Exhibit 10.1

Execution Copy

COLLATERAL AGREEMENT

Dated as of May 11, 2012,

among

VERSO PAPER HOLDINGS LLC,

as Company,

each other PLEDGOR identified herein,

and

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Collateral Agent

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, (I) THE LIENS AND SECURITY
INTERESTS GRANTED TO THE COLLATERAL AGENT PURSUANT TO THIS AGREEMENT ARE
EXPRESSLY SUBJECT AND SUBORDINATE TO THE LIENS AND SECURITY INTERESTS GRANTED TO
ANY AGENT OR TRUSTEE FOR ANY SENIOR LENDER (AS DEFINED IN THE INTERCREDITOR
AGREEMENT REFERRED TO BELOW), AND (II) THE EXERCISE OF ANY RIGHT OR REMEDY BY
THE COLLATERAL AGENT HEREUNDER IS SUBJECT TO THE LIMITATIONS AND PROVISIONS OF
THE INTERCREDITOR AGREEMENT DATED AS OF MAY 11, 2012 (AS FURTHER AMENDED,
RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
“INTERCREDITOR AGREEMENT”), BY AND AMONG CITIBANK, N.A., AS INTERCREDITOR AGENT
AND AS ADMINISTRATIVE AGENT UNDER THE ABL CREDIT AGREEMENT, CREDIT SUISSE AG,
CAYMAN ISLANDS BRANCH, AS ADMINISTRATIVE AGENT UNDER THE CASH FLOW CREDIT
AGREEMENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS TRUSTEE UNDER THE 2019
FIRST-LIEN NOTES INDENTURE, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS TRUSTEE
UNDER THE 1-1/2 LIEN NOTES INDENTURE, VERSO PAPER FINANCE HOLDINGS LLC, VERSO
PAPER HOLDINGS, LLC AND THE SUBSIDIARIES PARTY THERETO. IN THE EVENT OF ANY
CONFLICT BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT AND THE TERMS OF THIS
AGREEMENT, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN.

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TABLE OF CONTENTS

 

          Page  

ARTICLE 1 DEFINITIONS

     2   

Section 1.01.

  

Indenture

     2   

Section 1.02.

  

Other Defined Terms

     2   

ARTICLE 2 RESERVED

     9   

ARTICLE 3 PLEDGE OF DEBT SECURITIES

     9   

Section 3.01.

  

Pledge

     9   

Section 3.02.

  

Delivery of the Pledged Collateral

     9   

Section 3.03.

  

Representations, Warranties and Covenants

     10   

Section 3.04.

  

Registration in Nominee Name; Denominations

     11   

Section 3.05.

  

Voting Rights; Dividends and Interest, Etc

     12   

ARTICLE 4 SECURITY INTERESTS IN OTHER PERSONAL PROPERTY

     14   

Section 4.01.

  

Security Interest

     14   

Section 4.02.

  

Representations and Warranties

     16   

Section 4.03.

  

Covenants

     19   

Section 4.04.

  

Other Actions

     22   

Section 4.05.

  

Covenants Regarding Patent, Trademark and Copyright Collateral

     23   

ARTICLE 5 REMEDIES

     25   

Section 5.01.

  

Remedies Upon Default

     25   

Section 5.02.

  

Application of Proceeds

     26   

Section 5.03.

  

Securities Act, Etc

     27   

ARTICLE 6 RESERVED

     28   

ARTICLE 7 MISCELLANEOUS

     28   

Section 7.01.

  

Notices

     28   

Section 7.02.

  

Security Interest Absolute

     28   

Section 7.03.

  

Limitation by Law

     29   

 

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Section 7.04.

  

Binding Effect; Several Agreement

     29   

Section 7.05.

  

Successors and Assigns

     29   

Section 7.06.

  

Collateral Agent’s Fees and Expenses; Indemnification

     29   

Section 7.07.

  

Collateral Agent Appointed Attorney-in-Fact

     30   

Section 7.08.

  

GOVERNING LAW

     31   

Section 7.09.

  

Waivers; Amendment

     31   

Section 7.10.

  

WAIVER OF JURY TRIAL

     32   

Section 7.11.

  

Severability

     32   

Section 7.12.

  

Counterparts

     32   

Section 7.13.

  

Headings

     32   

Section 7.14.

  

Jurisdiction; Consent to Service Of Process

     32   

Section 7.15.

  

Termination or Release

     33   

Section 7.16.

  

Additional Subsidiaries

     34   

Section 7.17.

  

Right of Set-off

     34   

Section 7.18.

  

Intercreditor Agreements.

     34   

Section 7.19.

  

Other Senior Documents.

     34   

Section 7.20.

  

Other Pari Passu Obligations.

     35   

 

Schedules Schedule I    Subsidiary Parties Schedule II    Debt Securities
Schedule III    Intellectual Property Schedule IV    Filing Jurisdictions
Schedule V    Commercial Tort Claims Schedule VI    Matters Relating to Accounts
and Inventory Exhibits Exhibit I    Form of Supplement to the Collateral
Agreement Exhibit II    Form of Other Pari Passu Obligations Secured Party
Joinder Agreement

 

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COLLATERAL AGREEMENT dated as of May 11, 2012 (this “Agreement”), among VERSO
PAPER HOLDINGS LLC, a Delaware limited liability company (the “Company”), VERSO
PAPER INC. (“Finance Co” and, together with the Company, the “Issuers”), each
Subsidiary of the Company identified on Schedule I or otherwise identified
herein as a party (each, a “Subsidiary Party”), and Wilmington Trust, National
Association, as collateral agent (in such capacity, together with any successor
collateral agent, the “Collateral Agent”) for the Secured Parties (as defined
below).

WHEREAS, pursuant to the terms, conditions and provisions of the Indenture,
dated as of May 11, 2012 (as amended, restated, amended and restated,
supplemented, waived or otherwise modified from time to time, the “Indenture”),
among the Issuers, the Subsidiary Parties, and Wilmington Trust, National
Association, as trustee (the “Trustee), the Issuers are issuing $271,573,000
aggregate principal amount of 11.75% Senior Secured Notes due 2019 (the
“Notes”), which will be guaranteed on a senior secured basis by each of the
Subsidiary Parties.

WHEREAS, pursuant to (i) the Credit Agreement dated as of May 4, 2012 (as
amended, restated, supplemented or otherwise modified from time to time, the
“ABL Credit Agreement”), among Verso Paper Finance Holdings LLC, a Delaware
limited liability company (“Holdings”), the Company, as borrower, certain
lenders, Citibank, N.A., as administrative agent (the “ABL Administrative
Agent”), (ii) the Credit Agreement dated as of May 4, 2012 (as amended,
restated, supplemented or otherwise modified from time to time, the “Cash Flow
Credit Agreement”), among Holdings, the Company, as borrower, certain lenders,
Credit Suisse AG, Cayman Islands Branch, as administrative agent (the “Cash Flow
Administrative Agent”), and (iii) the Indenture dated as of March 21, 2012 (as
amended, restated, supplemented or otherwise modified from time to time, the
“First Lien Notes Indenture”), among the Issuers, the Guarantors named therein,
and Wilmington Trust, National Association, as Trustee, the Pledgors (as defined
below) have granted to the Senior Lenders (as defined in the Secured Notes
Intercreditor Agreement) a first-priority lien and security interest in the
Collateral.

WHEREAS, the Issuers, the Subsidiary Parties, the Collateral Agent and the
agents on behalf of the first-priority lien secured parties have entered into a
Secured Notes Intercreditor Agreement dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the “Secured
Notes Intercreditor Agreement”), pursuant to which the Liens upon and security
interest in the Collateral granted by this Agreement are and shall be
subordinated in all respects to the Liens upon and security interest in the
Collateral granted pursuant to, and subject to the terms and conditions of, the
Senior Lender Documents (as defined in the Secured Notes Intercreditor
Agreement).

WHEREAS, from time to time after the date hereof, the Company may, subject to
the terms and conditions of the Indenture, incur Other Pari Passu Obligations,
which when incurred would be equally and ratably secured with the Obligations.

WHEREAS, pursuant to Section 7.18 below, this Agreement shall be subject to the
terms and conditions of the Secured Notes Intercreditor Agreement in all
respects.

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WHEREAS, the Subsidiary Parties are affiliates of the Issuers, will derive
substantial benefits from the extension of credit to the Issuers pursuant to the
Indenture and are willing to execute and deliver this Agreement in order to
induce the Trustee to enter into the Indenture and to induce the Initial
Purchasers to purchase the Notes.

Accordingly, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Indenture. (a) Capitalized terms used in this Agreement and not
otherwise defined herein have the respective meanings assigned thereto in the
Indenture. All terms defined in the New York UCC (as defined herein) and not
defined in this Agreement have the meanings specified therein. The term
“instrument” shall have the meaning specified in Article 9 of the New York UCC.
If the First Lien Termination Date (as defined below) has occurred, a reference
in this Agreement to the Applicable Agent shall, unless the context requires
otherwise, be construed as a reference to the Collateral Agent and this
agreement shall be interpreted accordingly.

