices and upon such terms as the Collateral Agent deems advisable, in its sole discretion (subject to any and all mandatory legal requirements). Each Obligor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall be deemed to have been made in a commercially reasonable manner and, in the case of a sale of Pledged Equity, that the Collateral Agent shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933.  Neither the Collateral Agent’s compliance with applicable Law nor its disclaimer of warranties relating to the Collateral shall be considered to adversely affect the commercial reasonableness of any sale.  To the extent the rights of notice cannot be legally waived hereunder, each Obligor agrees that any requirement of reasonable notice shall be met if such notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to the Borrower in accordance with the notice provisions of Section 11.02 of the Credit Agreement or paragraph 11I of the Note Agreement at least 10 days before the time of sale or other event giving rise to the requirement of such notice.  The Collateral Agent may adjourn any public

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or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  Each Obligor further acknowledges and agrees that any offer to sell any Pledged Equity which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above shall be deemed to involve a “public sale” under the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act of 1933, and the Collateral Agent may, in such event, bid for the purchase of such securities.  The Collateral Agent shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given.  To the extent permitted by applicable Law, any Secured Party may be a purchaser at any such sale.  To the extent permitted by applicable Law, each of the Obligors hereby waives all of its rights of redemption with respect to any such sale.  Subject to the provisions of applicable Law, the Collateral Agent may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by Law, be made at the time and place to which the sale was postponed, or the Collateral Agent may further postpone such sale by announcement made at such time and place.

(b)           Remedies relating to Accounts.  During the continuation of an Event of Default, whether or not the Collateral Agent has exercised any or all of its rights and remedies hereunder, (i) each Obligor will promptly upon request of the Collateral Agent instruct all account debtors to remit all payments in respect of Accounts to a mailing location selected by the Collateral Agent and (ii) the Collateral Agent shall have the right to enforce any Obligor’s rights against its customers and account debtors, and the Collateral Agent or its designee may notify any Obligor’s customers and account debtors that the Accounts of such Obligor have been assigned to the Collateral Agent or of the Collateral Agent’s security interest therein, and may (either in its own name or in the name of an Obligor or both) demand, collect (including without limitation by way of a lockbox arrangement), receive, take receipt for, sell, sue for, compound, settle, compromise and give acquittance for any and all amounts due or to become due on any Account, and, in the Collateral Agent’s discretion, file any claim or take any other action or proceeding to protect and realize upon the security interest of the Secured Parties in the Accounts.  Each Obligor acknowledges and agrees that the Proceeds of its Accounts remitted to or on behalf of the Collateral Agent in accordance with the provisions hereof shall be solely for the Collateral Agent’s own convenience and that such Obligor shall not have any right, title or interest in such Accounts or in any such other amounts except as expressly provided herein.  Neither the Collateral Agent nor the Secured Parties shall have any liability or responsibility to any Obligor for acceptance of a check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance.  Furthermore, during the continuation of an Event of Default, (i) the Collateral Agent shall have the right, but not the obligation, to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and the Obligors shall furnish all such assistance and information as the Collateral Agent may reasonably require in connection with such test verifications, (ii) upon the Collateral Agent’s request and at the expense of the Obligors, the Obligors shall cause independent public accountants or others satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts and (iii) the Collateral Agent in its own name or in the name of others may communicate with account debtors on the Accounts to verify with them to the Collateral Agent’s satisfaction the existence, amount and terms of any Accounts.

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(c)           Access.  In addition to the rights and remedies hereunder, upon the occurrence of an Event of Default and during the continuance thereof, the Collateral Agent shall have the right to enter and remain upon the various premises of the Obligors without cost or charge to the Collateral Agent, and use the same, together with materials, supplies, books and records of the Obligors for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise.  In addition, the Collateral Agent may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral.

(d)           Nonexclusive Nature of Remedies.  Failure by the Collateral Agent or the Secured Parties to exercise any right, remedy or option under this Agreement, any other Financing Document, any other document relating to the Secured Obligations, or as provided by Law, or any delay by the Collateral Agent or the Secured Parties in exercising the same, shall not operate as a waiver of any such right, remedy or option.  No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated, which in the case of the Collateral Agent or the Secured Parties shall only be granted as provided herein.  To the extent permitted by Law, neither the Collateral Agent, the Secured Parties, nor any party acting as attorney for the Collateral Agent or the Secured Parties, shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct hereunder.  The rights and remedies of the Collateral Agent and the Secured Parties under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Collateral Agent or the Secured Parties may have.

(e)           Retention of Collateral.  In addition to the rights and remedies hereunder, the Collateral Agent may, in compliance with Sections 9-620 and 9-621 of the UCC or otherwise complying with the requirements of applicable Law of the relevant jurisdiction, accept or retain the Collateral in satisfaction of the Secured Obligations.  Unless and until the Collateral Agent shall have provided such notices, however, the Collateral Agent shall not be deemed to have retained any Collateral in satisfaction of any Secured Obligations for any reason.

(f)            Deficiency.  In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent or the Secured Parties are legally entitled, the Obligors shall be jointly and severally liable for the deficiency, together with interest thereon at the Default Rate, together with the costs of collection and the fees, charges and disbursements of counsel.  Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Obligors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto.

(g)           Indemnification.  Each Obligor hereby agrees to indemnify the Collateral Agent and the Secured Parties in accordance with the terms of Section 11.04 of the Credit Agreement, paragraph 11B of the Note Agreement, each of the other Financing Documents and the Intercreditor Agreement with respect to the actions taken by the Collateral Agent in accordance with the foregoing.  The foregoing indemnity shall survive the repayment of the Secured Obligations.

12.           Rights of the Collateral Agent.

(a)           Power of Attorney.  In addition to other powers of attorney contained herein, each Obligor hereby designates and appoints the Collateral Agent, on behalf of the Secured Parties, and each of its designees or agents, as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default:

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(i)            to demand, collect, settle, compromise, adjust, give discharges and releases, all as the Collateral Agent may reasonably determine;

(ii)           to commence and prosecute any actions at any court for the purposes of collecting any Collateral and enforcing any other right in respect thereof;

(iii)          to defend, settle or compromise any action brought and, in connection therewith, give such discharge or release as the Collateral Agent may deem reasonably appropriate;

(iv)          receive, open and dispose of mail addressed to an Obligor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to the Collateral of such Obligor on behalf of and in the name of such Obligor, or securing, or relating to such Collateral;

(v)           sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any Collateral or the goods or services which have given rise thereto, as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes;

(vi)          adjust and settle claims under any insurance policy relating thereto;

(vii)         execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, security agreements, affidavits, notices and other agreements, instruments and documents that the Collateral Agent may determine necessary in order to perfect and maintain the security interests and liens granted in this Agreement and in order to fully consummate all of the transactions contemplated therein;

(viii)        institute any foreclosure proceedings that the Collateral Agent may deem appropriate;

(ix)           to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Collateral;

(x)            to exchange any of the Pledged Equity or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Pledged Equity with any committee, depository, transfer agent, registrar or other designated agency upon such terms as the Collateral Agent may reasonably deem appropriate;

(xi)           to vote for a shareholder resolution, or to sign an instrument in writing, sanctioning the transfer of any or all of the Pledged Equity into the name of the Collateral Agent or one or more of the Secured Parties or into the name of any transferee to whom the Pledged Equity or any part thereof may be sold pursuant to Section 7 hereof;

(xii)          to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral;

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(xiii)         to direct any parties liable for any payment in connection with any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct;

(xiv)        to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Collateral; and

(xv)         do and perform all such other acts and things as the Collateral Agent may reasonably deem to be necessary, proper or convenient in connection with the Collateral.

This power of attorney is a power coupled with an interest and shall be irrevocable until such time as the Secured Obligations arising under the Financing Documents have been paid in full and the Commitments have expired or been terminated.  The Collateral Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Collateral Agent in this Agreement, and shall not be liable for any failure to do so or any delay in doing so.  The Collateral Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct.  This power of attorney is conferred on the Collateral Agent solely to protect, preserve and realize upon its security interest in the Collateral.

(b)           Assignment by the Collateral Agent. The Collateral Agent may from time to time assign its security interests in the Collateral to a successor Collateral Agent appointed in accordance with the Intercreditor Agreement, and such successor shall be entitled to all of the rights and remedies of the Collateral Agent under this Agreement in relation thereto.

(c)           The Collateral Agent’s Duty of Care.  Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Collateral Agent hereunder, the Collateral Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Obligors shall be responsible for preservation of all rights in the Collateral, and the Collateral Agent shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Obligors.  The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Collateral Agent shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral.  In the event of a public or private sale of Collateral pursuant to Section 7 hereof, the Collateral Agent shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, or (ii) taking any steps to clean, repair or otherwise prepare the Collateral for sale.

(d)           Liability with Respect to Accounts.  Anything herein to the contrary notwithstanding, each of the Obligors shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account.  Neither the Collateral Agent nor any Secured Party shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any Secured Party of any payment relating to such Account pursuant hereto, nor shall the Collateral Agent or any Secured Party be obligated in any manner to perform any of the obligations of an

F-19

Obligor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(e)           Voting and Payment Rights in Respect of the Pledged Equity.

(i)            So long as no Event of Default shall exist, each Obligor may (A) exercise any and all voting and other consensual rights pertaining to the Pledged Equity of such Obligor or any part thereof for any purpose not inconsistent with the terms of this Agreement or any Financing Document and (B) receive and retain any and all dividends (other than stock dividends and other dividends constituting Collateral which are addressed hereinabove), principal or interest paid in respect of the Pledged Equity to the extent they are allowed under each of the Financing Documents; and

(ii)           During the continuance of an Event of Default, (A) all rights of an Obligor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (i)(A) above shall cease and all such rights shall thereupon become vested in the Collateral Agent which shall then have the sole right to exercise such voting and other consensual rights, (B) all rights of an Obligor to receive the dividends, principal and interest payments which it would otherwise be authorized to receive and retain pursuant to clause (i)(B) above shall cease and all such rights shall thereupon be vested in the Collateral Agent which shall then have the sole right to receive and hold as Collateral such dividends, principal and interest payments, and (C) all dividends, principal and interest payments which are received by an Obligor contrary to the provisions of clause (ii)(B) above shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Obligor, and shall be forthwith paid over to the Collateral Agent as Collateral in the exact form received, to be held by the Collateral Agent as Collateral and as further collateral security for the Secured Obligations.

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(f)            Releases of Collateral.

(i)            If any Collateral shall be sold, transferred or otherwise disposed of by any Obligor in a transaction permitted by each of the Financing Documents, then the Collateral Agent, at the request and sole expense of such Obligor, shall promptly execute and deliver to such Obligor all releases and other documents, and take such other action, reasonably necessary for the release of the Liens created hereby or by any other Collateral Document on such Collateral.

(ii)           The Collateral Agent may release any of the Pledged Equity from this Agreement or may substitute any of the Pledged Equity for other Pledged Equity without altering, varying or diminishing in any way the force, effect, lien, pledge or security interest of this Agreement as to any Pledged Equity not expressly released or substituted, and this Agreement shall continue as a first priority lien on all Pledged Equity not expressly released or substituted.

13.Application of Proceeds.  Upon the acceleration of any of the Secured Obligations pursuant to any of the Financing Documents, any payments in respect of the Secured Obligations and any proceeds of the Collateral, when received by the Collateral Agent or any Secured Party in Money, will be applied in reduction of the Secured Obligations in the order set forth in the Intercreditor Agreement.

14.           Continuing Agreement.

(a)           This Agreement shall remain in full force and effect until such time as the Secured Obligations arising under the Financing Documents have been paid in full and the Commitments have expired or been terminated, at which time this Agreement shall be automatically terminated and the Collateral Agent shall, upon the request and at the expense of the Obligors, forthwith release all of its liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination.

(b)           This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Secured Party as a preference, fraudulent conveyance or otherwise under any Debtor Relief Law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Collateral Agent or any Secured Party in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations.

15.Amendments; Waivers; Modifications, etc.  This Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in the Intercreditor Agreement; provided that any update or revision to Schedule 2(c) or Schedule 2(k) hereof delivered by any Obligor shall not constitute an amendment for purposes of this Section 11 or any of the Financing Documents.

16.Successors in Interest.  This Agreement shall be binding upon each Obligor, its successors and assigns and shall inure, together with the rights and remedies of the Collateral Agent and the Secured Parties hereunder, to the benefit of the Collateral Agent and the Secured Parties and their successors and permitted assigns.

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17.Notices.  All notices required or permitted to be given under this Agreement shall be in conformance with Section 11.02 of the Credit Agreement and paragraph 11I of the Note Agreement.

18.Counterparts; Signatures.  This Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.  It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.  Any signature delivered by facsimile or electronic mail shall be deemed to be an original signature hereto, provided that the Obligors shall deliver an original to the Collateral Agent upon the Collateral Agent’s request.

19.Headings.  The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

20.           Governing Law; Submission to Jurisdiction; Venue; WAIVER OF JURY TRIAL.

(a)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.

(b)           SUBMISSION TO JURISDICTION.  THE BORROWER AND EACH OTHER OBLIGOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS SITTING IN COOK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF ILLINOIS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER FINANCING DOCUMENT SHALL AFFECT ANY RIGHT THAT THE COLLATERAL AGENT, THE ADMINISTRATIVE AGENT, THE NOTEHOLDERS OR ANY OTHER SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT AGAINST THE BORROWER OR ANY OTHER OBLIGOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)           WAIVER OF VENUE.  THE BORROWER AND EACH OTHER OBLIGOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT

F-22

FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(f)            SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02 OF THE CREDIT AGREEMENT AND PARAGRAPH 11I OF THE NOTE AGREEMENT.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

(g)           WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

21.Severability.  If any provision of any of the Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

22.Entirety.  This Agreement, the other Financing Documents and the other documents relating to the Secured Obligations represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to any of the Financing Documents, any other documents relating to the Secured Obligations, or the transactions contemplated herein and therein.

23.Other Security.  To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real property and securities owned by an Obligor), or by a guarantee, endorsement or property of any other Person, then the Collateral Agent shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence of any Event of Default, and the Collateral Agent shall have the right, in its sole discretion, to determine which rights, security, liens, security interests or remedies the Collateral Agent shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or the Secured Obligations or any of the rights of the Collateral Agent or the Secured Parties under this Agreement, under any other of the Financing Documents or under any other document relating to the Secured Obligations.

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24.Joint and Several Obligations of Obligors.

(a)           Subject to clause (c) below, each of the Obligors is accepting joint and several liability hereunder in consideration of the financial accommodations to be provided by the Lenders under the Credit Agreement and the Noteholders under the Note Agreement, for the mutual benefit, directly and indirectly, of each of the Obligors and in consideration of the undertakings of each of the Obligors to accept joint and several liability for the obligations of each of them.

(b)           Subject to clause (c) below, each of the Obligors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Obligors with respect to the payment and performance of all of the Secured Obligations arising under this Agreement and the other Financing Documents, it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each of the Obligors without preferences or distinction among them.

(c)           Notwithstanding any provision to the contrary contained herein or in any other of the Financing Documents, to the extent the obligations of an Obligor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal Law relating to fraudulent conveyances or transfers) then the obligations of such Obligor hereunder shall be limited to the maximum amount that is permissible under applicable Law (whether federal or state and including, without limitation, Debtor Relief Laws).

