Exhibit 10.1

 

EXECUTION VERSION

 

NOTE SECURITY AGREEMENT

 

among

 

CELLU TISSUE HOLDINGS, INC.

 

and certain of its Subsidiaries,

 

and

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

 

as Collateral Agent

 

Dated as of June 3, 2009

 

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TABLE OF CONTENTS

 

 

Page

 

 

SECTION 1.   DEFINED TERMS

1

1.1   Definitions

1

1.2   Other Definitional Provisions

8

 

 

SECTION 2.   APPOINTMENT OF COLLATERAL AGENT

9

 

 

SECTION 3.   GRANT OF SECURITY INTEREST

9

3.1   Grant of First Priority Interest

9

3.2   Grant of Second Priority Interest

9

3.3   Right of Setoff

9

3.4   Excluded Property

9

 

 

SECTION 4.   REPRESENTATIONS AND WARRANTIES

10

4.1   Title; No Other Liens

10

4.2   Perfected First Priority Liens

11

4.3   Perfected Second Priority Liens

11

4.4   Jurisdiction of Organization; Chief Executive Office

11

4.5   Equipment

11

4.6   Farm Products

11

4.7   Investment Property

12

4.8   Intellectual Property

12

4.9   Receivables

13

4.10   Deposit Accounts and Securities Accounts

13

4.11   Excluded Property

13

4.12   Existing IRB Lien

13

 

 

SECTION 5.   COVENANTS

13

5.1   Delivery of Instruments, Certificated Securities and Chattel Paper

13

5.2   Maintenance of Insurance

13

5.3   Maintenance of Perfected Security Interest; Further Documentation

14

5.4   Changes in Locations, Name, etc.

15

5.5   Notices

15

5.6   Investment Property

16

5.7   Intellectual Property

16

5.8   Receivables

18

5.9   Securities Accounts and Deposit Account

18

5.10   Payment of Obligations

18

5.11   Reserved

18

5.12   Terminations; Amendments Not Authorized

18

 

 

SECTION 6.   REMEDIAL PROVISIONS

19

6.1   Certain Matters Relating to Receivables

19

6.2   Communications with Grantors; Grantors Remain Liable

19

 

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6.3   Pledged Stock

20

6.4   Application of Proceeds

20

6.5   Code and Other Remedies

21

6.6   Registration Rights

22

6.7   Deficiency

23

6.8   Proceeds to be Turned Over To Collateral Agent

23

 

 

SECTION 7.   ACTIONS AFTER EVENT OF DEFAULT

23

7.1   General Authority of the Collateral Agent over the Collateral

23

7.2   Judicial Proceedings and Insolvency Events

23

7.3   Right to Appoint a Receiver

23

7.4   Remedies Not Exclusive

24

7.5   Waiver and Estoppel

24

7.6   Limitation on Collateral Agent’s Duty in Respect of Collateral

25

 

 

SECTION 8.   COLLATERAL ACCOUNT; DISTRIBUTIONS

25

8.1   The Collateral Account

25

8.2   Control of Collateral Account

25

8.3   Investment of Funds Deposited in Collateral Account

25

8.4   Withdrawals by the Grantors

26

8.5   Application of Moneys

26

8.6   Collateral Agent’s Calculations

26

8.7   Excess Payments

26

 

 

SECTION 9.   AGREEMENTS WITH THE COLLATERAL AGENT

26

9.1   Delivery of Secured Debt Documents

26

9.2   Compensation and Expenses

26

9.3   Stamp and Other Similar Taxes

27

9.4   Filing Fees, Excise Taxes, Etc.

27

9.5   Indemnification

27

9.6   Collateral Agent’s Lien

27

 

 

SECTION 10.   THE COLLATERAL AGENT

28

10.1   Collateral Agent’s Appointment as Attorney-in-Fact, etc.

28

10.2   Duty of Collateral Agent

29

10.3   Filing of Financing Statements

30

10.4   Authority of Collateral Agent

30

10.5   Exculpatory Provisions

30

10.6   Delegation of Duties

31

10.7   Reliance by Collateral Agent

31

10.8   Limitations on Duties of Collateral Agent

32

10.9   Moneys to be Held in Trust

33

10.10   Resignation and Removal of the Collateral Agent

33

10.11   Status of Successor Collateral Agent

34

10.12   Merger of the Collateral Agent

34

10.13   Co-Collateral Agent; Separate Collateral Agent

34

 

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10.14   Treatment of Payee or Indorsee by Collateral Agent; Representatives of
Secured Parties

35

 

 

SECTION 11.   MISCELLANEOUS

36

11.1   Notices

36

11.2   Amendments in Writing

36

11.3   No Waiver by Course of Conduct; Cumulative Remedies

37

11.4   Enforcement Expenses

37

11.5   Successors and Assigns

37

11.6   Counterparts

37

11.7   Severability

37

11.8   Section Headings

37

11.9   Integration

38

11.10   GOVERNING LAW

38

11.11   Submission To Jurisdiction; Waivers

38

11.12   Acknowledgements

38

11.13   Additional Grantors

39

11.14   Releases; Termination of Security Interests

39

11.15   Reinstatement

39

11.16   WAIVER OF JURY TRIAL

39

11.17   Force Majeure

39

11.18   No Liability for Clean-up of Hazardous Materials

40

 

SCHEDULES

 

 

 

Schedule 1

Notice Addresses

Schedule 2

Investment Property

Schedule 3

Perfection Matters

Schedule 4

Jurisdictions of Organization and Chief Executive Offices

Schedule 5

Inventory and Equipment Locations

Schedule 6

Intellectual Property

Schedule 7

Deposit Accounts

Schedule 8

Section 3.4 Existing Exclusions

 

 

ANNEXES

 

 

 

Annex 1

Form of Assumption Agreement

Annex 2

Form of Issuer’s Acknowledgement and Consent

 

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NOTE SECURITY AGREEMENT

 

NOTE SECURITY AGREEMENT, dated as of June 3, 2009, made by CELLU TISSUE
HOLDINGS, INC. (the “Company”) and each of its subsidiaries signatories hereto
(the Company and such subsidiaries, together with any other entity that may
become a party hereto as provided herein, the “Grantors”) in favor of THE BANK
OF NEW YORK MELLON TRUST COMPANY, N.A., as Collateral Agent (in such capacity,
the “Collateral Agent”) for the holders of the notes (the “Holders”) issued
pursuant to the Indenture, dated as of June 3, 2009 (as amended, supplemented or
otherwise modified from time to time, the “Indenture”), among the Company, the
subsidiary guarantors parties thereto (the “Subsidiary Guarantors”) and The Bank
of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Indenture, dated as of March 12, 2004 (as supplemented
by the First Supplemental Indenture dated as of June 2, 2006, the Second
Supplemental Indenture dated as of March 21, 2007, the Third Supplemental
Indenture dated as of July 2, 2008 and the Fourth Supplemental Indenture dated
as of April 8, 2009, the “Prior Indenture”), the Company has issued 9¾% Senior
Secured Notes due 2010 (the “Prior Notes”) issued by the Company to the holders
of the Prior Notes;

 

WHEREAS, the Company is entering into the Indenture for the purpose of
refinancing and replacing the Prior Notes;

 

WHEREAS, pursuant to the Indenture, the Company has issued to the Holders its
11½% Senior Secured Notes due 2014, and may issue from time to time additional
notes in connection with the provisions of the Indenture (as the same may be
amended, restated, replaced, supplemented, substituted or otherwise modified
from time to time, collectively, the “Notes”);

 

WHEREAS, pursuant to the Indenture, each Subsidiary Guarantor has guaranteed the
obligations of the Company with respect to the Notes and the Indenture; and

 

WHEREAS, it is a condition precedent to the purchase by the Holders of the Notes
that the Grantors shall have executed and delivered this Agreement to the
Collateral Agent for the ratable benefit of the Holders and the Trustee for the
purpose of providing security for the Company Obligations and the Guarantor
Obligations;

 

NOW, THEREFORE, in consideration of the premises, to induce the Holders to
purchase the Notes and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, each Grantor hereby agrees
with the Collateral Agent, for the ratable benefit of the Holders and the
Collateral Agent, as follows:

 

SECTION 1.  DEFINED TERMS

 

1.1  Definitions.  (a)  Unless otherwise defined herein, the following terms are
used herein as defined in the New York UCC: Accessions, Account Debtor,
Accounts, Certificate of Title, Certificated Security, Chattel Paper, Documents,
Commercial Tort Claims, Equipment, Farm Products, Fixtures, General Intangibles,
Instruments, Inventory, Letter-of-Credit Rights, Securities Accounts and
Supporting Obligations.

 

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(B)  THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:

 

“Additional Interest”: any additional interest payable on the Notes pursuant to
Section 2(d) of the Registration Rights Agreement.

 

“Affiliate”: as to any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
“control” when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to the foregoing;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.

 

“Agreement”: this Note Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

 

“Asset Disposition”: as defined in the Indenture.

 

“Asset Swap”: as defined in the Indenture.

 

“Bank Administrative Agent”: the collective reference to JPMorgan Chase Bank,
N.A., as U.S. administrative agent for the U.S. lenders and JPMorgan Chase Bank,
N.A., Toronto Branch, as Canadian administrative agent for the Canadian lenders,
under the Pledge and Security Agreement and the General Security Agreement
related to the Working Capital Facility.

 

“Bank Documents”: the collective reference to the Working Capital Facility and
any other documents entered in connection therewith.

 

“Business Day”: a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.

 

“Capital Stock”: of any Person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.

 

“Cash Equivalents”: as defined in the Indenture.

 

“Collateral”: the First-Priority Collateral and the Second-Priority Collateral.

 

“Collateral Accounts”: the First-Priority Collateral Account and the
Second-Priority Collateral Account.

 

“Collateral Agent Fees”: all fees, costs and expenses of the Collateral Agent of
the types described in Sections 9.2, 9.3, 9.4 and 9.5.

 

“Collateral Documents”: the collective reference to this Agreement, the
Mortgages and each other document or agreement pursuant to which the Collateral
Agent is granted a Lien in any or all of the Collateral for the benefit of the
Secured Parties or is entitled to exercise, or restricted from exercising, any
rights or remedies with respect to any or all of the Collateral and any other

 

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agreement, document or instrument delivered by or on behalf of any Grantor
pursuant to or in connection with any of the foregoing.

 

“Company Obligations”: the collective reference to the unpaid principal of and
interest (including Additional Interest) on the Notes and all other obligations
and liabilities of the Company to the Collateral Agent or any Secured Party,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, the other Note Documents or any other document made,
delivered or given in connection with any of the foregoing, in each case whether
on account of principal, interest (including Additional Interest), reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Collateral Agent or to
the Secured Parties that are required to be paid by the Company pursuant to the
terms of any of the foregoing agreements).

 

“Copyright Licenses”: any written agreement naming any Grantor as licensor or
licensee (including, without limitation, those listed in Schedule 6), granting
any right under any Copyright, including, without limitation, the grant of
rights to manufacture, distribute, exploit and sell materials derived from any
Copyright.

 

“Copyrights”: (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Schedule 6), all registrations and recordings
thereof and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United States
Copyright Office, and (ii) the right to obtain all renewals thereof.

 

“Deposit Account”: as defined in the Uniform Commercial Code of any applicable
jurisdiction and, in any event, including, without limitation, any demand, time,
savings, passbook or like account maintained with a depositary institution.

 

“Dollars” and “$”: lawful currency of the United States.

 

“Event of Default”: as defined in the Indenture.

 

“Exchange Act”: the Securities Exchange Act of 1934, as amended.

 

“First-Priority Collateral”: with respect to each Grantor, the following
property now owned or hereafter acquired by such Grantor or in which such
Grantor has now or at any time in the future may acquire any right, title or
interest: all Chattel Paper, Deposit Accounts (except to the extent that such
Deposit Accounts or funds or other amounts credit thereto constitute
Second-Priority Collateral), Documents (other than title documents with respect
to Vehicles), Equipment, General Intangibles, Instruments, Intellectual
Property, Investment Property, Letter-of-Credit Rights and all other property
not described above, all books and records pertaining to the foregoing and, to
the extent not otherwise included in the foregoing, all Proceeds, all Supporting
Obligations and all products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to any of the
foregoing; but, excluding, however, all Second-Priority Collateral and the
property described in Section 3.4; provided, however, that any Collateral,
regardless of type, received in connection with an Asset Disposition or Asset
Swap of First-Priority Collateral or otherwise in exchange for First-Priority
Collateral, or any additional issuance of Notes, pursuant to

 

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the terms of the Indenture shall be treated as First-Priority Collateral under
this Agreement and the Intercreditor Agreement; provided, further, that any
Collateral of the type that constitutes First-Priority Collateral, if received
in connection with an Asset Disposition or Asset Swap of Second-Priority
Collateral or otherwise in exchange for Second-Priority Collateral pursuant to
the terms of the Indenture, shall be treated as Second-Priority Collateral under
this Agreement and the Intercreditor Agreement.

 

“First-Priority Collateral Account”: the “Cellu Tissue First-Priority Collateral
Account” established by the Collateral Agent as provided in Section 8.1.

 

“First Priority Interest”: as defined in Section 3.1.

 

“Foreign Subsidiary”: any Subsidiary organized under the laws of any
jurisdiction outside the United States of America.

 

“Foreign Subsidiary Voting Stock”: Voting Stock of any Restricted Subsidiary
that is not organized under the laws of the United States of America or any
state thereof or the District of Columbia and any Subsidiary of such Restricted
Subsidiary.

 

“GAAP”: generally accepted accounting principles in the United States of America
as in effect as of the date of the Indenture, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.

 

“Governmental Authority”: any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory, supervisory or administrative functions or of pertaining to
government, any securities exchange and any self-regulatory organization
(including the National Association of Insurance Commissioners).

 

“Guarantor Obligations”: with respect to any Subsidiary Guarantor, the
collective reference to all obligations and liabilities of such Guarantor which
may arise under or in connection with any Subsidiary Guarantee or any other
document related thereto to which such Subsidiary Guarantor is a party, in each
case whether on account of guarantee obligations, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise.

 

“Intellectual Property”: the collective reference to all rights, priorities and
privileges relating to intellectual property owned, held or used, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks, the Trademark Licenses,
technology, know how and processes, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.

 

“Intercompany Note”: any promissory note evidencing loans made by any Grantor to
the Company or any of its Subsidiaries.

 

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“Intercreditor Agreement”: the Second Amended and Restated Intercreditor
Agreement, dated as of June 3, 2009, among the Company, the Subsidiary
Guarantors, the Collateral Agent and the Bank Administrative Agent.

 

“Investment Property”: the collective reference to (i) all “investment property”
as such term is defined in Section 9-102(a)(49) of the New York UCC (other than
any Foreign Subsidiary Voting Stock or other Capital Stock excluded from the
definition of “Pledged Stock”) and (ii) whether or not constituting “investment
property” as so defined, all Pledged Notes and all Pledged Stock.

 

“IRB Deposit Accounts”: the accounts of Cellu Tissue-Cityforest LLC at
Associated Bank, National Association and Pioneer Bank listed on Schedule 7
hereto.

 

“Issuers”: the collective reference to each issuer of any Investment Property.

 

“License”: any Copyright License, Patent License, Trademark License or other
license of rights or interests now held or hereafter acquired by any Grantor.

 

“Liens”: any mortgage, security interest, encumbrance, lien or charge of any
kind (including any conditional sale or other title retention agreement or lease
in the nature thereof).

 

“Mortgages”: each of the mortgages, deeds to secure debt and deeds of trust now
or hereafter made by any Grantor with respect to property owned in fee by such
Grantor in favor of, or for the benefit of, the Collateral Agent for the benefit
of the Secured Parties, substantially in the form attached to the Indenture.

 

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

 

“Note Documents”: the collective reference to the Indenture, the Collateral
Documents, the Intercreditor Agreement, the Registration Rights Agreement and
any other documents entered in connection therewith.

 

“Obligations”: the Company Obligations and the Guarantor Obligations.

 

“Opinion of Counsel”: a written opinion reasonably satisfactory to the
Collateral Agent signed by legal counsel.  Such counsel may be an employee of or
counsel to the Company or the Collateral Agent.

 

“Patent License”: all agreements, whether written or oral, providing for the
grant by or to any Grantor of any right to manufacture, license, disclose, use
or sell any invention covered in whole or in part by a Patent, including,
without limitation, any of the foregoing referred to in Schedule 6.

 

“Patents”: (i) all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof and all
goodwill associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, (ii) all applications for letters patent of
the United States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues
or extensions of the foregoing.

 

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

 

“Pledged Notes”: all promissory notes listed on Schedule 2, all Intercompany
Notes at any time issued to any Grantor and all other promissory notes issued to
or held by any Grantor (other than promissory notes issued in connection with
extensions of trade credit by any Grantor in the ordinary course of business).

 

“Pledged Stock”: the shares of Capital Stock listed on Schedule 2, together with
any other shares, stock certificates, options, interests or rights of any nature
whatsoever in respect of the Capital Stock of any Person, whether certificated
or uncertificated, that may be issued or granted to, or held by, any Grantor
while this Agreement is in effect; provided, that in no event shall more than
65% of the total outstanding Foreign Subsidiary Voting Stock of any Foreign
Subsidiary (other than Interlake Acquisition Corporation Limited or any Foreign
Subsidiary that becomes a Subsidiary Guarantor under the Indenture) be required
to be pledged hereunder, unless a greater percentage is pledged to secure any
other Indebtedness of any Grantor, in which case such greater percentage shall
be required to be pledged hereunder; provided, further, that, subject to
Section 3.4(b), to the extent that the pledge of any Capital Stock results in
the Company being required to file separate financial statements of any
Subsidiary of the Company with the Securities and Exchange Commission pursuant
to Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act (or another
rule, regulation or law), such Capital Stock shall automatically be deemed not
to be part of the Collateral, but only to the extent necessary for the Company
not to be subject to such filing requirement.

 

“Preferred Stock”: as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.

 

“Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of
the New York UCC and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.

 

“Receivable”: any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or Chattel
Paper and whether or not it has been earned by performance (including, without
limitation, any Account).

 

“Registration Rights Agreement”: the Registration Rights Agreement, dated as of
June 3, 2009, among the Company, the Subsidiary Guarantors and J.P. Morgan
Securities Inc., on behalf of itself and the other initial purchasers.

 

“Requirement of Law”: as to any Person, the certificate of incorporation and
by-laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

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“Responsible Officer”: the chief executive officer, president or chief financial
officer of the Company, but in any event, with respect to financial matters, the
chief financial officer of the Company.

 

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

 

“SEC”:  the Securities and Exchange Commission or any agency that is the
successor thereof.