(b) The definitions set forth or referred to in Section 1.02 shall apply equally
to both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include,” “includes” and “including” shall be deemed to
be followed by the phrase “without limitation.” All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, any reference in this Agreement to any Note Document shall mean such
document as amended, restated, amended and restated, supplemented or otherwise
modified from time to time.

Section 1.02. Other Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:

“ABL Administrative Agent” has the meaning specified in the preamble, together
with its successors in such capacity.

“ABL Credit Agreement” has the meaning specified in the preamble.

“Account Debtor” means any person who is or who may become obligated to any
Pledgor under, with respect to or on account of an Account, Chattel Paper,
General Intangibles, Instruments or Investment Property.

“Applicable Agent” means the Intercreditor Agent (as defined in the Secured
Notes Intercreditor Agreement), provided that in the event the First Lien
Termination Date shall have occurred, the Applicable Agent shall be the
Collateral Agent.

“Article 9 Collateral” has the meaning assigned to such term in Section 4.01.

 

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“Authorized Representative” with respect to any Other Pari Passu Obligations
means the agent or trustee under the agreement pursuant to which such Other Pari
Passu Obligations are issued or incurred.

“Bucksport Co-Gen Assets” means all right, title and interest of Verso Bucksport
LLC in, to and under the Amended and Restated Co-Owners Ownership, Operating &
Mutual Sales Agreement by and between Champion International Corporation and
Bucksport Energy LLC, including without limitation any ownership interests as
tenants in common in the property rights established pursuant thereto.

“Cash Flow Administrative Agent” has the meaning specified in the preamble,
together with its successors in such capacity.

“Cash Flow Credit Agreement” has the meaning specified in the preamble.

“Closing Date” means the Issue Date as defined in the Indenture.

“Collateral” means Article 9 Collateral and Pledged Collateral.

“Company” has the meaning specified in the preamble.

“Control Agreement” means a deposit account control agreement, a securities
account control agreement or a commodity account control agreement, as
applicable, enabling the Collateral Agent to obtain “control” (within the
meaning of the New York UCC) of any such accounts, in form and substance
reasonably satisfactory to the Collateral Agent.

“Copyright License” means any written agreement, now or hereafter in effect,
granting any right to any Pledgor under any Copyright now or hereafter owned by
any third party, and all rights of any Pledgor under any such agreement
(including, without limitation, any such rights that such Pledgor has the right
to license).

“Copyrights” means all of the following now owned or hereafter acquired by any
Pledgor: (a) all copyright rights in any work subject to the copyright laws of
the United States or any other country, whether as author, assignee, transferee
or otherwise, (b) all registrations and applications for registration of any
such Copyright in the United States or any other country, including
registrations, supplemental registrations and pending applications for
registration in the United States Copyright Office and the right to obtain all
renewals thereof, including those listed on Schedule III, (c) all claims for,
and rights to sue for, past or future infringements of any of the foregoing and
(d) all income, royalties, damages and payments now or hereafter due and payable
with respect to any of the foregoing, including damages and payments for past or
future infringement thereof.

“Discharge of Senior Lender Claims” has the meaning assigned to such term in the
Secured Notes Intercreditor Agreement.

“Excluded Minority Interests” means any Equity Interests owned by Verso Paper
LLC in each of (a) Androscoggin Reservoir Company and (b) Gulf Island Pond

 

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Oxygenation Project, provided that such Equity Interests shall constitute
Excluded Minority Interests only for so long as they are subject to an
enforceable contractual obligation (including, for this purpose, rights of first
refusal) restricting the grant of a security interest therein.

“Federal Securities Laws” has the meaning assigned to such term in Section 5.03.

“Finance Co.” has the meaning specified in the preamble.

“First Lien Termination Date” means, subject to Section 5.7 of the Secured Notes
Intercreditor Agreement, the date on which the Discharge of Senior Lender Claims
occurs; provided that if, at any time after the First Lien Termination Date, the
Discharge of Senior Lender Claims is deemed not to have occurred pursuant to
Section 5.7 of the Intercreditor Agreement, the First Lien Termination Date
shall automatically be deemed not to have occurred for all purposes of this
Agreement (other than with respect to any actions taken prior to the date of
incurrence and designation of any Future First-Lien Indebtedness as a result of
the occurrence of such first Discharge of Senior Lender Claims).

“General Intangibles” means all “General Intangibles” as defined in the New York
UCC, including all choses in action and causes of action and all other
intangible personal property of any Pledgor of every kind and nature (other than
Accounts) now owned or hereafter acquired by any Pledgor, including corporate or
other business records, indemnification claims, contract rights (including
rights under leases, whether entered into as lessor or lessee, Swap Agreements
and other agreements), Intellectual Property (but excluding “intent-to-use”
applications for trademark or service mark registrations filed pursuant to
Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment
to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of Lanham Act
has been filed, to extent that, and solely during the period for which, any
assignment of an “intent-to-use” application prior to such filing would violate
the Lanham Act), goodwill, registrations, franchises, tax refund claims and any
guarantee, claim, security interest or other security held by or granted to any
Pledgor to secure payment by an Account Debtor of any of the Accounts.

“Governmental Authority” shall mean any federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory or legislative
body.

“Holdings” has the meaning specified in the preamble.

“Indenture” has the meaning specified in the preamble.

“Indenture Documents” means (a) the Indenture, the Notes, the Security Documents
and this Agreement and (b) any other related documents or instruments executed
and delivered pursuant to the Indenture or any Security Document, in each case,
as such agreements may be amended, restated, supplemented or otherwise modified
from time to time.

 

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“Indenture Parties” means the Issuers and the Subsidiary Parties.

“Intellectual Property” means all intellectual property of every kind and nature
now owned or hereafter acquired by any Pledgor, including, inventions, designs,
Patents, Copyrights, Trademarks, Patent Licenses, Copyright Licenses, Trademark
Licenses, trade secrets, domain names, confidential or proprietary technical and
business information, know-how, show-how or other data or information and all
related documentation.

“Intellectual Property Security Agreement” means a security agreement in the
form hereof or a short form hereof, in each case, which form shall be reasonably
acceptable to the Collateral Agent.

“IP Agreements” means all material Copyright Licenses, Patent Licenses,
Trademark Licenses, and all other agreements, permits, consents, orders and
franchises relating to the license, development, use or disclosure of any
material Intellectual Property to which a Pledgor, now or hereafter, is a party
or a beneficiary, including, without limitation, the agreements set forth on
Schedule III hereto.

“Issuers” has the meaning specified in the preamble.

“Letter of Credit” means a letter of credit issued under any Credit Agreement.

“Material Adverse Effect” shall mean a material adverse effect on the business,
property, operations or condition of Holdings, the Company and their
Subsidiaries, taken as a whole, or the validity or enforceability of any of the
material Note Documents or the rights and remedies of the Secured Parties
thereunder.

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

“Note Documents” means this Agreement, the Indenture, the Notes and the Security
Documents.

“Note Obligations” has the meaning set forth in the Indenture.

“Obligations” means (a) the Note Obligations and (b) if any Other Pari Passu
Obligations are incurred, (1) the due and punctual payment by the Company of
(i) the unpaid principal of and interest (including interest accruing during the
pendency interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) owing to any holder of Other
Pari Passu Obligations under any Other Pari Passu Obligations Documents, when
and as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (ii) all other monetary obligations of the Company
to any holder of Other Pari Passu Obligations under the Other Pari Passu
Obligations Documents, including obligations to pay fees, expense reimbursement
obligations and indemnification obligations, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar

 

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proceeding, regardless of whether allowed or allowable in such proceeding),
(2) the due and punctual performance of all other obligations of the Company
under or pursuant to the Other Pari Passu Obligations Documents and (3) the due
and punctual payment and performance of all the obligations of each other
Pledgor under or pursuant to this Agreement and the Other Pari Passu Obligations
Documents.

“Other Pari Passu Obligations” means other Indebtedness of the Company and its
Restricted Subsidiaries that is equally and ratably secured with the Securities
as permitted by the Indenture and any Other Pari Passu Obligations Documents in
effect at the time such Indebtedness is incurred and which is designated by the
Company as an Other Pari Passu Obligation in accordance with Section 7.20
hereof.

“Other Pari Passu Obligations Documents” means any document or instrument
executed and delivered with respect to any Other Pari Passu Obligations,
including the Security Documents and this Agreement, in each case, as such
agreements, documents or instruments may be amended, restated, supplemented or
otherwise modified from time to time.

“Other Pari Passu Obligations Secured Party Joinder Agreement” means a Joinder
Agreement, substantially in the form of Exhibit II hereto, executed by the
Authorized Representative of any holders of Other Pari Passu Obligations
pursuant to Section 7.20.