25.Joinder.  At any time after the date of this Agreement, one or more additional Persons may become party hereto by executing and delivering to the Collateral Agent a Joinder Agreement.  Immediately upon such execution and delivery of such Joinder Agreement (and without any further action), each such additional Person will become a party to this Agreement as an “Obligor” and have all of the rights and obligations of an Obligor hereunder and this Agreement and the schedules hereto shall be deemed amended by such Joinder Agreement.

26.Rights of Required Creditors.  All rights of the Collateral Agent hereunder, if not exercised by the Collateral Agent, unless waived in writing may be exercised by the Required Creditors.

27.           Consent of Issuers of Pledged Equity.  Each issuer of Pledged Equity party to this Agreement hereby acknowledges, consents and agrees to the grant of the security interests in such Pledged Equity by the applicable Obligors pursuant to this Agreement, together with all rights accompanying such security interest as provided by this Agreement and applicable law, notwithstanding any anti-assignment provisions in any operating agreement, limited partnership agreement or similar organizational or governance documents of such issuer.

[remainder of page intentionally left blank]

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                                Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

	OBLIGORS:	KAPSTONE KRAFT PAPER CORPORATION
			By:
			Name:
			Title:
		KAPSTONE PAPER AND PACKAGING CORPORATION
			By:
			Name:
			Title:
		KAPSTONE CHARLESTON KRAFT LLC
			By:
			Name:
			Title:
Accepted and agreed to as of the date first above written.
BANK OF AMERICA, N.A., as Collateral Agent
By:
Name:
Title:

F-25

SCHEDULE 1(b)

PLEDGED EQUITY

Obligor:

Name of Subsidiary Number of Shares Certificate
Number Percentage
Ownership

Obligor:

Name of Subsidiary Number of Shares Certificate
Number Percentage
Ownership

F-26

SCHEDULE 2(c)

COMMERCIAL TORT CLAIMS

F-27

SCHEDULE 2(k)

INDEBTEDNESS EVIDENCED BY PLEDGED INSTRUMENTS

F-28

SCHEDULE 3(B)

CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS,

MERGERS, CONSOLIDATIONS OR TRADENAMES

F-29

SCHEDULE 3(H)

INSTRUMENTS, DOCUMENTS OR TANGIBLE CHATTEL PAPER

F-30

SCHEDULE 3(K)

NOTICE OF MERGERS, CONSOLIDATIONS, CHANGES IN STRUCTURE, USE OF TRADENAMES

F-31

SCHEDULE 3(M)

PERMITTED UNPLEDGED ACCOUNTS

F-32

SCHEDULE 3(N)

INTELLECTUAL PROPERTY

F-33

SCHEDULE 3(P)

DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS

F-34

EXHIBIT 4(a)(ii)

IRREVOCABLE STOCK POWER

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to

the following Equity Interests of                                           , a                          corporation:

No. of Shares Certificate No.

and irrevocably appoints                                                                      its agent and attorney-in-fact to transfer all or any part of such Equity Interests and to take all necessary and appropriate action to effect any such transfer.  The agent and attorney-in-fact may substitute and appoint one or more persons to act for him.  The effectiveness of a transfer pursuant to this stock power shall be subject to any and all transfer restrictions referenced on the face of the certificates evidencing such interest or in the certificate of incorporation or bylaws of the subject corporation, to the extent they may from time to time exist.

By:

Name:

Title:

F-35

SCHEDULE 4(b)(i)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of July 1, 2008 (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Bank of America, N.A., as collateral agent (the “Collateral Agent”) for the Secured Parties referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the copyrights and copyright applications shown below to the Collateral Agent for the ratable benefit of the Secured Parties:

COPYRIGHTS

Copyright No. Description of Copyright Date of
Copyright

COPYRIGHT APPLICATIONS

Copyright
Applications No. Description of Copyright
Applied For Date of Copyright
Applications

F-36

The Obligors and the Collateral Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the foregoing copyrights and copyright applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any copyright or copyright application.

	Very truly yours,
	[Obligor]
	By:
	Name:
	Title:
Acknowledged and Accepted:
BANK OF AMERICA, N.A., as Collateral Agent
By:
Name:
Title:

F-37

SCHEDULE 4(b)(ii)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of July 1, 2008 (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Bank of America, N.A., as collateral agent (the “Collateral Agent”) for the Secured Parties referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the patents and patent applications shown below to the Collateral Agent for the ratable benefit of the Secured Parties:

PATENTS

Patent No. Description of Patent
Item Date of
Patent

PATENT APPLICATIONS

Patent
Applications No. Description of Patent
Applied For Date of Patent
Applications

F-38

The Obligors and the Collateral Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the foregoing patents and patent applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any patent or patent application.

	Very truly yours,
	[Obligor]
	By:
	Name:
	Title:
Acknowledged and Accepted:
BANK OF AMERICA, N.A., as Collateral Agent
By:
Name:
Title:

F-39

SCHEDULE 4(b)(iii)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of July 1, 2008 (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Bank of America, N.A., as collateral agent (the “Collateral Agent”) for the Secured Parties referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the trademarks and trademark applications shown below to the Collateral Agent for the ratable benefit of the Secured Parties:

TRADEMARKS

Trademark No. Description of Trademark
Item Date of
Trademark

TRADEMARK APPLICATIONS

Trademark
Applications No. Description of Trademark
Applied For Date of Trademark
Applications

F-40

The Obligors and the Collateral Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the foregoing trademarks and trademark applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any trademark or trademark application.

	Very truly yours,
	[Obligor]
	By:
	Name:
	Title:
Acknowledged and Accepted:
BANK OF AMERICA, N.A., as Collateral Agent
By:
Name:
Title:

F-41

EXHIBIT G

FORM OF MORTGAGE

[see attached]

G-1

EXHIBIT H

FORM OF SECURED PARTY DESIGNATION NOTICE

Date:                    ,            

To:          Bank of America, N.A.,
                as Administrative Agent
                Agency Management
                901 Main Street, 14th Floor
                TX1-492-14-14
                Dallas, TX  75202
                Attention:  Denise Wolfenberger

Ladies and Gentlemen:

THIS SECURED PARTY DESIGNATION NOTICE (this “Designation Notice”) is made by                                               , a                              corporation (the “[Cash Management Bank/Hedge Bank”), to BANK OF AMERICA, N.A. (“Bank of America”), as administrative agent under the Credit Agreement referred to below (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent”).  All capitalized terms not defined herein shall have the meaning ascribed to them in the Credit Agreement.

W I T N E S S E T H :

WHEREAS, KAPSTONE KRAFT PAPER CORPORATION, a Delaware corporation (the “Borrower”), KAPSTONE PAPER AND PACKAGING CORPORATION and certain Subsidiaries of the Borrower (the “Guarantors”), the Lenders party thereto and the Administrative Agent have entered into that certain Credit Agreement, dated as of June 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) pursuant to which certain loans and financial accommodations have been made to the Borrower;

WHEREAS, in connection with the Credit Agreement, the Borrower and the Guarantors have executed certain Collateral Documents in favor of certain holders of the Obligations (the “Secured Parties”);

WHEREAS, in connection with the Credit Agreement, a [Cash Management Bank/Hedge Bank] is permitted to designate its [Cash Management Agreement/Swap Contract] as a [“Secured Cash Management Agreement”/“Secured Hedge Agreement”] under the Credit Agreement and the Collateral Documents;

WHEREAS, the Credit Agreement requires that the [Cash Management Bank/Hedge Bank] deliver this Designation Notice to the Administrative Agent; and

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WHEREAS, the [Cash Management Bank/Hedge Bank] has agreed to execute and deliver this Designation Notice in order to become a [Cash Management Bank/Hedge Bank] and Secured Party under the Credit Agreement and the other Loan Documents.

1.             Designation.  [                          ] hereby designates (x) itself as a [Cash Management Bank/Hedge Bank] under the Credit Agreement and (y) the [Cash Management Agreement/Swap Contract] described on Schedule 1 hereto to be a “[Secured Cash Management Agreement/Secured Hedge Agreement]” and hereby represents and warrants to the Administrative Agent that such [Cash Management Agreement/Swap Contract] satisfies all the requirements under the Loan Documents to be so designated including that such [Cash Management Bank/Hedge Bank] was a Lender or Affiliate of a Lender at the time such [Cash Management Agreement/Swap Contract] was entered into.  By executing and delivering this Designation Notice, the [Cash Management Bank/Hedge Bank], as provided in the Credit Agreement, hereby agrees to be bound by all of the provisions of the Loan Documents which are applicable to it as a [Cash Management Bank/Hedge Bank] or a Secured Party thereunder and hereby (a) confirms that it has received a copy of the Loan Documents and such other documents and information as it has deemed appropriate to make its own decision to enter into this Designation Notice, (b) appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto, and (c) agrees that it will be bound by the provisions of the Loan Documents and will perform in accordance with its terms all the obligations which by the terms of the Loan Documents are required to be performed by it as a [Cash Management Bank/Hedge Bank] or Secured Party, including without limitation its obligations as a Creditor under the Intercreditor Agreement.  Notwithstanding anything to the contrary contained in Section 11.04 of the Credit Agreement, to the extent (w) there are any amounts owed to the [Cash Management Bank/Hedge Bank] in respect of Secured Hedge Agreements or Cash Management Agreements, (x) the Loan Parties for any reason fail to indefeasibly pay any amount required under subsection (a) or (b) of Section 11.04 of the Credit Agreement to be paid by them to the Administrative Agent, (y) the Administrative Agent has taken action with respect of the Collateral or any breach of the Loan Documents by a Loan Party, and (z) the [Cash Management Bank/Hedge Bank] shares in the proceeds of such Collateral, the [Cash Management Bank/Hedge Bank] agrees to indemnify the Administrative Agent with respect to any action taken by it in respect of (i) the Collateral or (ii) any breach of the Loan Documents by any Loan Party, and agrees to undertake and fulfill a portion of the liability of the Lenders under Section 11.04 of the Credit Agreement (without relieving the Lenders of their obligations) in an amount equal to, as of any date of determination, the product of (a) the aggregate liability of the Lenders under Section 11.04 as of such date multiplied by (b) a fraction, the numerator of which shall be the aggregate amount owed to the [Cash Management Bank/Hedge Bank] in respect of Secured Hedge Agreements or Cash Management Agreements and the denominator of which shall be the sum of the aggregate outstanding principal amount of indebtedness evidenced by the Private Placement Notes, the aggregate Outstanding Amount under the Credit Agreement and all amounts owed in respect of Secured Hedge Agreements or Cash Management Agreements.

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2.             The address and facsimile number for notices to the undersigned pursuant to the Credit Agreement is as follows:

[set forth address and facsimile number for notices]

3.             GOVERNING LAW.  THIS DESIGNATION NOTICE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, the undersigned has caused this Designation Notice to be duly executed and delivered as of the date first above written.

	[CASH MANAGEMENT BANK/HEDGE BANK]
	a
	By:
		Name:
		Title:
ACCEPTED AND
ACKNOWLEDGED BY:
BANK OF AMERICA, N.A.,
as the Administrative Agent
By:
Name:
Title:

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Schedule 1

[CASH MANAGEMENT AGREEMENT/SWAP CONTRACT]
TO BE SPECIFIED AS A [SECURED CASH MANAGEMENT AGREEMENT/
SECURED HEDGE AGREEMENT]

H-5

EX-10.8

Exhibit 10.8

EXECUTION COPY

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of August 25, 2008 is by and among KAPSTONE KRAFT PAPER CORPORATION, a Delaware corporation (the “Borrower”), KAPSTONE PAPER AND PACKAGING CORPORATION, a Delaware corporation (the “Parent”), certain subsidiaries of the Parent 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 (the “Administrative Agent”), Swing Line Lender and L/C Issuer.

W I T N E S S E T H

WHEREAS, the Borrower, the Parent, the other Guarantors party thereto, the Lenders party thereto, and the Administrative Agent have entered into that certain Credit Agreement dated as of June 12, 2008 (as modified by this Amendment, that certain Joinder Agreement dated as of July 15, 2008 among Cogen South L.L.C., the Administrative Agent and Bank of America, N.A., as Collateral Agent, and as may be further amended, restated, modified or supplemented from time to time, the “Credit Agreement”);

WHEREAS, the Borrower has 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:

1.             Defined Terms.  Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Credit Agreement, as amended hereby.

2.             Amendments.  Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, clause (v) contained in Section 2.05(b) of the Credit Agreement is hereby amended by (a) deleting the word “Immediately” appearing at the beginning of the first sentence thereof, (b) capitalizing the word “upon” appearing at the beginning of the first sentence thereof and (c) adding the following sentence to the end of such clause:

Such Net Cash Proceeds shall be used to prepay the Senior Debt as follows: (A) with respect to all such Net Cash Proceeds received during the Fiscal Year ending December 31, 2008, (x) within seven (7) days of each date on which the aggregate amount of all Net Cash Proceeds received by the Loan Parties or their Subsidiaries from the exercise of any Warrants not previously used to prepay the Senior Debt in accordance with Section

2.05(b) (the “Unremitted Warrant Proceeds”) equals $10,000,000 or more and (y) with respect to all remaining Unremitted Warrant Proceeds from such period, within 90 days after the end of such Fiscal Year and (B) with respect to all such Net Cash Proceeds received during each fiscal quarter thereafter, (x) within seven (7) days of each date on which the aggregate amount of all Unremitted Warrant Proceeds equals $10,000,000 or more and (y) with respect to all remaining Unremitted Warrant Proceeds from such period, within seven (7) days after the end of each fiscal quarter.

3.             Condition Precedent to Effectiveness.  This Amendment shall become effective as of the date hereof upon the satisfaction of the following conditions:

(a)           Execution of Counterparts of Amendment.  Receipt by the Administrative Agent of counterparts of this Amendment duly executed by the Borrower, the Parent, the Guarantors, the Administrative Agent and the Required Lenders;

(b)           Amendment to Note Purchase Agreement.  Receipt by the Administrative Agent of a copy of an amendment under that certain Note Purchase Agreement, dated as of July 1, 2008, among the Borrower, the Parent, and the Purchasers identified therein, amending (among other things) paragraph 4E(5) thereof and otherwise in form and substance satisfactory to the Administrative Agent, executed by the Borrower, the Parent and the Purchasers, and such amendment shall be in full force and effect; and

(c)           Fees and Expenses.  The payment by the Borrower to the Administrative Agent (or its Affiliates) of all fees and expenses which are due and payable as of the date hereof under the Credit Agreement, including all reasonable out of pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment (including, without limitation, the reasonable fees and expenses of Moore & Van Allen PLLC, special counsel to the Administrative Agent).

4.             Representations and Warranties.  Each Loan Party hereby represents and warrants that (a) it has the requisite corporate power and authority to execute, deliver and perform this Amendment, (b) it is duly authorized to, and has been authorized by all necessary corporate action to, execute, deliver and perform this Amendment, (c) no consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by it of this Amendment, (d) the execution, delivery and performance by it of this Amendment do not and will not (i) require any consent or approval of any governmental agency or authority (other than any consent or approval which has been obtained and is in full force and effect), (ii) conflict with (A) any provision of Law, (B) the charter, by-laws or other organizational documents of any Loan Party or (C) any agreement, indenture, instrument or other document material to the business of any Loan Party, or any judgment, order or decree, which is binding upon any Loan Party or any of their respective properties, (e) the representations and warranties contained in Article V of the Credit Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of such date (except for those which expressly relate to an earlier date, in which

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case they are true and correct in all material respects as of such date) and (f) no Default or Event of Default exists under the Credit Agreement on and as of the date hereof and after giving effect to this Amendment, or will occur as a result of the transactions contemplated hereby.