 

“Second-Priority Collateral”: with respect to each Grantor, all such Grantor’s
now existing or hereinafter arising (i) Inventory, (ii) Receivables,
(iii) Instruments, Chattel Paper and other contracts, in each case evidencing or
substituted for any Receivable, (iv) guarantees, Supporting Obligations,
Letter-of-Credit Rights, security and other credit enhancements for the
Receivables, (v) documents of title for any Inventory, (vi) claims and causes of
action in any way relating to any of the Receivables or Inventory, (vii) Deposit
Accounts into which any proceeds of Receivables or Inventory are initially
deposited (including all cash and other funds on deposit therein) but only with
respect to and including such Proceeds of Receivables or Inventory, (viii) all
books and records pertaining to any of the foregoing, and all substitutions,
replacements, Accessions, products or Proceeds (including, without limitation,
insurance proceeds) of any of the foregoing; but, excluding, however, all
First-Priority Collateral and the property described in Section 3.4; provided,
however, that any Collateral, regardless of type, received in connection with an
Asset Disposition or Asset Swap of Second-Priority Collateral or otherwise in
exchange for Second-Priority Collateral pursuant to the terms of the Indenture
shall be treated as Second-Priority Collateral under this Agreement and the
Intercreditor Agreement; provided, further, that any Collateral of the type that
constitutes Second-Priority Collateral, if received in connection with an Asset
Disposition or Asset Swap of First-Priority Collateral or otherwise in exchange
for First-Priority Collateral pursuant to the terms of the Indenture, shall be
treated as First-Priority Collateral under this Agreement and the Intercreditor
Agreement.

 

“Second-Priority Collateral Account”: the “Cellu Tissue Second-Priority
Collateral Account” established by the Collateral Agent as provided in
Section 8.1.

 

“Second Priority Interest”: as defined in Section 3.2.

 

“Secured Debt Documents”: the collective reference to the Note Documents and the
Bank Documents.

 

“Secured Parties”: the collective reference to the Trustee and the Holders.

 

“Securities Act”: the Securities Act of 1933, as amended.

 

“Subsidiary”: as to any Person means (a) any corporation, association or other
business entity (other than a partnership, joint venture, limited liability
company or similar entity) of which more than 50% of the total ordinary voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof (or persons performing similar functions) or (b) any partnership, joint
venture limited liability company or similar entity of which more than 50% of
the capital accounts, distribution rights, total equity and voting interests or
general or limited partnership interests, as applicable, is, in the case of

 

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clauses (a) and (b), at the time owned or controlled, directly or indirectly, by
(1) such Person, (2) such Person and one or more Subsidiaries of such Person or
(3) one or more Subsidiaries of such Person. Unless otherwise specified herein,
each reference to a Subsidiary will refer to a Subsidiary of the Company.

 

“Subsidiary Guarantee”: the guarantee by the Subsidiaries of the Company of the
Notes under the Indenture, as amended from time to time.

 

“Trademark License”: any agreement, whether written or oral, providing for the
grant by or to any Grantor of any right to use any Trademark, including, without
limitation, any of the foregoing referred to in Schedule 6.

 

“Trademarks”: (i) 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 all 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, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in Schedule 6,
and (ii) the right to obtain all renewals thereof.

 

“Unrestricted Subsidiary”: (1) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided in the Indenture; and (2) any
Subsidiary of an Unrestricted Subsidiary.

 

“Vehicles”: all cars, trucks, trailers, construction and earth moving equipment
and other vehicles covered by a certificate of title law of any state and all
tires and other appurtenances to any of the foregoing.

 

“Voting Stock”: as to a corporation, all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

 

“Working Capital Facility”: the Credit Agreement, dated as of June 12, 2006,
among the Company, as U.S. borrower, Interlake Acquisition Corporation Limited,
a subsidiary of the Company, as Canadian borrower, the loan guarantors party
thereto, JPMorgan Chase Bank, N.A., as U.S. administrative agent, JPMorgan Chase
Bank, N.A. Toronto Branch, as Canadian administrative agent, and the lenders
party thereto, as the same may be amended, supplemented, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time (and
whether or not with the original agent and lenders or another agent or agents or
other lenders).

 

1.2  Other Definitional Provisions.  (a)  The words “hereof,” “herein,” “hereto”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.

 

(B)  THE MEANINGS GIVEN TO TERMS DEFINED HEREIN SHALL BE EQUALLY APPLICABLE TO
BOTH THE SINGULAR AND PLURAL FORMS OF SUCH TERMS.

 

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(C)  WHERE THE CONTEXT REQUIRES, TERMS RELATING TO THE COLLATERAL OR ANY PART
THEREOF, WHEN USED IN RELATION TO A GRANTOR, SHALL REFER TO SUCH GRANTOR’S
COLLATERAL OR THE RELEVANT PART THEREOF.

 

(D)  SUBJECT TO SECTION 11.15, THE PHRASES “SATISFIED IN FULL” OR “PAYMENT IN
FULL” (OR PHRASES OF SIMILAR IMPORT) WHEN USED IN THIS AGREEMENT WITH RESPECT TO
ANY OF THE OBLIGATIONS (OR THE LIENS SECURING SUCH OBLIGATIONS), AS THE CASE MAY
BE, SHALL MEAN SATISFACTION OR PAYMENT IN FULL OF SUCH APPLICABLE OBLIGATIONS
OTHER THAN CONTINGENT INDEMNIFICATION OBLIGATIONS WHICH ARE NOT THEN DUE AND
PAYABLE (OR REASONABLY EXPECTED TO BECOME DUE AND PAYABLE IN THE THEN
FORESEEABLE FUTURE).

 

SECTION 2.  APPOINTMENT OF COLLATERAL AGENT

 

The Secured Parties hereby appoint and authorize The Bank of New York Mellon
Trust Company, N.A. to act as Collateral Agent hereunder and under each other
Collateral Document and the Intercreditor Agreement with such powers as are
expressly delegated to the Collateral Agent by the terms of this Agreement, the
other Collateral Documents or the Intercreditor Agreement, together with such
other powers as are reasonably incidental thereto. The Collateral Agent shall
not have any duties or responsibilities except those expressly set forth in this
Agreement, the Collateral Documents and the Intercreditor Agreement.  The Bank
of New York Mellon Trust Company, N.A. hereby agrees to and accepts such
appointment.

 

SECTION 3.  GRANT OF SECURITY INTEREST

 

3.1  Grant of First Priority Interest.  Each Grantor hereby collaterally assigns
and transfers to the Collateral Agent, and hereby grants to the Collateral
Agent, for the benefit of the Secured Parties, a first priority security
interest (the “First Priority Interest”) in all right, title and interest of
such Grantor in the First-Priority Collateral, as collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, at redemption, by acceleration or otherwise) of such Grantor’s
Obligations.

 

3.2  Grant of Second Priority Interest.  Each Grantor hereby collaterally
assigns and transfers to the Collateral Agent, and hereby grants to the
Collateral Agent, for the benefit of the Secured Parties, a second priority
security interest (the “Second Priority Interest”) in all right, title and
interest of such Grantor in the Second-Priority Collateral, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, at redemption, by acceleration or otherwise) of such
Grantor’s Obligations.

 

3.3  Right of Setoff.  To secure the prompt and complete payment, performance
and observance of the Obligations, and in order to induce the Collateral Agent
and the Secured Parties as aforesaid, each Grantor hereby grants to the
Collateral Agent, for itself and the benefit of the Secured Parties, a right of
setoff against the Collateral of such Grantor held by the Collateral Agent or
any Secured Party now or hereafter in the possession or custody of, or in
transit to, the Collateral Agent or any Secured Party, for any purpose,
including safekeeping, collection or pledge, for the account of such Grantor, or
as to which such Grantor may have any right or power.

 

3.4  Excluded Property.  (a)  Notwithstanding anything to the contrary contained
in the definition of Collateral, Sections 3.1 and 3.2 or any other provisions of
this Agreement or any Mortgage, neither this Agreement nor any Mortgage shall
constitute a grant of a security interest in:

 

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(1)           any property to the extent that, and for so long as, such grant of
a security interest: (A) is prohibited by any Requirements of Law of a
Governmental Authority, (B) requires a consent not obtained of any Governmental
Authority pursuant to such Requirement of Law or (C) is prohibited by, or
constitutes a breach or default under or results in the termination of, or
requires any consent not obtained under, any permit, contract, license,
agreement, instrument or other document evidencing or giving rise to such
property or, in the case of any Investment Property, Pledged Stock or Pledged
Note, any applicable shareholder or similar agreement, except to the extent that
such Requirement of Law or the term in such contract, license, agreement,
instrument or other document or shareholder or similar agreement providing for
such prohibition, breach, default or termination or requiring such consent is
ineffective under applicable law; and

 

(2)           any property securing Indebtedness incurred after the date hereof
under Section 3.2(b)(6) of the Indenture with a Lien in reliance on clause
(10) of the definition of Permitted Liens contained in the Indenture, but solely
to the extent the documentation relating thereto prohibits such assets from
being Collateral and no Lien on those assets secures any other Indebtedness of
any Grantor; provided that only such property whose price of acquisition,
construction or improvement is financed by means of the Indebtedness described
in this clause (2) shall be excluded from the Collateral pursuant to this clause
(2), and no security interest on any property granted pursuant to this Agreement
or any Mortgage and existing prior to the incurrence of such Indebtedness shall
be released from the Collateral pursuant to this clause (2).

 

(B)  IN ADDITION, IN THE EVENT THAT RULE 3-16 OR RULE 3-10 OF REGULATION S-X
UNDER THE SECURITIES ACT REQUIRES OR IS AMENDED, MODIFIED OR INTERPRETED BY THE
SEC TO REQUIRE (OR IS REPLACED WITH ANOTHER RULE OR REGULATION, OR ANY OTHER
LAW, RULE OR REGULATION IS ADOPTED, WHICH WOULD REQUIRE) THE FILING WITH THE SEC
(OR ANY OTHER GOVERNMENTAL AGENCY) OF SEPARATE FINANCIAL STATEMENTS OF ANY
SUBSIDIARY OF THE COMPANY DUE TO THE FACT THAT SUCH SUBSIDIARY’S CAPITAL STOCK
CONSTITUTES PLEDGED STOCK, THEN THE CAPITAL STOCK OF SUCH SUBSIDIARY SHALL
AUTOMATICALLY BE DEEMED NOT TO BE PART OF THE COLLATERAL BUT ONLY TO THE EXTENT
NECESSARY TO NOT BE SUBJECT TO SUCH REQUIREMENT.  IN SUCH EVENT, THE COLLATERAL
DOCUMENTS MAY BE AMENDED OR MODIFIED, WITHOUT THE CONSENT OF ANY HOLDER OF
NOTES, TO THE EXTENT NECESSARY TO RELEASE THE SECURITY INTERESTS IN FAVOR OF THE
COLLATERAL AGENT ON THE SHARES OF CAPITAL STOCK THAT ARE SO DEEMED TO NO LONGER
CONSTITUTE PART OF THE COLLATERAL. IN THE EVENT THAT RULE 3-16 AND RULE 3-10 OF
REGULATION S-X UNDER THE SECURITIES ACT ARE AMENDED, MODIFIED OR INTERPRETED BY
THE SEC TO PERMIT (OR ARE REPLACED WITH ANOTHER RULE OR REGULATION, OR ANY OTHER
LAW, RULE OR REGULATION IS ADOPTED, WHICH WOULD PERMIT) SUCH SUBSIDIARY’S
CAPITAL STOCK TO SECURE THE NOTES IN EXCESS OF THE AMOUNT THEN PLEDGED WITHOUT
THE FILING WITH THE SEC (OR ANY OTHER GOVERNMENTAL AGENCY) OF SEPARATE FINANCIAL
STATEMENTS OF SUCH SUBSIDIARY, THEN THE CAPITAL STOCK OF SUCH SUBSIDIARY SHALL
AUTOMATICALLY BE DEEMED TO BE PLEDGED STOCK UNDER THIS AGREEMENT BUT ONLY TO THE
EXTENT NECESSARY TO NOT BE SUBJECT TO ANY SUCH FINANCIAL STATEMENT REQUIREMENT.

 

SECTION 4.  REPRESENTATIONS AND WARRANTIES

 

To induce each of the Holders to purchase the Notes, each Grantor hereby
represents and warrants to the Collateral Agent and each Secured Party that:

 

4.1  Title; No Other Liens.  Except for the security interests granted to the
Collateral Agent for the benefit of the Secured Parties pursuant to this
Agreement and the Mortgages and the other Liens permitted to exist on the
Collateral by all of the Secured Debt Documents, such Grantor

 

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owns and has good title to each item of the Collateral free and clear of any and
all Liens, options in favor of or claims of any other Person. No effective
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as have been filed in favor of the Collateral Agent, for the benefit
of the Secured Parties, pursuant to this Agreement or the Mortgages or as are
permitted by all of the Secured Debt Documents.

 

4.2  Perfected First Priority Liens.  The First Priority Interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Collateral Agent in
completed and, if applicable, duly executed form) will constitute valid
perfected security interests in all of the First-Priority Collateral in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, as
collateral security for such Grantor’s Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any First-Priority Collateral from such Grantor and
(b) are prior to all other Liens on the First-Priority Collateral in existence
on the date hereof except as set forth in Section 4.12 and except for Liens
permitted by all of the Secured Debt Documents that have priority over the Liens
on the First-Priority Collateral granted hereby by operation of law.

 

4.3  Perfected Second Priority Liens.  The Second Priority Interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Collateral Agent in
completed and, if applicable, duly executed form) will constitute valid
perfected security interests in all of the Second-Priority Collateral other than
the IRB Deposit Accounts in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, as collateral security for such Grantor’s
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any
Second-Priority Collateral from such Grantor and (b) are prior to all other
Liens on the Second-Priority Collateral in existence on the date hereof except
for the Liens permitted by all of the Secured Debt Documents that have priority
over the Liens on the Second-Priority Collateral granted hereby by operation of
law.

 

4.4  Jurisdiction of Organization; Chief Executive Office.  On the date hereof,
such Grantor’s jurisdiction of organization, name as it appears in and
identification number, if any, from the official filings in its jurisdiction of
organization (if any), and the location of such Grantor’s chief executive office
are specified on Schedule 4. Such Grantor’s jurisdiction of organization is the
only jurisdiction in which such Grantor is a “registered organization” (as such
term is used in Section 9-307 of the New York UCC). Such Grantor has furnished
to the Collateral Agent a certified charter, certificate of incorporation or
other organization document and long-form good standing certificate as of a date
that is recent to the date hereof. Except as disclosed in Schedule 4, during the
five years ending on the date hereof, such Grantor has not changed its name,
location, chief executive office, type of organization, jurisdiction of
organization or organizational identification number from the information set
forth on Schedule 4.

 

4.5  Equipment.  On the date hereof, the Inventory and Equipment is kept at the
locations listed on Schedule 5.

 

4.6  Farm Products.  None of the Collateral constitutes, or is the Proceeds of,
Farm Products.

 

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4.7  Investment Property.  (a)  The shares of Pledged Stock pledged by such
Grantor hereunder constitute all the issued and outstanding shares or interests
of all classes of the Capital Stock of each Issuer owned by such Grantor or, in
the case of Foreign Subsidiary Voting Stock (other than Interlake Acquisition
Corporation Limited), if less, 65% of the outstanding Foreign Subsidiary Voting
Stock of each relevant Issuer.

 

(B)  ALL THE SHARES OF THE PLEDGED STOCK HAVE BEEN DULY AND VALIDLY ISSUED AND
ARE FULLY PAID AND NONASSESSABLE.

 

(C)  EACH OF THE PLEDGED NOTES CONSTITUTES THE LEGAL, VALID AND BINDING
OBLIGATION OF THE OBLIGOR WITH RESPECT THERETO, ENFORCEABLE IN ACCORDANCE WITH
ITS TERMS, SUBJECT TO THE EFFECTS OF BANKRUPTCY, INSOLVENCY, FRAUDULENT
CONVEYANCE, REORGANIZATION, MORATORIUM AND OTHER SIMILAR LAWS RELATING TO OR
AFFECTING CREDITORS’ RIGHTS GENERALLY, GENERAL EQUITABLE PRINCIPLES (WHETHER
CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW) AND AN IMPLIED COVENANT OF GOOD
FAITH AND FAIR DEALING. THE PLEDGED NOTES LISTED ON SCHEDULE 2 HERETO CONSTITUTE
ALL OF THE PLEDGED NOTES HELD BY SUCH GRANTOR ON THE DATE HEREOF.

 

(D)  SCHEDULE 2 LISTS ALL INSTRUMENTS, LETTER-OF-CREDIT RIGHTS, CHATTEL PAPER
AND SECURITIES ACCOUNTS OF EACH GRANTOR THAT IS INCLUDED IN THE COLLATERAL ON
THE DATE HEREOF. ALL ACTION BY EACH GRANTOR NECESSARY OR DESIRABLE TO PROTECT
AND PERFECT THE LIEN OF THE COLLATERAL AGENT ON EACH ITEM SET FORTH ON SCHEDULE
2 (INCLUDING DELIVERY OF ORIGINALS THEREOF TO THE COLLATERAL AGENT OR, IF
REQUIRED UNDER THE INTERCREDITOR AGREEMENT, TO THE BANK ADMINISTRATIVE AGENT,
AND THE ACTIONS REFERRED TO IN SECTIONS 5.1 AND 5.3) HAS BEEN DULY TAKEN.

 

4.8  Intellectual Property.  (a)  Schedule 6 lists all Intellectual Property
owned by such Grantor in its own name on the date hereof.

 

(B)  ON THE DATE HEREOF, ALL MATERIAL INTELLECTUAL PROPERTY IS VALID,
SUBSISTING, UNEXPIRED AND ENFORCEABLE, HAS NOT BEEN ABANDONED AND DOES NOT
INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF ANY OTHER PERSON.

 

(C)  EXCEPT AS SET FORTH IN SCHEDULE 6, ON THE DATE HEREOF, NONE OF THE
INTELLECTUAL PROPERTY IS THE SUBJECT OF ANY LICENSING OR FRANCHISE AGREEMENT
PURSUANT TO WHICH SUCH GRANTOR IS THE LICENSOR OR FRANCHISOR. SCHEDULE 6 LISTS
ALL INTELLECTUAL PROPERTY, WHICH, ON THE DATE HEREOF, IS THE SUBJECT OF A
LICENSE AGREEMENT PURSUANT TO WHICH SUCH GRANTOR IS A LICENSEE THEREOF. EACH
SUCH LICENSE AGREEMENT IS VALID AND BINDING AND IN FULL FORCE AND EFFECT WITH
RESPECT TO SUCH GRANTOR AND SUCH GRANTOR HAS NOT RECEIVED ANY NOTICE OF
TERMINATION OR CANCELLATION OR RECEIVED ANY NOTICE OF A BREACH OR DEFAULT UNDER
SUCH AGREEMENT. TO THE EXTENT THAT SECTION 9-408 OF THE NEW YORK UCC IS
APPLICABLE THERETO OR SUCH AGREEMENT PERMITS THE ASSIGNMENT OF SUCH GRANTOR’S
RIGHTS THEREUNDER, SUCH LICENSE AGREEMENT WILL NOT CEASE TO BE VALID AND BINDING
AND IN FULL FORCE AND EFFECT (OTHER THAN SUCH TERMS AS ARE DEEMED INEFFECTIVE
PURSUANT TO SECTION 9-408 OF THE NEW YORK UCC) WITH RESPECT TO SUCH GRANTOR ON
TERMS IDENTICAL TO THOSE CURRENTLY IN EFFECT AS A RESULT OF THE RIGHTS AND
INTEREST GRANTED HEREIN, NOR WILL THE GRANT OF SUCH RIGHTS AND INTEREST
CONSTITUTE A MATERIAL BREACH OR DEFAULT UNDER SUCH AGREEMENT OR OTHERWISE GIVE
ANY PARTY THERETO A RIGHT TO TERMINATE SUCH AGREEMENT.