“Patent License” means any written agreement, now or hereafter in effect,
granting to any Pledgor any right to make, use or sell any invention covered by
a Patent, now or hereafter owned by any third party (including, without
limitation, any such rights that such Pledgor has the right to license).

“Patents” means all of the following now owned or hereafter acquired by any
Pledgor: (a) all letters patent of the United States or the equivalent thereof
in any other country or jurisdiction, including those listed on Schedule III,
and all applications for letters patent of the United States or the equivalent
thereof in any other country or jurisdiction, including those listed on Schedule
III, (b) all provisionals, reissues, extensions, continuations, divisions,
continuations-in-part, reexaminations or revisions thereof, and the inventions
disclosed or claimed therein, including the right to make, use, import and/or
sell the inventions disclosed or claimed therein, (c) all claims for, and rights
to sue for, past or future infringements of any of the foregoing and (d) all
income, royalties, damages and payments now or hereafter due and payable with
respect to any of the foregoing, including damages and payments for past or
future infringement thereof.

“Permitted Liens” means Liens that are not prohibited by the Indenture or any
Other Pari Passu Obligations Document.

“person” shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company or
government, individual or family trusts, or any agency or political subdivision
thereof.

“Pledged Collateral” has the meaning assigned to such term in Section 3.01.

 

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“Pledged Debt Securities” has the meaning assigned to such term in Section 3.01.

“Pledged Securities” means any promissory notes, stock certificates or other
certificated securities now or hereinafter included in the Pledged Collateral,
including all certificates, instruments or other documents representing or
evidencing any Pledged Collateral.

“Pledgor” shall mean each Issuer and each Subsidiary Party.

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

“Second-Priority Lien Documents” means the Note Documents and the Other Pari
Passu Obligations Documents.

“Secured Notes Intercreditor Agreement” has the meaning assigned to such term in
the recitals of this Agreement.

“Secured Parties” means (a) the Collateral Agent, (b) the holders of the
Securities and any other Note Obligations, (c) the beneficiaries of each
indemnification obligation undertaken by any Indenture Party under any Indenture
Document, (d) the Trustee, (e) the holders of any Other Pari Passu Obligations
and their Authorized Representative, provided that such Authorized
Representative executes an Other Pari Passu Obligations Secured Party Joinder
Agreement, and (f) the successors and permitted assigns of each of the
foregoing.

“Security Documents” means this Agreement, any agreement pursuant to which
assets are added to the Collateral and any other instruments or documents
entered into and delivered in connection with any of the foregoing, in each
case, in favor of the Collateral Agent as security for the Obligations, as such
agreements, instruments or documents may from time to time be amended.

“Security Interest” has the meaning assigned to such term in Section 4.01.

“Senior Collateral Documents” has the meaning assigned to such term in the
Secured Notes Intercreditor Agreement.

“Senior Lender Claims” has the meaning assigned to such term in the Secured
Notes Intercreditor Agreement.

“Senior Lender Documents” has the meaning assigned to such term in the Secured
Notes Intercreditor Agreement.

“Senior Lenders” has the meaning assigned to such term in the Secured Notes
Intercreditor Agreement.

 

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“Subsidiary Party” has the meaning assigned to such term in the preliminary
statement of this Agreement, and any Subsidiary that becomes a party hereto
pursuant to Section 7.16.

“Swap Agreement” shall mean any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided, that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
Holdings, the Company or any of the Subsidiaries shall be a Swap Agreement.

“Trademark License” means any written agreement, now or hereafter in effect,
granting to any Pledgor any right to use any Trademark now or hereafter owned by
any third party (including, without limitation, any such rights that such
Pledgor has the right to license).

“Trademarks” means all of the following now owned or hereafter acquired by any
Pledgor: (a) all trademarks, service marks, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations thereof
(if any), and all registration and recording applications filed in connection
therewith, including registrations and registration applications in the United
States Patent and Trademark Office or any similar offices in any State of the
United States or any other country or any political subdivision thereof (except
for “intent-to-use” applications for trademark or service mark registrations
filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and
until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and
1(d) of Lanham Act has been filed, to extent that, and solely during the period
for which, any assignment of an “intent-to-use” application prior to such filing
would violate the Lanham Act), and all renewals thereof, including those listed
on Schedule III, (b) all goodwill associated therewith or symbolized thereby,
(c) all claims for, and rights to sue for, past or future infringements of any
of the foregoing and (d) all income, royalties, damages and payments now or
hereafter due and payable with respect to any of the foregoing, including
damages and payments for past or future infringement thereof.

“Trustee” has the meaning specified in the preamble.

 

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ARTICLE 2

RESERVED

ARTICLE 3

PLEDGE OF SECURITIES

Section 3.01. Pledge. As security for the payment or performance, as the case
may be, in full of its Obligations, each Pledgor hereby assigns and pledges to
the Collateral Agent, its successors and permitted assigns, for the ratable
benefit of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and permitted assigns, for the ratable benefit of the Secured
Parties, a security interest in all of such Pledgor’s right, title and interest
in, to and under (a)(i) the debt obligations listed opposite the name of such
Pledgor on Schedule II, (ii) any debt securities in the future issued to such
Pledgor having, in the case of each instance of debt securities, an aggregate
principal amount in excess of $5.0 million, and (iii) the certificates,
promissory notes and any other instruments, if any, evidencing such debt
securities (the “Pledged Debt Securities”); (b) subject to Section 3.05 hereof,
all payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of, in exchange for or upon the conversion of, and all other proceeds
received in respect of, the securities referred to in clause (a) above;
(c) subject to Section 3.05 hereof, all rights and privileges of such Pledgor
with respect to the securities and other property referred to in clauses (a) and
(b) above; and (d) all proceeds of any of the foregoing (the items referred to
in clauses (a) through (d) above being collectively referred to as the “Pledged
Collateral”).

TO HAVE AND TO HOLD, to the extent consistent with the terms of the Secured
Notes Intercreditor Agreement, the Pledged Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or incidental
thereto, unto the Collateral Agent, its successors and permitted assigns, for
the ratable benefit of the Secured Parties, forever; subject, however, to the
terms, covenants and conditions hereinafter set forth.

Section 3.02. Delivery of the Pledged Collateral. (a) Each Pledgor agrees
promptly to deliver or cause to be delivered to the Applicable Agent, for the
ratable benefit of the Secured Parties, any and all Pledged Securities to the
extent such Pledged Securities, in the case of promissory notes or other
instruments evidencing Indebtedness, are required to be delivered pursuant to
paragraph (b) of this Section 3.02.

(b) Each Pledgor will cause any Indebtedness for borrowed money having an
aggregate principal amount in excess of $5.0 million (other than
(i) intercompany current liabilities incurred in the ordinary course of business
in connection with the cash management operations and intercompany sales of
Holdings, the Company and its Subsidiaries or (ii) to the extent that a pledge
of such promissory note or instrument would violate applicable law) owed to such
Pledgor by any person to be evidenced by a duly executed promissory note that is
pledged and delivered to the Applicable Agent, for the ratable benefit of the
Secured Parties, pursuant to the terms hereof. To the extent any such promissory
note is a demand note, each Pledgor party

 

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thereto agrees, if requested by the Collateral Agent, to immediately demand
payment thereunder upon an Event of Default specified under Sections 6.01(a),
(b), (e), (f), or (g) of the Indenture, unless such demand would not be
commercially reasonable or would otherwise expose Pledgor to liability to the
maker.

(c) Upon delivery to the Applicable Agent, (i) any Pledged Securities required
to be delivered pursuant to the foregoing paragraphs (a) and (b) of this
Section 3.02 shall be accompanied by note powers duly executed in blank or other
instruments of transfer reasonably satisfactory to the Applicable Agent and by
such other instruments and documents as the Applicable Agent may reasonably
request and (ii) all other property composing part of the Pledged Collateral
delivered pursuant to the terms of this Agreement shall be accompanied to the
extent necessary to perfect the security interest in or allow realization on the
Pledged Collateral by proper instruments of assignment duly executed by the
applicable Pledgor and such other instruments or documents (including issuer
acknowledgments in respect of uncertificated securities) as the Applicable Agent
may reasonably request. Each delivery of Pledged Securities shall be accompanied
by a schedule describing the securities, which schedule shall be attached hereto
as Schedule II (or a supplement to Schedule II, as applicable) and made a part
hereof; provided that failure to attach any such schedule hereto shall not
affect the validity of such pledge of such Pledged Securities. Each schedule so
delivered shall supplement any prior schedules so delivered.