5.             No Other Changes; Ratification.  Except as expressly modified or waived hereby, all of the terms and provisions of the Credit Agreement (including schedules and exhibits thereto) and the other Loan Documents shall remain in full force and effect.  The term “this Agreement” or “Credit Agreement” and all similar references as used in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by this Amendment.  This Amendment shall constitute a “Loan Document” under, and as defined in, the Credit Agreement.  Except as herein specifically agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.  This Amendment shall be effective only to the extent specifically set forth herein and shall not (i) be construed as a waiver of any breach or default other than as specifically waived herein nor as a waiver of any breach or default of which the Lenders have not been informed by the Borrower, (ii) affect the right of the Lenders to demand compliance by the Loan Parties with all terms and conditions of the Credit Agreement in all other instances, (iii) be deemed a waiver of any transaction or future action on the part of the Loan Parties requiring the Lenders’ or the Required Lenders’ consent or approval under the Credit Agreement, or (iv) be deemed or construed to be a wavier or release of, or a limitation upon, the Administrative Agent’s or the Lenders’ exercise of any rights or remedies under the Credit Agreement or any other document executed or delivered in connection therewith, whether arising as a consequence of any Event of Default which may now exist or otherwise, all such rights and remedies hereby being expressly reserved.

6.             Expenses.  The Borrower agrees to pay all reasonable costs and expenses in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of Moore & Van Allen PLLC, special counsel to the Administrative Agent.

7.             Acknowledgment of Guarantors.  The Guarantors acknowledge and consent to all of the terms and conditions of this Amendment and agree that this Amendment and any documents executed in connection herewith do not operate to reduce or discharge the Guarantors’ obligations under the Credit Agreement or the other Loan Documents.

8.             Affirmation of Liens. Each Loan Party affirms the liens and security interests created and granted by it in the Loan Documents (including, but not limited to, the Security Agreement) and agrees that this Amendment shall in no manner adversely affect or impair such liens and security interests.

9.             Counterparts; Facsimile/Email.  This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart.  Delivery of an executed counterpart of this Amendment by telecopy or

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electronic mail by any party hereto shall be effective as such party’s original executed counterpart.

10.           Governing Law.  This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of Illinois.

11.           Entirety. This Amendment and the other Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof.  These Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no oral agreements between the parties.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.

BORROWER:	KAPSTONE KRAFT PAPER CORPORATION,
	a Delaware corporation
	By:	/s/ Andrea Tarbox
	Name:	Andrea Tarbox
	Title:	Treasurer and CFO
GUARANTORS:	KAPSTONE PAPER AND PACKAGING CORPORATION,
	a Delaware corporation
	By:	/s/ Andrea Tarbox
	Name:	Andrea Tarbox
	Title:	VP and CFO
	KAPSTONE CHARLESTON KRAFT LLC,
	a Delaware limited liability company
	By:	/s/ Andrea Tarbox
	Name:	Andrea Tarbox
	Title:	Treasurer and CFO
	COGEN SOUTH L.L.C.,
	a Delaware limited liability company
	By:	/s/ Andrea Tarbox
	Name:	Andrea Tarbox
	Title:	Treasurer and CFO

ADMINISTRATIVE	BANK OF AMERICA, N.A.,
AGENT:	as Administrative Agent
	By:	/s/ Suzanne M. Paul
	Name:	Suzanne M. Paul
	Title:	Vice President

LENDERS:	BANK OF AMERICA, N.A.,
	as a Lender, L/C Issuer and Swing Line Lender
	By:	/s/ David Balon
	Name:	David Balon
	Title:	VP

GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender
By:	/s/ Dwayne Coker
Name:	Dwayne Coker
Title:	Duly Authorized Signatory

COBANK, ACB,
as a Lender
By:	/s/ Michael Tousignant
Name:	Michael Tousignant
Title:	Vice President

NORTHWEST FARM CREDIT SERVICES, PCA,
as a Lender
By:	/s/ Jim D. Allen
Name:	Jim D. Allen
Title:	Senior Vice President

FARM CREDIT SERVICES OF AMERICA, PCA,
as a Lender
By:	/s/ Steven L. Moore
Name:	Steven L. Moore
Title:	Vice President

AGFIRST FARM CREDIT BANK,
as a Lender
By:	/s/ Matt Jeffords
Name:	Matt Jeffords
Title:	Assistant Vice President

COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., “RABOBANK NEDERLAND” NEW YORK BRANCH,
as a Lender
By:	/S/ Andrew Sherman
Name:	Andrew Sherman
Title:	Executive Director
By:	/S/ Peter Duncan
Name:	Peter Duncan
Title:	Managing Director

SUNTRUST BANK,
as a Lender
By:	/s/ Robert Maddox
Name:	Robert Maddox
Title:	Director

TD BANK, N.A.,
as a Lender
By:	/s/ Susanna C. Satten
Name:	Susanna C. Satten
Title:	Assistant Vice President

THE NORTHERN TRUST COMPANY,
as a Lender
By:	/s/ Brandon Rolek
Name:	Brandon Rolek
Title:	Vice President

FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
as a Lender
By:	/s/ James H. Moore, Jr.
Name:	James H. Moore, Jr.
Title:	Sr. Vice President

GREENSTONE FARM CREDIT SERVICES ACA/FLCA
as a Lender
By:	/S/ Jeff Pavlik
Name:	Jeff Pavlik
Title:	Vice President

EX-10.10

Exhibit 10.10

Execution Copy

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

Dated as of July 1, 2008

By and Among

BANK OF AMERICA, N.A.,
AS COLLATERAL AGENT

And

BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT UNDER THE CREDIT
FACILITY AGREEMENT ON BEHALF OF THE SECURED LENDER PARTIES

And

THE INSTITUTIONAL INVESTORS LISTED ON SCHEDULE 1 HERETO, AS NOTEHOLDERS

WITH RESPECT TO INDEBTEDNESS ISSUED BY KAPSTONE KRAFT PAPER CORPORATION

TABLE OF CONTENTS

SECTION		HEADING			PAGE
SECTION 1.			Definitions		2
	Section 1.1.			Definitions	2
	Section 1.2.			Effectiveness of this Agreement	7
SECTION 2.			Relationships Among Secured Parties		7
	Section 2.1.			Equal and Ratable Sharing of Collateral	7
	Section 2.2.			Restrictions on Actions	8
	Section 2.3.			Representations and Warranties	10
	Section 2.4.			Cooperation; Accountings	10
	Section 2.5.			Termination Note Agreement, Credit Facility Agreement or Franchise Loan Facility Agreement	10
SECTION 3.			Appointment and Authorization of Collateral Agent		10
SECTION 4.			Agency Provisions		11
	Section 4.1.			Delegation of Duties	11
	Section 4.2.			Exculpatory Provisions	12
	Section 4.3.			Reliance by Collateral Agent	12
	Section 4.4.			Knowledge or Notice of Default or Event of Default	12
	Section 4.5.			Non-Reliance on Collateral Agent and Other Creditors	13
	Section 4.6.			Indemnification	13
	Section 4.7.			Collateral Agent in Its Individual Capacity	15
	Section 4.8.			Successor Collateral Agent	15
SECTION 5.			Actions by the Collateral Agent		16
	Section 5.1.			Duties and Obligations	16
	Section 5.2.			Notification of Default	16
	Section 5.3.			Exercise of Remedies	16
	Section 5.4.			Changes to Security Documents	17
	Section 5.5.			Release of Collateral	17
	Section 5.6.			Other Actions	17
	Section 5.7.			Cooperation	17
	Section 5.8.			Distribution of Proceeds	18
	Section 5.9.			Authorized Investments	19
	Section 5.10.			Determination of Amount of Senior Secured Obligations	19
	Section 5.11.			Reinstatement	20
SECTION 6.			Bankruptcy Proceedings		21
SECTION 7.			Miscellaneous		21

Section 7.1.	Creditors; Other Collateral	21
Section 7.2.	Marshalling	22
Section 7.3.	Consents, Amendments, Waivers	22
Section 7.4.	Governing Law	22
Section 7.5.	Parties in Interest	22
Section 7.6.	Counterparts	22
Section 7.7.	Termination	23
Section 7.8.	Notices	23

ATTACHMENTS TO INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT:

Schedule 1 — Information relating to the Noteholders

Exhibit A — List of Security Documents

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

THIS INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT dated as of July 1, 2008 (this “Agreement”), is entered into by and among (i) Bank of America, N.A., in its capacity as Collateral Agent (as hereinafter defined), (ii) Bank of America, N.A., in its capacity as administrative agent (the “Credit Facility Agent”) under the Credit Facility Agreement (as hereinafter defined) on behalf of itself and each of the Secured Lender Parties (as hereinafter defined), (iii) each of the institutional investors listed on Schedule 1 attached hereto (together with their respective successors and assigns, each a “Noteholder” and collectively, the “Noteholders”), (iv) the Company (as hereinafter defined) and (v) the Guarantors (as hereinafter defined).

RECITALS:

A.    KapStone Kraft Paper Corporation, a Delaware corporation (the “Company”), is concurrently herewith entering into that certain Note Purchase Agreement dated as of July 1, 2008 (as amended, supplemented or restated from time to time, the “Note Agreement”) with the institutional investors listed on Schedule 1 attached thereto, (the “Holders”) pursuant to which the Holders are purchasing from the Company those certain 8.30% senior secured notes due 2015 in the original aggregate principal amount of $40,000,000 (as amended, supplemented or restated from time to time, the “Private Placement Notes”).

B.    The Company has heretofore entered into that certain Credit Agreement dated as of June 12, 2008 with the Credit Facility Lenders and the Credit Facility Agent (as amended, supplemented or restated from time to time, the “Credit Facility Agreement”), pursuant to which the Credit Facility Lenders may from time to time make certain extensions of credit to the Company in an aggregate amount not to exceed $515,000,000.

C.    The obligations of the Company to the Noteholders under the Note Agreement and the Private Placement Notes and the other Note Documents, the obligations of the Company to the Credit Facility Lenders, the Credit Facility Agent and the other Secured Lender Parties under the Credit Facility Agreement and the other Credit Facility Loan Documents (as hereinafter defined), and the other Senior Secured Obligations (as hereinafter defined), if any, will be secured equally and ratably by the Collateral (as hereinafter defined) pursuant to certain documents set forth on Exhibit A hereto and the other Security Documents and administered in accordance with the terms and conditions hereof and thereof.  The Noteholders, and the Credit Facility Agent on behalf of the Secured Lender Parties desire to appoint Bank of America, N.A. as the collateral agent (the “Collateral Agent”) to act on behalf of the Noteholders and the Secured Lender Parties regarding the Collateral, all as more fully provided herein.  The parties hereto have entered into this Agreement to, among other things, further define the rights, duties, authority and responsibilities of the Collateral Agent and the relationship between the Noteholders, and the Secured Lender Parties regarding their equal and ratable interests in the Collateral.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.           DEFINITIONS.

Section 1.1.           Definitions.  The following terms shall have the meanings assigned to them below in this Section 1.1 or in the provisions of this Agreement referred to below:

“Affiliate” means, 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 meanings correlative thereto.

“Agreement” is defined in the preamble hereof, and shall include such agreement as amended, restated, supplemented or otherwise modified in accordance with its terms.

“Bankruptcy Proceeding” shall mean, with respect to any Person, a general assignment by such Person for the benefit of its creditors, or the institution by or against such Person of any proceeding seeking relief as debtor, or seeking to adjudicate such Person as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of such Person or its debts, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for such Person or for any substantial part of its property.

“Business Day” shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois, New York, New York or Charlotte, North Carolina are required or authorized to be closed.

“Cash Equivalent Investments” shall mean, (a) direct obligations of the United States Government or any agencies thereof and obligations guaranteed by the United States Government, in each case having remaining terms to maturity of not more than 30 days; and (b) certificates of deposit, time deposits and acceptances, having remaining terms to maturity of not more than 60 days issued by United States banks which have a combined capital and surplus of at least $1,000,000,000 and having an “A” rating or better assigned thereto by Standard & Poor’s Ratings Group, a Division of The McGraw Hill Companies, Inc. or Moody’s Investors Service, Inc.

“Cash Management Agreements” shall mean the Cash Management Agreements under and as defined in the Credit Facility Agreement.

“Collateral” shall mean all collateral under, and cash received in respect of, the Security Documents.

“Collateral Agent” shall be the party identified as such in the Recitals hereof, and its successors and permitted assigns.

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“Commitment” means the “Commitment” under and as defined in the Credit Facility Agreement as in effect on the date hereof.

“Company Proceeds” shall have the meaning assigned thereto in Section 2.1(c).

“Credit Facility Agent” shall have the meaning assigned thereto in the Recitals hereof, and shall include its successors and permitted assigns.

“Credit Facility Agreement” shall have the meaning assigned thereto in the Recitals hereof.

“Credit Facility Agreement Obligations” shall mean the “Obligations” under and as defined in the Credit Facility Agreement as in effect on the date hereof.

“Credit Facility Loan Documents” mean the “Loan Documents” under and as defined in the Credit Facility Agreement as in effect on the date hereof.

“Credit Facility Lenders” shall mean the financial institutions from time to time party to the Credit Facility Agreement as Lenders thereunder and as defined therein and their successors and permitted assigns.

“Credit Facility Notes” shall mean the “Notes” under and as defined in the Credit Facility Agreement as in effect on the date hereof.

“Creditor” shall mean any one of the Noteholders or the Secured Lender Parties, but, in each case, only in such capacity, and any successors and permitted assigns to the interests in the Senior Secured Obligations owing to any such Person in such capacity.

“Default” shall mean any event or condition, the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default.

“Default Notice” shall have the meaning assigned thereto in Section 5.2.

“Disallowed Obligations” shall have the meaning assigned thereto in Section 5.10(b).

“Enforcement Event” shall mean (a) the commencement of a Bankruptcy Proceeding with respect to the Company or any Subsidiary, (b) the acceleration of the obligations pursuant to the Private Placement Notes or Private Placement Note Purchase Agreement or the Credit Facility Agreement Obligations or (c) the exercise of any remedy by the Collateral Agent against the Company or any Subsidiary with respect to the Collateral.

“Event of Default” shall mean any event or occurrence which would constitute an “Event of Default” under the terms of the Note Agreement, the Credit Facility Agreement  or any Security Document.

“Financing Documents” means the Credit Facility Loan Documents and the Note Documents.

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“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guaranties” shall mean each of the Guaranty (as defined in the Credit Facility Agreement and the Guaranty Agreement (as defined in the Note Agreement), as applicable) as each is in effect on the date hereof and as each may be amended, restated, supplemented, replaced or otherwise modified in accordance with the terms thereof.

“Guarantors” shall mean the “Guarantors” under and as defined in the Credit Facility Agreement and/or the Note Agreement, as applicable.

“Hedging Agreements” shall mean the Secured Hedge Agreements under and as defined in the Credit Facility Agreement.

“Indemnity Share” shall have the meaning assigned thereto in Section 4.6.

“L/C Issuer” shall mean the L/C Issuer under and as defined in the Credit Facility Agreement, and shall include any successor thereof.

“Letter of Credit Collateral Account” shall have the meaning assigned thereto in Section 5.8 hereof.

“Letter of Credit Exposure” shall mean, at any time and without duplication, the sum of (a) the aggregate undrawn portion of all uncancelled and unexpired Letters of Credit and (b) the aggregate unpaid reimbursement obligations of the Company in respect of drawings under any Letter of Credit.

“Letters of Credit” shall mean all Letters of Credit issued under or pursuant to the Credit Facility Agreement.