 

(D)  NO HOLDING, DECISION OR JUDGMENT HAS BEEN RENDERED BY ANY GOVERNMENTAL
AUTHORITY WHICH WOULD LIMIT, CANCEL OR QUESTION THE VALIDITY OF, OR SUCH
GRANTOR’S RIGHTS IN, ANY INTELLECTUAL PROPERTY IN ANY MATERIAL RESPECT.

 

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(E)  NO ACTION OR PROCEEDING IS PENDING, OR, TO THE KNOWLEDGE OF SUCH GRANTOR,
THREATENED, ON THE DATE HEREOF (I) SEEKING TO LIMIT, CANCEL OR QUESTION THE
VALIDITY OF ANY INTELLECTUAL PROPERTY OR SUCH GRANTOR’S OWNERSHIP INTEREST OR
RIGHTS THEREIN, OR (II) WHICH, IF ADVERSELY DETERMINED, WOULD HAVE A MATERIAL
ADVERSE EFFECT ON THE VALUE OF ANY INTELLECTUAL PROPERTY.

 

4.9  Receivables.  None of the obligors on any Receivable is a Governmental
Authority.

 

4.10  Deposit Accounts and Securities Accounts.  All of the Deposit Accounts and
Securities Accounts maintained by such Grantor on the date hereof are listed on
Schedule 7 and Schedule 2, respectively.

 

4.11  Excluded Property.  No property or assets are excluded from the security
interests granted to the Secured Parties hereunder in reliance on Section 3.4
except as set forth on Schedule 8.

 

4.12  Existing IRB Lien.  The assets of Cellu Tissue—CityForest LLC
(“CityForest”) have been pledged to Associated Bank, National Association
(“Associated Bank”) pursuant to the Security Agreement, dated June 29, 2005,
between CityForest Corporation and Associated Bank, as amended by the Assignment
of Security Agreement and Amendment, dated March 21, 2007, between Cellu
Tissue-CityForest LLC and Associated Bank (the “IRB Security Agreement”), to
secure the obligations of CityForest under the Amended and Restated
Reimbursement Agreement, dated March 21, 2007 (the “Reimbursement Agreement”),
in connection with the Variable Rate Demand Solid Waste Disposal Facility
Revenue Bonds, Series 1998, of the City of Ladysmith, Wisconsin.  The Lien on
such CityForest assets granted pursuant to this Agreement is and will be
permitted under the Reimbursement Agreement and will be prior (except to the
extent that any such assets constitute Second-Priority Collateral) to all other
Liens on such assets in existence on the date hereof except for the Lien granted
pursuant to the IRB Security Agreement.

 

SECTION 5.  COVENANTS

 

Each Grantor covenants and agrees with the Collateral Agent for the benefit of
the Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full:

 

5.1  Delivery of Instruments, Certificated Securities and Chattel Paper.  If any
amount payable under or in connection with any of the First-Priority Collateral
shall be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in a manner
reasonably satisfactory to the Collateral Agent, to be held as First-Priority
Collateral pursuant to this Agreement. If any amount payable in excess of
$250,000 under or in connection with any of the Second-Priority Collateral shall
be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be
immediately delivered to the Bank Administrative Agent, duly indorsed in a
manner reasonably satisfactory to the Bank Administrative Agent, to be held as
Second-Priority Collateral pursuant to the Intercreditor Agreement.

 

5.2  Maintenance of Insurance.  (a)  Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Collateral against loss by fire, explosion, theft and such other casualties as
is customary for companies of the same industry and geographic region and
(ii) insuring such Grantor, the Collateral Agent and the Secured Parties against
liability

 

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for personal injury and property damage relating to the Collateral, such
policies to be with Travelers Property Casualty Company of America, American
Home Assurance Co., Travelers Indemnity Co. of America, Ohio Casualty Group,
Factory Mutual Insurance Company and Liberty Mutual Fire Insurance Company or
such insurance companies of nationally recognized standing and in such form and
amounts and having such coverage as is customary for companies of the same
industry and geographic region. Such Grantor will not use or permit the
Collateral to be used in any manner that would violate the terms of any
insurance policy covering such Collateral.

 

(B)  ALL SUCH INSURANCE SHALL (I) PROVIDE THAT NO CANCELLATION, MATERIAL
REDUCTION IN AMOUNT OR MATERIAL CHANGE IN COVERAGE THEREOF SHALL BE EFFECTIVE
UNTIL AT LEAST 30 DAYS AFTER RECEIPT BY THE COLLATERAL AGENT OF WRITTEN NOTICE
THEREOF, (II) WITH RESPECT TO LIABILITY INSURANCE, NAME THE COLLATERAL AGENT AS
AN ADDITIONAL INSURED AS ITS INTEREST MAY APPEAR AND, WITH RESPECT TO CASUALTY
INSURANCE, NAME THE COLLATERAL AGENT AS INSURED PARTY AND LOSS PAYEE ON A LENDER
LOSS PAYABLE ENDORSEMENT AND (III) INCLUDE A BREACH OF WARRANTY CLAUSE.

 

(C)  THE COMPANY SHALL DELIVER TO THE COLLATERAL AGENT A REPORT OF A REPUTABLE
INSURANCE BROKER WITH RESPECT TO SUCH INSURANCE SUBSTANTIALLY CONCURRENTLY WITH
EACH DELIVERY OF THE COMPANY’S ANNUAL REPORTS TO THE SECURED PARTIES PURSUANT TO
SECTION 3.11 OF THE INDENTURE, DESCRIBING IN REASONABLE DETAIL THE CASUALTY AND
LIABILITY INSURANCE THEN CARRIED AND MAINTAINED BY EACH GRANTOR AND STATING THAT
SUCH INSURANCE COMPLIES WITH THIS SECTION 5.2.

 

5.3  Maintenance of Perfected Security Interest; Further Documentation. 
(a)  Such Grantor shall maintain each security interest created by this
Agreement as a perfected security interest having at least the priority
described in Sections 3.1 and 3.2 and shall defend such security interest
against the claims and demands of all Persons whomsoever, subject to the rights
of such Grantor under the Secured Debt Documents to dispose of the Collateral;
provided that notwithstanding anything to the contrary in this Agreement, no
Grantor shall be required to perfect the security interest created by this
Agreement in any vehicle or other asset subject to a Certificates of Title. 
Such Grantor shall maintain the Collateral in good, safe and insurable operating
order, condition and repair and do all other acts as may be reasonably necessary
or appropriate to maintain and preserve the value of the Collateral except as
otherwise permitted by the Indenture.

 

(B)  SUCH GRANTOR WILL FURNISH TO THE COLLATERAL AGENT UPON ITS REQUEST FROM
TIME TO TIME STATEMENTS AND SCHEDULES FURTHER IDENTIFYING AND DESCRIBING THE
ASSETS AND PROPERTY OF SUCH GRANTOR AND SUCH OTHER REPORTS IN CONNECTION
THEREWITH, ALL IN REASONABLE DETAIL.

 

(C)  AT ANY TIME AND FROM TIME TO TIME, AT THE SOLE EXPENSE OF SUCH GRANTOR,
SUCH GRANTOR WILL PROMPTLY AND DULY EXECUTE AND DELIVER, AND HAVE RECORDED, ANY
AND ALL SUCH FURTHER INSTRUMENTS AND DOCUMENTS AND TAKE SUCH FURTHER ACTIONS AS
NECESSARY TO PERFECT AND PROTECT ANY PLEDGE OR SECURITY INTEREST PURPORTED TO BE
GRANTED BY SUCH GRANTOR HEREUNDER OR UNDER THE MORTGAGES AND OBTAINING OR
PRESERVING THE FULL BENEFITS OF THIS AGREEMENT AND OF THE RIGHTS AND POWERS
HEREIN GRANTED, INCLUDING, WITHOUT LIMITATION, (I) USING ITS REASONABLE BEST
EFFORTS TO SECURE ALL CONSENTS AND APPROVALS NECESSARY OR APPROPRIATE FOR THE
ASSIGNMENT TO OR FOR THE BENEFIT OF THE COLLATERAL AGENT OF ANY LICENSE HELD BY
SUCH GRANTOR AND TO ENFORCE THE SECURITY INTERESTS GRANTED HEREUNDER,
(II) FILING ANY FINANCING OR CONTINUATION STATEMENTS UNDER THE UNIFORM
COMMERCIAL CODE (OR OTHER SIMILAR LAWS) IN EFFECT IN ANY JURISDICTION WITH
RESPECT TO THE SECURITY INTERESTS CREATED HEREBY, (III) IN THE CASE OF CHATTEL
PAPER (INCLUDING ELECTRONIC CHATTEL PAPER), INVESTMENT PROPERTY (INCLUDING
SECURITIES ACCOUNTS), DEPOSIT ACCOUNTS, LETTER-OF-CREDIT RIGHTS AND ANY OTHER
RELEVANT COLLATERAL, TAKING ANY ACTIONS NECESSARY TO ENABLE THE COLLATERAL AGENT
TO OBTAIN “CONTROL” (WITHIN THE MEANING OF THE

 

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APPLICABLE UNIFORM COMMERCIAL CODE) WITH RESPECT THERETO OR POSSESSION THEREOF.
EACH GRANTOR ALSO HEREBY AUTHORIZES THE COLLATERAL AGENT TO SIGN AND FILE ANY
SUCH FINANCING OR CONTINUATION STATEMENTS WITHOUT THE SIGNATURE OF SUCH GRANTOR
TO THE EXTENT PERMITTED BY APPLICABLE LAW. NOTWITHSTANDING THE FOREGOING, IN NO
EVENT SHALL THE COLLATERAL AGENT HAVE ANY OBLIGATION TO MONITOR THE PERFECTION,
CONTINUATION OF PERFECTION OR THE SUFFICIENCY OR VALIDITY OF ANY SECURITY
INTEREST IN OR RELATED TO THE COLLATERAL OR TO PREPARE OR FILE ANY UNIFORM
COMMERCIAL CODE FINANCING STATEMENT OR CONTINUATION STATEMENT.

 

(D)  SUCH GRANTOR SHALL TAKE ALL STEPS NECESSARY TO GRANT THE COLLATERAL AGENT
CONTROL OF ALL ELECTRONIC CHATTEL PAPER IN ACCORDANCE WITH THE UNIFORM
COMMERCIAL CODE AND ALL “TRANSFERABLE RECORDS” AS DEFINED IN EACH OF THE UNIFORM
ELECTRONIC TRANSACTIONS ACT AND THE ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL
COMMERCE ACT.

 

(E)  IF SUCH GRANTOR IS OR BECOMES THE BENEFICIARY OF A LETTER OF CREDIT WITH
RESPECT TO ANY RECEIVABLE IN EXCESS OF $250,000, GRANTOR SHALL PROMPTLY, AND IN
ANY EVENT WITHIN TWO BUSINESS DAYS AFTER BECOMING A BENEFICIARY, NOTIFY THE
COLLATERAL AGENT AND BANK ADMINISTRATIVE AGENT THEREOF AND ENTER INTO AN
AGREEMENT WITH THE COLLATERAL AGENT, THE BANK ADMINISTRATIVE AGENT AND THE
ISSUER AND/OR CONFIRMATION BANK WITH RESPECT TO SUCH LETTER-OF-CREDIT RIGHTS
ASSIGNING SUCH LETTER-OF-CREDIT RIGHTS TO THE COLLATERAL AGENT, IN THE EVENT
SUCH LETTER-OF-CREDIT RIGHT CONSTITUTES FIRST-PRIORITY COLLATERAL, OR TO THE
BANK ADMINISTRATIVE AGENT, IN THE EVENT SUCH LETTER-OF-CREDIT RIGHT CONSTITUTES
SECOND-PRIORITY COLLATERAL, AND DIRECTING ALL PAYMENTS THEREUNDER TO THE
COLLATERAL ACCOUNT SPECIFIED PURSUANT TO THE SECURED DEBT DOCUMENTS, ALL IN FORM
AND SUBSTANCE REASONABLY SATISFACTORY TO THE COLLATERAL AGENT OR THE BANK
ADMINISTRATIVE AGENT, AS THE CASE MAY BE.

 

(F)  SUCH GRANTOR SHALL PROMPTLY, AND IN ANY EVENT WITHIN TWO BUSINESS DAYS
AFTER THE SAME IS ACQUIRED BY IT, NOTIFY THE COLLATERAL AGENT OF ANY COMMERCIAL
TORT CLAIM FOR AN AMOUNT IN EXCESS OF $250,000 ACQUIRED BY IT AND SHALL ENTER
INTO A SUPPLEMENT TO THIS AGREEMENT, GRANTING TO THE COLLATERAL AGENT A LIEN IN
SUCH COMMERCIAL TORT CLAIM ON BEHALF OF THE SECURED PARTIES.

 

5.4  Changes in Locations, Name, etc.  Such Grantor will not, except after not
less than 15 days’ prior written notice to the Collateral Agent and delivery to
the Collateral Agent of (a) all additional authenticated financing statements
and other documents necessary to maintain the validity, perfection and priority
of the security interests provided for herein and (b) if applicable, a written
supplement to Schedule 5 showing any additional location at which Inventory and
Equipment shall be kept:

 

(I)                                    CHANGE ITS JURISDICTION OF ORGANIZATION
OR THE LOCATION OF ITS CHIEF EXECUTIVE OFFICE FROM, OR TAKE ANY ACTION TO BECOME
A “REGISTERED ORGANIZATION” (AS USED IN SECTION 9-307 OF THE NEW YORK UCC) IN
ANY JURISDICTION OTHER THAN, THAT REFERRED TO ON SCHEDULE 4; OR

 

(II)                                 CHANGE ITS NAME.

 

5.5  Notices.  Such Grantor will advise the Collateral Agent promptly, in
reasonable detail, of (a) any Lien (other than security interests created hereby
or by any Mortgage or Liens permitted under any Secured Debt Document) on any of
the Collateral; and (b) of the occurrence of any other event that could
reasonably be expected to have a material adverse effect on the aggregate value
of the Collateral or on the security interests created hereby or by any
Mortgage.

 

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5.6  Investment Property.  (a)  If such Grantor shall become entitled to receive
or shall receive any certificate (including, without limitation, any certificate
representing a dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Grantor shall accept the same as the agent of the Collateral
Agent, hold the same in trust for the Collateral Agent and deliver the same
forthwith to the Collateral Agent in the exact form received, duly indorsed by
such Grantor to the Collateral Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by such Grantor
and, if the Collateral Agent so requests, signature guaranteed, to be held by
the Collateral Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Investment
Property upon the liquidation or dissolution of any Issuer shall be paid over to
the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Investment Property or any property shall be
distributed upon or with respect to the Investment Property pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Collateral Agent, be
delivered to the Collateral Agent to be held by it hereunder as additional
collateral security for the Obligations. If any sums of money or property so
paid or distributed in respect of the Investment Property shall be received by
such Grantor, such Grantor shall, until such money or property is paid or
delivered to the Collateral Agent, hold such money or property in trust for the
Collateral Agent, segregated from other funds of such Grantor, as additional
collateral security for the Obligations.

 

(B)  SUCH GRANTOR WILL NOT (I) VOTE TO ENABLE, OR TAKE ANY OTHER ACTION TO
PERMIT, ANY ISSUER TO ISSUE ANY CAPITAL STOCK OF ANY NATURE OR TO ISSUE ANY
OTHER SECURITIES CONVERTIBLE INTO OR GRANTING THE RIGHT TO PURCHASE OR EXCHANGE
FOR ANY CAPITAL STOCK OF ANY NATURE OF ANY ISSUER (EXCEPT AS EXPRESSLY PERMITTED
BY EACH OF THE NOTE DOCUMENTS), (II) SELL, ASSIGN, TRANSFER, EXCHANGE, OR
OTHERWISE DISPOSE OF, OR GRANT ANY OPTION WITH RESPECT TO, THE INVESTMENT
PROPERTY OR PROCEEDS THEREOF (EXCEPT PURSUANT TO A TRANSACTION EXPRESSLY
PERMITTED BY EACH OF THE NOTE DOCUMENTS), (III) CREATE, INCUR OR PERMIT TO EXIST
ANY LIEN OR OPTION IN FAVOR OF, OR ANY CLAIM OF ANY PERSON WITH RESPECT TO, ANY
OF THE INVESTMENT PROPERTY OR PROCEEDS THEREOF, OR ANY INTEREST THEREIN, EXCEPT
FOR THE SECURITY INTERESTS CREATED BY THIS AGREEMENT (EXCEPT AS EXPRESSLY
PERMITTED BY EACH OF THE NOTE DOCUMENTS) OR (IV) ENTER INTO ANY AGREEMENT OR
UNDERTAKING RESTRICTING THE RIGHT OR ABILITY OF SUCH GRANTOR OR THE COLLATERAL
AGENT TO SELL, ASSIGN OR TRANSFER ANY OF THE INVESTMENT PROPERTY OR PROCEEDS
THEREOF (EXCEPT AS EXPRESSLY PERMITTED BY EACH OF THE NOTE DOCUMENTS).

 

(C)  IN THE CASE OF EACH GRANTOR THAT IS AN ISSUER, SUCH ISSUER AGREES THAT
(I) IT WILL BE BOUND BY THE TERMS OF THIS AGREEMENT RELATING TO THE INVESTMENT
PROPERTY ISSUED BY IT AND WILL COMPLY WITH SUCH TERMS INSOFAR AS SUCH TERMS ARE
APPLICABLE TO IT, (II) IT WILL NOTIFY THE COLLATERAL AGENT PROMPTLY IN WRITING
OF THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN SECTION 5.6(A) WITH RESPECT
TO THE INVESTMENT PROPERTY ISSUED BY IT AND (III) THE TERMS OF SECTIONS
6.3(C) AND 6.6 SHALL APPLY TO IT, MUTATIS MUTANDIS, WITH RESPECT TO ALL ACTIONS
THAT MAY BE REQUIRED OF IT PURSUANT TO SECTION 6.3(C) OR 6.6 WITH RESPECT TO THE
INVESTMENT PROPERTY ISSUED BY IT. UPON EXECUTION HEREOF, THE GRANTORS SHALL
CAUSE EACH ISSUER THAT IS NOT A PARTY TO THIS AGREEMENT TO EXECUTE AND DELIVER
TO THE COLLATERAL AGENT AN ACKNOWLEDGEMENT AND CONSENT IN THE FORM ATTACHED
HERETO AS ANNEX 2.

 

5.7  Intellectual Property.  (a)  Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its

 

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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, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) use such Trademark with the
appropriate notice of registration and all other notices and legends required by
applicable Requirements of Law, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Collateral Agent shall be provided with a perfected security interest in such
mark pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any way.

 

(B)  SUCH GRANTOR (EITHER ITSELF OR THROUGH LICENSEES) WILL NOT DO ANY ACT, OR
OMIT TO DO ANY ACT, WHEREBY ANY MATERIAL PATENT MAY BECOME FORFEITED, ABANDONED
OR DEDICATED TO THE PUBLIC.