Section 3.03. Representations, Warranties and Covenants. The Pledgors, jointly
and severally, represent, warrant and covenant to and with the Collateral Agent,
for the ratable benefit of the Secured Parties, that:

(a) Schedule II includes all debt securities and promissory notes or instruments
evidencing Indebtedness required to be delivered pursuant to Section 3.02(b);

(b) the Pledged Debt Securities (solely with respect to Pledged Debt Securities
issued by a person that is not a Subsidiary of Holdings or an Affiliate of any
such Subsidiary, to the best of each Pledgor’s knowledge) have been duly and
validly authorized and issued by the issuers thereof and (solely with respect to
Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings
or an Affiliate of any such subsidiary, to the best of each Pledgor’s knowledge)
are legal, valid and binding obligations of the issuers thereof, 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 at
law or in equity) and an implied covenant of good faith and fair dealing;

(c) except for the security interests granted hereunder, each Pledgor (i) is
and, subject to any transfers made in compliance with the Note Documents, will
continue to be the direct owner, beneficially and of record, of the Pledged
Securities indicated on Schedule II as owned by such Pledgor, (ii) holds the
same free and clear of all Liens, other than Permitted Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to exist
any security interest in or other Lien on, the Pledged Collateral, other than
pursuant to a transaction permitted by the Note Documents

 

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and other than Permitted Liens and (iv) subject to the rights of such Pledgor
under the Note Documents to dispose of Pledged Collateral, will use commercially
reasonable efforts to defend its title or interest hereto or therein against any
and all Liens (other than Permitted Liens), however arising, of all persons;

(d) [Intentionally Omitted];

(e) each Pledgor has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;

(f) no action, consent or approval of, registration or filing with or any other
action by any Governmental Authority is or will be required in connection with
the perfection or maintenance of the Liens created hereunder or the exercise by
the Collateral Agent or any Secured Party of its rights hereunder or the
remedies in respect of the Collateral, except for (a) the filing of Uniform
Commercial Code financing statements, (b) filings with the United States Patent
and Trademark Office and the United States Copyright Office and comparable
offices in foreign jurisdictions and equivalent filings in foreign
jurisdictions, (c) such as have been made or obtained and are in full force and
effect and (d) such actions, consents and approvals the failure of which to be
obtained or made would not reasonably be expected to have a Material Adverse
Effect;

(g) by virtue of the execution and delivery by the Pledgors of this Agreement
any pledge agreement governed by foreign law, when any Pledged Securities
(including foreign stock covered by any pledge agreement governed by foreign
law) are delivered to the Collateral Agent, for the ratable benefit of the
Secured Parties, in accordance with this Agreement and a financing statement
covering such Pledged Securities is filed in the appropriate filing office, the
Collateral Agent will obtain, for the ratable benefit of the Secured Parties, a
legal, valid and perfected lien upon and security interest in such Pledged
Securities under the New York UCC, subject only to Liens permitted under the
Note Documents, as security for the payment and performance of the Obligations;
and

(h) each Pledgor that is an issuer of the Pledged Collateral confirms that it
has received notice of the security interest granted hereunder.

Section 3.04. Registration in Nominee Name; Denominations. The Applicable Agent,
on behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion) to hold the Pledged Securities in the name of the applicable
Pledgor, endorsed or assigned in blank or in favor of the Applicable Agent or,
if an Event of Default shall have occurred and be continuing, in its own name as
pledgee or the name of its nominee (as pledgee or as sub-agent). Each Pledgor
will promptly give to the Applicable Agent copies of any notices or other
communications received by it with respect to Pledged Securities registered in
the name of such Pledgor. If an Event of Default shall have occurred and be
continuing, the Applicable Agent shall have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement. Each
Pledgor shall use its commercially reasonable efforts to cause any Indenture
Party that is not a party to this

 

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Agreement to comply with a request by the Applicable Agent, pursuant to this
Section 3.04, to exchange certificates representing Pledged Securities of such
Indenture Party for certificates of smaller or larger denominations.

Section 3.05. Voting Rights; Dividends and Interest, Etc. (a) Unless and until
an Event of Default shall have occurred and be continuing and the Collateral
Agent shall have given notice to the relevant Pledgors of the Collateral Agent’s
intention to exercise its rights hereunder:

(i) Each Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Collateral or any
part thereof for any purpose consistent with the terms of this Agreement and the
Note Documents; provided, that, except as permitted under the Note Documents,
such rights and powers shall not be exercised in any manner that could
materially and adversely affect the rights inuring to a holder of any Pledged
Collateral, the rights and remedies of any of the Collateral Agent or the other
Secured Parties under any Note Document or the ability of the Secured Parties to
exercise the same.

(ii) The Collateral Agent shall promptly execute and deliver to each Pledgor, or
cause to be executed and delivered to such Pledgor, all such proxies, powers of
attorney and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting and/or consensual rights
and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Pledgor shall be entitled to receive and retain any and all
dividends, interest, principal and other distributions paid on or distributed in
respect of the Pledged Collateral to the extent and only to the extent that such
dividends, interest, principal and other distributions are permitted by, and
otherwise paid or distributed in accordance with, the terms and conditions of
the Note Documents and applicable laws; provided, that (A) any noncash
dividends, interest, principal or other distributions, payments or other
consideration in respect thereof, including any rights to receive the same to
the extent not so distributed or paid, that would constitute Pledged Securities,
whether resulting from a subdivision, combination or reclassification of the
outstanding Equity Interests of the issuer of any Pledged Securities, received
in exchange for Pledged Securities or any part thereof, or in redemption
thereof, as a result of any merger, consolidation, acquisition or other exchange
of assets to which such issuer may be a party or otherwise or (B) any non-cash
dividends and other distributions paid or payable in respect of any Pledged
Securities that would constitute Pledged Securities in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid in surplus, shall be and become part of the
Pledged Collateral, and, if received by any Pledgor, shall not be commingled by
such Pledgor with any of its other funds or property but shall be held separate
and apart therefrom, shall be held in trust for the benefit of the Applicable
Agent and the Collateral Agent, for the ratable benefit of the

 

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Secured Parties, and shall be forthwith delivered to the Applicable Agent, for
the ratable benefit of the Secured Parties, in the same form as so received
(endorsed in a manner reasonably satisfactory to the Applicable Agent).

(b) In accordance with, and to the extent consistent with, the terms of the
Secured Notes Intercreditor Agreement, upon the occurrence and during the
continuance of an Event of Default and after notice by the Collateral Agent to
the Company of the Collateral Agent’s intention to exercise its rights
hereunder, all rights of any Pledgor to dividends, interest, principal or other
distributions that such Pledgor is authorized to receive pursuant to paragraph
(a)(iii) of this Section 3.05 shall cease, and all such rights shall thereupon
become vested, for the ratable benefit of the Secured Parties, in the Applicable
Agent which shall have the sole and exclusive right and authority to receive and
retain such dividends, interest, principal or other distributions; provided,
however, that even after the occurrence of an Event of Default, any Pledgor may
continue to exercise dividend and distribution rights solely to the extent
permitted under subclause (xii) and subclause (xiii) of Section 4.04(b) of the
Indenture, and not otherwise prohibited by any Note Documents. All dividends,
interest, principal or other distributions received by any Pledgor contrary to
the provisions of this Section 3.05 shall not be commingled by such Pledgor with
any of its other funds or property but shall be held separate and apart
therefrom, shall be held in trust for the benefit of the Applicable Agent, for
the ratable benefit of the Secured Parties, and shall be forthwith delivered to
the Applicable Agent, for the ratable benefit of the Secured Parties, in the
same form as so received (endorsed in a manner reasonably satisfactory to the
Applicable Agent). Any and all money and other property paid over to or received
by the Applicable Agent pursuant to the provisions of this paragraph (b) shall
be retained by the Applicable Agent in an account to be established by the
Applicable Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 5.02 hereof. After all
Events of Default have been cured or waived and the Company has delivered to the
Applicable Agent a certificate to that effect, the Applicable Agent shall
promptly release to each Pledgor (without interest) all dividends, interest,
principal or other distributions that such Pledgor would otherwise be permitted
to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.05 and
that remain in such account.

(c) In accordance with, and to the extent consistent with, the terms of the
Secured Notes Intercreditor Agreement, upon the occurrence and during the
continuance of an Event of Default and after notice by the Collateral Agent to
the Company of the Collateral Agent’s intention to exercise its rights
hereunder, all rights of any Pledgor to exercise the voting and/or consensual
rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of
this Section 3.05, and the obligations of the Collateral Agent under paragraph
(a)(ii) of this Section 3.05, shall cease, and all such rights shall thereupon
become vested in the Collateral Agent (subject to the Secured Notes
Intercreditor Agreement), for the ratable benefit of the Secured Parties, which
shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers; provided that, to the extent consistent with,
the terms of the Secured Notes Intercreditor Agreement and the Indenture, unless
the Collateral Agent shall have received written objections from Holders of at
least 25% in principal amount of the Notes, the Collateral Agent shall have the
right from time to time following and during

 

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the continuance of an Event of Default to permit the Pledgors to exercise such
rights. After all Events of Default have been cured or waived and the Company
has delivered to the Collateral Agent a certificate to that effect, each Pledgor
shall have the right to exercise the voting and/or consensual rights and powers
that such Pledgor would otherwise be entitled to exercise pursuant to the terms
of paragraph (a)(i) above.