“Lien” shall mean, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person (including an interest in respect of a Capital Lease) which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

“Majority Creditors” shall mean Creditors holding more than 50% of the sum of (a) the aggregate outstanding principal amount of the indebtedness evidenced by the Private Placement Notes and (b) Total Outstandings (as defined in the Credit Facility Agreement).

“Non-Indemnifying Creditor” shall have the meaning assigned thereto in Section 4.6.

“Note Agreement” shall have the meaning assigned thereto in the Recitals hereof.

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“Note Documents” shall mean the Note Agreement, the Private Placement Notes and all other “Transaction Documents” under and as defined in the Note Agreement as in effect on the date hereof.

“Noteholders” shall mean the parties identified as such in the Recitals hereof, and their successors and permitted assigns.

“Notice of Default” shall mean a notice pursuant to Section 5.2 hereof from the Collateral Agent to the Creditors of the occurrence of an Event of Default.

“Outstanding Amount” shall have the meaning assigned thereto in the Credit Facility Agreement as in effect on the date hereof.

“Person” means any natural person, corporation, partnership, trust, limited liability company, association, Governmental Authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

“Preferential Amount” shall mean, with respect to any Creditor, an amount equal to (a) the outstanding principal amount of any Loans under the Credit Facility Agreement owed to such Creditor, the outstanding principal amount of any Private Placement Notes held by such Creditor, the outstanding amount of such Creditor’s Letter of Credit Exposure and/or the outstanding amount of all obligations of the Company or any of its Affiliates owed to such Creditor in respect of any Cash Management Agreements on the date of the occurrence of the Sharing Date with respect to an Enforcement Event, less (b) the outstanding principal amount of any Loans under the Credit Facility Agreement owed to such Creditor, the outstanding principal amount of any Private Placement Notes held by such Creditor, the outstanding amount of such Creditor’s Letter of Credit Exposure and/or the outstanding amount of all obligations of the Company or its Affiliates owed to such Creditor in respect of any Cash Management Agreement on the date of such Enforcement Event.

“Requisite Creditors” shall mean (a) the Noteholders holding obligations under the Private Placement Notes, the approval of which is required to approve any contemplated amendment or modification of, termination or waiver of any provision of or consent to any departure from the terms of this Agreement under the terms of the Note Agreement and (b) the Credit Facility Lenders the approval of which is required to approve any contemplated amendment or modification of, termination or waiver of any provision of or consent to any departure from the terms of this Agreement under the terms of the Credit Facility Agreement, in each case, voting as a separate class.

“Returned Amount” shall have the meaning assigned thereto in Section 5.11.

“Secured Lender Parties” shall mean the Credit Facility Agent, the L/C Issuer, the Credit Facility Lenders and any Hedge Bank (as defined in the Credit Facility Agreement) and any Cash Management Bank (as defined in the Credit Facility Agreement).

“Security” shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

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“Security Documents” shall mean the documents set forth on Exhibit A hereto including all agreements, documents and instruments relating to, arising out of, or in any way connected with any of the foregoing documents or granting to the Collateral Agent Liens to secure the Senior Secured Obligations, whether now or hereafter executed, each as amended or amended and restated in conjunction herewith, or as may be amended, restated, replaced, supplemented or otherwise modified from time to time hereafter in accordance with the terms hereof.  Security Documents shall not include the Note Agreement, the Private Placement Notes, the Credit Facility Notes or the Credit Facility Agreement.

“Senior Secured Obligations” shall mean collectively (a) the indebtedness, obligations and liabilities of the Company and its Affiliates (including, without limitation, the Guarantors) to the Noteholders under the Note Documents (including, but not limited to, all unpaid principal of, and the Yield-Maintenance Amount, if any, and accrued and unpaid interest on, the Private Placement Notes) and (b) the indebtedness, obligations and liabilities of the Company and its Affiliates (including, without limitation, the Guarantors) to the Secured Lender Parties under the Credit Facility Loan Documents (including, but not limited to, all amounts owed in respect of Secured Hedge Agreements or Cash Management Agreements of the Company or its Affiliates owing to a Credit Facility Secured Creditor or any of its Affiliates) and any other Credit Facility Agreement Obligation, in each case whether now existing or hereafter arising, joint or several, direct or indirect, absolute or contingent, due or to become due, matured or unmatured, liquidated or unliquidated, arising by contract, operation of law or otherwise, and all obligations of the Company and their Affiliates to the Creditors arising out of any extension, refinancing or refunding of any of the foregoing obligations.

“Sharing Date” with respect to an Enforcement Event shall mean the earliest date on or prior to the date of such Enforcement Event (a) on which a Sharing Event occurred and (b) on each date after which, until the date of such Enforcement Event, one or more Sharing Events were in effect.

“Sharing Event” shall mean the delivery to the Collateral Agent or the Credit Facility Agent of written notice (which notice the Collateral Agent or the Credit Facility Agent, as the case may be, shall promptly forward to each Creditor or to such Creditor’s agent or representative) of, or the actual knowledge of the Collateral Agent or the Credit Facility Agent of, (a) the occurrence of any Specified Event of Default, or (b) any refusal by any Secured Lender Party to make any loan under the Credit Facility Agreement or issue any Letter of Credit requested by the Company, either when obligated to do so under the Credit Facility Agreement or on the grounds that an Event of Default has occurred or that a representation or warranty of the Company is not true as of the date of the requested loan or Letter of Credit where such loan or issuance would not cause the Company to exceed the limitations set forth in Section 2.01 or 2.03 of the Credit Facility Agreement, so long as such refusal continues for a period of at least three (3) consecutive Business Days. Any Sharing Event occurring under clause (b) shall be deemed to have ceased to be in effect at such time as the Secured Lender Parties make loans and issue Letters of Credit under the Credit Facility Agreement as requested by the Company.

“Specified Event of Default” shall mean (a) any default in any payment of any Senior Secured Obligation when due, (b) an Event of Default described in Section 8.01(d) of the Credit Facility Agreement or clause (vii) of paragraph 7A of the Note Agreement, or (c) an Event of

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Default described in clause 8.01(e)(i) of the Credit Facility Agreement or clause (v) of paragraph 7A of the Note Agreement, provided that any Specified Event of Default which occurs under this clause (c) shall, unless otherwise agreed by the Credit Facility Agent and the Required Holders (as defined in the Note Agreement), be deemed to have ceased to be in effect if such Specified Event of Default has been cured or waived (in accordance with the provisions of the Credit Facility Agreement and/or the Note Agreement, as applicable) or if, within 365 days of the occurrence thereof, no Enforcement Event, Sharing Event described in clause (b) of the definition thereof, or Specified Event of Default described in clause (a) or (b) of this definition has occurred.

“Subsidiary” shall mean, as to any Person, any corporation, association or other business entity in which at least a majority of the outstanding voting securities shall be beneficially owned, directly or indirectly, by such Person.  Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

“Yield-Maintenance Amount” shall have the meaning assigned thereto in the Note Agreement as in effect on the date hereof.

Section 1.2.Effectiveness of this Agreement.  The effectiveness of this Agreement is conditioned upon the execution and delivery of (a) this Agreement by the Collateral Agent, the Noteholders and the Credit Facility Agent, (b) the Note Agreement by each of the parties thereto and the Private Placement Notes by the Company, (c) the Credit Facility Agreement by each of the parties thereto and (d) the Security Documents by each of the parties thereto that are necessary for such agreements to be legally effective.

SECTION 2.RELATIONSHIPS AMONG SECURED PARTIES.

Section 2.1.Equaland Ratable Sharing of Collateral.

(a)The equal and ratable sharing of Collateral by the Creditors as provided for by this Agreement shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement or refinancing of any of the Note Agreement, the Credit Facility Agreement or the institution of any Bankruptcy Proceeding unless expressly agreed to in writing by the Requisite Creditors.

(b)Notwithstanding the order or time of attachment of, or the order, time, or manner of perfection or the order or time of filing or recordation of any document or instrument, or other method of perfecting any Lien which may have heretofore been, or may hereafter be, granted to, or created in favor of, any Creditor (in its capacity as such) in any property or assets included or intended to be included in the Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any Financing Document or Security Document and notwithstanding any provision of the Uniform Commercial Code (as in effect in any applicable jurisdiction) or other applicable law, the Collateral Agent shall have a senior priority lien on and security interest in the Collateral.  No Creditor (in its capacity as such) shall have apart from its interest as provided herein and in the Security Documents, (i) any Lien on or security interest in the property and assets included in the Collateral or (ii) any Lien on or security interest in

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any other property or assets of the Company or any Subsidiary, and, notwithstanding the foregoing, to the extent any Creditor acquires any such Liens or security interests, such Creditor shall be deemed to (and by its acceptance of this Agreement agrees to) hold those Liens and security interests for the ratable benefit of all Creditors and such property or assets shall be deemed a part of the Collateral.

(c)All proceeds received by the Collateral Agent or any Creditor upon the sale, exchange, collection, foreclosure, or other disposition of or realization upon all or any part of the Collateral, in each case pursuant to the exercise of remedies under any Financing Document or any Security Document, or upon any collection or enforcement under any guaranty of the Senior Secured Obligations in connection with, or during the existence of, an Enforcement Event and any payment received by the Collateral Agent or any Creditor with respect to the Senior Secured Obligations on or after the occurrence of an Enforcement Event (together, the “Company Proceeds”), which term shall include, without limitation, (i) the proceeds of any liquidation, foreclosure sale, enforcement of any Lien, or other realization upon any Collateral or of any collection or enforcement under any guaranty of the Senior Secured Obligations, together with any other sums thereafter received by any Creditor or the Collateral Agent as part of the Collateral (including, without limitation, all amounts received by the Collateral Agent or any Creditor pursuant to the exercise by it of any right of set off in respect of the Senior Secured Obligations held by it) and (ii) the proceeds of any distributions of Collateral received by any Creditor or the Collateral Agent in respect of any amounts owing to it under any of the Financing Documents following any marshaling of the assets of the Company (whether in bankruptcy, reorganization, winding up proceedings or similar proceedings, or otherwise), or following confirmation of any plan of arrangement or plan of reorganization of Company or any guarantor, shall be delivered to the Collateral Agent and distributed among the Creditors and the Collateral Agent as set forth in Section 5.8.

(d)Subject to clause (e) below, upon the occurrence of an Enforcement Event each Creditor shall deliver such Creditor’s Preferential Amount, if any, to the Collateral Agent, which shall be distributed among the Creditors and the Collateral Agent as set forth in Section 5.8.

(e)Notwithstanding the provision of subsection (c) and (d) of this Section 2.1, upon agreement between the Collateral Agent and any Creditor who is required to deliver any Company Proceeds or Preferential Amount to the Collateral Agent under either such subsection, such Creditor may deliver an amount of such Company Proceeds or Preferential Amount which is net of the amount thereof which would be distributed to such Creditor under Section 5.8, in which event such Creditor shall be deemed to have delivered the full amount of such Company Proceeds or Preferential Amount to the Collateral Agent and to have received the amount thereof which would have been distributed to such Creditor under Section 5.8 for all purposes hereof.

Section 2.2.Restrictions on Actions.  Each Creditor agrees that, so long as any Senior Secured Obligations are outstanding, the provisions of this Agreement shall provide the exclusive method by which any Creditor may exercise rights and remedies under the Security

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Documents or with respect to the Collateral.  Therefore, each Creditor shall, for the mutual benefit of all Creditors, except as permitted under this Agreement:

(a)refrain from taking or filing any action, judicial or otherwise, to enforce any rights or pursue any remedy under the Security Documents, except for delivering notices hereunder;

(b)refrain from (1) selling any Senior Secured Obligations to the Company or any Affiliate of the Company or (2) accepting any guaranty of, or any other security for, the Senior Secured Obligations from the Company or any Affiliate of the Company, except (i) the Guaranties, including any joinders thereto pursuant to Section 6.10(a) of the Credit Facility Agreement or paragraph 5K of the Note Agreement and (ii) any other guaranty or security granted to the Collateral Agent for the benefit of all Creditors; and

(c)refrain from exercising any rights or remedies under the Security Documents which have or may have arisen or which may arise as a result of a Default or Event of Default or exercising any rights of set-off against any account of the Company or any of its Affiliates (other than in connection with ordinary course set-off rights including, but not limited to, for the payment of account fees);

provided, however, that nothing contained in subsections (a) through (c) above, shall prevent any Creditor from exercising any remedy under its documents that does not exercise a right under the Security Documents or with respect to the Collateral, constitute a demand for payment under the Guaranties or constitute an exercise of rights of set-off against an account of the Company or any of its Affiliates (other than in connection with ordinary course set-off rights including, but not limited to, for the payment of account fees).  For the avoidance of doubt, the Creditors agree that this Section 2.2 shall not prohibit any of the following: (i) imposing a default rate of interest in accordance with the Note Agreement, the Private Placement Notes or the Credit Facility Agreement, as applicable, (ii) ceasing to honor requests for credit extensions of any kind including the issuance, extension or increase of Letters of Credit, (iii) ceasing to continue or make Eurodollar Rate Loans under and as defined in the Credit Facility Agreement, (iv) raising any defenses in any action in which it has been made a party defendant or has been joined as a third party, except that the Collateral Agent may direct and control any defense directly relating solely to the Collateral or any one or more of the Security Documents but not relating to any Creditor, which shall be governed by the provisions of this Agreement, (v) exercising any right of setoff, recoupment or similar right; provided that, with respect to this clause (v) and other than in connection with ordinary course set-off rights (including, but not limited to, for the payment of account fees), such action has been authorized in writing by the Majority Creditors and the amounts so set-off or recouped shall constitute Collateral for purposes of this Agreement and the Creditor shall promptly cause such amounts to be delivered to the Collateral Agent for application pursuant to Section 5.8, (vi) accelerating the obligations pursuant to the Private Placement Notes or Private Placement Note Purchase Agreement or the Credit Facility Agreement Obligations in accordance with the Note Agreement, the Private Placement Notes or the Credit Facility Agreement, as applicable, or (vii) subject to subsection (b) above, agreeing to new or modified covenants and other terms under, or otherwise amending, the Note Agreement, the Private Placement Notes or the Credit Facility Agreement, as applicable.

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Section 2.3.Representations and Warranties.

(a)Each of the parties hereto represents and warrants to the other parties hereto that:

(i)the execution, delivery and performance by such Person of this Agreement has been duly authorized by all necessary corporate proceedings and does not and will not contravene any provision of law, its charter or by-laws or any amendment thereof, or of any indenture, agreement, instrument or undertaking binding upon such Person; and

(ii)the execution, delivery and performance by such Person of this Agreement will result in a valid and legally binding obligation of such Person enforceable in accordance with its terms.

(b)The Credit Facility Agent represents and warrants to the other parties hereto that it is authorized to execute this Agreement on behalf of itself and each other Credit Facility Secured Creditor and the execution, delivery and performance by the Credit Facility Agent of this Agreement will result in a valid and legally binding obligation of each Credit Facility Secured Creditor enforceable in accordance with its terms.

Section 2.4.Cooperation; Accountings.  Each of the Creditors will, upon the reasonable request of another Creditor, from time to time execute and deliver or cause to be executed and delivered such further instruments, and do and cause to be done such further acts as may be necessary or proper to carry out more effectively the provisions of this Agreement.  Each of the Noteholders and the Credit Facility Agent, on behalf of the Secured Lender Parties, agree to provide to each other upon reasonable request a statement of all payments received in respect of Senior Secured Obligations.