 

(C)  SUCH GRANTOR (EITHER ITSELF OR THROUGH LICENSEES) (I) WILL EMPLOY EACH
MATERIAL COPYRIGHT AND (II) WILL NOT (AND WILL NOT PERMIT ANY LICENSEE OR
SUBLICENSEE THEREOF TO) DO ANY ACT OR KNOWINGLY OMIT TO DO ANY ACT WHEREBY ANY
MATERIAL PORTION OF THE COPYRIGHTS MAY BECOME INVALIDATED OR OTHERWISE IMPAIRED.
SUCH GRANTOR WILL NOT (EITHER ITSELF OR THROUGH LICENSEES) DO ANY ACT WHEREBY
ANY MATERIAL PORTION OF THE COPYRIGHTS MAY FALL INTO THE PUBLIC DOMAIN.

 

(D)  SUCH GRANTOR (EITHER ITSELF OR THROUGH LICENSEES) WILL NOT DO ANY ACT THAT
KNOWINGLY USES ANY MATERIAL INTELLECTUAL PROPERTY TO INFRINGE THE INTELLECTUAL
PROPERTY RIGHTS OF ANY OTHER PERSON.

 

(E)  SUCH GRANTOR WILL NOTIFY THE COLLATERAL AGENT PROMPTLY IF IT KNOWS, OR HAS
REASON TO KNOW, THAT ANY APPLICATION OR REGISTRATION RELATING TO ANY MATERIAL
INTELLECTUAL PROPERTY MAY BECOME FORFEITED, ABANDONED OR DEDICATED TO THE
PUBLIC, OR OF ANY 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, THE UNITED STATES
COPYRIGHT OFFICE OR ANY COURT OR TRIBUNAL IN ANY COUNTRY) REGARDING SUCH
GRANTOR’S OWNERSHIP OF, OR THE VALIDITY OF, ANY MATERIAL INTELLECTUAL PROPERTY
OR SUCH GRANTOR’S RIGHT TO REGISTER THE SAME OR TO OWN AND MAINTAIN THE SAME.

 

(F)  WHENEVER SUCH GRANTOR, EITHER BY ITSELF OR THROUGH ANY AGENT, EMPLOYEE,
LICENSEE OR DESIGNEE, SHALL FILE AN APPLICATION FOR THE REGISTRATION OF ANY
INTELLECTUAL PROPERTY WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE, THE
UNITED STATES COPYRIGHT OFFICE OR ANY SIMILAR OFFICE OR AGENCY IN ANY OTHER
COUNTRY OR ANY POLITICAL SUBDIVISION THEREOF, SUCH GRANTOR SHALL REPORT SUCH
FILING TO THE COLLATERAL AGENT WITHIN FIVE BUSINESS DAYS AFTER THE LAST DAY OF
THE FISCAL QUARTER IN WHICH SUCH FILING OCCURS. SUCH GRANTOR SHALL EXECUTE AND
DELIVER, AND HAVE RECORDED, ANY AND ALL AGREEMENTS, INSTRUMENTS, DOCUMENTS, AND
PAPERS NECESSARY TO EVIDENCE THE COLLATERAL AGENT’S SECURITY INTEREST IN ANY
COPYRIGHT, PATENT OR TRADEMARK AND THE GOODWILL AND GENERAL INTANGIBLES OF SUCH
GRANTOR RELATING THERETO OR REPRESENTED THEREBY.

 

(G)  SUCH GRANTOR WILL TAKE ALL REASONABLE AND NECESSARY STEPS, INCLUDING,
WITHOUT LIMITATION, IN ANY PROCEEDING BEFORE THE UNITED STATES PATENT AND
TRADEMARK OFFICE, THE UNITED STATES COPYRIGHT 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 THE MATERIAL INTELLECTUAL PROPERTY, INCLUDING,
WITHOUT LIMITATION, FILING OF APPLICATIONS FOR RENEWAL, AFFIDAVITS OF USE AND
AFFIDAVITS OF INCONTESTABILITY.

 

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(H)  IN THE EVENT THAT ANY MATERIAL INTELLECTUAL PROPERTY IS INFRINGED,
MISAPPROPRIATED OR DILUTED BY A THIRD PARTY, SUCH GRANTOR SHALL (I) TAKE SUCH
ACTIONS AS SUCH GRANTOR SHALL REASONABLY DEEM APPROPRIATE UNDER THE
CIRCUMSTANCES TO PROTECT SUCH INTELLECTUAL PROPERTY AND (II) IF SUCH
INTELLECTUAL PROPERTY IS OF MATERIAL ECONOMIC VALUE, PROMPTLY NOTIFY THE
COLLATERAL AGENT AFTER IT LEARNS THEREOF AND SUE FOR INFRINGEMENT,
MISAPPROPRIATION OR DILUTION, SEEK INJUNCTIVE RELIEF WHERE APPROPRIATE AND
RECOVER ANY AND ALL DAMAGES FOR SUCH INFRINGEMENT, MISAPPROPRIATION OR DILUTION.

 

5.8  Receivables.  (a)            Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could materially adversely affect the
value thereof.

 

(B)  SUCH GRANTOR WILL DELIVER TO THE COLLATERAL AGENT A COPY OF EACH MATERIAL
DEMAND, NOTICE OR DOCUMENT RECEIVED BY IT THAT QUESTIONS OR CALLS INTO DOUBT THE
VALIDITY OR ENFORCEABILITY OF ANY OF THE THEN OUTSTANDING RECEIVABLES.

 

5.9  Securities Accounts and Deposit Account.  No Grantor shall maintain or
establish any Deposit Account or any Securities Account included in the
Collateral with any financial institution unless such Grantor, the Collateral
Agent, in the case of First-Priority Collateral, the Bank Administrative Agent,
in the case of Second-Priority Collateral, and such financial institution shall
have entered into a control agreement in form and substance reasonably
satisfactory to the Collateral Agent, in the case of First-Priority Collateral,
or the Bank Administrative Agent, in the case of Second-Priority Collateral,
with respect to such Deposit Account or Securities Account included in the
Collateral or the Collateral Agent, in the case of First-Priority Collateral, or
the Bank Administrative Agent, in the case of Second-Priority Collateral,
otherwise has “control” (within the meaning of the Uniform Commercial Code of
any applicable jurisdiction) of such Deposit Account or Securities Account
included in the Collateral.

 

5.10  Payment of Obligations.  Such Grantor will pay and discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all taxes, assessments and government charges or levies imposed upon the
Collateral or in respect of income or profits therefrom, as well as all claims
of any kind (including, without limitation, claims for labor, material and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of such Grantor and such
proceedings could not reasonably be expected to result in the sale, forfeiture
or loss of any material portion of the Collateral or any interest therein.

 

5.11  Reserved.

 

5.12  Terminations; Amendments Not Authorized.  Other than for the purposes of
perfection and protection of any pledge or security interest granted or to be
granted by such Grantor to the Collateral Agent for the benefit of the Secured
Parties, such Grantor acknowledges that it is not authorized to file any
financing statement with respect to the Collateral or amendment or termination
statement with respect to any financing statement covering the Collateral and
agrees that it will not do so, subject to such Grantor’s rights under
Section 9-509(d)(2) of the New York UCC.

 

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SECTION 6.  REMEDIAL PROVISIONS

 

6.1  Certain Matters Relating to Receivables.  (a)  At any time after an Event
of Default, the Collateral Agent shall have the right to make test verifications
of the Receivables in any manner and through any medium that it reasonably
considers advisable, and each Grantor shall furnish all such assistance and
information required in connection with such test verifications; and at any time
and from time to time, upon the Collateral Agent’s request and at the expense of
the relevant Grantor, such Grantor shall cause a nationally recognized firm of
independent accountants to furnish to the Collateral Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Receivables.

 

(B)  THE COLLATERAL AGENT SHALL AUTHORIZE EACH GRANTOR TO COLLECT SUCH GRANTOR’S
RECEIVABLES, SUBJECT TO THE COLLATERAL AGENT’S DIRECTION AND CONTROL, AND THE
COLLATERAL AGENT MAY CURTAIL OR TERMINATE SAID AUTHORITY AT ANY TIME AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. IF REQUIRED BY THE
COLLATERAL AGENT AT ANY TIME AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF
AN EVENT OF DEFAULT, ANY PAYMENTS OF RECEIVABLES, WHEN COLLECTED BY ANY GRANTOR,
(I) SHALL BE FORTHWITH (AND, IN ANY EVENT, WITHIN TWO BUSINESS DAYS) DEPOSITED
BY SUCH GRANTOR IN THE EXACT FORM RECEIVED, DULY INDORSED BY SUCH GRANTOR TO THE
COLLATERAL AGENT IF REQUIRED, IN THE SECOND-PRIORITY COLLATERAL ACCOUNT
MAINTAINED UNDER THE SOLE DOMINION AND CONTROL OF THE COLLATERAL AGENT, SUBJECT
TO WITHDRAWAL BY THE COLLATERAL AGENT ONLY AS PROVIDED IN SECTION 8.5 AND THE
RIGHTS OF THE BANK ADMINISTRATIVE AGENT PURSUANT TO THE INTERCREDITOR AGREEMENT,
AND (II) UNTIL SO TURNED OVER, SHALL BE HELD BY SUCH GRANTOR IN TRUST FOR THE
COLLATERAL AGENT, SEGREGATED FROM OTHER FUNDS OF SUCH GRANTOR; AND EACH SUCH
DEPOSIT OF PROCEEDS OF RECEIVABLES SHALL BE ACCOMPANIED BY A REPORT IDENTIFYING
IN REASONABLE DETAIL THE NATURE AND SOURCE OF THE PAYMENTS INCLUDED IN THE
DEPOSIT.

 

(C)  AT THE COLLATERAL AGENT’S REQUEST, EACH GRANTOR SHALL DELIVER TO THE
COLLATERAL AGENT ALL ORIGINAL AND OTHER DOCUMENTS EVIDENCING, AND RELATING TO,
THE AGREEMENTS AND TRANSACTIONS WHICH GAVE RISE TO THE RECEIVABLES, INCLUDING,
WITHOUT LIMITATION, ALL ORIGINAL ORDERS, INVOICES AND SHIPPING RECEIPTS.

 

6.2  Communications with Grantors; Grantors Remain Liable.  (a)    The
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default communicate
with obligors under the Receivables to verify with them to the Collateral
Agent’s satisfaction the existence, amount and terms of any Receivable.

 

(B)  WITHOUT LIMITING OR AFFECTING ANY OTHER RIGHT OR REMEDY OF THE COLLATERAL
AGENT HEREUNDER, UPON THE REQUEST OF THE COLLATERAL AGENT AT ANY TIME AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, EACH GRANTOR SHALL
NOTIFY OBLIGORS ON THE RECEIVABLES THAT THE RECEIVABLES HAVE BEEN ASSIGNED TO
THE COLLATERAL AGENT AND THAT ANY PAYMENTS OWING TO SUCH GRANTOR IN RESPECT
THEREOF SHALL BE MADE DIRECTLY TO THE COLLATERAL AGENT.

 

(C)  ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, EACH GRANTOR SHALL REMAIN
LIABLE UNDER EACH OF THE RECEIVABLES 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 THERETO. THE COLLATERAL AGENT SHALL
NOT HAVE ANY OBLIGATION OR LIABILITY UNDER ANY RECEIVABLE (OR ANY AGREEMENT
GIVING RISE THERETO) BY REASON OF OR ARISING OUT OF THIS AGREEMENT OR THE
RECEIPT BY THE COLLATERAL AGENT OF ANY PAYMENT RELATING THERETO, NOR SHALL THE
COLLATERAL AGENT BE OBLIGATED IN ANY MANNER TO PERFORM ANY OF THE OBLIGATIONS OF
ANY GRANTOR UNDER OR PURSUANT TO ANY RECEIVABLE (OR ANY AGREEMENT GIVING RISE
THERETO), TO MAKE ANY PAYMENT, TO MAKE ANY INQUIRY AS TO THE NATURE OR THE

 

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SUFFICIENCY OF ANY PAYMENT RECEIVED BY IT OR AS TO THE SUFFICIENCY OF ANY
PERFORMANCE BY ANY PARTY THEREUNDER, 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.

 

6.3  Pledged Stock.  (a)  Unless an Event of Default shall have occurred and be
continuing and the Collateral Agent shall have given notice to the relevant
Grantor of the Collateral Agent’s intent to exercise its corresponding rights
pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash
dividends paid in respect of the Pledged Stock and all payments made in respect
of the Pledged Notes, in each case paid in the normal course of business of the
relevant Issuer and consistent with past practice, to the extent permitted in
the Note Documents, and to exercise all voting and corporate or other
organizational rights with respect to the Investment Property; provided,
however, that no vote shall be cast or corporate or other organizational right
exercised or other action taken which would impair the Collateral or which would
be inconsistent with or result in any violation of any provision of this
Agreement or any Note Document.

 

(B)  IF AN EVENT OF DEFAULT SHALL OCCUR AND BE CONTINUING AND THE COLLATERAL
AGENT SHALL GIVE NOTICE OF ITS INTENT TO EXERCISE SUCH RIGHTS TO THE RELEVANT
GRANTOR OR GRANTORS, SUBJECT TO THE INTERCREDITOR AGREEMENT, (I) THE COLLATERAL
AGENT SHALL HAVE THE RIGHT TO RECEIVE ANY AND ALL CASH DIVIDENDS, PAYMENTS,
ADDITIONAL CAPITAL STOCK OR PROPERTY OR OTHER PROCEEDS PAID IN RESPECT OF THE
INVESTMENT PROPERTY AND MAKE APPLICATION THEREOF TO THE OBLIGATIONS IN SUCH
ORDER AS THE COLLATERAL AGENT MAY DETERMINE, AND (II) ANY OR ALL OF THE
INVESTMENT PROPERTY SHALL BE REGISTERED IN THE NAME OF THE COLLATERAL AGENT OR
ITS NOMINEE, AND THE COLLATERAL AGENT OR ITS NOMINEE MAY THEREAFTER EXERCISE
(X) ALL VOTING, CORPORATE AND OTHER RIGHTS PERTAINING TO SUCH INVESTMENT
PROPERTY AT ANY MEETING OF SHAREHOLDERS OF THE RELEVANT ISSUER OR ISSUERS OR
OTHERWISE AND (Y) ANY AND ALL RIGHTS OF CONVERSION, EXCHANGE AND SUBSCRIPTION
AND ANY OTHER RIGHTS, PRIVILEGES OR OPTIONS PERTAINING TO SUCH INVESTMENT
PROPERTY AS IF IT WERE THE ABSOLUTE OWNER THEREOF (INCLUDING, WITHOUT
LIMITATION, THE RIGHT TO EXCHANGE AT ITS DISCRETION ANY AND ALL OF THE
INVESTMENT PROPERTY UPON THE MERGER, CONSOLIDATION, REORGANIZATION,
RECAPITALIZATION OR OTHER FUNDAMENTAL CHANGE IN THE CORPORATE OR OTHER
ORGANIZATIONAL STRUCTURE OF ANY ISSUER, OR UPON THE EXERCISE BY ANY GRANTOR OR
THE COLLATERAL AGENT OF ANY RIGHT, PRIVILEGE OR OPTION PERTAINING TO SUCH
INVESTMENT PROPERTY, AND IN CONNECTION THEREWITH, THE RIGHT TO DEPOSIT AND
DELIVER ANY AND ALL OF THE INVESTMENT PROPERTY WITH ANY COMMITTEE, DEPOSITARY,
TRANSFER AGENT, REGISTRAR OR OTHER DESIGNATED AGENCY UPON SUCH TERMS AND
CONDITIONS AS THE COLLATERAL AGENT MAY DETERMINE), ALL WITHOUT LIABILITY EXCEPT
TO ACCOUNT FOR PROPERTY ACTUALLY RECEIVED BY IT, BUT THE COLLATERAL AGENT SHALL
HAVE NO DUTY TO ANY GRANTOR OR ANY SECURED PARTY TO EXERCISE ANY SUCH RIGHT,
PRIVILEGE OR OPTION AND SHALL NOT BE RESPONSIBLE FOR ANY FAILURE TO DO SO OR
DELAY IN SO DOING.

 

(C)  EACH GRANTOR HEREBY AUTHORIZES AND INSTRUCTS EACH ISSUER OF ANY INVESTMENT
PROPERTY PLEDGED BY SUCH GRANTOR HEREUNDER TO (I) COMPLY WITH ANY INSTRUCTION
RECEIVED BY IT FROM THE COLLATERAL AGENT IN WRITING THAT (X) STATES THAT AN
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING AND (Y) IS OTHERWISE IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, WITHOUT ANY OTHER OR FURTHER
INSTRUCTIONS FROM SUCH GRANTOR, AND EACH GRANTOR AGREES THAT EACH ISSUER SHALL
BE FULLY PROTECTED IN SO COMPLYING, AND (II) UNLESS OTHERWISE EXPRESSLY
PERMITTED HEREBY, PAY ANY DIVIDENDS OR OTHER PAYMENTS WITH RESPECT TO THE
INVESTMENT PROPERTY DIRECTLY TO THE COLLATERAL AGENT.

 

6.4  Application of Proceeds.  The Collateral Agent may apply, subject to the
terms of the Intercreditor Agreement, all or any part of Proceeds constituting
Collateral, whether or not held in a Collateral Account, in accordance with the
provisions of the Indenture. Any balance of such

 

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Proceeds remaining after the Obligations shall have been paid in full shall be
paid over to the Grantors or to whomsoever may be lawfully entitled to receive
the same.

 

6.5  Code and Other Remedies.  If an Event of Default shall occur and be
continuing, the Collateral Agent may, subject to the terms of the Intercreditor
Agreement, exercise, in addition to all other rights and remedies granted to
them in this Agreement, in the Mortgages and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the New York UCC or any other applicable law.
Without limiting the generality of the foregoing, the Collateral Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may, subject to the terms of the
Intercreditor Agreement, in such circumstances forthwith (i) collect, receive,
appropriate and realize upon the Collateral, or any part thereof, (ii) transfer
all or any part of the Collateral into the Collateral Agent’s name or the name
of its nominee or nominees, (iii) vote all or any part of the Pledged Stock
(whether or not transferred into the name of the Collateral Agent) and give all
consents, waivers and ratification in respect of the Pledged Stock and otherwise
act with respect thereto as though it were the outright owner thereof (each
Grantor hereby irrevocably constituting and appointing the Collateral Agent the
proxy and attorney-in-fact of such Grantor, with full power of substitution to
do so) and to exercise any and all of the rights or power of such Grantor in its
capacity as shareholder of any relevant Issuer, and/or (iv) forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of the Collateral Agent or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Collateral Agent shall have the right, subject to the terms
of the Intercreditor Agreement, upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released.
If an Event of Default shall have occurred and shall be continuing, each Grantor
further agrees, at the Collateral Agent’s request, to assemble the Collateral
and, subject to the terms of the Intercreditor Agreement, make it available to
the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at such Grantor’s premises or elsewhere, and promptly to execute
and deliver to the Collateral Agent such instruments or other documents as may
be necessary or advisable to enable the Collateral Agent or its agent or
representative to obtain, subject to the terms of the Intercreditor Agreement,
possession of all or any part of the Collateral the possession of which the
Collateral Agent shall at the time be entitled to hereunder. The Collateral
Agent shall, subject to the terms of the Intercreditor Agreement, also be
entitled, so long as an Event of Default shall have occurred and be continuing,
to occupy any premises owned or leased by any Grantor where the Collateral or
any part thereof is assembled or located for a reasonable period to effectuate
its rights and remedies hereunder or under law, without obligation to such
Grantor for such occupation and to otherwise exercise, subject to the terms of
the Intercreditor Agreement, any and all rights and remedies of any Grantor
under or in connection with the Collateral, or otherwise in respect of the
Collateral. The Collateral Agent shall apply the net proceeds of any action
taken by it pursuant to this Section 6.5, after deducting all reasonable costs
and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Collateral Agent hereunder, including, without
limitation, reasonable attorneys’ fees and disbursements, in the manner required
by Section 8.5, and only after such application and after the payment by the
Collateral Agent of any other amount

 

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required by any provision of law, including, without limitation,
Section 9-615(a)(3) of the New York UCC, need the Collateral Agent account for
the surplus, if any, to any Grantor. To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Collateral Agent arising out of the exercise by the Collateral Agent of any
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.