ARTICLE 4

SECURITY INTERESTS IN OTHER PERSONAL PROPERTY

Section 4.01. Security Interest. (a) As security for the payment or performance
when due (whether at the stated maturity, by acceleration or otherwise), as the
case may be, in full of its Obligations, each Pledgor hereby assigns and pledges
to the Collateral Agent, its successors and permitted assigns, for the ratable
benefit of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and permitted assigns, for the ratable benefit of the Secured
Parties, a security interest (the “Security Interest”) in all right, title and
interest in or to any and all of the following assets and properties now owned
or at any time hereafter acquired by such Pledgor or in which such Pledgor now
has or at any time in the future may acquire any right, title or interest
(collectively, the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

(iii) all cash and Deposit Accounts;

(iv) all Documents;

(v) all Equipment;

(vi) all General Intangibles;

(vii) all Instruments;

(viii) all Inventory;

(ix) all Investment Property;

(x) all Letter of Credit Rights;

(xi) all Commercial Tort Claims;

(xii) (1) Securities Accounts, (2) Financial Assets credited to Securities
Accounts or Deposit Accounts from time to time and all Security Entitlements in
respect thereof, (3) all cash held any Securities Account or Deposit Account and
(4) all other money in the possession of the Collateral Agent;

(xiii) all timber to be cut;

 

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(xiv) all other personal property not otherwise described above (except for
property specifically excluded from any defined term used in any of the
foregoing clauses);

(xv) all books and records pertaining to the Article 9 Collateral; and

(xvi) to the extent not otherwise included, all proceeds, Supporting Obligations
and 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.

Notwithstanding anything to the contrary in this Agreement, the Indenture or any
Security Documents, this Agreement shall not constitute a grant of a security
interest in (and the following shall not constitute Collateral for the
Obligations) (A) any vehicle covered by a certificate of title or ownership,
whether now owned or hereafter acquired, (B) the capital stock or other
securities of the Company or any of its Affiliates, (C) (i) the Bucksport Co-Gen
Assets, (ii) the Excluded Minority Interests, (iii) any Equity Interests
acquired after the Closing Date in a person that is not a Subsidiary if, and to
the extent that, and for so long as, a grant of a security interest in such
Equity Interests would violate applicable law or an enforceable contractual
obligation binding on or relating to such Equity Interests (if such obligation
existed at the time of acquisition of such Equity Interests and was not created
or made binding on such Equity Interests in contemplation of or in connection
with the acquisition of such Equity Interests), and (iv) any assets acquired
after the Closing Date to the extent that, and for so long as, granting a
security interest in such assets would violate an enforceable contractual
obligation binding on such assets that existed at the time of acquisition
thereof and was not created or made binding on such assets in contemplation or
in connection with the acquisition of such assets (except in the case of assets
acquired with Indebtedness of the type permitted pursuant to Section 4.03(b)(iv)
of the Indenture or any equivalent exception under any other agreement governing
indebtedness that is secured by a Permitted Lien), (D) any property excluded
from the definition of Pledged Collateral by virtue of the proviso to
Section 3.01 hereof, (E) any Letter of Credit Rights to the extent any Pledgor
is required by applicable law to apply the proceeds of a drawing of such Letter
of Credit for a specified purpose, (F) any Pledgor’s right, title or interest in
any license, contract or agreement to which such Pledgor is a party or any of
its right, title or interest thereunder to the extent, but only to the extent,
that such a grant would, under the terms of such license, contract or agreement,
result in a breach of the terms of, or constitute a default under, or result in
the abandonment, invalidation or unenforceability of, any license, contract or
agreement to which such Pledgor is a party (other than to the extent that any
such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408
or 9-409 of the New York UCC or any other applicable law (including, without
limitation, Title 11 of the United States Code) or principles of equity);
provided, that immediately upon the ineffectiveness, lapse or termination of any
such provision, the Collateral shall include, and such Pledgor shall be deemed
to have granted a security interest in, all such rights and interests as if such
provision had never been in effect, or (G) any asset or property that is not at
any time subject to a Lien securing the Senior Lender Claims at such time.

 

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(b) Each Pledgor hereby irrevocably authorizes the Collateral Agent at any time
and from time to time to file in any relevant jurisdiction any financing
statements (including fixture filings and filings with respect to timber to be
cut) with respect to the Article 9 Collateral or any part thereof and amendments
thereto that contain the information required by Article 9 of the Uniform
Commercial Code of each applicable jurisdiction for the filing of any financing
statement or amendment, including (i) whether such Pledgor is an organization,
the type of organization and any organizational identification number issued to
such Pledgor, (ii) in the case of a financing statement filed as a fixture
filing, a sufficient description of the real property to which such Article 9
Collateral relates and (iii) a description of collateral that describes such
property in any other manner as the Collateral Agent may reasonably determine is
necessary or advisable to ensure the perfection of the security interest in the
Article 9 Collateral granted under this Agreement, including describing such
property as “all assets” or “all property.” Each Pledgor agrees to provide such
information to the Collateral Agent promptly upon request, including providing
within 30 days of any reasonable request therefor legal descriptions of real
property (other than real property subject to a Mortgage) on which timber to be
cut of such Pledgor is located.

The Collateral Agent is further authorized to file with the United States Patent
and Trademark Office or United States Copyright Office (or any successor office)
such documents as may be reasonably necessary or advisable for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Pledgor, without the signature of any Pledgor, and
naming any Pledgor or the Pledgors as debtors and the Collateral Agent as
secured party. Notwithstanding anything to the contrary herein, no Pledgor shall
be required to take any action under the laws of any jurisdiction other than the
United States (or any political subdivision thereof) and its territories and
possessions for the purpose of perfecting the Security Interest in any Article 9
Collateral of such Pledgor constituting Patents, Trademarks or Copyrights.

(c) The Security Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way alter or modify,
any obligation or liability of any Pledgor with respect to or arising out of the
Article 9 Collateral.

(d) Notwithstanding anything to the contrary in the Note Documents, none of the
Pledgors shall be required to enter into any Control Agreement with respect to
any cash or Deposit Account or (except as provided in Section 4.04(b)) any
Securities Account.

Section 4.02. Representations and Warranties. The Pledgors jointly and severally
represent and warrant to the Collateral Agent and the Secured Parties that:

(a) Each Pledgor has good and valid rights in and title to the Article 9
Collateral with respect to which it has purported to grant a Security Interest
hereunder and has full power and authority to grant to the Collateral Agent the
Security Interest in such Article 9 Collateral pursuant hereto and to execute,
deliver and perform its obligations in

 

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accordance with the terms of this Agreement, without the consent or approval of
any other person other than any consent or approval that has been obtained and
is in full force and effect or has otherwise been disclosed herein or in the
Indenture.

(b) The information set forth in the Schedules attached hereto is correct and
complete, in all material respects, as of the Closing Date. The Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations containing a
description of the Article 9 Collateral that have been prepared by the
Collateral Agent for filing in each governmental, municipal or other office
specified in Schedule IV (or specified by notice from the Company to the
Collateral Agent after the Closing Date in the case of filings, recordings or
registrations required by Section 4.16 of the Indenture or corresponding
provisions of any other Note Documents) and in each relevant governmental,
municipal or other office pertaining to real property for which a legal
description is provided pursuant to Section 4.01(b) constitute all the filings,
recordings and registrations (except to the extent that filings are required to
be made in the United States Patent and Trademark Office and the United States
Copyright Office, or any similar office in any other jurisdiction, in order to
perfect the Security Interest in Article 9 Collateral consisting of United
States Patents, United States registered Trademarks and United States registered
Copyrights) that are necessary to publish notice of and protect the validity of
and to establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Article 9 Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or
amendments. Each Pledgor represents and warrants that a fully executed
Intellectual Property Security Agreement containing a description of all
Article 9 Collateral consisting of Intellectual Property with respect to United
States Patents (and Patents for which United States applications are pending),
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
(and Copyrights for which United States registration applications are pending)
has been delivered to the Collateral Agent for recording with the United States
Patent and Trademark Office and the United States Copyright Office pursuant to
35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations
thereunder, as applicable, and reasonably requested by the Collateral Agent, to
protect the validity of and to establish a legal, valid and perfected security
interest in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, in respect of all Article 9 Collateral consisting of such
Intellectual Property in which a security interest may be perfected by recording
with the United States Patent and Trademark Office and the United States
Copyright Office, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary (other than the Uniform
Commercial Code financing statements referred to above, and other than such
actions as are necessary to perfect the Security Interest with respect to any
Article 9 Collateral consisting of United States Patents, Trademarks and
Copyrights (or registration or application for registration thereof) acquired or
developed after the date hereof).