Section 2.5.Termination of Note Agreement or Credit Facility Agreement.  Upon payment in full to any Creditor of all Senior Secured Obligations of such Creditor, and, in the case of the Credit Facility Lenders, the termination of such Credit Facility Lender’s Commitment and the expiration or cancellation of any Letter of Credit under such facility, and provided that no Sharing Event or Enforcement Event shall be continuing at such time, such Creditor (a “Former Creditor”) shall, subject to Section 5.11 hereof, cease to be a party to this Agreement; provided, however, if all or any part of any payments to any Creditor made prior to such Former Creditor ceasing to be a party to this Agreement become a Returned Amount, then this Agreement in respect of such Former Creditor shall be renewed as of such date and shall thereafter continue in full force and effect to the extent of the Senior Secured Obligations so invalidated, set aside or repaid.

SECTION 3.APPOINTMENT AND AUTHORIZATION OF COLLATERAL AGENT.

(a)Each Creditor and each other holder of Senior Secured Obligations by its acceptance thereof hereby designates and appoints Bank of America, N.A. as the Collateral Agent of such Creditor under this Agreement and the Security Documents.  The appointment made by this Section 3(a) is given for valuable consideration and

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coupled with an interest and, subject to Section 4.8, is irrevocable so long as the Senior Secured Obligations, or any part thereof, shall remain unpaid or any Credit Facility Lender is obligated to fund its Commitment or make or fund any advances under the Letters of Credit.

(b)Each Creditor and each other holder of Senior Secured Obligations by its acceptance thereof hereby irrevocably authorizes Bank of America, N.A. as the Collateral Agent for such Creditor to (1) execute and enter into each of the Security Documents and all other instruments relating to said Security Documents, (2) take action on its behalf expressly permitted to perfect, maintain and preserve the Liens granted thereby, (3) execute instruments of release or to take such other action necessary to release Liens upon the Collateral to the extent authorized by this Agreement or the Financing Documents or the Requisite Creditors, (4) act as its agent for perfection and (5) exercise such other powers and perform such other duties as are, in each case, expressly delegated to the Collateral Agent by the terms hereof together with such powers as are reasonably incidental thereto.

(c)Notwithstanding any provision to the contrary elsewhere in this Agreement or the Security Documents, the Collateral Agent shall not have any duties or responsibilities except those expressly set forth herein or therein and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Security Documents or this Agreement or otherwise be deemed to exist for, be undertaken by or apply to the Collateral Agent.

(d)The relationship between the Collateral Agent and each of the Creditors is that of an independent contractor.  The use of the term “Collateral Agent” is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Collateral Agent and each of the Creditors.  Nothing contained in this Agreement nor the other Security Documents shall be construed to create an agency, trust or other fiduciary relationship between the Collateral Agent and any of the Creditors or the Company.  As an independent contractor empowered by the Creditors to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Security Documents, the Collateral Agent is nevertheless a “representative” of the Creditors, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Creditors and the Collateral Agent with respect to all Collateral.  Such actions include the designation of the Collateral Agent as “secured party”, “mortgagee” or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Senior Secured Obligations, all for the benefit of the Creditors and the Collateral Agent.

SECTION 4.AGENCY PROVISIONS.

Section 4.1.Delegation of Duties.  The Collateral Agent may exercise its powers and execute any of its duties under this Agreement and the Security Documents by or through

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employees, agents or attorneys-in-fact and shall be entitled to take and to rely on advice of counsel concerning all matters pertaining to such powers and duties.  The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.  The Collateral Agent may utilize the services of such Persons as the Collateral Agent in its sole discretion may determine, and all reasonable fees and expenses of such Persons shall be borne by the Company (and shall constitute a Senior Secured Obligation under the Security Documents and hereunder) and shall be subject to the indemnity provisions of Section 4.6.

Section 4.2.Exculpatory Provisions.  Neither the Collateral Agent nor any of the Collateral Agent’s officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any Security Document (except for its or such Person’s own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Creditors for any recitals, statements, representations or warranties made by the Company or any officer, representative, agent or employee thereof contained in any Security Document or in any certificate, report, statement or other document referred to or provided for in, or received by, the Collateral Agent under or in connection with this Agreement or any Security Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Security Documents or for any failure of the Company to perform its obligations thereunder.  The Collateral Agent shall be under no obligation to the Creditors to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Security Documents or any of the Note Documents or the Credit Facility Loan Documents.

Section 4.3.Reliance by Collateral Agent.  The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Collateral Agent.  The Collateral Agent shall be fully justified in failing or refusing to take action under this Agreement or any Security Document unless it shall first receive such advice or concurrence of the Majority Creditors as is contemplated by Section 5 hereof and it shall first be indemnified to its reasonable satisfaction by the Creditors against any and all liability and expense which may be incurred by it by reason of taking, continuing to take or refraining from taking any such action.  The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Security Documents in accordance with the provisions of Section 5.6 hereof and in accordance with written instructions of the Majority Creditors pursuant to Section 5.3 hereof, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Creditors and all future holders of the Senior Secured Obligations.

Section 4.4.Knowledge or Notice of Default or Event of Default.  The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Collateral Agent has received written notice from a Creditor or the Company referring to the Note Agreement or the Credit Facility Agreement, describing such Default or Event of Default, setting forth in reasonable detail the facts and circumstances thereof and stating

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that the Collateral Agent may rely on such notice without further inquiry; provided that the failure of any Creditor to provide such notice shall not impair any rights of such Creditor hereunder.

Section 4.5.Non-Reliance on Collateral Agent and Other Creditors.  Each Creditor expressly acknowledges that except as set forth in Section 2.3(a) hereof, neither the Collateral Agent nor any of the Collateral Agent’s officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it.  Each Creditor represents that it has, independently and without reliance upon the Collateral Agent or any other Creditor, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company.  Each Creditor also represents that it will, independently and without reliance upon the Collateral Agent or any other Creditor, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the Security Documents and this Agreement and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company.  The Collateral Agent shall have no duty or responsibility to provide any Creditor with information concerning the business, operations, property, financial or other condition, or creditworthiness of Company that may come into the possession of the Collateral Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates; provided, however, that the foregoing shall not alter the obligations of the Credit Facility Agent (in its capacity as such) under the Credit Facility Agreement to deliver to the Credit Facility Lenders certain financial information and other notices.

Section 4.6.Indemnification.

(a)Each Creditor agrees to indemnify the Collateral Agent and its employees, directors, officers, agents and attorneys-in-fact in their capacity as such (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to its respective share of the sum of the aggregate outstanding principal amount of indebtedness evidenced by the Private Placement Notes and the aggregate Outstanding Amount under the Credit Facility Agreement and all amounts owed in respect of Secured Hedge Agreements or Cash Management Agreements by the Company or its Affiliates from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following an Event of Default or the payment of the Senior Secured Obligations) be imposed on, incurred by or asserted against the Collateral Agent arising out of or relating to the Security Documents, the actions or omissions of the Collateral Agent specifically required or permitted by this Agreement or the Security Documents or the exercise of remedies pursuant to written instructions of the Majority Creditors pursuant to Section 5.3 hereof; provided that no Creditor shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Collateral Agent’s gross negligence or willful misconduct.  If any Creditor (a “Non-Indemnifying Creditor”) fails to tender payment of its ratable share of any of such Indemnified Liabilities (its “Indemnity

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Share”), then the Collateral Agent is hereby expressly granted the right thereafter to, and shall, withhold from any distributions of Collateral otherwise payable to such Non-Indemnifying Creditor an amount equal to its Indemnity Share remaining unpaid at such time of receipt of such distributions and apply such amount withheld in satisfaction of such Indemnity Share.  The Collateral Agent shall also have the right to collect from such Non-Indemnifying Creditor, or withhold from any distributions to otherwise be made to such Non-Indemnifying Secured Creditor, the Collateral Agent’s reasonable costs and expenses incurred in collecting such Non-Indemnifying Creditor’s Indemnity Share.  The agreements in this Section 4.6(a) shall survive the payment of the Senior Secured Obligations, the resignation or removal of the Collateral Agent and the termination of this Agreement, the Security Documents and the Financing Documents.

(b)The Company agrees to indemnify the Collateral Agent its employees, directors, officers, agents and attorneys-in-fact in their capacity as such from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever (including, without limitation, reasonable attorneys’ fees and expenses) which may at any time (including, without limitation, at any time following an Event of Default or the payment of the Senior Secured Obligations) be imposed on, incurred by or asserted against the Collateral Agent arising out of or relating to (i) the Security Documents, (ii) the actions or omissions of the Collateral Agent specifically required or permitted by this Agreement or the Security Documents or the exercise of remedies pursuant to written instructions of the Majority Creditors pursuant to Section 5.3 hereof, (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Company, and regardless of whether any Person to be indemnified hereunder is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of such indemnitee and (iv) the payment, failure to pay, or delay in payment of any taxes in respect of the granting of security under this Agreement or the Security Documents, any stamp or other taxes in respect of Senior Secured Obligations, or any other taxes imposed upon or assessed against the Collateral Agent relating to or, in connection with its services hereunder and thereunder (but excluding therefrom net income taxes and franchise taxes in lieu of net income taxes imposed on the Collateral Agent as a result of a present or former connection between the jurisdiction of the governmental authority imposing such tax and the Collateral Agent (except a connection arising solely from the Collateral Agent having executed, delivered or performed its obligations or received a payment under, or enforced, any of the Security Documents or any of the Financing Documents), provided that the Company shall not be liable under this Section 4.6(b) for any such loss, claim, damage, liability, expense or obligation incurred by the Collateral Agent to the extent resulting from its own gross negligence or willful misconduct.  It is the express intention of the parties hereto that each Person to be indemnified hereunder shall be indemnified and held harmless against any and all losses, liabilities, claims or damages arising out of or resulting from the ordinary, sole or contributory negligence of such Person.  The Company shall also reimburse any Creditor upon demand for any indemnification obligation in respect of which such Creditor shall become liable to the Collateral Agent as contemplated by Section 4.6(a) of this Agreement.  The indemnity rights set forth in this Section 4.6(b) 

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shall survive the payment of the Senior Secured Obligations, the resignation or removal of the Collateral Agent and the termination of this Agreement, the Security Documents and the Financing Documents.

Section 4.7.Collateral Agent in Its Individual Capacity. Bank of America, N.A. and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and its Affiliates as though such Person was not the Collateral Agent hereunder.  With respect to any obligations owed to it under the Credit Facility Agreement, Bank of America, N.A. shall have the same rights and powers under this Agreement as any Creditor and may exercise the same as though it were not the Collateral Agent, and the terms “Creditor” and “Creditors” shall include the Collateral Agent in its individual capacity.

Section 4.8.Successor Collateral Agent.

(a)The Collateral Agent may resign at any time upon 60 days’ written notice to the Creditors and the Company and may be removed at any time, with or without cause, by the Majority Creditors by written notice delivered to the Company, the Collateral Agent and the Creditors.  After any resignation or removal hereunder of the Collateral Agent, the provisions of this Section 4 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it in connection with its agency hereunder while it was the Collateral Agent under this Agreement.

(b)Upon receiving written notice of any such resignation or removal, a successor Collateral Agent shall be appointed by the Majority Creditors; provided, however, that such successor Collateral Agent shall be (1) a bank or trust company having a combined capital and surplus of at least $1,000,000,000, subject to supervision or examination by a Federal or state banking authority; and (2) authorized under the laws of the jurisdiction of its incorporation or organization to assume the functions of the Collateral Agent.  If a successor Collateral Agent shall not have been appointed pursuant to this Section 4.8(b) within such 60 day period after the Collateral Agent’s resignation or upon removal of the Collateral Agent then any Creditor or the Collateral Agent (unless the Collateral Agent is being removed) may petition a court of competent jurisdiction for the appointment of a successor Collateral Agent.  Such court shall, after such notice as it may deem proper, appoint a successor Collateral Agent meeting the qualifications specified in this Section 4.8(b).  The Creditors hereby consent to such petition and appointment so long as such criteria are met.

(c)The resignation or removal of a Collateral Agent shall take effect on the day specified in the notice described in Section 4.8(a), unless previously a successor Collateral Agent shall have been appointed and shall have accepted such appointment, in which event such resignation or removal shall take effect immediately upon the acceptance of such appointment by such successor Collateral Agent, provided, however, that no such resignation or removal shall be effective hereunder unless and until a successor Collateral Agent shall have been appointed and shall have accepted such appointment.

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(d)           The appointment of a successor Collateral Agent pursuant to Section 4.8(b) shall become effective upon the acceptance of the appointment as Collateral Agent hereunder by a successor Collateral Agent.  Upon such effective appointment, the successor Collateral Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent.  Such appointment and designation shall be full evidence of the right and authority to act as Collateral Agent hereunder and all Collateral, power, trusts, duties, documents, rights and authority of the previous Collateral Agent shall rest in the successor, without any further deed or conveyance.  The predecessor Collateral Agent shall, nevertheless, on the written request of the Majority Creditors or successor Collateral Agent, execute and deliver any other such instrument transferring to such successor Collateral Agent all the Collateral, properties, rights, power, trust, duties, authority and title of such predecessor.  The Company, to the extent requested by the Majority Creditors or the Collateral Agent shall procure any and all documents, conveyances or instruments and execute the same, to the extent required, in order to reflect the transfer to the successor Collateral Agent.

SECTION 5.           ACTIONS BY THE COLLATERAL AGENT.

Section 5.1.           Duties and Obligations.  The duties and obligations of the Collateral Agent are only those set forth in this Agreement and in the Security Documents.

Section 5.2.           Notification of Default.  If the Collateral Agent has been notified in writing that a Default or an Event of Default has occurred, the Collateral Agent shall notify the Creditors and may notify the Company of such determination.  Any Creditor which has actual knowledge of a Default or an Event of Default, shall deliver to the Collateral Agent a written statement to such effect (a “Default Notice”).  Failure to deliver a Default Notice to the Collateral Agent, however, shall not (a) constitute a waiver of such Default or Event of Default by the Creditors or (b) impair any rights of such Creditor hereunder.  No Default Notice from any Creditor shall be required to be given (i) if such Event of Default is waived or cured by amendment prior to the time a Default Notice is delivered or (ii) if notice of such Event of Default has previously been delivered to the Collateral Agent.  Upon receipt of a Default Notice or a notice as required by Section 4.4 from a Creditor, the Collateral Agent shall promptly (and in any event no later than five (5) Business Days after receipt of such notice in the manner provided in Section 7.8 hereof) issue its “Notice of Default” to all Creditors.  The Notice of Default may contain a recommendation of actions by the Creditors and/or request instructions from the Creditors as to specific matters and shall specify a date on which responses are due.

Section 5.3.           Exercise of Remedies.  Except for the preservation of Collateral (and similar actions) in exigent circumstances to prevent the damage, destruction or perishing of the Collateral or to the extent expressly authorized herein, the Collateral Agent shall take only such actions and exercise only such remedies under the Security Documents as are approved in a written notice delivered to the Collateral Agent and signed by the Majority Creditors; provided, however, that if, solely in connection with the initial exercise of remedies against the Collateral, such action has not been approved by (a) Noteholders holding more than 50% of the aggregate outstanding principal amount of the indebtedness evidenced by the Private Placement Notes and (b) Credit Facility Lenders holding more than 50% of the sum of (i) Total Outstandings (as defined in the Credit Facility Agreement) and (ii) aggregate unused Revolving Credit

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Commitments aggregate (as defined in the Credit Facility Agreement), in each case, voting as a separate class, then the Collateral Agent shall not take such action until ten (10) Business Days have elapsed from the date of the Collateral Agent’s request for approval (during which time the disapproving Creditors shall have the opportunity to voice their objections and potentially alter the voting of the Majority Creditors).