 

6.6  Registration Rights.  (a)                     If the Collateral Agent
shall, subject to the terms of the Intercreditor Agreement, determine to
exercise its right to sell any or all of the Pledged Stock pursuant to
Section 6.5, and if it is necessary or advisable to have the Pledged Stock, or
that portion thereof to be sold, registered under the provisions of the
Securities Act, the relevant Grantor will cause the Issuer thereof to
(i) execute and deliver, and cause the directors and officers of such Issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold, under the provisions of the
Securities Act, (ii) use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or that
portion thereof to be sold, and (iii) make all amendments thereto and/or to the
related prospectus which are reasonably necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. Each
Grantor agrees to cause such Issuer to comply with the provisions of the
securities or “Blue Sky” laws of any and all applicable jurisdictions and to
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.

 

(B)  EACH GRANTOR RECOGNIZES THAT THE COLLATERAL AGENT MAY BE UNABLE TO EFFECT A
PUBLIC SALE OF ANY OR ALL THE PLEDGED STOCK, BY REASON OF CERTAIN PROHIBITIONS
CONTAINED IN THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR
OTHERWISE, AND MAY BE COMPELLED TO RESORT TO ONE OR MORE PRIVATE SALES THEREOF
TO A RESTRICTED GROUP OF PURCHASERS WHICH WILL BE OBLIGED 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. EACH GRANTOR ACKNOWLEDGES AND
AGREES THAT ANY SUCH PRIVATE SALE MAY RESULT IN PRICES AND OTHER TERMS LESS
FAVORABLE THAN IF SUCH SALE WERE A PUBLIC SALE AND, NOTWITHSTANDING SUCH
CIRCUMSTANCES, AGREES THAT ANY SUCH PRIVATE SALE SHALL BE DEEMED TO HAVE BEEN
MADE IN A COMMERCIALLY REASONABLE MANNER. THE COLLATERAL AGENT SHALL BE UNDER NO
OBLIGATION TO DELAY A SALE OF ANY OF THE PLEDGED STOCK FOR THE PERIOD OF TIME
NECESSARY TO PERMIT THE ISSUER THEREOF TO REGISTER SUCH SECURITIES FOR PUBLIC
SALE UNDER THE SECURITIES ACT, OR UNDER APPLICABLE STATE SECURITIES LAWS, EVEN
IF SUCH ISSUER WOULD AGREE TO DO SO.

 

(C)  EACH GRANTOR AGREES TO USE ITS BEST EFFORTS TO DO OR CAUSE TO BE DONE ALL
SUCH OTHER ACTS AS MAY BE NECESSARY TO MAKE SUCH SALE OR SALES OF ALL OR ANY
PORTION OF THE PLEDGED STOCK PURSUANT TO THIS SECTION 6.6 VALID AND BINDING AND
IN COMPLIANCE WITH ANY AND ALL OTHER APPLICABLE REQUIREMENTS OF LAW. EACH
GRANTOR FURTHER AGREES THAT A BREACH OF ANY OF THE COVENANTS CONTAINED IN THIS
SECTION 6.6 WILL CAUSE IRREPARABLE INJURY TO THE COLLATERAL AGENT AND THE
SECURED PARTIES, THAT THE COLLATERAL AGENT AND THE SECURED PARTIES HAVE NO
ADEQUATE REMEDY AT LAW IN RESPECT OF SUCH BREACH AND, AS A CONSEQUENCE, THAT
EACH AND EVERY COVENANT CONTAINED IN THIS SECTION 6.6 SHALL BE SPECIFICALLY
ENFORCEABLE AGAINST SUCH GRANTOR, AND SUCH GRANTOR HEREBY WAIVES AND AGREES NOT
TO ASSERT ANY DEFENSES AGAINST AN ACTION FOR SPECIFIC PERFORMANCE OF SUCH
COVENANTS EXCEPT FOR A DEFENSE THAT NO EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING.

 

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6.7  Deficiency.  Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Collateral Agent to collect such deficiency.

 

6.8  Proceeds to be Turned Over To Collateral Agent.  In addition to the rights
of the Collateral Agent specified in Section 6.1 with respect to payments of
Receivables, if an Event of Default shall occur and be continuing, all Proceeds
with respect to Second-Priority Collateral received by any Grantor consisting of
cash, checks and other near-cash items shall be held by such Grantor in trust
for the Collateral Agent and the Secured Parties, segregated from other funds of
such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over
to the Collateral Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Collateral Agent, if required). All Proceeds
with respect to Second-Priority Collateral received by the Collateral Agent
hereunder shall be held by the Collateral Agent in the Second-Priority
Collateral Account maintained under its sole dominion and control; provided,
that the security interest and lien of the Bank Administrative Agent pursuant to
the Bank Documents shall have been satisfied and discharged in full with respect
to such Proceeds and the Collateral Agent is not required under the
Intercreditor Agreement to deliver such Proceeds to the Bank Administrative
Agent. All Proceeds with respect to Second-Priority Collateral while held by the
Collateral Agent in the Second-Priority Collateral Account (or by such Grantor
in trust for the Collateral Agent and the Secured Parties) shall continue to be
held as collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided by the Indenture.

 

SECTION 7.  ACTIONS AFTER EVENT OF DEFAULT

 

7.1  General Authority of the Collateral Agent over the Collateral.  Each
Grantor and, by its acceptance of the benefits hereof, each Secured Party,
hereby irrevocably constitutes and appoints the Collateral Agent and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in its or his own name, from time
to time in the Collateral Agent’s discretion so long as an Event of Default has
occurred and is continuing, to take any and all actions and to execute any and
all documents and instruments which may be necessary or desirable to carry out
the terms of this Agreement and accomplish the purposes hereof.

 

7.2  Judicial Proceedings and Insolvency Events.  If an Event of Default has
occurred and is continuing, the Collateral Agent (i) shall have the right and
power to institute, maintain, defend and participate in such suits and
proceedings as it may deem appropriate to protect and enforce the rights vested
in it by this Agreement and the interests of the Secured Parties, (ii) may,
either after entry, or without entry, proceed by suit or suits at law or in
equity to enforce such rights and to foreclose upon the Collateral and to sell
all or, from time to time, any of the Collateral under the judgment or decree of
a court of competent jurisdiction and (iii) may, on behalf of the Secured
Parties, file claims concerning, stipulate or consent to, any matter concerning,
and otherwise represent the interests of the Secured Parties concerning, the
Collateral.

 

7.3  Right to Appoint a Receiver. If an Event of Default has occurred and is
continuing, upon the filing of a bill in equity or other commencement of
judicial proceedings to enforce the rights of the Collateral Agent under this
Agreement, the Collateral Agent shall, to the extent permitted by law, with
notice to the Company but without notice to any party claiming through the
Grantors, without regard to the solvency or insolvency at the time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral, and without requiring any bond from any
complainant in such proceedings, be entitled as a matter of right to the
appointment of

 

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a receiver or receivers of the Collateral, or any part thereof, and of the
rents, issues, tolls, profits, royalties, revenues and other income thereof,
pending such proceedings, with such powers as the court making such appointment
shall confer, and to the entry of an order directing that the rents, issues,
tolls, profits, royalties, revenues and other income of the property
constituting the whole or any part of the Collateral be segregated, sequestered
and impounded for the benefit of the Collateral Agent and the Secured Parties,
and each Grantor irrevocably consents to the appointments of such receiver or
receivers and to the entry of such order; provided that, notwithstanding the
appointment of any receiver, the Collateral Agent shall be entitled to retain
possession and control of all cash and Cash Equivalents held by or deposited
with it pursuant to this Agreement.

 

7.4  Remedies Not Exclusive.  (a)  No remedy conferred upon or reserved to the
Collateral Agent herein is intended to be exclusive of any other remedy or
remedies, but 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.

 

(B)  NO DELAY OR OMISSION BY THE COLLATERAL AGENT TO EXERCISE ANY RIGHT, REMEDY
OR POWER HEREUNDER OR UNDER ANY OTHER COLLATERAL DOCUMENT SHALL IMPAIR ANY SUCH
RIGHT, REMEDY OR POWER OR SHALL BE CONSTRUED TO BE A WAIVER THEREOF, AND EVERY
RIGHT, POWER AND REMEDY GIVEN BY THIS AGREEMENT TO THE COLLATERAL AGENT MAY BE
EXERCISED FROM TIME TO TIME AND AS OFTEN AS MAY BE DEEMED EXPEDIENT BY THE
COLLATERAL AGENT.

 

(C)  IF THE COLLATERAL AGENT SHALL HAVE PROCEEDED TO ENFORCE ANY RIGHT, REMEDY
OR POWER UNDER THIS AGREEMENT AND THE PROCEEDING FOR THE ENFORCEMENT THEREOF
SHALL HAVE BEEN DISCONTINUED OR ABANDONED FOR ANY REASON OR SHALL HAVE BEEN
DETERMINED ADVERSELY TO THE COLLATERAL AGENT, THEN THE GRANTORS, THE COLLATERAL
AGENT AND THE SECURED PARTIES SHALL, SUBJECT TO ANY DETERMINATION IN SUCH
PROCEEDING, SEVERALLY AND RESPECTIVELY BE RESTORED TO THEIR FORMER POSITIONS AND
RIGHTS HEREUNDER OR THEREUNDER WITH RESPECT TO THE COLLATERAL AND IN ALL OTHER
RESPECTS, AND THEREAFTER ALL RIGHTS, REMEDIES AND POWERS OF THE COLLATERAL AGENT
SHALL CONTINUE AS THOUGH NO SUCH PROCEEDING HAD BEEN TAKEN.

 

(D)  ALL RIGHTS OF ACTION AND OF ASSERTING CLAIMS UPON OR UNDER THIS AGREEMENT
MAY BE ENFORCED BY THE COLLATERAL AGENT WITHOUT THE POSSESSION OF ANY NOTE
DOCUMENT OR INSTRUMENT EVIDENCING ANY OBLIGATION OR THE PRODUCTION THEREOF AT
ANY TRIAL OR OTHER PROCEEDING RELATIVE THERETO, AND ANY SUIT OR PROCEEDING
INSTITUTED BY THE COLLATERAL AGENT SHALL BE, SUBJECT TO SECTION 10, BROUGHT IN
ITS NAME AS COLLATERAL AGENT AND ANY RECOVERY OF JUDGMENT SHALL BE HELD AS PART
OF THE COLLATERAL.

 

7.5  Waiver and Estoppel.  (a)  Each Grantor agrees, to the extent it may
lawfully do so, that it will not at any time in any manner whatsoever claim, or
take the benefit or advantage of, any appraisement, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force, which may delay, prevent or otherwise affect the performance or
enforcement of this Agreement or any other Collateral Document and hereby waives
all benefit or advantage of all such laws and covenants that it will not hinder,
delay or impede the execution of any power granted to the Collateral Agent in
this Agreement or in any other Collateral Document but will suffer and permit
the execution of every such power as though no such law were in force.

 

(B)  EACH GRANTOR, TO THE EXTENT IT MAY LAWFULLY DO SO, ON BEHALF OF ITSELF AND
ALL WHO MAY CLAIM THROUGH OR UNDER IT, INCLUDING WITHOUT LIMITATION ANY AND ALL
SUBSEQUENT CREDITORS, VENDEES, ASSIGNEES AND LIENORS, WAIVES AND RELEASES ALL
RIGHTS TO DEMAND OR TO HAVE ANY MARSHALING OF

 

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THE COLLATERAL UPON ANY SALE, WHETHER MADE UNDER ANY POWER OF SALE GRANTED
HEREIN OR PURSUANT TO JUDICIAL PROCEEDINGS OR UPON ANY FORECLOSURE OR ANY
ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT AND CONSENTS AND
AGREES THAT ALL THE COLLATERAL MAY AT ANY SUCH SALE BE OFFERED AND SOLD AS AN
ENTIRETY.

 

(C)  EACH GRANTOR WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
PRESENTMENT, DEMAND, PROTEST AND ANY NOTICE OF ANY KIND (EXCEPT NOTICES
EXPLICITLY REQUIRED HEREUNDER OR UNDER ANY NOTE DOCUMENT) IN CONNECTION WITH
THIS AGREEMENT AND ANY OTHER COLLATERAL DOCUMENT AND ANY ACTION TAKEN BY THE
COLLATERAL AGENT WITH RESPECT TO THE COLLATERAL.

 

7.6  Limitation on Collateral Agent’s Duty in Respect of Collateral. Beyond its
duties as to the custody thereof expressly provided in Section 10.2 herein and
to account to the Secured Parties and the Grantors for moneys and other property
received by it hereunder, the Collateral Agent shall not have any duty to the
Grantors or to the Secured Parties as to any Collateral in its possession or
control or in the possession or control of any of its agents or nominees, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.

 

SECTION 8.  COLLATERAL ACCOUNT; DISTRIBUTIONS

 

8.1  The Collateral Account.  On the date hereof, there shall be established
and, at all times thereafter until the Liens created by this Agreement and by
each other Collateral Document shall have terminated, there shall be maintained
with the Collateral Agent at the office of the Collateral Agent’s corporate
trust administration, an account which shall be entitled the “Cellu Tissue First
Priority Collateral Account” (the “First-Priority Collateral Account”) and an
account which shall be entitled the “Cellu Tissue Second-Priority Collateral
Account” (the “Second-Priority Collateral Account”). All moneys which are
required by the Indenture, this Agreement or by any Mortgage to be delivered to
the Collateral Agent while an Event of Default has occurred and is continuing or
which are received by the Collateral Agent or any agent or nominee of the
Collateral Agent in respect of the Collateral or otherwise in accordance with
the terms of the Indenture, whether in connection with the exercise of the
remedies provided in this Agreement or in any other Collateral Document or
otherwise, shall be deposited (as directed pursuant to an Officers’ Certificate
as defined under the Indenture) (a) in the First-Priority Collateral Account, to
the extent that such moneys constitute Proceeds of First-Priority Collateral or
constitute First-Priority Collateral under the terms of the Indenture and (b) in
the Second-Priority Collateral Account, to the extent that such moneys
constitute Proceeds of Second-Priority Collateral or constitute Second-Priority
Collateral under the terms of the Indenture and are not otherwise required under
the Intercreditor Agreement to be delivered to the Bank Administrative Agent.
Moneys in the First-Priority Collateral Account and the Second-Priority
Collateral Account shall be held by the Collateral Agent as part of the
Collateral and applied in accordance with the terms of this Agreement.

 

8.2  Control of Collateral Account.  All right, title and interest in and to the
Collateral Accounts shall vest in the Collateral Agent, and funds on deposit in
the Collateral Accounts shall constitute part of the Collateral. The Collateral
Accounts shall be subject to the exclusive dominion and control of the
Collateral Agent, and no Grantor shall have any right of withdrawal from the
Collateral Accounts without the Collateral Agent’s consent.

 

8.3  Investment of Funds Deposited in Collateral Account. The Collateral Agent
shall invest and reinvest moneys on deposit in the Collateral Accounts at any
time in Cash Equivalents as directed in writing by the relevant Grantor. In the
absence of such directions, moneys shall remain

 

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uninvested. All such investments and the interest and income received thereon
and the net proceeds realized on the sale or redemption thereof shall be held in
the Collateral Accounts as part of the Collateral. The Collateral Agent shall
not be responsible for any diminution in funds resulting from such investments
or any liquidation prior to maturity.

 

8.4  Withdrawals by the Grantors.  The Grantors shall be permitted to make
withdrawals from the Collateral Accounts pursuant to the provisions of the
Indenture.

 

8.5  Application of Moneys.  The Collateral Agent shall hold and apply moneys in
the Collateral Accounts in accordance with the provisions of the Indenture.

 

8.6  Collateral Agent’s Calculations.  All distributions made by the Collateral
Agent pursuant to Section 8.5 shall be final (absent manifest error), and the
Collateral Agent shall have no duty to inquire as to the application of any
amounts distributed by it.

 

8.7  Excess Payments.  If at any time when an Event of Default shall have
occurred and be continuing, any Secured Party (a “Receiving Party”) shall
receive any payment or distribution on account of the Obligations owed to such
Receiving Party (whether voluntary, involuntary, through the exercise of any
rights of set-off, or otherwise, and whether in cash, property or securities)
representing proceeds of any of the Collateral and which is in excess of the
payments or distributions such Receiving Party would have received through the
operation of Section 8.5 and after giving effect to the circumstances described
in Section 11.15 (such payments or distributions, “Excess Payments”), then such
Receiving Party shall hold such Excess Payments in trust for the benefit of all
Secured Parties and shall promptly pay over such Excess Payments in the form
received (duly endorsed, if necessary, to the Collateral Agent) to the
Collateral Agent, for distribution by the Collateral Agent pursuant to
Section 8.5.

 

SECTION 9.  AGREEMENTS WITH THE COLLATERAL AGENT

 

9.1  Delivery of Secured Debt Documents.  On the date hereof, the Company shall
deliver to the Collateral Agent true and complete copies of each Secured Debt
Document as in effect on the date hereof. The Company shall deliver to the
Collateral Agent, promptly upon the execution thereof, (i) a true and complete
copy of all amendments, modifications or supplements to any Secured Debt
Document entered into after the date hereof, and (ii) a true and complete copy
of any new Secured Debt Document entered into after the date hereof.

 

9.2  Compensation and Expenses.  Each Grantor, jointly and severally, agrees to
pay to the Collateral Agent, from time to time upon demand, (i) compensation
(which shall not be limited by any provision of law in regard to compensation of
fiduciaries or of a Collateral Agent of an express trust) for its services
hereunder and for administering the Collateral and (ii) all of the fees, costs
and expenses of the Collateral Agent (including, without limitation, the
reasonable fees and disbursements of its counsel, advisors and agents)
(A) arising in connection with the preparation, execution, delivery,
modification, termination and administration of this Agreement, each other Note
Document or the enforcement of any of the provisions hereof or thereof,
(B) incurred or required to be advanced in connection with the administration of
the Collateral, the sale or other disposition of Collateral and the
preservation, protection or defense of the Collateral Agent’s rights under this
Agreement, each other Note Document and in and to the Collateral, (C) incurred
by the Collateral Agent in connection with the removal of the Collateral Agent
pursuant to Section 10.10 or (D) the failure by any Grantor to perform or
observe any of the provisions of this Agreement or any other

 

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Note Document. Such fees, costs and expenses are intended to constitute expenses
of administration under any other bankruptcy law relating to creditors’ rights
generally. The obligations of the Grantors under this Section 9.2 shall survive
the termination of the other provisions of this Agreement and the other Note
Documents and the resignation or removal of the Collateral Agent hereunder.