 

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(c) The Security Interest constitutes (i) a legal and valid security interest in
all the Article 9 Collateral securing the payment and performance of the
Obligations, (ii) subject to the filings described in Section 4.02(b), a
perfected security interest in all Article 9 Collateral in which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political
subdivision thereof) and its territories and possessions pursuant to the Uniform
Commercial Code or other applicable law in such jurisdictions and (iii) a
security interest that shall be perfected in all Article 9 Collateral in which a
security interest may be perfected upon the receipt and recording of the
Intellectual Property Security Agreement with the United States Patent and
Trademark Office and the United States Copyright Office, as applicable. The
Security Interest is and shall be a second priority Security Interest, prior to
any other Lien on any of the Article 9 Collateral, other than Liens in respect
of Senior Lender Claims, subject to Permitted Liens.

(d) The Article 9 Collateral is owned by the Pledgors free and clear of any
Lien, other than Permitted Liens. None of the Pledgors has filed or consented to
the filing of (i) any financing statement or analogous document under the
Uniform Commercial Code or any other applicable laws covering any Article 9
Collateral, (ii) any assignment in which any Pledgor assigns any Article 9
Collateral or any security agreement or similar instrument covering any
Article 9 Collateral with the United States Patent and Trademark Office or the
United States Copyright Office or (iii) any assignment in which any Pledgor
assigns any Article 9 Collateral or any security agreement or similar instrument
covering any Article 9 Collateral with any foreign governmental, municipal or
other office, which financing statement or analogous document, assignment,
security agreement or similar instrument is still in effect, except, in each
case, for Permitted Liens.

(e) None of the Pledgors holds any Commercial Tort Claim individually in excess
of $5.0 million as of the Closing Date except as indicated on Schedule V.

(f) Except as set forth in Schedule VI, as of the Closing Date, all Accounts
have been originated by the Pledgors and all Inventory has been produced or
acquired by the Pledgors in the ordinary course of business.

(g) As to itself and its Article 9 Collateral consisting of Intellectual
Property (the “Intellectual Property Collateral”), to the best of each Pledgor’s
knowledge:

(i) The Intellectual Property Collateral set forth on Schedule III includes all
of the material Patents, Trademarks, Copyrights and IP Agreements owned by such
Pledgor as of the date hereof.

(ii) The Intellectual Property Collateral is subsisting and, to the best of such
Pledgor’s knowledge, has not been adjudged invalid or unenforceable in whole or
part (except for office actions issued in the ordinary course by the United
States Patent and Trademark Office or any similar office in any foreign

 

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jurisdiction), and to the best of such Pledgor’s knowledge, is valid and
enforceable, except as would not reasonably be expected to have a Material
Adverse Effect. Such Pledgor is not aware of any uses of any item of
Intellectual Property Collateral that would be expected to lead to such item
becoming invalid or unenforceable, except as would not reasonably be expected to
have a Material Adverse Effect.

(iii) Such Pledgor has made or performed all commercially reasonable acts,
including without limitation filings, recordings and payment of all required
fees and taxes, required to maintain and protect its interest in each and every
item of Intellectual Property Collateral in full force and effect in the United
States and such Pledgor has used proper statutory notice in connection with its
use of each Patent, Trademark and Copyright in the Intellectual Property
Collateral, in each case, except to the extent that the failure to do so would
not reasonably be expected to have a Material Adverse Effect.

(iv) With respect to each IP Agreement, the absence, termination or violation of
which would reasonably be expected to have a Material Adverse Effect: (A) such
Pledgor has not received any notice of termination or cancellation under such IP
Agreement; (B) such Pledgor has not received any notice of a breach or default
under such IP Agreement, which breach or default has not been cured or waived;
and (C) to the knowledge of such Pledgor, neither such Pledgor nor any other
party to such IP Agreement is in breach or default thereof in any material
respect, and no event has occurred that, with notice or lapse of time or both,
would constitute such a breach or default or permit termination, modification or
acceleration under such IP Agreement.

(v) Except as would not reasonably be expected to have a Material Adverse
Effect, no Pledgor or Intellectual Property Collateral is subject to any
outstanding consent, settlement, decree, order, injunction, judgment or ruling
restricting the use of any Intellectual Property Collateral or that would impair
the validity or enforceability of such Intellectual Property Collateral.

Section 4.03. Covenants. (a) Each Pledgor agrees to provide at least 10 days’
prior written notice to Collateral Agent of any change (i) in its corporate or
organization name, (ii) in its identity or type of organization or corporate
structure, (iii) in its Federal Taxpayer Identification Number or organizational
identification number or (iv) in its “location” (determined as provided in the
Uniform Commercial Code Section 9-307). Each Pledgor agrees promptly to provide
the Collateral Agent with certified organizational documents reflecting any of
the changes described in the immediately preceding sentence. Each Pledgor agrees
not to effect or permit any change referred to in the first sentence of this
paragraph (a) unless all filings have been made, or will have been made within
any applicable statutory period, under the Uniform Commercial Code or otherwise
that are required in order for the Collateral Agent to continue at all times
following such change to have a valid, legal and perfected first priority
security interest in all the Article 9 Collateral, for the ratable benefit of
the Secured Parties. Each Pledgor agrees promptly to notify the Collateral Agent
if any material portion of the Article 9 Collateral owned or held by such
Pledgor is damaged or destroyed.

 

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(b) Subject to the rights of such Pledgor under the Note Documents to dispose of
Collateral, each Pledgor shall, at its own expense, use commercially reasonable
efforts to defend title to the Article 9 Collateral against all persons and to
defend the Security Interest of the Collateral Agent, for the ratable benefit of
the Secured Parties, in the Article 9 Collateral and the priority thereof
against any Lien that is not a Permitted Lien.

(c) Each Pledgor agrees, at its own expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents and take
all such actions that, in accordance with, and to the extent consistent with the
terms of the Secured Notes Intercreditor Agreement and the Indenture, the
Holders of at least 25% in principal amount of the Notes or the Collateral Agent
may from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement and the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
under or in connection with any of the Article 9 Collateral that is in excess of
$5.0 million shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be promptly pledged and delivered to
the Applicable Agent, for the ratable benefit of the Secured Parties, duly
endorsed in a manner reasonably satisfactory to the Applicable Agent.

Without limiting the generality of the foregoing, each Pledgor hereby authorizes
the Applicable Agent, with prompt notice thereof to the Pledgors, to supplement
this Agreement by supplementing Schedule III or adding additional schedules
hereto to specifically identify any asset or item that may constitute material
Copyrights, Patents, Trademarks, Copyright Licenses, Patent Licenses or
Trademark Licenses; provided that any Pledgor shall have the right, exercisable
within 30 days after the Company has been notified by the Applicable Agent of
the specific identification of such Article 9 Collateral, to advise the
Applicable Agent in writing of any inaccuracy of the representations and
warranties made by such Pledgor hereunder with respect to such Article 9
Collateral. Each Pledgor agrees that it will use its commercially reasonable
efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Article 9 Collateral within 30 days after the date it has been notified
by the Applicable Agent of the specific identification of such Article 9
Collateral.

(d) In accordance with, and to the extent consistent with, the terms of the
Secured Notes Intercreditor Agreement, after the occurrence of an Event of
Default and during the continuance thereof, the Collateral Agent shall have the
right to verify under reasonable procedures the validity, amount, quality,
quantity, value, condition and status of, or any other matter relating to, the
Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral
in the possession of any third person, by contacting

 

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Account Debtors or the third person possessing such Article 9 Collateral for the
purpose of making such a verification. The Collateral Agent shall have the right
to share any information it gains from such inspection or verification with any
Secured Party.

(e) In accordance with, and to the extent consistent with, the terms of the
Secured Notes Intercreditor Agreement , at its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Article 9 Collateral
and not a Permitted Lien, and may pay for the maintenance and preservation of
the Article 9 Collateral to the extent any Pledgor fails to do so as required by
the Note Documents or this Agreement, and each Pledgor jointly and severally
agrees to reimburse the Collateral Agent on demand for any reasonable payment
made or any reasonable expense incurred by the Collateral Agent pursuant to the
foregoing authorization; provided, however, that nothing in this
Section 4.03(e) shall be interpreted as excusing any Pledgor from the
performance of, or imposing any obligation on the Collateral Agent or any
Secured Party to cure or perform, any covenants or other promises of any Pledgor
with respect to taxes, assessments, charges, fees, Liens, security interests or
other encumbrances and maintenance as set forth herein or in the other Note
Documents.

(f) Each Pledgor (rather than the Collateral Agent or any Secured Party) shall
remain liable for the observance and performance of all the conditions and
obligations to be observed and performed by it under each contract, agreement or
instrument relating to the Article 9 Collateral and each Pledgor jointly and
severally agrees to indemnify and hold harmless the Collateral Agent and the
Secured Parties from and against any and all liability for such performance.