Section 5.4.           Changes to Security Documents.  Any term of the Security Documents may be amended, and the performance or observance by the parties to a Security Document of any term of such Security Document may be waived (either generally or in a particular instance and either retroactively or prospectively) by the Collateral Agent only upon the written consent of the Requisite Creditors.

Section 5.5.           Release of Collateral.  Unless an Event of Default has occurred and is continuing and the Collateral Agent shall have received a Default Notice in connection therewith, the Collateral Agent may (but shall not be obligated to), without the approval of the Majority Creditors as required by Section 5.3 hereof, release any Collateral under the Security Documents which is permitted to be sold or disposed of by the Company and its Affiliates pursuant to the Note Agreement and the Credit Facility Agreement and execute and deliver such releases as may be necessary to terminate of record the Collateral Agent’s security interest in such Collateral so long as, if such sale or disposition causes the Company to be required to make a mandatory prepayment of the loans under the Credit Facility Agreement or an offer to prepay the Private Placement Notes under the Note Agreement, the proceeds from such sale or disposition are used to prepay such loans and, to the extent such offer has been accepted (or deemed to have been accepted) under the Note Agreement, the Private Placement Notes in accordance with the terms of the Credit Facility Agreement and the Note Agreement.  In determining whether any such release is permitted, the Collateral Agent may rely upon the instructions or stipulation from the class of Majority Creditors party to such agreement.

Section 5.6.           Other Actions.  The Collateral Agent shall have the right to take such actions, or omit to take such actions, hereunder and under the Security Documents not inconsistent with the written instructions of the Majority Creditors delivered pursuant to Section 5.3 hereof or the terms of this Agreement, including actions the Collateral Agent deems necessary or appropriate to perfect or continue the perfection of the Liens on the Collateral for the benefit of the Creditors.  Except as otherwise provided by applicable law, the Collateral Agent shall have no duty as to the collection or protection of the Collateral or any income thereon, nor as to the preservation of rights against prior parties, nor as to the preservation of rights pertaining to the Collateral beyond those duties imposed by Section 207 of Article 9 of the Uniform Commercial Code with respect to any Collateral in the Collateral Agent’s actual possession.

Section 5.7.           Cooperation.  To the extent that the exercise of the rights, powers and remedies of the Collateral Agent in accordance with this Agreement requires that any action be taken by any Creditor, such Creditor shall take such reasonable action and cooperate with the Collateral Agent to reasonably ensure that the rights, powers and remedies of all Creditors are exercised in full.

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Section 5.8.           Distribution of Proceeds.  All amounts owing with respect to the Senior Secured Obligations shall be secured pro rata by the Collateral without distinction as to whether some Senior Secured Obligations are then due and payable and other Senior Secured Obligations are not then due and payable.  The Collateral Agent shall distribute any Company Proceeds  or Preferential Amount received by it in accordance with the provisions of this Section 5.8.  Upon any realization upon the Collateral and/or the receipt of any payments under any Security Document after the occurrence of an Enforcement Event and any payments under any Guaranty and any other guaranty of any Senior Secured Obligations, the Creditors agree that the proceeds thereof shall be applied:

first, to any amounts owing to the Collateral Agent by the Company or the Creditors pursuant to this Agreement or the Security Documents, including, without limitation, payment of expenses incurred by the Collateral Agent with respect to maintenance and protection of the Collateral and of expenses incurred with respect to the sale of or realization upon any of the Collateral or the perfection, enforcement or protection of the rights of the Creditors (including reasonable attorneys’ fees and expenses);

second, equally and ratably to the payment of all amounts of the Senior Secured Obligations constituting reimbursement of expenses (including attorney fees and other expenses of other professionals) and indemnities (other than breakage costs) required to be paid pursuant to the Note Agreement or the Credit Facility Agreement;

third, equally and ratably to the payment of all amounts of interest outstanding that constitute Senior Secured Obligations (other than any Yield-Maintenance Amount or breakage costs but including any periodic payments due under any Hedging Agreement constituting a Senior Secured Obligation) and letter of credit fees and commitment fees that constitute Senior Secured Obligations and are required to be paid pursuant to any Financing Document according to the aggregate amounts of such interest and fees then owing to each Creditor;

fourth, equally and ratably to the payment of all outstanding amounts of principal, Letter of Credit Exposure, the termination value of any Hedging Agreement or Cash Management Agreement, breakage compensation, prepayment premiums and the Yield-Maintenance Amount, if any, which constitute Senior Secured Obligations;

fifth, equally and ratably to all other amounts then due to the Creditors under the Note Agreement and the Credit Facility Agreement;

sixth, equally and ratably to all Disallowed Obligations under the Note Agreement and the Credit Facility Agreement; and

seventh, the balance, if any, shall be returned to the Company or such other Persons as are entitled thereto.

Any payment pursuant to this Section 5.8 with respect to the outstanding amount of any undrawn Letters of Credit shall be paid to the Collateral Agent for deposit in an account (the “Letter of Credit Collateral Account”) to be held as collateral for the Senior Secured Obligations

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and disposed of as provided herein.  On each date on which a payment is made to a beneficiary pursuant to a draw on a Letter of Credit, the Collateral Agent shall distribute from the Letter of Credit Collateral Account for application to the payment of the reimbursement obligation due to the Credit Facility Lenders with respect to such draw an amount equal to the product of (1) the amount then on deposit in the Letter of Credit Collateral Account, and (2) a fraction, the numerator of which is the amount of such draw and the denominator of which is the outstanding amount of all undrawn Letters of Credit immediately prior to such draw.  On each date on which a reduction in the outstanding amount of undrawn Letters of Credit occurs other than on account of a payment made to a beneficiary pursuant to a draw on a Letter of Credit, then the Collateral Agent shall distribute from the Letter of Credit Collateral Account an amount equal to the product of (i) the amount then on deposit in the Letter of Credit Collateral Account, and (ii) a fraction, the numerator of which is the amount of such reduction in the outstanding amount of undrawn Letters of Credit and the denominator of which is the amount of all undrawn Letters of Credit immediately prior to such reduction, which amount shall be distributed as provided in the first paragraph of this Section 5.8.  At such time as the outstanding amount of all undrawn Letters of Credit is reduced to zero, any amount remaining in the Letter of Credit Collateral Account, after the distribution therefrom as provided above, shall be distributed as provided in the first paragraph of this Section 5.8.  All payments by the Collateral Agent hereunder shall be made (x) if to a Noteholder, directly to the applicable Noteholder, (y) if to any Credit Facility Secured Creditor, to the Credit Facility Agent for the account of the applicable Credit Facility Secured Creditor and (z) if to the Collateral Agent, directly to the Collateral Agent.

The Company and each Guarantor agrees that in the event the Company or any Guarantor shall make any payment to any Creditor with respect to the Senior Secured Obligations that such Creditor is required to deliver to the Collateral Agent for distribution pursuant to this Section 5.8, then, notwithstanding that such payment was initially delivered to such Creditor, such payment shall discharge the Senior Secured Obligations to the extent such payment is distributed with respect to the various Senior Secured Obligations pursuant to the provisions of this Section 5.8.

Section 5.9.           Authorized Investments.  Any and all funds held by the Collateral Agent in its capacity as Collateral Agent, whether pursuant to any provision of any of the Security Documents or otherwise, shall to the extent feasible within a reasonable time be invested by the Collateral Agent in Cash Equivalent Investments.  Any interest earned on such funds shall be disbursed to the Creditors in accordance with Section 5.8.  The Collateral Agent may hold any such funds in a common interest bearing account.  The Collateral Agent shall have no duty to place funds held pursuant to this Section 5.9 in investments which provide a maximum return; provided, however, that the Collateral Agent shall to the extent feasible invest funds in Cash Equivalent Investments with reasonable promptness.  In the absence of gross negligence or willful misconduct, the Collateral Agent shall not be responsible for any loss of any funds invested in accordance with this Section 5.9.

Section 5.10.        Determination of Amount of Senior Secured Obligations.

(a)           In determining the amount of the Senior Secured Obligations owed to each Creditor and the portions thereof which are due on account of principal, interest, fees or expenses or otherwise, the Collateral Agent may request from each Creditor, and shall be entitled to rely upon, a statement from each Creditor setting forth the Senior Secured

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Obligations owed to it in such detail as shall permit the Collateral Agent to make the foregoing distributions.  In the event of any dispute between any Creditors as to the Senior Secured Obligations owed to them or the amounts thereof, the Collateral Agent shall be entitled to hold such portion of the proceeds to be distributed as are subject to such dispute pending the resolution by the parties or pursuant to a judicial determination.

(b)           If in connection with a Bankruptcy Proceeding of the Company any portion of the Senior Secured Obligations referred to in clauses SECOND, THIRD, FOURTH or FIFTH of Section 5.8 is determined to be unenforceable or is disallowed (such portion to be hereinafter referred to as a “Disallowed Obligation”), then such Disallowed Obligation shall not be included in the calculation of amounts to be paid pursuant to clauses SECOND, THIRD, FOURTH or FIFTH of Section 5.8 but shall be included in clause SIXTH of Section 5.8; provided, that in no event shall a claim pursuant to a Guaranty or any other guaranty of a Senior Secured Obligation be included as a Disallowed Obligation unless the Senior Secured Obligation which is guaranteed by such Guaranty or other guaranty also constitutes a Disallowed Obligation.  In no event shall any Creditor take any action to challenge, contest or dispute the validity, extent, enforceability or priority of the Liens or claims of any other Creditor on the Collateral, or that would have the effect of invalidating such liens, or support any person who takes any such action.  Each of the Creditors agrees that it will not take any action to challenge, contest or dispute the validity, extent, enforceability or the secured status of any other Creditor’s claims against the Company (other than any such claim resulting from the breach of this Agreement), or that would have the effect of invalidating such claim or support any person who takes any such action.  For the avoidance of doubt, a Creditor’s claims that constitute Senior Secured Obligations shall be included in any distribution of proceeds pursuant to Section 5.8 whether or not a Lien held by such Creditor is invalidated or set aside.  This Section 5.10(b) is without prejudice to the obligation of the Credit Facility Lenders to reimburse the Credit Facility Agent for fees, expenses and other charges under the terms of the Credit Facility Agreement irrespective of the disallowance of such fees, expenses or charges.

(c)           If in connection with a Bankruptcy Proceeding of Company, the fees and expenses of the Collateral Agent referred to in clause First of Section 5.8 are determined to be unenforceable or are disallowed, in whole or in part, each Creditor agrees to pay its Indemnity Share of such fees and expenses.

Section 5.11.        Reinstatement.  If at any time the Collateral Agent or any Creditor shall be required to restore or return, or if such Person restores or returns in good faith settlement of pending or threatened avoidance claims, to the Company or any Guarantor or to the bankruptcy estate of the Company or any Guarantor any payments or distributions theretofore applied to the Senior Secured Obligations or any portion thereof, whether by reason of the insolvency, bankruptcy, reorganization or other similar event in respect of the Company (a “Returned Amount”), then, (a) the Collateral Agent (or Creditor, as applicable) shall promptly give notice of the Returned Amount to each Creditor and (b) each of the Creditors shall promptly transfer to the Collateral Agent (for reimbursement to the Collateral Agent or such Creditor, as the case may be) such amounts as are necessary such that each Creditor shall have received and retained the amount it would have received under Section 5.8 had the Returned Amount not previously been

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distributed (its “Returned Amount Share”).  If any Creditor (a “Non-Returning Secured Creditor”) fails to tender payment of its Returned Amount Share, then the Collateral Agent is hereby expressly granted the right thereafter to, and shall, withhold from any distributions otherwise payable to such Non-Returning Secured Creditor an amount equal to its Returned Amount Share remaining unpaid at such time of receipt of such distributions and apply such amount withheld in satisfaction of such Returned Amount Share.  The Collateral Agent shall also have the right to collect from such Non-Returning Secured Creditor, or withhold from any distributions under Section 5.8 to otherwise be made to such Non-Returning Secured Creditor, the Collateral Agent’s reasonable costs and expenses incurred in collecting such Non-Returning Secured Creditor’s Returned Amount Share.  The agreements in this Section 5.11 shall survive the payment of the Senior Secured Obligations and the termination of the Financing Documents or this Agreement.

SECTION 6.           BANKRUPTCY PROCEEDINGS.

The following provisions shall apply during any Bankruptcy Proceeding of the Company or any Affiliate of the Company:

(a)           The Collateral Agent shall act on the instructions of the Majority Creditors with respect to the administration of the Collateral in such Bankruptcy Proceeding (including with respect to questions regarding adequate protection and post-petition use of Collateral) and each Creditor agrees to be bound by such instructions with respect to matters pertaining to the Collateral; provided that no such vote by the Majority Creditors shall treat the Noteholders or the Revolving Credit Facility Lenders differently with respect to rights in the Collateral.

(b)           Each Creditor shall be free to act independently on any issue not directly relating solely to the Collateral.  Each Creditor shall give prior notice to the Collateral Agent of any action hereunder to the extent that such notice is possible.  If such prior notice is not given, such Creditor shall give prompt notice following any action taken hereunder.

(c)           Any proceeds of the Collateral received by any Creditor as a result of, or during, any Bankruptcy Proceeding will be delivered promptly to the Collateral Agent for distribution in accordance with Section 5.8.

(d)           No Creditor shall enter into any post-petition financing arrangements with the Company or any Affiliate of the Company in any Bankruptcy Proceeding unless authorized in writing by the Majority Creditors and unless all Creditors shall have been given the opportunity to participate ratably in such post-petition financing arrangements.

SECTION 7.           MISCELLANEOUS.

Section 7.1.           Creditors; Other Collateral.  The Creditors agree that all of the provisions of this Agreement shall apply to any and all properties, assets and rights of the Company and their Affiliates, including, without limitation, the Guarantors, in which the Collateral Agent at any time acquires a security interest or Lien pursuant to the Security Documents, the Note

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Agreement, the Credit Facility Agreement including, without limitation, real property or rights in, on or over real property, notwithstanding any provision to the contrary in any mortgage, security agreement, pledge agreement or other document purporting to grant or perfect any Lien in favor of the Creditors or any of them or the Collateral Agent for the benefit of the Creditors.

Section 7.2.           Marshalling.  The Collateral Agent shall not be required to marshall any present or future security for (including, without limitation, the Collateral), or guaranties of, the Senior Secured Obligations or any of them, or to resort to such security or guaranties in any particular order; and all of each of such Person’s rights in respect of such security and guaranties shall be cumulative and in addition to all other rights, however existing or arising.  To the extent that they lawfully may, the Creditors hereby agree that they will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Creditors’ rights under the Security Documents or under any other instrument evidencing any of the Senior Secured Obligations or under which any of the Senior Secured Obligations is outstanding or by which any of the Senior Secured Obligations is secured or guaranteed.

Section 7.3.           Consents, Amendments, Waivers.  All amendments, waivers or consents of any provision of this Agreement shall be effective only if the same shall be in writing and signed by the Requisite Creditors referred to in clause (a) of the definition thereof, the Credit Facility Agent and the Collateral Agent.

Section 7.4.           Governing Law.  This Agreement shall be deemed to be a contract under seal and shall for all purposes be governed by and construed in accordance with the laws of the State of Illinois.