 

9.3  Stamp and Other Similar Taxes.  Each Grantor, jointly and severally, agrees
to indemnify and hold harmless the Collateral Agent and each Secured Party from
any present or future claim for liability for any stamp or any other similar
tax, and any penalties or interest with respect thereto, which may be assessed,
levied or collected by any jurisdiction in connection with this Agreement, any
other Note Document or any Collateral. The obligations of the Grantors under
this Section 9.3 shall survive the termination of the other provisions of this
Agreement and the other Note Documents and the resignation or removal of the
Collateral Agent hereunder.

 

9.4  Filing Fees, Excise Taxes, Etc.  Each Grantor, jointly and severally,
agrees to pay or to reimburse the Collateral Agent for any and all payments made
by the Collateral Agent in respect of all search, filing, recording and
registration fees, taxes, excise taxes and other similar imposts which may be
payable or determined to be payable in respect of the execution and delivery of
this Agreement and the other Note Documents. The obligations of the Grantors
under this Section 9.4 shall survive the termination of the other provisions of
this Agreement and the other Note Documents and the resignation or removal of
the Collateral Agent hereunder.

 

9.5  Indemnification.  Each Grantor, jointly and severally, agrees to pay,
indemnify, and hold the Collateral Agent and each Secured Party (and their
respective directors, officers, agents and employees) harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, the reasonable
fees and expenses of counsel, advisors and agents) or disbursements of any kind
or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, and each other Note Document
including, without limitation in connection with any action taken with respect
to the Collateral and any contract, agreement, interest or obligation
constituting part of the Collateral, unless determined to have been caused by
from the gross negligence or willful misconduct of the indemnified party,
including for taxes in any jurisdiction in which the Collateral Agent is subject
to tax by reason of actions hereunder, unless such taxes are imposed on or
measured by compensation paid to the Collateral Agent under Section 9.2. In any
suit, proceeding or action brought by the Collateral Agent under or with respect
to any contract, agreement, interest or obligation constituting part of the
Collateral for any sum owing thereunder, or to enforce any provisions thereof,
each Grantor, jointly and severally, will save, indemnify and keep the
Collateral Agent and each Secured Party harmless from and against all expense,
loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor thereunder,
arising out of a breach by any Grantor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such obligor or its successors from any Grantor, and all such
obligations of any Grantor shall be and remain enforceable against and only
against the Grantors and shall not be enforceable against the Collateral Agent
or any Secured Party. The agreements in this Section 9.5 shall survive the
termination of the other provisions of this Agreement and the other Note
Documents and the resignation or removal of the Collateral Agent hereunder.

 

9.6  Collateral Agent’s Lien.  Notwithstanding anything to the contrary in this
Agreement or in any other Note Document, as security for the payment of the
Collateral Agent Fees (i) the Collateral Agent is hereby granted a lien upon all
Collateral and (ii) the Collateral Agent shall have

 

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the right to use and apply any of the funds held by the Collateral Agent in the
Collateral Accounts to cover such Collateral Agent Fees.

 

SECTION 10.  THE COLLATERAL AGENT

 

10.1  Collateral Agent’s Appointment as Attorney-in-Fact, etc.  (a)  Each
Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement and the other
Collateral Documents, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and the other Collateral Documents,
and, without limiting the generality of the foregoing, each Grantor hereby gives
the Collateral Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:

 

(I)                                     IN THE NAME OF SUCH GRANTOR OR ITS OWN
NAME, OR OTHERWISE, TAKE POSSESSION OF AND INDORSE AND COLLECT ANY CHECKS,
DRAFTS, NOTES, ACCEPTANCES OR OTHER INSTRUMENTS FOR THE PAYMENT OF MONEYS DUE
UNDER ANY RECEIVABLE OR WITH RESPECT TO ANY OTHER COLLATERAL AND FILE ANY CLAIM
OR TAKE ANY OTHER ACTION OR PROCEEDING IN ANY COURT OF LAW OR EQUITY OR
OTHERWISE DEEMED APPROPRIATE BY THE COLLATERAL AGENT FOR THE PURPOSE OF
COLLECTING ANY AND ALL SUCH MONEYS DUE WITH RESPECT TO THE COLLATERAL WHENEVER
PAYABLE;

 

(II)                                  IN THE CASE OF ANY INTELLECTUAL PROPERTY,
EXECUTE AND DELIVER, AND HAVE RECORDED, ANY AND ALL AGREEMENTS, INSTRUMENTS,
DOCUMENTS AND PAPERS AS NECESSARY TO EVIDENCE THE COLLATERAL AGENT’S AND THE
SECURED PARTIES’ SECURITY INTEREST IN SUCH INTELLECTUAL PROPERTY AND THE
GOODWILL AND GENERAL INTANGIBLES OF SUCH GRANTOR RELATING THERETO OR REPRESENTED
THEREBY;

 

(III)                               PAY OR DISCHARGE TAXES AND LIENS LEVIED OR
PLACED ON OR THREATENED AGAINST THE COLLATERAL, EFFECT ANY REPAIRS OR ANY
INSURANCE CALLED FOR BY THE TERMS OF THIS AGREEMENT OR ANY MORTGAGE AND PAY ALL
OR ANY PART OF THE PREMIUMS THEREFOR AND THE COSTS THEREOF;

 

(IV)                              EXECUTE, IN CONNECTION WITH ANY SALE PROVIDED
FOR IN SECTION 6.5 OR 6.6, ANY ENDORSEMENTS, ASSIGNMENTS OR OTHER INSTRUMENTS OF
CONVEYANCE OR TRANSFER WITH RESPECT TO THE COLLATERAL; AND

 

(V)                                 (1) DIRECT ANY PARTY LIABLE FOR ANY PAYMENT
UNDER ANY OF THE COLLATERAL TO MAKE PAYMENT OF ANY AND ALL MONEYS DUE OR TO
BECOME DUE THEREUNDER DIRECTLY TO THE COLLATERAL AGENT OR AS THE COLLATERAL
AGENT SHALL DIRECT; (2) ASK OR DEMAND FOR, COLLECT, AND RECEIVE PAYMENT OF AND
RECEIPT FOR, ANY AND ALL MONEYS, CLAIMS AND OTHER AMOUNTS DUE OR TO BECOME DUE
AT ANY TIME IN RESPECT OF OR ARISING OUT OF ANY COLLATERAL; (3) SIGN AND INDORSE
ANY INVOICES, FREIGHT OR EXPRESS BILLS, BILLS OF LADING, STORAGE OR WAREHOUSE
RECEIPTS, DRAFTS AGAINST DEBTORS, ASSIGNMENTS, VERIFICATIONS, NOTICES AND OTHER
DOCUMENTS IN CONNECTION WITH ANY OF THE COLLATERAL; (4) COMMENCE AND PROSECUTE
ANY SUITS, ACTIONS OR PROCEEDINGS AT LAW OR IN EQUITY IN ANY COURT OF COMPETENT
JURISDICTION TO COLLECT THE COLLATERAL OR ANY PORTION THEREOF AND TO ENFORCE ANY
OTHER RIGHT IN RESPECT OF ANY COLLATERAL; (5) DEFEND ANY SUIT, ACTION OR
PROCEEDING

 

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BROUGHT AGAINST SUCH GRANTOR WITH RESPECT TO ANY COLLATERAL; (6) SETTLE,
COMPROMISE OR ADJUST ANY SUCH SUIT, ACTION OR PROCEEDING AND, IN CONNECTION
THEREWITH, GIVE SUCH DISCHARGES OR RELEASES AS THE COLLATERAL AGENT MAY DEEM
APPROPRIATE; (7) ASSIGN ANY COPYRIGHT, PATENT OR TRADEMARK (ALONG WITH THE
GOODWILL OF THE BUSINESS TO WHICH ANY SUCH COPYRIGHT, PATENT OR TRADEMARK
PERTAINS), THROUGHOUT THE WORLD FOR SUCH TERM OR TERMS, ON SUCH CONDITIONS, AND
IN SUCH MANNER, AS THE COLLATERAL AGENT MAY IN ITS SOLE DISCRETION DETERMINE;
AND (8) GENERALLY, SELL, TRANSFER, PLEDGE AND MAKE ANY AGREEMENT WITH RESPECT TO
OR OTHERWISE DEAL WITH ANY OF THE COLLATERAL AS FULLY AND COMPLETELY AS THOUGH
THE COLLATERAL AGENT WERE THE ABSOLUTE OWNER THEREOF FOR ALL PURPOSES, AND DO,
AT THE COLLATERAL AGENT’S OPTION AND SUCH GRANTOR’S EXPENSE, AT ANY TIME, OR
FROM TIME TO TIME, ALL ACTS AND THINGS WHICH THE COLLATERAL AGENT DEEMS
NECESSARY TO PROTECT, PRESERVE OR REALIZE UPON THE COLLATERAL AND THE COLLATERAL
AGENT’S AND THE SECURED PARTIES’ SECURITY INTERESTS THEREIN AND TO EFFECT THE
INTENT OF THIS AGREEMENT AND THE OTHER COLLATERAL DOCUMENTS, ALL AS FULLY AND
EFFECTIVELY AS SUCH GRANTOR MIGHT DO.

 

Anything in this Section 10.1(a) to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 10.1(a) unless an Event of Default shall have
occurred and be continuing.

 

(B)  IF ANY GRANTOR FAILS TO PERFORM OR COMPLY WITH ANY OF ITS AGREEMENTS
CONTAINED HEREIN, THE COLLATERAL AGENT, AT ITS OPTION, BUT WITHOUT ANY
OBLIGATION SO TO DO, MAY PERFORM OR COMPLY, OR OTHERWISE CAUSE PERFORMANCE OR
COMPLIANCE, WITH SUCH AGREEMENT.

 

(C)  THE EXPENSES OF THE COLLATERAL AGENT INCURRED IN CONNECTION WITH ACTIONS
UNDERTAKEN AS PROVIDED IN THIS SECTION 10.1, TOGETHER WITH INTEREST THEREON AT A
RATE PER ANNUM EQUAL TO THE HIGHEST RATE PER ANNUM AT WHICH INTEREST WOULD BE
PAYABLE ON ANY CATEGORY OF PAST DUE PAYMENTS UNDER THE INDENTURE, FROM THE DATE
OF PAYMENT BY THE COLLATERAL AGENT TO THE DATE REIMBURSED BY THE RELEVANT
GRANTOR, SHALL BE PAYABLE BY SUCH GRANTOR TO THE COLLATERAL AGENT ON DEMAND.

 

(D)  EACH GRANTOR HEREBY RATIFIES ALL THAT SAID ATTORNEYS SHALL LAWFULLY DO OR
CAUSE TO BE DONE BY VIRTUE HEREOF. ALL POWERS, AUTHORIZATIONS AND AGENCIES
CONTAINED IN THIS AGREEMENT ARE COUPLED WITH AN INTEREST AND ARE IRREVOCABLE
UNTIL THIS AGREEMENT AND EACH OTHER NOTE DOCUMENT IS TERMINATED AND THE SECURITY
INTERESTS CREATED HEREBY AND THEREBY ARE RELEASED.

 

10.2  Duty of Collateral Agent.  The Collateral Agent’s sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the New York UCC or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. Neither the Collateral Agent, any Secured Party
nor any of their respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof. The powers conferred on the Collateral Agent and the Secured Parties
hereunder are solely to protect the Collateral Agent’s and the Secured Parties’
interests in the Collateral and shall not impose any duty upon the Collateral
Agent or any Secured Party to exercise any such powers. The Collateral Agent and
the Secured Parties shall be accountable only for amounts that they actually
receive as a result of the exercise of such powers, and neither they nor any of
their officers, directors, employees

 

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or agents shall be responsible to any Grantor or any Secured Party for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.

 

10.3  Filing of Financing Statements.  Pursuant to any applicable law, each
Grantor authorizes the Collateral Agent to file or record financing statements
and other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as necessary to perfect the security interests of the Collateral Agent
under this Agreement and under each other Collateral Document. Each Grantor
authorizes the Collateral Agent to use the collateral description “all personal
property” in any such appropriate financing statements. Each Grantor hereby
ratifies and authorizes the filing by the Collateral Agent of any financing
statement with respect to the Collateral made prior to the date hereof.
Notwithstanding the foregoing, in no event shall the Collateral Agent have any
obligation to monitor the perfection, continuation of perfection or the
sufficiency or validity of any security interest in or related to the Collateral
or to prepare or file any Uniform Commercial Code financing statement or
continuation statement.

 

10.4  Authority of Collateral Agent.  Each Grantor acknowledges that the rights
and responsibilities of the Collateral Agent under this Agreement and the other
Collateral Documents with respect to any action taken by the Collateral Agent or
the exercise or non-exercise by the Collateral Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement or any other Collateral Document
shall, as between the Collateral Agent and the Secured Parties, be governed by
the Note Documents and by such other agreements with respect thereto as may
exist from time to time among the Collateral Agent and the Secured Parties, but,
as between the Collateral Agent and the Grantors, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.

 

10.5  Exculpatory Provisions.  (a)  The Collateral Agent shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties in any Note Document, all of which are
made solely by the Grantors. The Collateral Agent makes no representations as
to, nor shall it be responsible for, the existence, genuineness, value or
condition of any of the Collateral or any part thereof, the title of the
Grantors thereto or the security afforded or intended to be afforded by this
Agreement and the other Collateral Documents, or the validity, execution (except
its execution), enforceability, legality or sufficiency of this Agreement, the
other Collateral Documents or the Intercreditor Agreement or the Obligations or
the validity, perfection, priority or enforceability of the liens or security
interests in any of the Collateral created or intended to be created by this
Agreement or the other Collateral Documents, or the validity or sufficiency of
the Collateral, or insuring the Collateral or the payment of taxes, charges,
assessments or liens upon the Collateral or otherwise as to the maintenance of
the Collateral, and the Collateral Agent shall incur no liability or
responsibility in respect of any such matters. The Collateral Agent shall have
no responsibility for preparing, recording, filing, re-recording or refiling any
financing statement, continuation statement or other instrument in any public
office at any time.

 

(B)  THE COLLATERAL AGENT SHALL NOT BE REQUIRED TO ASCERTAIN OR INQUIRE AS TO
THE PERFORMANCE BY THE GRANTORS OF ANY OF THE COVENANTS OR AGREEMENTS CONTAINED
HEREIN, IN THE OTHER COLLATERAL DOCUMENTS OR IN ANY SECURED DEBT DOCUMENT.
WHENEVER IT IS NECESSARY, OR IN THE OPINION OF THE COLLATERAL AGENT ADVISABLE,
FOR THE COLLATERAL AGENT TO ASCERTAIN THE AMOUNT OF OBLIGATIONS THEN HELD BY
SECURED PARTIES, THE COLLATERAL AGENT MAY RELY ON A CERTIFICATE OF THE TRUSTEE.

 

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(C)  THE COLLATERAL AGENT SHALL BE UNDER NO OBLIGATION OR DUTY TO TAKE ANY
ACTION UNDER THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT OR OTHERWISE IF TAKING
SUCH ACTION (I) WOULD SUBJECT THE COLLATERAL AGENT TO A TAX IN ANY JURISDICTION
WHERE IT IS NOT THEN SUBJECT TO A TAX OR (II) WOULD REQUIRE THE COLLATERAL AGENT
TO QUALIFY TO DO BUSINESS IN ANY JURISDICTION WHERE IT IS NOT THEN SO QUALIFIED,
UNLESS THE COLLATERAL AGENT SHALL RECEIVE SECURITY OR INDEMNITY REASONABLY
SATISFACTORY TO IT AGAINST SUCH TAX (OR EQUIVALENT LIABILITY), OR ANY LIABILITY
RESULTING FROM SUCH QUALIFICATION, IN EACH CASE AS RESULTS FROM THE TAKING OF
SUCH ACTION UNDER THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT.

 

(D)  THE COLLATERAL AGENT SHALL HAVE THE SAME RIGHTS WITH RESPECT TO ANY
OBLIGATION HELD BY IT AS ANY OTHER SECURED PARTY AND MAY EXERCISE SUCH RIGHTS AS
THOUGH IT WERE NOT THE COLLATERAL AGENT HEREUNDER, AND IT AND ITS AFFILIATES MAY
ACCEPT DEPOSITS FROM, LEND MONEY TO, PROVIDE SERVICES TO AND GENERALLY ENGAGE IN
ANY KIND OF BANKING OR TRUST BUSINESS WITH, ANY OF THE GRANTORS AS IF IT WERE
NOT THE COLLATERAL AGENT.

 

(E)  THE COLLATERAL AGENT SHALL NOT BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN IN ACCORDANCE WITH THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT
EXCEPT FOR ITS OWN NEGLIGENCE OR WILLFUL MISCONDUCT.

 

(F)  THE PERMISSIVE RIGHT OF THE COLLATERAL AGENT TO TAKE ANY ACTION UNDER THIS
AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT SHALL NOT BE CONSTRUED AS A DUTY TO
SO ACT.

 

(G)  THE COLLATERAL AGENT SHALL NOT BE LIABLE FOR ANY ACTION TAKEN, SUFFERED OR
OMITTED TO BE TAKEN BY IT IN GOOD FAITH AND REASONABLY BELIEVED BY IT TO BE
AUTHORIZED OR WITHIN THE DISCRETION OR RIGHTS OR POWERS CONFERRED UPON IT BY THE
INDENTURE AND THIS AGREEMENT, UNLESS ITS CONDUCT CONSTITUTES WILLFUL MISCONDUCT
OR NEGLIGENCE.

 

(H)  IN NO EVENT SHALL THE COLLATERAL AGENT BE RESPONSIBLE OR LIABLE FOR
SPECIAL, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER
(INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFIT), IRRESPECTIVE OF WHETHER THE
COLLATERAL AGENT HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND
REGARDLESS OF THE FORM OF ACTION.

 

(I)  THE COLLATERAL AGENT SHALL BE DEEMED TO HAVE EXERCISED REASONABLE CARE IN
THE CUSTODY OF THE COLLATERAL IN ITS POSSESSION IF THE COLLATERAL IS ACCORDED
TREATMENT SUBSTANTIALLY EQUAL TO THAT WHICH IT ACCORDS ITS OWN PROPERTY AND IN
ACCORDANCE WITH SECTION 9-207 OF THE NEW YORK UCC AND SHALL NOT BE LIABLE OR
RESPONSIBLE FOR ANY LOSS OR DIMINUTION IN THE VALUE OF ANY OF THE COLLATERAL BY
REASON OF THE ACT OR OMISSION OF ANY CARRIER, FORWARDING AGENCY OR OTHER AGENT
OR BAILEE SELECTED BY THE COLLATERAL AGENT IN GOOD FAITH.

 

10.6  Delegation of Duties.  The Collateral Agent may execute any of the trusts
or powers hereof and perform any duty hereunder or under any other Note Document
either directly or by or through agents or attorneys-in-fact. The Collateral
Agent shall be entitled to advice of counsel concerning all matters pertaining
to such trusts, powers and duties, and the advice of such counsel or an Opinion
of Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Collateral Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it
without gross negligence or willful misconduct.