(g) None of the Pledgors shall make or permit to be made an assignment, pledge
or hypothecation of the Article 9 Collateral or shall grant any other Lien in
respect of the Article 9 Collateral, except as permitted by the Note Documents
and the other provisions hereof. None of the Pledgors shall make or permit to be
made any transfer of the Article 9 Collateral and each Pledgor shall remain at
all times in possession of the Article 9 Collateral owned by it, except as
permitted by the Note Documents and the other provisions hereof.

(h) None of the Pledgors will, without the Collateral Agent’s prior written
consent (which consent shall not be unreasonably withheld), grant any extension
of the time of payment of any Accounts included in the Article 9 Collateral,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof or allow
any credit or discount whatsoever thereon, other than extensions, credits,
discounts, compromises or settlements granted or made in the ordinary course of
business and consistent with prudent business practices or as otherwise
permitted under the Note Documents.

(i) Each Pledgor irrevocably makes, constitutes and appoints the Applicable
Agent (and all officers, employees or agents designated by the Applicable Agent)
as such Pledgor’s true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and adjusting
claims in

 

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respect of Article 9 Collateral under policies of insurance, endorsing the name
of such Pledgor on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect thereto. In the event that any Pledgor at any time or
times shall fail to obtain or maintain any of the policies of insurance required
hereby or to pay any premium in whole or part relating thereto, the Applicable
Agent may, without waiving or releasing any obligation or liability of the
Pledgors hereunder or any Event of Default, in its sole discretion, obtain and
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Applicable Agent reasonably deems advisable.
All sums disbursed by the Applicable Agent in connection with this
Section 4.03(i), including reasonable attorneys’ fees, court costs, expenses and
other charges relating thereto, shall be payable, upon demand, by the Pledgors
to the Applicable Agent and shall be additional Obligations secured hereby.

Section 4.04. Other Actions. In order to further ensure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
for the ratable benefit of the Secured Parties, the Collateral Agent’s security
interest in the Article 9 Collateral, each Pledgor agrees, in each case at such
Pledgor’s own expense, to take the following actions with respect to the
following Article 9 Collateral:

(a) Instruments and Tangible Chattel Paper. If any Pledgor shall at any time
hold or acquire any Instrument (other than checks received and processed in the
ordinary course of business) or Tangible Chattel Paper evidencing an amount in
excess of $5.0 million, such Pledgor shall forthwith endorse, assign and deliver
the same to the Applicable Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Applicable Agent may from time to time
reasonably request.

(b) Investment Property. Except to the extent otherwise provided in Article 3,
if any Pledgor shall at any time hold or acquire any certificated security
constituting Pledged Collateral or Article 9 Collateral, such Pledgor shall
forthwith endorse, assign and deliver the same to the Applicable Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as the Applicable Agent may from time to time reasonably specify. If any
security of a domestic issuer now owned or hereafter acquired by any Pledgor is
uncertificated and is issued to such Pledgor or its nominee directly by the
issuer thereof, such Pledgor shall promptly notify the Applicable Agent of such
uncertificated securities and (i) upon the Applicable Agent’s reasonable request
or (ii) upon the occurrence and during the continuance of an Event of Default,
such Pledgor shall pursuant to an agreement in form and substance reasonably
satisfactory to the Applicable Agent, either cause the issuer to agree to comply
with instructions from the Applicable Agent as to such security, without further
consent of any Pledgor or such nominee, or cause the issuer to register the
Applicable Agent as the registered owner of such security. If any security or
other Investment Property, whether certificated or uncertificated, representing
an Equity Interest in a third party and having a fair market value in excess of
$5.0 million now or hereafter acquired by any Pledgor is held by such Pledgor or
its nominee through a securities intermediary or commodity intermediary, such
Pledgor shall promptly notify the Applicable Agent thereof and, at the
Applicable Agent’s request and option, pursuant to a Control Agreement in form
and substance

 

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reasonably satisfactory to the Applicable Agent, either (A) cause such
securities intermediary or commodity intermediary, as applicable, to agree, in
the case of a securities intermediary, to comply with entitlement orders or
other instructions from the Applicable Agent to such securities intermediary as
to such securities or other Investment Property or, in the case of a commodity
intermediary, to apply any value distributed on account of any commodity
contract as directed by the Applicable Agent to such commodity intermediary, in
each case without further consent of any Pledgor or such nominee, or (B) in the
case of Financial Assets or other Investment Property held through a securities
intermediary, arrange for the Applicable Agent to become the entitlement holder
with respect to such Investment Property, for the ratable benefit of the Secured
Parties, with such Pledgor being permitted, only with the consent of the
Applicable Agent, to exercise rights to withdraw or otherwise deal with such
Investment Property. The Applicable Agent agrees with each of the Pledgors that
the Applicable Agent shall not give any such entitlement orders or instructions
or directions to any such issuer, securities intermediary or commodity
intermediary, and shall not withhold its consent to the exercise of any
withdrawal or dealing rights by any Pledgor, unless an Event of Default has
occurred and is continuing or, after giving effect to any such withdrawal or
dealing rights, would occur. The provisions of this paragraph (b) shall not
apply to any Financial Assets credited to a Securities Account for which the
Applicable Agent is the securities intermediary.

(c) Commercial Tort Claims. If any Pledgor shall at any time hold or acquire a
Commercial Tort Claim in an amount reasonably estimated to exceed $5.0 million,
such Pledgor shall promptly notify the Applicable Agent thereof in a writing
signed by such Pledgor, including a summary description of such claim, and grant
to the Applicable Agent in writing a security interest therein and in the
proceeds thereof, all under the terms and provisions of this Agreement, with
such writing to be in form and substance reasonably satisfactory to the
Applicable Agent.

Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral.
Except as permitted by the Note Documents: (a) Each Pledgor agrees that it will
not knowingly do any act or omit to do any act (and will exercise commercially
reasonable efforts to prevent its licensees from doing any act or omitting to do
any act) whereby any Patent that is material to the normal conduct of such
Pledgor’s business may become prematurely invalidated, abandoned, lapsed or
dedicated to the public, and agrees that it shall take commercially reasonable
steps with respect to any material products covered by any such Patent as
necessary and sufficient to establish and preserve its rights under applicable
patent laws.

(b) Each Pledgor will, and will use its commercially reasonable efforts to cause
its licensees or its sublicensees to, for each material Trademark necessary to
the normal conduct of such Pledgor’s business, (i) maintain such Trademark in
full force free from any adjudication of abandonment or invalidity for non-use,
(ii) maintain the quality of products and services offered under such Trademark,
(iii) display such Trademark with notice of federal or foreign registration or
claim of trademark or service mark as required under applicable law and (iv) not
knowingly use or knowingly permit its licensees’ use of such Trademark in
violation of any third-party rights.

 

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(c) Each Pledgor will, and will use its commercially reasonable efforts to cause
its licensees or its sublicensees to, for each work covered by a material
Copyright necessary to the normal conduct of such Pledgor’s business that it
publishes, displays and distributes, use a copyright notice as provided by
applicable copyright laws.

(d) Each Pledgor shall notify the Applicable Agent promptly if it knows that any
Patent, Trademark or Copyright material to the normal conduct of such Pledgor’s
business may imminently become abandoned, lapsed or dedicated to the public, or
of any materially adverse determination or development, excluding office actions
and similar determinations or developments in the United States Patent and
Trademark Office, United States Copyright Office, any court or any similar
office of any country, regarding such Pledgor’s ownership of any such material
Patent, Trademark or Copyright or its right to register or to maintain the same.

(e) Each Pledgor, either itself or through any agent, employee, licensee or
designee, shall (i) inform the Applicable Agent on an annual basis of each
application by itself, or through any agent, employee, licensee or designee, for
any Patent with the United States Patent and Trademark Office and each
registration of any Trademark or Copyright with the United States Patent and
Trademark Office, the United States Copyright Office or any comparable office or
agency in any other country filed during the preceding twelve-month period, and
(ii) upon the reasonable request of the Applicable Agent, execute and deliver
any and all agreements, instruments, documents and papers as the Applicable
Agent may reasonably request to evidence the Applicable Agent’s security
interest for the ratable benefit of the Secured Parties in such Patent,
Trademark or Copyright.

(f) Each Pledgor shall exercise its reasonable business judgment consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, the United States Copyright Office or any comparable office or agency in
any other country with respect to maintaining and pursuing each application
relating to any Patent, Trademark and/or Copyright (and obtaining the relevant
grant or registration) material to the normal conduct of such Pledgor’s business
and to maintain (i) each issued Patent and (ii) the registrations of each
Trademark and each Copyright that is material to the normal conduct of such
Pledgor’s business, including, when applicable and necessary in such Pledgor’s
reasonable business judgment, timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if any Pledgor believes necessary in its reasonable business
judgment, to initiate opposition, interference and cancellation proceedings
against third parties.