Section 7.5.           Parties in Interest.  All terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, including, without limitation, any future holder of the Senior Secured Obligations; provided that no Creditor may assign or transfer its rights hereunder or under the Security Documents without such assignees or transferees agreeing, by executing an instrument in form and substance reasonably acceptable to the Collateral Agent, to be bound by the terms of this Agreement as though named herein; provided further, (a) that with respect to the Secured Lender Parties (other than the Credit Facility Agent), the requirements of this Section 7.5 shall be satisfied upon satisfaction of the assignment provisions set forth in the Credit Facility Agreement and (b) that with respect to the Credit Facility Agent, the requirements of this Section 7.5 shall be satisfied upon the satisfaction of the resignation of the Credit Facility Agent in accordance with the terms of the Credit Facility Agreement and appointment of a successor thereto in accordance with the terms of the Credit Facility Agreement.

Section 7.6.           Counterparts.  This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument.  In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.  Delivery of executed counterparts of this Agreement electronically or by telecopy shall be effective as an original and shall constitute a representation that an original shall be delivered.

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Section 7.7.           Termination.  Subject to Section 5.11, upon payment in full of the Senior Secured Obligations in accordance with their respective terms, the termination of the Commitments and the expiration or cancellation of all undrawn Letters of Credit under the Credit Facility Loan Documents, this Agreement shall terminate.

Section 7.8.           Notices.  Except as otherwise expressly provided herein, all notices, consents and waivers and other communications made or required to be given pursuant to this Agreement shall be in writing and shall be delivered by hand, mailed by registered or certified mail or prepaid overnight air courier, or by facsimile communications, addressed as follows:

If to the Collateral Agent, at:	Bank of America, N.A.
	231 S. LaSalle Street
	Mail Code: IL1-231-10-41 Chicago, IL 60697
	Attention: Suzanne M. Paul
	Telephone: 312-923-1640
	Telecopier: 877-206-8435
	Electronic Mail: suzanne.m.paul@bankofamerica.com
If to any Credit Facility Secured Creditor, at:	c/o Credit Facility Agent, Bank of America, N.A.
	231 S. LaSalle Street
	Mail Code: IL1-231-10-41 Chicago, IL 60697
	Attention: Suzanne M. Paul
	Telephone: 312-923-1640
	Telecopier: 877-206-8435
	Electronic Mail: suzanne.m.paul@bankofamerica.com
If to any Noteholder, at:	Such address as set forth for such Noteholder on Schedule 1 hereto
If to the Company, at:	KapStone Kraft Paper Corporation
	1101 Skokie Blvd., STE 300 Northbrook, IL 60062
	Attention: Andrea K. Tarbox
	Telephone: 847-239-8812
	Telecopier: 847-919-3833
	Electronic Mail: andrea.tarbox@kapstonepaper.com

or at such other address for notice as the Collateral Agent, such Creditor or the Company shall last have furnished in writing to the Person giving the notice, provided that a notice by overnight air courier shall only be effective if delivered at a street address designated for such purpose and

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a notice by facsimile communication shall only be effective if made by confirmed transmission at a telephone number designated for such purpose.  Notwithstanding any provision of this Agreement to the contrary, all notices to the Secured Lender Parties shall be delivered to the Credit Facility Agent.   The obligation of any Credit Facility Secured Creditor to give notice hereunder may be satisfied by the giving of such notice by the Credit Facility Agent.

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IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed as an instrument under seal by their authorized representatives as of the date first written above.

BANK OF AMERICA, N.A., as Collateral Agent
By	/s/ Suzanne M. Paul
	Name:	Suzanne M. Paul
	Title:	Vice President
BANK OF AMERICA, N.A., as Credit Facility Agent
By	/s/ Suzanne M. Paul
	Name:	Suzanne M. Paul
	Title:	Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By	/s/ G. Anthony Coletta
	Name:	G. Anthony Coletta
	Title:	Vice President

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Each of the undersigned hereby acknowledges (a) the terms of the foregoing Agreement, (b) that the foregoing Agreement is for the sole benefit of the Creditors and that it has no rights or benefits under such Agreement, and (c) that the provisions of the foregoing Agreement may be waived, amended or modified without its consent.

KAPSTONE KRAFT PAPER CORPORATION
By	/s/ Roger W. Stone
	Name:	Roger W. Stone
	Title:	CEO
KAPSTONE PAPER AND PACKAGING
CORPORATION
By	/s/ Roger W. Stone
	Name:	Roger W. Stone
	Title:	Chairman and CEO
KAPSTONE CHARLESTON KRAFT LLC
By	/s/ Roger W. Stone
	Name:	Roger W. Stone
	Title:	CEO

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SCHEDULE 1

INFORMATION RELATING TO THE NOTEHOLDERS

1.The Prudential Insurance Company of America

c/o Prudential Capital Group

Two Prudential Plaza

180 North Stetson, Suite 5600

Chicago, IL  60601-6716

Attn:   Managing Director

Telephone: (312) 540-4204

EXHIBIT A

SECURITY DOCUMENTS

1.	Security and Pledge Agreement dated July 1, 2008 between the Guarantors and the Collateral Agent;
2.	Deposit Account Control Agreement dated July 1, 2008 between the Company, the Collateral Agent and PNC Bank, National Association;
3.	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Charleston County, SC;
4.	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Kershaw County, SC;
5.	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Berkeley, SC;
6.	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Dorchester County, SC;
7.	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Hampton County, SC;
8.	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Newberry County, SC;
9.	Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Dorchester County, SC;
10.	Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Georgetown County, SC;
11.	Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Berkeley County, SC;
12.	Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Colleton County, SC;
13.	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Halifax County, NC;
14.	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Northampton County, NC (Aircraft property);

15. Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing from the Subsidiary Guarantor to be recorded in Northampton County, NC;

EX-14.0

Exhibit 14.0

KAPSTONE PAPER AND PACKAGING CORPORATION

CODE OF CONDUCT AND ETHICS

Introduction

KapStone Paper and Packaging Corporation and its subsidiaries (collectively “KapStone” or the “Company”) has always endeavored to conduct its business in a manner conforming to the highest ethical and business standards.  The Company’s reputation for unquestionable integrity is its most valuable asset in its relationships with its employees and agents (collectively “employee(s)”), its customers, its stockholders and the communities in which its operations are located.

This Code of Business Conduct and Ethics (the “Code”) covers a wide range of business practices and procedures and applies to all directors, officers and employees of the Company.  It does not cover every issue that may arise, but it sets out basic principles to guide directors, officers and employees of the Company to act in an ethical and legal manner.  All of our directors, officers and employees must conduct themselves accordingly and seek to avoid even the appearance of improper behavior.  It is essential and a condition of employment that all employees and representatives conform to these principles as they perform their activities on behalf of KapStone.

Since it is not practicable to specify specific requirements for business conduct and ethics for application in every possible situation, an understanding of the philosophy behind these standards is essential. The philosophy of the Company — upon which its ethical standards are based — is outlined below.

·We work hard and treat others with respect.

·We earn an honest profit by providing the right products and services to our customers.

·We act responsibly and in a manner that reflects favorably on the Company.

·We observe applicable laws and regulations.

·We require honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest, on the part of ourselves and others.

·We are committed to full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all reports and other documents filed with, or furnished to, the Securities and Exchange Commission (“SEC”) and in all other public releases of information regarding the Company’s finances and operations.

If a law conflicts with a policy in this Code, you must comply with the law; however, if a local custom or policy conflicts with this Code, you must comply with the Code.  If you have any questions about these conflicts, you should ask your supervisor how to handle the situation.

This Code will be strictly enforced.  All managers and supervisors are required to enforce this policy and are not permitted to sanction or condone violations. There will be serious adverse consequences for non-adherence to the Code, which may include removal from a position as director or officer, and dismissal as an employee of the Company.  If you are in a situation which you believe may violate or lead to a violation of this Code, you should follow the procedures described in Sections 15, 16 and 17 of this Code.

The Company does not tolerate retribution against persons who, in good faith, report suspected violations of law.  Persons subject to this Code who retaliate against others who report suspected crimes or wrongs will themselves be subject to immediate discipline.

1.Compliance with Laws

It is the policy of KapStone to comply fully with all valid laws and regulations that govern its operations in the various communities and states in which it operates and to conduct its affairs in keeping with the highest moral, legal, and ethical standards.

There is an obligation, both corporate and individual, to fulfill the intent of the above statement.  It is not expected that every employee will have full knowledge of the laws affecting his or her responsibilities. However, KapStone does expect that every employee with significant responsibilities will have a general knowledge of prohibited activities involved in his or her work and will seek guidance on any matter on which there is a question, either directly through his or her supervisor or if necessary, from KapStone’s Chairman, Roger Stone.

2.Business Ethics

The law is a base, and ethical business conduct should normally exist at a level above the minimum required by law.  This includes the obligation to avoid any actual or apparent conflicts of interest in personal and professional relationships.  The honesty and integrity of the Company’s business conduct must not be compromised.  The Company will not condone ethical violations for the sake of personal gain, personal advantage, expediency or perceived business advantage.

3.KapStone and Its Employees

Employees are KapStone’s greatest asset, and it is a KapStone policy to treat them fairly in all matters.  KapStone is committed to equal opportunity in all aspects of employment and to full compliance with all federal, state and local laws applicable to hiring and promoting people.

With this in mind, it is the intent of KapStone to:

2

·Choose and promote its employees on the basis of their ability to perform the work for which they are hired.  KapStone strictly prohibits discrimination based on any legally protected status, including race, color, gender, religion, national origin, disability, veteran status and age.

·Offer employees a safe, healthful, and clean environment in which to work.  Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe conditions.  Violence and threatening behavior are not permitted.  Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol.  The use of illegal drugs in the workplace will not be tolerated.

·Pay employees fairly in relationship to their contributions to KapStone efforts, within the boundaries of current standards, profitability and market conditions.

4.Discrimination, Harassment and Retaliation

KapStone is firmly committed to providing equal opportunity in all aspects of employment and will not tolerate discrimination, harassment or retaliation. The Company’s policy against discrimination applies to any legally protected status, including race, color, gender, religion, national origin, disability, veteran status, sexual orientation and age.

KapStone also prohibits any individual from engaging in any act or any form of harassment of any other individual on the basis of any legally protected status, including race, color, gender, religion, national origin, disability, veteran status, sexual orientation or age.  This prohibition covers verbal, as well as physical harassment.  Included within this prohibition are unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature, where: (a) there is an attempt made to make submission to such conduct a term or condition of an individual’s employment; (b) the submission or rejection of such conduct is used as a basis for employment related decision; and (c) such conduct has the purpose or effect of substantially interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment.

KapStone prohibits discrimination against any person who provides information to a federal regulatory or law enforcement agency, a member of Congress or any committee of Congress or to a supervisor concerning conduct which the employee reasonably believes constitutes a violation of securities laws or any provision of federal law relating to fraud against stockholders.  No one may take any action harmful to any person for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense.

No director, officer or employee may retaliate against an individual for bringing a complaint of discrimination or harassment or for participating in an investigation or proceeding involving a complaint of discrimination or harassment.

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KapStone requires continuous management attention at all levels to assure compliance with the spirit and letter of this policy.

5.Competition and Fair Dealing

KapStone seeks to outperform its competition fairly and honestly.  The Company seeks competitive advantages through superior performance, never through unethical or illegal business practices.  Stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent or inducing such disclosures by past or present employees of other companies is prohibited.  Each employee should endeavor to respect the rights of and to deal fairly with the Company’s customers, suppliers, competitors and employees.  No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other intentional act or practice.

In its relationships with its competitors, KapStone and its employees will fully understand and strictly adhere to the requirements of the antitrust laws.  These laws, which, in the U.S., include the Sherman Act, the Clayton Act, the Robinson-Patman Act, and the Federal Trade Commission Act, seek to advance and maintain the free enterprise system and take precedence over any business objective of KapStone, notwithstanding any resulting increases in income or profits.  Such acts as price fixing, restrictive agreements, boycotts, tie-in arrangements exclusive of reciprocal dealings, monopolizing, price inducements, and discriminatory allowances are or may be illegal.  All violations of the antitrust laws must be scrupulously avoided by all employees.  KapStone will not condone any actions which an employee knew or should have known would violate the antitrust laws or any other valid law or regulation.

The purpose of business entertainment and gifts in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with customers or suppliers.  Gifts or bribes for the purpose of influencing the buying decisions of employees of customers or potential customers or to any person in a position to influence a buying decision are clearly improper and prohibited.

6.Insider Trading

Directors, officers and employees who have access to material confidential information are not permitted to use or share that information for securities trading purposes or for any other purpose except the conduct of the Company’s business and in strict conformity with all applicable laws and SEC regulations. All non-public information about the Company should be considered confidential information.  To use non-public information for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is not only unethical but also illegal. Trading in the securities of other companies with which the Company has a relationship while in possession of material nonpublic information is also prohibited.

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7.Accounting, Auditing and Internal Control Matters; Public Disclosure Obligations

KapStone’s requirement that directors, officers and employees follow the highest ethical standards applies directly to all actions which involve business accounting, financial reporting, internal accounting controls, auditing matters and public disclosure obligations.

The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions.  All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform to applicable legal requirements, generally accepted accounting principles and the Company’s system of internal controls.  No employee is ever authorized to knowingly enter or maintain false or misleading information in corporate books, records or reports.  It is prohibited under federal law and Company policy to fraudulently influence, coerce, manipulate or mislead the Company’s independent public accountants for the purpose of rendering the Company’s financial statements materially misleading.  Records should always be retained or destroyed according to the Company’s record retention policies.

Full, fair, accurate, timely and understandable disclosure is required in all reports and documents that the Company files with, or submits to, the SEC and in any other public communications regarding the Company’s business, financial condition or results of operations.

All officers, directors and employees are required to report, or cause to be reported, information, and should assist in any investigation by any regulatory or law enforcement agency, elected officials or others responsible for such matters, concerning matters that the officer, director or employee reasonably believes could constitute matters described in:

·Section 806 of the Sarbanes-Oxley Act of 2002, including wire fraud, mail fraud, bank fraud or securities fraud, breach of any rule or regulation promulgated by the SEC or any federal rules relating to fraud against stockholders;

·Section 301 of the Sarbanes-Oxley Act of 2002, including questionable accounting, internal controls and auditing matters;

·Item 406 of Regulation S-K, including disclosures in SEC reports and other public disclosures that are not full, fair, accurate, timely and understandable; and

·Applicable New York Stock Exchange listing standards, including conflicts of interest and violations of laws, rules, or regulations applicable to the Company.

Accounting procedures and controls are prescribed by Company policies.  Within these policies, the officers of the Company have the primary responsibility for establishing and monitoring adequate systems of internal accounting and controls, and all employees must adhere to these controls.  The Company’s auditors monitor and document compliance with these internal controls.

The Audit Committee of the Company has adopted special procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters.  These procedures are set out in Sections 16 and 17 of this Code.

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8.Confidentiality

Employees must maintain the confidentiality of the information entrusted to them by the Company or its customers, except when disclosure is authorized by the Chairman and Chief Executive Officer, the President or required by law.  Confidential information includes all non-public information that might be of use to competitors or harmful to the Company or its customers, if disclosed.  It also includes information that suppliers and customers have entrusted to us.  The obligation to preserve confidential information continues even after employment ends.

9.Protection and Proper Use of Company Assets

All directors, officers and employees should endeavor to protect the Company’s assets and ensure their efficient use.  Theft, carelessness and waste have a direct impact on the Company’s profitability.  Any suspected incident of fraud or theft should be immediately reported for investigation.

Many employees regularly use business expense accounts, which must be documented and recorded accurately and in accordance with the Company’s policies.  If you are not sure whether a certain expense is legitimate, ask your supervisor or your controller.