 

10.7  Reliance by Collateral Agent.  (a)  Whenever in the administration of this
Agreement, or any other Collateral Document the Collateral Agent shall deem it
necessary or

 

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desirable that a factual matter be proved or established in connection with the
Collateral Agent taking, suffering or omitting any action hereunder or
thereunder, such matter (unless other evidence in respect thereof is herein
specifically prescribed) may be deemed to be conclusively proved or established
by a certificate of a Responsible Officer delivered to the Collateral Agent, and
such certificate shall be full warrant to the Collateral Agent for any action
taken, suffered or omitted in reliance thereon.

 

(B)  THE COLLATERAL AGENT MAY, AT THE EXPENSE OF THE GRANTORS, CONSULT WITH
COUNSEL, AND ANY OPINION OF COUNSEL SHALL BE FULL AND COMPLETE AUTHORIZATION AND
PROTECTION IN RESPECT OF ANY ACTION TAKEN OR SUFFERED BY IT HEREUNDER IN
ACCORDANCE THEREWITH. THE COLLATERAL AGENT SHALL HAVE THE RIGHT AT ANY TIME TO
SEEK INSTRUCTIONS CONCERNING THE ADMINISTRATION OF THIS AGREEMENT OR ANY OTHER
NOTE DOCUMENT FROM ANY COURT OF COMPETENT JURISDICTION. ANY OPINION OF COUNSEL
MAY BE BASED, INSOFAR AS IT RELATES TO FACTUAL MATTERS, UPON A CERTIFICATE OF A
RESPONSIBLE OFFICER OR REPRESENTATIONS MADE BY A RESPONSIBLE OFFICER IN A
WRITING DELIVERED TO THE COLLATERAL AGENT.

 

(C)  THE COLLATERAL AGENT MAY CONCLUSIVELY RELY UPON, AND SHALL BE FULLY
PROTECTED IN ACTING UPON OR FAILING TO ACT AS A CONSEQUENCE OF, ANY RESOLUTION,
STATEMENT, CERTIFICATE, INSTRUMENT, OPINION, REPORT, NOTICE, REQUEST, CONSENT,
ORDER, BOND OR OTHER PAPER OR DOCUMENT WHICH IT BELIEVES IN GOOD FAITH IS
GENUINE AND HAS BEEN SIGNED OR PRESENTED BY THE PROPER PARTY OR PARTIES OR, IN
THE CASE OF TELECOPIES, TO HAVE BEEN SENT BY THE PROPER PARTY OR PARTIES. IN THE
ABSENCE OF ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE COLLATERAL AGENT
MAY CONCLUSIVELY RELY, AS TO THE TRUTH OF THE STATEMENTS AND THE CORRECTNESS OF
THE OPINIONS EXPRESSED THEREIN, UPON ANY SUCH CERTIFICATES, OPINIONS OR OTHER
INFORMATION AND NEED NOT INVESTIGATE ANY FACT OR MATTER STATED THEREIN.

 

(D)  THE COLLATERAL AGENT SHALL NOT BE UNDER ANY OBLIGATION TO EXERCISE ANY OF
THE RIGHTS OR POWERS VESTED IN THE COLLATERAL AGENT BY THIS AGREEMENT OR BY ANY
OTHER NOTE DOCUMENT, UNLESS THE COLLATERAL AGENT SHALL HAVE BEEN PROVIDED
SECURITY AND INDEMNITY REASONABLY SATISFACTORY TO IT AGAINST THE COSTS, EXPENSES
AND LIABILITIES WHICH MAY BE INCURRED BY THE COLLATERAL AGENT, ITS AGENTS AND
ITS COUNSEL IN THE EXERCISE OF ANY SUCH RIGHT OR POWER OR IN COMPLIANCE WITH
SUCH REQUEST OR DIRECTION, INCLUDING SUCH REASONABLE ADVANCES AS MAY BE
REQUESTED BY THE COLLATERAL AGENT.

 

(E)  UPON ANY APPLICATION OR DEMAND BY ANY OF THE GRANTORS TO THE COLLATERAL
AGENT TO TAKE OR PERMIT ANY ACTION UNDER ANY OF THE PROVISIONS OF THIS AGREEMENT
OR ANY OTHER NOTE DOCUMENT, THE COMPANY SHALL FURNISH TO THE COLLATERAL AGENT A
CERTIFICATE OF A RESPONSIBLE OFFICER STATING THAT ALL CONDITIONS PRECEDENT, IF
ANY, PROVIDED FOR IN THIS AGREEMENT OR IN ANY NOTE DOCUMENT RELATING TO THE
PROPOSED ACTION HAVE BEEN COMPLIED WITH, AND IN THE CASE OF ANY SUCH APPLICATION
OR DEMAND AS TO WHICH THE FURNISHING OF ANY DOCUMENT IS SPECIFICALLY REQUIRED BY
ANY PROVISION OF THIS AGREEMENT OR ANY NOTE DOCUMENT RELATING TO SUCH PARTICULAR
APPLICATION OR DEMAND, SUCH ADDITIONAL DOCUMENT SHALL ALSO BE FURNISHED.

 

10.8  Limitations on Duties of Collateral Agent.  (a)  The Collateral Agent
shall be obligated to perform such duties and only such duties as are
specifically set forth in this Agreement, or any other Note Document, and no
implied covenants or obligations shall be read into this Agreement or any other
Note Document against the Collateral Agent. If and so long as an Event of
Default has occurred and is continuing, the Collateral Agent may exercise the
rights and powers vested in the Collateral Agent by this Agreement or any other
Note Document. The Collateral Agent shall not be liable with respect to any
action taken or omitted to be taken.

 

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(B)  EXCEPT AS HEREIN OTHERWISE EXPRESSLY PROVIDED, THE COLLATERAL AGENT SHALL
NOT BE UNDER ANY OBLIGATION TO TAKE ANY ACTION THAT IS DISCRETIONARY UNDER THE
PROVISIONS OF THIS AGREEMENT OR OF ANY OTHER NOTE DOCUMENT, EXCEPT UPON THE
WRITTEN REQUEST OF THE TRUSTEE OR THE OTHER SECURED PARTIES PURSUANT TO THE
TERMS OF THE INDENTURE.

 

(C)  NO PROVISION OF THIS AGREEMENT, OR ANY OTHER NOTE DOCUMENT SHALL BE DEEMED
TO IMPOSE ANY DUTY OR OBLIGATION ON THE COLLATERAL AGENT TO PERFORM ANY ACT OR
ACTS OR EXERCISE ANY RIGHT, POWER, DUTY OR OBLIGATION CONFERRED OR IMPOSED ON
IT, IN ANY JURISDICTION IN WHICH IT SHALL BE ILLEGAL, OR IN WHICH THE COLLATERAL
AGENT SHALL BE UNQUALIFIED OR INCOMPETENT, TO PERFORM ANY SUCH ACT OR ACTS OR TO
EXERCISE ANY SUCH RIGHT, POWER, DUTY OR OBLIGATION OR IF SUCH PERFORMANCE OR
EXERCISE WOULD CONSTITUTE DOING BUSINESS BY THE COLLATERAL AGENT IN SUCH
JURISDICTION OR IMPOSE A TAX ON THE COLLATERAL AGENT BY REASON THEREOF OR TO
EXPEND OR RISK ITS OWN FUNDS OR OTHERWISE INCUR ANY FINANCIAL LIABILITY IN THE
PERFORMANCE OF ITS DUTIES HEREUNDER.

 

10.9  Moneys to be Held in Trust.  All moneys received by the Collateral Agent
under or pursuant to any provision of this Agreement, or any other Note Document
(except Collateral Agent Fees) shall be held in trust for the purposes for which
they were paid or are held. The Collateral Agent shall not be liable for
interest on any money or assets received by it except as the Collateral Agent
may agree in writing. Assets held in trust by the Collateral Agent need not be
segregated from other assets except to the extent required by law.

 

10.10  Resignation and Removal of the Collateral Agent.  (a)  The Collateral
Agent may at any time, by giving written notice to the Company, resign and be
discharged of the responsibilities hereby created, such resignation to become
effective upon (i) the appointment of a successor Collateral Agent and (ii) the
acceptance of such appointment by such successor Collateral Agent. If no
successor Collateral Agent shall be appointed and shall have accepted such
appointment within 60 days after the Collateral Agent gives the aforesaid notice
of resignation, the Collateral Agent, the Company or any Secured Party may apply
to any court of competent jurisdiction at the expense of the Grantors to appoint
a successor Collateral Agent to act until such time, if any, as a successor
Collateral Agent shall have been appointed as provided in this Section 10.10.
Any successor so appointed by such court shall immediately and without further
act be superseded by any successor Collateral Agent appointed by the Trustee or
its successor as provided in Section 10.10(b). The Collateral Agent shall be
entitled to the Collateral Agent Fees to the extent incurred or arising, or
relating to events occurring, before such resignation or removal or in
connection with actions taken in accordance with Section 10.10(b).

 

(B)  IF AT ANY TIME THE COLLATERAL AGENT SHALL RESIGN OR BE REMOVED OR OTHERWISE
BECOME INCAPABLE OF ACTING, OR IF AT ANY TIME A VACANCY SHALL OCCUR IN THE
OFFICE OF THE COLLATERAL AGENT FOR ANY OTHER CAUSE, A SUCCESSOR COLLATERAL AGENT
MAY BE APPOINTED BY THE COMPANY, WHICH CONSENT SHALL NOT BE UNREASONABLY
WITHHELD. THE POWERS, DUTIES, AUTHORITY AND TITLE OF THE PREDECESSOR COLLATERAL
AGENT SHALL BE TERMINATED AND CANCELED WITHOUT PROCURING THE RESIGNATION OF SUCH
PREDECESSOR AND WITHOUT ANY OTHER FORMALITY (EXCEPT AS MAY BE REQUIRED BY
APPLICABLE LAW) THAN APPOINTMENT AND DESIGNATION OF A SUCCESSOR IN WRITING DULY
ACKNOWLEDGED AND DELIVERED TO THE PREDECESSOR AND THE COMPANY. SUCH APPOINTMENT
AND DESIGNATION SHALL BE FULL EVIDENCE OF THE RIGHT AND AUTHORITY TO MAKE THE
SAME AND OF ALL THE FACTS THEREIN RECITED, AND THIS AGREEMENT SHALL VEST IN SUCH
SUCCESSOR, WITHOUT ANY FURTHER ACT, DEED OR CONVEYANCE, ALL THE ESTATES,
PROPERTIES, RIGHTS, POWERS, TRUSTS, DUTIES, AUTHORITY AND TITLE OF ITS
PREDECESSOR; BUT SUCH PREDECESSOR SHALL, NEVERTHELESS, ON THE WRITTEN REQUEST OF
THE COMPANY OR THE SUCCESSOR, EXECUTE AND DELIVER AN INSTRUMENT TRANSFERRING TO
SUCH SUCCESSOR ALL THE ESTATES, PROPERTIES, RIGHTS, POWERS, TRUSTS, DUTIES,
AUTHORITY AND

 

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TITLE OF SUCH PREDECESSOR HEREUNDER AND SHALL DELIVER ALL COLLATERAL HELD BY IT
OR ITS AGENTS TO SUCH SUCCESSOR. SHOULD ANY DEED, CONVEYANCE OR OTHER INSTRUMENT
IN WRITING FROM ANY GRANTOR BE REQUIRED BY ANY SUCCESSOR COLLATERAL AGENT FOR
MORE FULLY AND CERTAINLY VESTING IN SUCH SUCCESSOR THE ESTATES, PROPERTIES,
RIGHTS, POWERS, TRUSTS, DUTIES, AUTHORITY AND TITLE VESTED OR INTENDED TO BE
VESTED IN THE PREDECESSOR COLLATERAL AGENT, ANY AND ALL SUCH DEEDS, CONVEYANCES
AND OTHER INSTRUMENTS IN WRITING SHALL, ON REQUEST OF SUCH SUCCESSOR, BE
EXECUTED, ACKNOWLEDGED AND DELIVERED BY SUCH GRANTOR. IF SUCH GRANTOR SHALL NOT
HAVE EXECUTED AND DELIVERED ANY SUCH DEED, CONVEYANCE OR OTHER INSTRUMENT WITHIN
10 DAYS AFTER IT RECEIVED A WRITTEN REQUEST FROM THE SUCCESSOR COLLATERAL AGENT
TO DO SO, OR IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, THE
PREDECESSOR COLLATERAL AGENT MAY EXECUTE THE SAME ON BEHALF OF SUCH GRANTOR.
SUCH GRANTOR HEREBY APPOINTS ANY PREDECESSOR COLLATERAL AGENT AS ITS AGENT AND
ATTORNEY TO ACT FOR IT AS PROVIDED IN THE NEXT PRECEDING SENTENCE.

 

10.11  Status of Successor Collateral Agent.  Every successor Collateral Agent
appointed pursuant to Section 10.10(b) shall be a bank or trust company in good
standing and having power to act as Collateral Agent hereunder, incorporated
under the laws of the United States of America or any State thereof or the
District of Columbia and having its principal corporate trust office within the
48 contiguous States and shall also have capital, surplus and undivided profits
of not less than $100,000,000, if there be such an institution with such
capital, surplus and undivided profits willing, qualified and able to accept the
trust hereunder upon reasonable or customary terms.

 

10.12  Merger of the Collateral Agent.  Any corporation into which the
Collateral Agent may be merged, or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Collateral
Agent shall be a party, shall be Collateral Agent under this Agreement without
the execution or filing of any paper or any further act on the part of the
parties hereto.

 

10.13  Co-Collateral Agent; Separate Collateral Agent.  (a)  If at any time or
times it shall be necessary or prudent in order to conform to any law of any
jurisdiction in which any of the Collateral shall be located, or to avoid any
violation of law or imposition on the Collateral Agent of taxes by such
jurisdiction not otherwise imposed on the Collateral Agent, or the Collateral
Agent shall be advised by Opinion of Counsel that it is necessary or prudent in
the interest of the Secured Parties or the Collateral Agent shall deem it
desirable for its own protection in the performance of its duties hereunder, the
Collateral Agent and each of the Grantors shall execute and deliver all
instruments and agreements necessary or proper to constitute another bank or
trust company, or one or more persons approved by the Collateral Agent and the
Grantors, either to act as Collateral Agent or co-Collateral Agents of all or
any of the Collateral under this Agreement, jointly with the Collateral Agent
originally named herein or therein or any successor Collateral Agent, or to act
as separate Collateral Agent or Collateral Agents of any of the Collateral. If
any of the Grantors shall not have joined in the execution of such instruments
and agreements within 10 days after it receives a written request from the
Collateral Agent to do so, or if an Event of Default has occurred and is
continuing, the Collateral Agent may act under the foregoing provisions of this
Section 10.13(a) without the concurrence of such Grantors and execute and
deliver such instruments and agreements on behalf of such Grantors. Each of the
Grantors hereby appoints the Collateral Agent as its agent and attorney to act
for it under the foregoing provisions of this Section 10.13(a) in either of such
contingencies.

 

(B)  EVERY SEPARATE COLLATERAL AGENT AND EVERY CO-COLLATERAL AGENT, OTHER THAN
ANY SUCCESSOR COLLATERAL AGENT APPOINTED PURSUANT TO SECTION 10.10(B), SHALL, TO
THE EXTENT PERMITTED BY LAW, BE APPOINTED AND ACT AND BE SUCH, SUBJECT TO THE
FOLLOWING PROVISIONS AND CONDITIONS:

 

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(I)                                     ALL RIGHTS, POWERS, DUTIES AND
OBLIGATIONS CONFERRED UPON THE COLLATERAL AGENT IN RESPECT OF THE CUSTODY,
CONTROL AND MANAGEMENT OF MONEYS, PAPERS OR SECURITIES SHALL BE EXERCISED SOLELY
BY THE COLLATERAL AGENT OR ANY AGENT APPOINTED BY THE COLLATERAL AGENT;

 

(II)                                  ALL RIGHTS, POWERS, DUTIES AND OBLIGATIONS
CONFERRED OR IMPOSED UPON THE COLLATERAL AGENT HEREUNDER SHALL BE CONFERRED OR
IMPOSED AND EXERCISED OR PERFORMED BY THE COLLATERAL AGENT AND SUCH SEPARATE
COLLATERAL AGENT OR SEPARATE COLLATERAL AGENTS OR CO-COLLATERAL AGENT OR
CO-COLLATERAL AGENTS, JOINTLY, AS SHALL BE PROVIDED IN THE INSTRUMENT APPOINTING
SUCH SEPARATE COLLATERAL AGENT OR SEPARATE COLLATERAL AGENTS OR CO-COLLATERAL
AGENT OR CO-COLLATERAL AGENTS, EXCEPT TO THE EXTENT THAT UNDER ANY LAW OF ANY
JURISDICTION IN WHICH ANY PARTICULAR ACT OR ACTS ARE TO BE PERFORMED THE
COLLATERAL AGENT SHALL BE INCOMPETENT OR UNQUALIFIED TO PERFORM SUCH ACT OR
ACTS, OR UNLESS THE PERFORMANCE OF SUCH ACT OR ACTS WOULD RESULT IN THE
IMPOSITION OF ANY TAX ON THE COLLATERAL AGENT WHICH WOULD NOT BE IMPOSED ABSENT
SUCH JOINT ACT OR ACTS, IN WHICH EVENT SUCH RIGHTS, POWERS, DUTIES AND
OBLIGATIONS SHALL BE EXERCISED AND PERFORMED BY SUCH SEPARATE COLLATERAL AGENT
OR SEPARATE COLLATERAL AGENTS OR CO-COLLATERAL AGENT OR CO-COLLATERAL AGENTS;

 

(III)                               NO POWER GIVEN HEREBY TO, OR WHICH IT IS
PROVIDED HEREIN OR THEREIN MAY BE EXERCISED BY, ANY SUCH CO-COLLATERAL AGENT OR
CO-COLLATERAL AGENTS OR SEPARATE COLLATERAL AGENT OR SEPARATE COLLATERAL AGENTS
SHALL BE EXERCISED HEREUNDER OR THEREUNDER BY SUCH CO-COLLATERAL AGENT OR
CO-COLLATERAL AGENTS OR SEPARATE COLLATERAL AGENT OR SEPARATE COLLATERAL AGENTS
EXCEPT JOINTLY WITH, OR WITH THE CONSENT IN WRITING OF, THE COLLATERAL AGENT,
ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING;

 

(IV)                              NO COLLATERAL AGENT HEREUNDER SHALL BE
PERSONALLY LIABLE BY REASON OF ANY ACT OR OMISSION OF ANY OTHER COLLATERAL AGENT
HEREUNDER; AND

 

(V)                                 THE COMPANY AND THE COLLATERAL AGENT, AT ANY
TIME BY AN INSTRUMENT IN WRITING EXECUTED BY THEM JOINTLY, MAY ACCEPT THE
RESIGNATION OF OR REMOVE (FOR ANY REASON OR NO REASON AT ALL) ANY SUCH SEPARATE
COLLATERAL AGENT OR CO-COLLATERAL AGENT AND, IN THAT CASE BY AN INSTRUMENT IN
WRITING EXECUTED BY THEM JOINTLY, MAY APPOINT A SUCCESSOR TO SUCH SEPARATE
COLLATERAL AGENT OR CO-COLLATERAL AGENT, AS THE CASE MAY BE, ANYTHING CONTAINED
HEREIN TO THE CONTRARY NOTWITHSTANDING. IF THE COMPANY SHALL NOT HAVE JOINED IN
THE EXECUTION OF ANY SUCH INSTRUMENT WITHIN 10 DAYS AFTER IT RECEIVES A WRITTEN
REQUEST FROM THE COLLATERAL AGENT TO DO SO, OR IF AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, THE COLLATERAL AGENT SHALL HAVE THE POWER TO ACCEPT
THE RESIGNATION OF OR REMOVE ANY SUCH SEPARATE COLLATERAL AGENT OR CO-COLLATERAL
AGENT AND TO APPOINT A SUCCESSOR WITHOUT THE CONCURRENCE OF THE COMPANY, THE
COMPANY HEREBY APPOINTING THE COLLATERAL AGENT ITS AGENT AND ATTORNEY TO ACT FOR
IT IN SUCH CONNECTION IN SUCH CONTINGENCY. IF THE COLLATERAL AGENT SHALL HAVE
APPOINTED A SEPARATE COLLATERAL AGENT OR SEPARATE COLLATERAL AGENTS OR
CO-COLLATERAL AGENT OR CO-COLLATERAL AGENTS AS ABOVE PROVIDED, THE COLLATERAL
AGENT MAY AT ANY TIME, BY AN INSTRUMENT IN WRITING, ACCEPT THE RESIGNATION OF OR
REMOVE ANY SUCH SEPARATE COLLATERAL AGENT OR CO-COLLATERAL AGENT AND THE
SUCCESSOR TO ANY SUCH SEPARATE COLLATERAL AGENT OR CO-COLLATERAL AGENT SHALL BE
APPOINTED BY THE COMPANY AND THE COLLATERAL AGENT, OR BY THE COLLATERAL AGENT
ALONE PURSUANT TO THIS SECTION 10.13(B).

 

10.14  Treatment of Payee or Indorsee by Collateral Agent;  Representatives of
Secured Parties.  (a)  The Collateral Agent may treat the registered holder or,
if none, the payee or indorsee of any promissory note or debenture evidencing an
Obligation as the absolute owner thereof

 

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for all purposes and shall not be affected by any notice to the contrary,
whether such promissory note or debenture shall be past due or not.

 

(B)  ANY PERSON THAT SHALL BE DESIGNATED AS THE DULY AUTHORIZED REPRESENTATIVE
OF ONE OR MORE SECURED PARTIES TO ACT AS SUCH IN CONNECTION WITH ANY MATTERS
PERTAINING TO THIS AGREEMENT, ANY OTHER NOTE DOCUMENT OR THE COLLATERAL SHALL
PRESENT TO THE COLLATERAL AGENT SUCH DOCUMENTS, INCLUDING, WITHOUT LIMITATION,
OPINIONS OF COUNSEL, AS THE COLLATERAL AGENT MAY REASONABLY REQUIRE, IN ORDER TO
DEMONSTRATE TO THE COLLATERAL AGENT THE AUTHORITY OF SUCH PERSON TO ACT AS THE
REPRESENTATIVE OF SUCH SECURED PARTIES.

 

SECTION 11.  MISCELLANEOUS

 

11.1  Notices.  Unless otherwise specified herein, all notices, requests,
demands or other communications given to any of the Grantors or the Collateral
Agent shall be given in writing or by facsimile transmission and shall be deemed
to have been duly given when personally delivered or when duly deposited in the
mails, registered or certified mail postage prepaid, or when transmitted by
facsimile transmission, addressed to such party at its address specified on
Schedule 1 hereof, in the case of the Grantors, or on the signature
pages thereof, in the case of the Collateral Agent, or any other address which
such party shall have specified as its address for the purpose of communications
hereunder, by notice given in accordance with this Section 11.1 to the party
sending such communication; provided that any notice, request or demand to the
Collateral Agent shall not be effective until received by the Collateral Agent
in writing or by facsimile transmission in the corporate trust administration at
the office designated by it pursuant to this Section 11.1.

 

11.2  Amendments in Writing.  (a)  The Collateral Agent and the Grantors may,
from time to time, enter into written agreements supplemental hereto for the
purpose of amending, modifying or adding to, or waiving any provisions of, this
Agreement or changing in any manner the rights of the Collateral Agent, the
Secured Parties or the Grantors hereunder in accordance with and subject to the
terms set forth in Article IX of the Indenture. Notwithstanding the foregoing,
such supplemental agreements shall not amend, modify or waive any provision of
Section 9 or 10 or alter the duties, rights or obligations of the Collateral
Agent hereunder without the written consent of the Collateral Agent.

 

(B)  WITHOUT THE CONSENT OF ANY SECURED PARTY, THE COLLATERAL AGENT AND ANY OF
THE GRANTORS, AT ANY TIME AND FROM TIME TO TIME, MAY IN ACCORDANCE WITH
SECTION 9.1 OF THE INDENTURE ENTER INTO ONE OR MORE AGREEMENTS SUPPLEMENTAL
HERETO, IN FORM SATISFACTORY TO THE COLLATERAL AGENT, (I) TO ADD TO THE
COVENANTS OF SUCH GRANTOR FOR THE BENEFIT OF THE SECURED PARTIES OR TO SURRENDER
ANY RIGHT OR POWER HEREIN CONFERRED UPON SUCH GRANTOR; (II) TO MORTGAGE OR
PLEDGE TO THE COLLATERAL AGENT, OR GRANT A SECURITY INTEREST IN FAVOR OF THE
COLLATERAL AGENT IN, ANY TYPES OR ITEMS OF PROPERTY OR ASSETS THAT CONSTITUTE
TYPES OR ITEMS OF PROPERTY OR ASSETS INCLUDED IN THE DEFINITION OF COLLATERAL AS
ADDITIONAL SECURITY FOR THE OBLIGATIONS; (III) TO CURE ANY AMBIGUITY, TO CORRECT
OR SUPPLEMENT ANY PROVISION HEREIN WHICH MAY BE DEFECTIVE OR INCONSISTENT WITH
ANY OTHER PROVISION HEREIN OR THEREIN, OR TO MAKE ANY OTHER PROVISION WITH
RESPECT TO MATTERS OR QUESTIONS ARISING HEREUNDER WHICH SHALL NOT BE
INCONSISTENT WITH ANY PROVISION HEREOF; PROVIDED THAT ANY SUCH ACTION
CONTEMPLATED BY THIS CLAUSE (III) SHALL NOT ADVERSELY AFFECT THE INTERESTS OF
THE SECURED PARTIES; OR (IV) TO THE EXTENT THAT THE PLEDGE OF ANY CAPITAL STOCK
RESULTS IN THE COMPANY BEING REQUIRED TO FILE SEPARATE FINANCIAL STATEMENTS OF
ANY SUBSIDIARY OF THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 3-10 OR RULE 3-16 OF REGULATION S-X UNDER THE SECURITIES ACT,
TO RELEASE SUCH CAPITAL STOCK FROM THE

 

36

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COLLATERAL BUT ONLY TO THE EXTENT NECESSARY FOR THE COMPANY NOT TO BE SUBJECT TO
SUCH FILING REQUIREMENT.

 

(C)  THE COLLATERAL AGENT MAY, BUT SHALL NOT BE OBLIGATED TO, ENTER INTO ANY
SUPPLEMENTAL AGREEMENT PURSUANT TO THIS SECTION 11.2 THAT WOULD ADVERSELY AFFECT
ITS INTERESTS HEREUNDER.

 

11.3  No Waiver by Course of Conduct; Cumulative Remedies.  Neither the
Collateral Agent nor any Secured Party shall by any act (except by a written
instrument pursuant to Section 11.2), delay, indulgence, and omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or event of default under the Note Documents. No
failure to exercise, nor any delay in exercising, on the part of the Collateral
Agent or any Secured Party, any right, power or privilege hereunder or under any
other Note Document shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder or under any other Note
Document shall preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. A waiver by the Collateral Agent or any
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy that the Collateral Agent or such
Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.

 

11.4  Enforcement Expenses.  (a)  Each Grantor agrees to pay or reimburse each
Secured Party and the Collateral Agent for all its costs and expenses incurred
in enforcing or preserving any rights under this Agreement, the other Note
Documents and the Secured Debt Documents to which such Grantor is a party,
including, without limitation, the fees and disbursements of counsel to each
Secured Party and of counsel to the Collateral Agent.

 

(B)  THE AGREEMENTS IN THIS SECTION 11.4 SHALL SURVIVE REPAYMENT OF THE
OBLIGATIONS AND ALL OTHER AMOUNTS PAYABLE UNDER THE NOTE DOCUMENTS.

 

11.5  Successors and Assigns.  This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Collateral Agent and the Secured Parties and their successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Collateral Agent.

 

11.6  Counterparts.  This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

 

11.7  Severability.  Any provision of this Agreement that 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.

 

11.8  Section Headings.  The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.

 

37

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11.9  Integration.  This Agreement, the Mortgages, the Note Documents and the
Intercreditor Agreement represent the agreement of the Grantors, the Collateral
Agent and the Secured Parties with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Collateral Agent or any Secured Party related to the subject matter
hereof and thereof not expressly set forth or referred to herein or in the Note
Documents, the Mortgages and the Intercreditor Agreement.

 

11.10  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

11.11  Submission To Jurisdiction; Waivers.  Each Grantor hereby irrevocably and
unconditionally:

 

(I)                                     SUBMITS FOR ITSELF AND ITS PROPERTY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE NOTE DOCUMENTS
TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

 

(II)                                  CONSENTS THAT ANY SUCH ACTION OR
PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME;

 

(III)                               AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO
SUCH GRANTOR AT ITS ADDRESS REFERRED TO IN SECTION 11.1 OR AT SUCH OTHER ADDRESS
OF WHICH THE COLLATERAL AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;

 

(IV)                              AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND

 

(V)                                 WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

 

11.12  Acknowledgements.  Each Grantor hereby acknowledges that:

 

(I)                                     IT HAS BEEN ADVISED BY COUNSEL IN THE
NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT, THE OTHER NOTE DOCUMENTS
AND THE OTHER SECURED DEBT DOCUMENTS TO WHICH IT IS A PARTY;

 

(II)                                  NEITHER THE COLLATERAL AGENT NOR ANY
SECURED PARTY HAS ANY FIDUCIARY RELATIONSHIP WITH OR DUTY TO ANY GRANTOR ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER NOTE DOCUMENTS OR
ANY OF THE SECURED DEBT DOCUMENTS, AND THE RELATIONSHIP BETWEEN THE GRANTORS, ON
THE ONE HAND, AND THE COLLATERAL AGENT AND SECURED PARTIES, ON THE OTHER HAND,
IN CONNECTION HEREWITH OR THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR; AND

 

38

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(III)                               NO JOINT VENTURE IS CREATED HEREBY OR BY THE
NOTE DOCUMENTS OR OTHERWISE EXISTS BY VIRTUE OF THE TRANSACTIONS CONTEMPLATED
HEREBY AMONG THE SECURED PARTIES OR AMONG THE GRANTORS AND THE SECURED PARTIES.

 

11.13  Additional Grantors.  Each Subsidiary of the Company that is required to
become a party to this Agreement pursuant to any Note Document shall become a
Grantor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.

 

11.14  Releases; Termination of Security Interests.  (a)  The Liens on the
Collateral shall be released at the times, and to the extent, provided under
Section 11.6 of the Indenture; provided, that the provisions of Sections 9.2,
9.3, 9.4 and 9.5 shall not be affected by any such termination. At the request
and sole expense of any Grantor following any such termination, the Collateral
Agent shall deliver to such Grantor any Collateral held by the Collateral Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.

 

(B)  BY ACCEPTANCE OF THE BENEFITS HEREOF, EACH SECURED PARTY ACKNOWLEDGES AND
CONSENTS TO THE PROVISIONS OF THIS SECTION 11.14, AGREES THAT THE COLLATERAL
AGENT SHALL INCUR NO LIABILITY WHATSOEVER TO ANY SECURED PARTY FOR ANY RELEASE
EFFECTED BY THE COLLATERAL AGENT IN ACCORDANCE WITH THIS SECTION 11.14.

 

11.15  Reinstatement.  Each Grantor agrees that if any payment made by a Grantor
or other Person and applied to the Obligations is at any time annulled, avoided,
set aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or is required to be paid to the
Collateral Agent or any other Secured Party pursuant to the terms hereof, for
application in accordance with the priorities set forth herein, or the proceeds
of Collateral are required to be returned by any Secured Party to such Grantor,
its estate, trustee, receiver or any other Person under any Requirement of Law
of any Governmental Authority, then to the extent of such payment or repayment,
any Lien or other Collateral securing such Obligation shall be and remain in
full force and effect as fully as if such payment had never been made or, if
prior thereto the Lien granted hereby or by any other Collateral Document or
other Collateral securing such Obligation hereunder shall have been released or
terminated by virtue of such cancellation or surrender, such Lien or other
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect any Lien or other Collateral securing the Obligations of any
Grantor in respect of the amount of such payment.

 

11.16  WAIVER OF JURY TRIAL.  EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND ANY SECURED DEBT DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.

 

11.17  Force Majeure.  In no event shall the Collateral Agent be responsible or
liable for any failure or delay in the performance of its obligations hereunder
arising out of or caused by, directly or indirectly, forces beyond its control,
including, without limitation, strikes, work stoppages, accidents, acts of war
or terrorism, civil or military disturbances, nuclear or natural catastrophes or
acts of God, and interruptions, loss or malfunctions of utilities,
communications or computer (software and hardware) services, it being understood
that the Collateral Agent shall use

 

39

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reasonable best efforts which are consistent with accepted practices in the
banking industry to resume performance as soon as practicable under the
circumstances.

 

11.18  No Liability for Clean-up of Hazardous Materials.  In the event that
Collateral Agent is required to acquire title to an asset for any reason, or
take any managerial action of any kind in regard thereto, in order to carry out
any fiduciary or trust obligation for the benefit of another, which in
Collateral Agent’s sole discretion may cause Collateral Agent to be considered
an “owner or operator” under the provisions of the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §9601, et seq.,
or otherwise cause Collateral Agent to incur liability under CERCLA or any other
federal, state or local law, Collateral Agent reserves the right, instead of
taking such action, to either resign as Collateral Agent or arrange for the
transfer of the title or control of the asset to a court-appointed receiver. 
Collateral Agent shall not be liable to Grantors, Holders or any other Person
for any environmental claims or contribution actions under any federal, state or
local law, rule or regulation by reason of Collateral Agent’s actions and
conduct as authorized, empowered and directed hereunder or relating to the
discharge, release or threatened release of hazardous materials into the
environment.  If at any time it is necessary or advisable for the Facility to be
possessed, owned, operated or managed by any Person (including Collateral Agent)
other than Grantors, a Majority in Interest of Holders shall direct Collateral
Agent to appoint an appropriately qualified Person (excluding Collateral Agent)
who they shall designate to possess, own, operate or manage, as the case may be,
the Facility.

 

40

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IN WITNESS WHEREOF, each of the undersigned has caused this Note Security
Agreement to be duly executed and delivered as of the date first above written.

 

 

 

CELLU TISSUE HOLDINGS, INC.

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

CELLU TISSUE–CITYFOREST LLC

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

CELLU TISSUE CORPORATION – NATURAL DAM

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

CELLU TISSUE CORPORATION - NEENAH

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

CELLU TISSUE – LONG ISLAND, LLC

 

 

By:

Cellu Tissue Corporation – Natural Dam, individually and as a member

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title:

 

 

 

 

 

CELLU TISSUE – THOMASTON, LLC

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

CELLU TISSUE LLC

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

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COASTAL PAPER COMPANY

 

 

 

 

 

By:

Van Paper Company, its managing partner

 

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

INTERLAKE ACQUISITION CORPORATION LIMITED

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

MENOMINEE ACQUISITION CORPORATION

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

VAN PAPER COMPANY

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

VAN TIMBER COMPANY

 

 

 

 

 

By:

/s/ David J. Morris

 

 

 

Name: David J. Morris

 

 

 

Title: Chief Financial Office

 

 

 

 

Acknowledged and Agreed to as of the date first above written:

 

 

 

 

 

 

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Collateral Agent

 

 

By:

/s/ Vaneta Bernard

 

 

Name: Vaneta Bernard

 

 

Title: Vice President

 

 

 

Address for Notices:

 

 

 

222 Berkeley Street, 2nd Floor

 

Boston, MA 02116

 

Facsimile:  (617) 351-2401

 

Attention:  Peter M. Murphy, Vice President

 

 

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Annex 1 to

Note Security Agreement

 

ASSUMPTION AGREEMENT, dated as of                       , 200 , made by
                                                 (the “Additional Grantor”), in
favor of THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as collateral agent
(in such capacity, the “Collateral Agent”) for the Secured Parties. All
capitalized terms not defined herein shall have the meaning ascribed to them in
the Note Security Agreement referred to below.

 

W I T N E S S E T H:

 

WHEREAS, Cellu Tissue Holdings, Inc. (the “Company”), certain of its
subsidiaries and the Collateral Agent have entered into a Note Security
Agreement, dated as of                     , 2009 (as amended, supplemented or
otherwise modified from time to time, the “Security Agreement”);

 

WHEREAS, the Security Agreement requires the Additional Grantor to become a
party to the Security Agreement; and

 

WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Security Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                       Security Agreement.  By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 11.13 of the Security Agreement, hereby becomes a party to the Security
Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in the Schedules to the Security Agreement.
The Additional Grantor hereby represents and warrants that each of the
representations and warranties contained in Section 4 of the Security Agreement
is true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.

 

2.                                       Governing Law.  THIS ASSUMPTION
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written.

 

 

[ADDITIONAL GRANTOR]

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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Annex 1-A to

Assumption Agreement

 

Supplement to Schedule 1

 

Supplement to Schedule 2

 

Supplement to Schedule 3

 

Supplement to Schedule 4

 

Supplement to Schedule 5

 

Supplement to Schedule 6

 

Supplement to Schedule 7

 

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Annex 2 to

Note Security Agreement

 

ACKNOWLEDGEMENT AND CONSENT

 

The undersigned hereby acknowledges receipt of a copy of the Note Security
Agreement dated as of June 3, 2009 (the “Agreement”), among the Grantors parties
thereto, the Secured Parties named therein and The Bank of New York Mellon Trust
Company, N.A., as Collateral Agent. The undersigned agrees for the benefit of
the Collateral Agent and the Secured Parties as follows:

 

1.                                       The undersigned will be bound by the
terms of the Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.

 

2.                                       The undersigned will notify the
Collateral Agent promptly in writing of the occurrence of any of the events
described in Section 5.6(a) of the Agreement.

 

3.                                       The terms of Sections 6.3(c) and 6.6 of
the Agreement shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 6.3(c) or 6.6 of the Agreement.

 

 

 

[NAME OF ISSUER]

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

Address for Notices:

 

 

 

 

 

 

 

 

Fax:

 

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The following schedules have been deleted herefrom, but are available to the
Commission upon request:

 

Schedule 1

 

Notice Addresses

Schedule 2

 

Investment Property

Schedule 3

 

Perfection Matters

Schedule 4

 

Jurisdictions of Organization and Chief Executive Offices

Schedule 5

 

Inventory and Equipment Locations

Schedule 6

 

Intellectual Property

Schedule 7

 

Deposit Accounts

Schedule 8

 

Section 3.4 Existing Exclusions

 

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