The obligation to protect the Company’s assets includes the Company’s proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks and copyrights, as well as business, marketing, product development and service plans, records, salary information and any unpublished financial data and reports.  Unauthorized use or distribution of this information would violate Company policy.  It could also be illegal and result in civil or even criminal penalties.

10.Payments to Government Personnel

The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business.  It is strictly prohibited to make illegal payments to government officials of any country.  In addition, the U.S. government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel.  The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense.  State and local governments, as well as foreign governments, may have similar rules.

Payments, regardless of amount, to any government employee, or gifts or services of substantial value or lavish entertainment, regardless of motive, are prohibited.  Relationships with public employees shall be so conducted that neither the official’s nor KapStone’s integrity would be compromised if the full details of the relationship became a matter of public knowledge.  The Company’s Chief Financial Officer (the “Compliance Officer” for purposes of this Code) can provide guidance to you in this area.

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11.Political Contributions

A corporation is prohibited from making a political contribution to any candidate for federal office. In addition, virtually every state either limits or prohibits the making of political contributions by a corporation to a state or local candidate or political party.  KapStone’s policy is to make no financial contributions to a political party or to a candidate running for any elective office, except as permitted by law.  This applies to all political parties or candidates.  If any of the Company’s customers or suppliers request that the Company make a political contribution, it is essential that prior approval is given by the Compliance Officer before any contribution is made.  Under no circumstances shall the Company make a political contribution to any federal candidates.

12.KapStone and the Community

KapStone shall conduct its business in a manner that is socially and ethically responsible.  In addition to operating and managing its business, it shall seek to reasonably protect the quality of the environment and endeavor to conserve energy and other valuable resources.

Each of the KapStone’s facilities is expected to make every effort to be an integral part of the community in which it operates, and to participate in its activities as a concerned and responsible citizen.  Like individual citizens, the Company benefits from and supports such activities as health, welfare, character building, education, and culture.  KapStone recognizes that employee participation in cultural, social, or volunteer organizations can be public service of a higher order, and all KapStone employees are encouraged to participate during their non-working hours in public matters of their individual choice.

13.Conflicts of Interest

It has always been and continues to be KapStone’s intent that its employees maintain the highest standards of loyalty in their conduct of the Company’s affairs.  Directors, officers and employees owe a duty to the Company to advance the Company’s legitimate interests when the opportunity to do so arises.  In essence, KapStone’s employees shall deal with suppliers, customers, and other persons doing business or seeking to do business with the Company in a manner that eliminates considerations of personal advantage.  Because they hold positions of trust in the Company, a director, an officer, or any other employee may not make a profit from the Company because of his or her official position.  They are also prohibited from engaging in a competing business.

Any direct or indirect conflict of interest between the Company and any director, officer or employee is prohibited unless otherwise consented to by the Company.  The Company believes that it is in its best interests and is consistent with the obligations of directors, officers and employees to the Company to establish a policy that all business decisions will reflect independent judgment and discretion, uninfluenced by any considerations other than those honestly believed to be in the best interests of the Company and its stockholders.  Any decision will be deemed to be in conflict with the interests of the Company if, in the course of affiliation with the Company, the judgment and discretion of a director, officer or employee is or may be influenced by considerations of personal gain or benefit, or gain or benefit to a third party,

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whether or not affiliated with the director, officer or employee.  The divided loyalty that is present when a director, officer or employee has a conflict of interest could potentially lead to serious problems for the Company and could be grounds for disciplinary action or termination by the Company.

It is not possible to describe every situation or occurrence that could lead to a conflict of interest between a director, officer or employee and the Company.  The following events are intended to describe, by way of example, situations that could occur that could lead to a conflict of interest with the Company:

·Relationships with Customer or Competitors:  Stock ownership and other financial interests or participation in any customer, supplier or competitor of the Company must be reported to the Compliance Officer.

·Indirect Interests and Relationships: A conflict of interest can arise because of the business activities of an affiliate of a director, officer or employee.  The term affiliate includes close family members and family members who live in the same household as a director, officer or employee.  A director, officer or employee has a potential conflict of interest whenever his or her affiliate has a significant interest in a transaction or a significant relationship with any customer, supplier or competitor of the Company.  The director, officer or employee should not make or influence any decision which could directly or indirectly benefit his or her affiliate and, in order to protect the director, officer or employee and the Company from the appearance of a conflict of interest, all relationships of this nature must be reported to the Compliance Officer.

·Gifts, Loans and Entertainment:  A director, officer or employee will not accept gifts from competitors or from anyone having or seeking business with the Company, other than noncash gifts of nominal value (less than $50.00 per calendar year) generally used for promotional purposes by the giver or accept loans from any person having or seeking business with the Company (other than loans from banks or financial institutions at prevailing market rates and terms).  Participation in business-related functions is permitted, including the acceptance of lunches or other meals. However, each director, officer or employee should exercise care to ensure that such functions are necessary and related to the conduct of business on behalf of the Company. If in doubt, the Compliance Officer should be consulted.

·Outside Business Activities: As a general rule, the Company does not allow its employees to participate or engage in business activities outside of their employment with the Company.  As a general rule, participation on a part-time or other basis in any outside business or employment will be a conflict of interest if the director, officer or employee’s participation in that business could interfere with his or her ability to devote proper time and attention to his or her employment with the Company.

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·Non-business Activities: Participation in the activities of a trade association, professional society, charitable institution or governmental institution, on a non-compensated basis, or holding a part-time public office (with or without compensation) will not generally create a conflict of interest in violation of this Code.  However, if any director, officer or employee is unsure of his or her particular situation, the Compliance Officer should be consulted.

·Personal Use of Company Property and Company Information: It is against Company policy for any director, officer or employee to use or divert any Company property, including services of other employees, for his or her own advantage or benefit, or to use Company letterhead when writing personal correspondence.

·Related Party Business Dealing.  If there is any business relationship or proposed business transaction that the Company might have with any company in which a director, officer or employee, or a related party of any such person, has a direct or indirect interest, and from which such person might derive a benefit, or at which a related party is employed, and if such a relationship or transaction might give rise to the appearance of a conflict of interest, then the Compliance Officer should be consulted.

14.Waivers of the Code of Business Conduct and Ethics

Any waiver of this Code for executive officers or directors may be made only by the Board of Directors and will be promptly disclosed as required by law or NYSE rules.

15.Personal Responsibility

It is essential that the Company ensures prompt and consistent action against violations of this Code. However, in some situations it is difficult to know right from wrong.  Since directors, officers and employees cannot anticipate every situation that will arise, it is important to have guidelines on how to approach a new question or problem.  These are the steps to keep in mind:

·Make sure you have all the facts.  In order to reach the right solutions, we must be as fully informed as possible.

·Ask yourself: What specifically am I being asked to do?  Does it seem unethical or improper? This will enable you to focus on the specific question you are faced with, and the alternatives you have.  Use your judgment and common sense; if something seems unethical or improper, it probably is.

·Clarify your responsibility and role.  In most situations, there is shared responsibility.  Are your colleagues informed?  It may help to get others involved and discuss the problem.

·Discuss the problem with your supervisor.  This is the basic guidance for all situations.  In many cases, your supervisor will be more knowledgeable about the question, and will

9

appreciate being brought into the decision-making process.  Remember that it is your supervisor’s responsibility to help solve problems.

·Seek help from Company resources.  If you believe that it is not appropriate to discuss an issue with your supervisor, or you do not feel comfortable approaching your supervisor with your question, discuss it locally with the Compliance Officer.

·You may report ethical violations in confidence and without fear of retaliation.  If your situation requires that your identity be kept secret, your anonymity will be protected.  The Company does not permit retaliation of any kind against employees for good faith reports of ethical violations.

·Always ask first, act later:  If you are unsure of what to do in any situation, seek guidance before you act.

16.Reporting/Investigation Procedures

Any director, officer or employee who reasonably believes that there has been a material violation of this Code should report it immediately to the Compliance Officer or Roger Stone, Chairman. If the possible violation relates to questionable accounting, auditing, internal control or other matters described in Section 7 of this Code, the employee may submit an anonymous, confidential complaint as discussed in Section 17.  The Chairman of the Audit Committee shall in any event be promptly advised of any allegation of a material violation of Section 7 of this Code.  Upon receipt of a complaint, the Company or Audit Committee or other designee shall promptly investigate the matter.

Providing your name allows the Company to contact you if necessary during any investigation.  The Company will maintain in confidence the identity of those individuals who provide their names when reporting to the fullest extent possible consistent with the need to investigate. Absolute confidentiality of any complaint under this Code, however, cannot be guaranteed because the very fact of conducting an investigation may lead employees or other persons to reach conclusions of their own.  Anyone involved in an investigation under these procedures, whether as witnesses, participants in the performance of the investigation or otherwise, will be informed of their obligation to maintain confidentiality and may be asked to sign an acknowledgment of this obligation.

KapStone will not retaliate against any officer, director or employee who reports, causes to be reported, testifies, participates in or otherwise assists in any proceeding reported or about to be reported regarding any matter covered under this Code.

The Compliance Officer will send summaries of conversations, and will forward copies of written communications and transcripts of voice mail messages, containing reports to the Chairman of the Board of Directors and the Chairman of the Audit Committee, as appropriate under the circumstances.  The Compliance Officer will provide periodic reports to both Chairmen. The Compliance Officer will retain copies of all complaints, investigative reports,

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summaries of reports and other records relating to complaints in accordance with the Company’s records retention policy.

17.Procedures for Submitting Confidential, Anonymous Complaints Regarding Accounting, Auditing or Internal Control Matters

As an alternative to the procedures described in Section 16, any employee who reasonably believes that there has been a material violation of this Code relating to questionable accounting, auditing, internal control or other matters described in Section 7 of this Code may submit confidential, anonymous complaints in writing to the person listed below.  Complaints must provide sufficient information so that a reasonable investigation can be conducted and may be made directly to:

S. Jay Stewart, Chair of the Audit Committee of the Company’s Board of Directors;

Telephone No.: (312) 475-9883

Fax No.: (312) 475-9884

Email Address: sjaystewart@aol.com

or such other individuals who are designated from time to time by the Board of Directors of KapStone.

The Company shall maintain a record of all complaints submitted under this Code alleging a violation accounting, auditing or internal control matters.

18.Consequences

If an investigation leads to a conclusion that a material violation of the Code has occurred, the Company will take appropriate corrective action, which may include removal from a position as director or officer and dismissal as an employee of the Company.  Among other things, directors, officers and employees of the Company may be disciplined for:

·Committing, authorizing, or directing an illegal act.

·Failing to exercise proper compliance oversight or tolerating illegal conduct, if acting as a supervisor of another employee of the Company.

·Failing to report illegal business conduct of which he or she directly knows or observes.

·Discouraging another director, officer, or employee from reporting a violation of law or of this Code.

·Improperly disclosing the identity of a person who anonymously reports a violation of this Code.

·Retaliating or condoning retaliation against any director, officer, or employee of the Company who reports such a violation.

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As examples, the following are not valid excuses for failing to comply with the law and/or this Code and, as such, will not avoid disciplinary measures under this Code:

·“A supervisor demanded that I do the illegal, unethical or improper act.”

·“I thought the conduct was standard practice in our business.”

·“It was a business necessity because it would have cost more to act properly.”

·“I misinterpreted the law or this code and did not seek the advice of my supervisor.”

The Company recognizes the potentially serious impact of a false accusation. Employees are expected as part of the ethical standards required by this Code to act responsibly in making complaints. Making a complaint without a good faith basis is itself an ethical violation. Any employee who makes a complaint in bad faith will be subject to appropriate corrective action, up to and including dismissal.

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ACKNOWLEDGMENT

CODE OF CONDUCT AND ETHICS

·I acknowledge that I have received and read the KapStone Code of Conduct and Ethics.

·I acknowledge that I understand the standards, policies and procedures contained in the Code of Conduct and Ethics and understand that there may be additional standards, policies, procedures and laws relevant to my position.

·I agree to comply with the Code of Conduct and Ethics.

·I acknowledge that if I have questions concerning the meaning or application of the Code of Conduct and Ethics, any company policies, or the legal or regulatory requirements applicable to my position, it is my responsibility to seek guidance from my manager, the Human Resources Department or other relevant individuals or departments.

·I acknowledge that neither this Acknowledgement nor the Code of Conduct and Ethics is meant to vary or supersede the regular terms and conditions of my employment by the company or to constitute an employment contract.

(print name)

(signature)

(date)

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EX-21.1

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Exhibit 21.1

KAPSTONE PAPER AND PACKAGING CORPORATION
SUBSIDIARIES OF THE COMPANY

Consolidated Subsidiaries	Organized Under Laws of	Percentage Ownership
KapStone Kraft Paper Corporation	Delaware		100	%
KapStone Charleston Kraft, LLC	Delaware		100	%
KapStone Europe SPRL	Belgium		100	%
KapStone Asia Limited	Hong Kong		100	%

Non-Consolidated Subsidiaries

None

In 2009, COGEN South LLC, a Delaware company and an indirect wholly owned subsidiary of KapStone Paper and Packaging Corporation, was merged with KapStone Charleston Kraft, LLC.

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Exhibit 21.1

EX-23.1

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-124601) of KapStone Paper and Packaging Corporation, in the related Prospectus and Registration Statement (Form S-8 No. 333-141916) pertaining to the 2006 Incentive Plan, and in the Registration Statement (Form S-8 No. 333-163667) pertaining to the 2009 Employee Stock Purchase Plan of our reports dated March 10, 2010, with respect to the consolidated financial statements and schedule of KapStone Paper and Packaging Corporation and the effectiveness of internal control over financial reporting of KapStone Paper and Packaging Corporation, included in this Annual Report (Form 10-K) for the year-ended December 31, 2009.

/s/ Ernst & Young LLP

Chicago, Illinois
March 10, 2010

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Exhibit 23.1

EX-31.1

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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Roger W. Stone, certify that:

1.

I have reviewed this Annual Report on Form 10-K of KapStone Paper and Packaging Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 10, 2010

By:	/s/ Roger W. Stone
	Name:	Roger W. Stone
	Title:	Chairman and Chief Executive Officer

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Exhibit 31.1

EX-31.2

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Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Andrea K. Tarbox, certify that:

1.

I have reviewed this Annual Report on Form 10-K of KapStone Paper and Packaging Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 10, 2010

By:	/s/ Andrea K. Tarbox
	Name:	Andrea K. Tarbox
	Title:	Vice President and Chief Financial Officer

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Exhibit 31.2

EX-32.1

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Exhibit 32.1

Certification of CEO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        I, Roger W. Stone, Chairman and Chief Executive Officer of KapStone Paper and Packaging Corporation, hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that:

(1)

The Annual Report on Form 10-K of the KapStone Paper and Packaging Corporation for the annual period ended December 31, 2009, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of KapStone Paper and Packaging Corporation.

Dated: March 10, 2010

By: /s/ Roger W. Stone
Roger W. Stone
Chairman and Chief Executive Officer

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Exhibit 32.1

EX-32.2

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Exhibit 32.2

Certification of CFO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        I, Andrea K. Tarbox, Vice President and Chief Financial Officer of KapStone Paper and Packaging Corporation, hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that:

(1)

The Annual Report on Form 10-K of the KapStone Paper and Packaging Corporation for the annual period ended December 31, 2009, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of KapStone Paper and Packaging Corporation.

Dated: March 10, 2010

By: /s/ Andrea K. Tarbox
Andrea K. Tarbox
Vice President and Chief Financial Officer

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Exhibit 32.2