(g) In the event that any Pledgor knows or has reason to know that any Article 9
Collateral consisting of a Patent, Trademark or Copyright material to the normal
conduct of its business has been or is about to be materially infringed,
misappropriated or diluted by a third party, such Pledgor shall promptly notify
the Applicable Agent and shall, if such Pledgor deems it necessary in its
reasonable business judgment, promptly sue and recover any and all damages, and
take such other actions as are reasonably appropriate under the circumstances.

 

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ARTICLE 5

REMEDIES

Section 5.01. Remedies Upon Default. In accordance with, and to the extent
consistent with, the terms of the Secured Notes Intercreditor Agreement, upon
the occurrence and during the continuance of an Event of Default, each Pledgor
agrees to deliver each item of Collateral to the Collateral Agent on demand, and
it is agreed that the Collateral Agent shall have the right to take any of or
all the following actions at the same or different times: (a) with respect to
any Article 9 Collateral consisting of Intellectual Property, on demand, to
cause the Security Interest to become an assignment, transfer and conveyance of
any of or all such Article 9 Collateral by the applicable Pledgors to the
Collateral Agent or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or a nonexclusive basis, any such
Article 9 Collateral throughout the world on such terms and conditions and in
such manner as the Collateral Agent shall determine (other than in violation of
any then-existing licensing arrangements to the extent that waivers thereunder
cannot be obtained with the use of commercially reasonable efforts, which each
Pledgor hereby agrees to use) and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Article 9 Collateral and without liability for trespass to the applicable
Pledgor to enter any premises where the Article 9 Collateral may be located for
the purpose of taking possession of or removing the Article 9 Collateral and,
generally, to exercise any and all rights afforded to a secured party under the
applicable Uniform Commercial Code or other applicable law. Without limiting the
generality of the foregoing, each Pledgor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral at a public or private
sale or at any broker’s board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized in connection with any sale of a
security (if it deems it advisable to do so) pursuant to the foregoing to
restrict the prospective bidders or purchasers to persons who represent and
agree that they are purchasing such security for their own account, for
investment, and not with a view to the distribution or sale thereof. Upon
consummation of any such sale of Collateral pursuant to this Section 5.01 the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of any Pledgor, and each Pledgor hereby waives and releases
(to the extent permitted by law) all rights of redemption, stay, valuation and
appraisal that such Pledgor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall, except in the case of Collateral that is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, give the applicable Pledgors 10 Business Days’ written notice
(which each Pledgor agrees is reasonable notice within the meaning of
Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of
the Collateral Agent’s intention to make any sale of Collateral. Such notice, in
the case of a public sale, shall state the time and place for such sale and, in
the case of a sale at a broker’s board or on a securities

 

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exchange, shall state the board or exchange at which such sale is to be made and
the day on which the Collateral, or portion thereof, will first be offered for
sale at such board or exchange. Any such public sale shall be held at such time
or times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice (if any) of such sale. At any
such sale, the Collateral, or the portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Collateral Agent may (in its
sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In the case of any sale of all or any part of the Collateral made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in the event
that any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in the case of any such failure, such Collateral may be
sold again upon notice given in accordance with provisions above. At any public
(or, to the extent permitted by law, private) sale made pursuant to this
Section 5.01, any Secured Party may bid for or purchase for cash, free (to the
extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Pledgor (all such rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property in accordance with Section 5.02
hereof without further accountability to any Pledgor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and no Pledgor shall be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale
pursuant to the provisions of this Section 5.01 shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-610(b) of the New
York UCC or its equivalent in other jurisdictions.

Section 5.02. Application of Proceeds.

In accordance with, and to the extent consistent with, the terms of the Secured
Notes Intercreditor Agreement , the Collateral Agent shall promptly apply the
proceeds, moneys or balances of any collection or sale of Collateral, as well as
any Collateral consisting of cash, as follows:

FIRST, to the payment of all costs and expenses incurred by the Collateral Agent
in connection with such collection or sale or otherwise in connection with this
Agreement, any Note Document or any of the Obligations, including without
limitation all court costs and the fees and expenses of agents and legal counsel
for the Collateral Agent, the repayment of all advances made by the Collateral
Agent hereunder or under any Note Document on behalf of any Pledgor, any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder or under any other Note Document, and all other fees,
indemnities and other amounts owing or reimbursable to the Collateral Agent
under any Note Document or any Security Document in its capacity as such;

 

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SECOND, to interest in respect of the Obligations which such Collateral secures;

THIRD, to the principal of the Obligations which such Collateral secures; and

FOURTH, to the Pledgors, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.

The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

Section 5.03. Securities Act, Etc. In view of the position of the Pledgors in
relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar federal statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the “Federal Securities Laws”) with respect to any
disposition of the Pledged Collateral permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Collateral, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Collateral could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Collateral under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor acknowledges and agrees that in light of such restrictions
and limitations, the Collateral Agent, in its sole and absolute discretion,

 

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(a) may proceed to make such a sale whether or not a registration statement for
the purpose of registering such Pledged Collateral or part thereof shall have
been filed under the Federal Securities Laws or, to the extent applicable, Blue
Sky or other state securities laws and (b) may approach and negotiate with a
single potential purchaser to effect such sale. Each Pledgor acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller than if such sale were a public sale without such restrictions. In
the event of any such sale, the Collateral Agent shall incur no responsibility
or liability for selling all or any part of the Pledged Collateral at a price
that the Collateral Agent, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might have been realized if the sale were
deferred until after registration as aforesaid or if more than a single
purchaser were approached. The provisions of this Section 5.03 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.

ARTICLE 6

RESERVED

ARTICLE 7

MISCELLANEOUS

Section 7.01. Notices. All communications and notices hereunder (including
communications and notices to the Collateral Agent) shall (except as otherwise
permitted or provided herein) be in writing and given as provided in
Section 13.02 of the Indenture. All communications and notices hereunder to any
Subsidiary Party shall be given to it in care of the Company, with such notice
to be given as provided in Section 13.02 of the Indenture. Any such notice and
other communication shall be deemed to be given or made at such time as set
forth in the Indenture. Any party hereto may change its notice details by notice
to the other parties hereto.

Section 7.02. Security Interest Absolute. All rights of the Collateral Agent
hereunder, the Security Interest in the Article 9 Collateral, the security
interest in the Pledged Collateral and all obligations of each Pledgor hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of any Note Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from any Note Document or any other agreement
or instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Pledgor in respect of the
Obligations or this Agreement (other than a defense of payment or performance).

 

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Section 7.03. Limitation by Law. All rights, remedies and powers provided in
this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law that may be controlling and to be limited to the extent necessary so that
they shall not render this Agreement invalid, unenforceable, in whole or in
part, or not entitled to be recorded, registered or filed under the provisions
of any applicable law.

Section 7.04. Binding Effect; Several Agreement. This Agreement shall become
effective as to any party to this Agreement when a counterpart hereof executed
on behalf of such party shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such party and the Collateral Agent and
their respective permitted successors and assigns, and shall inure to the
benefit of such party, the Collateral Agent and the other Secured Parties and
their respective permitted successors and assigns, except that no party shall
have the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement or the Note
Documents. This Agreement shall be construed as a separate agreement with
respect to each party and may be amended, modified, supplemented, waived or
released with respect to any party without the approval of any other party and
without affecting the obligations of any other party hereunder.

Section 7.05. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Pledgor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective permitted successors and assigns; provided that no Pledgor may
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Collateral Agent, except as
permitted by the Indenture. The Collateral Agent hereunder shall at all times be
the same person that is the Collateral Agent under the Indenture. Written notice
of resignation by the Collateral Agent as trustee pursuant to the Indenture
shall also constitute notice of resignation as the Collateral Agent under this
Agreement. Upon the acceptance of any appointment as the trustee under the
Indenture by a successor Collateral Agent, that successor trustee shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent pursuant hereto.

Section 7.06. Collateral Agent’s Fees and Expenses; Indemnification

(a) In accordance with, and to the extent consistent with, the terms of the
Secured Notes Intercreditor Agreement, each Pledgor jointly and severally agrees
to pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon any
of the Collateral, (iii) the exercise, enforcement or protection of any rights
of the Collateral Agent hereunder or (iv) the failure of any Pledgor to perform
or observe any of the provisions hereof applicable to it.

 

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(b) Without limitation of its indemnification obligations under the other Note
Documents, each Pledgor jointly and severally agrees to indemnify the Collateral
Agent, the Trustee, and each Affiliate of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of, (i) the execution, delivery or performance of this Agreement or any
other Note Document or any agreement or instrument contemplated hereby or
thereby, the performance by the parties hereto and thereto of their respective
obligations thereunder or the consummation of the transactions contemplated
hereby, (ii) the use of proceeds of Notes or other Obligations or (iii) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.

(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Note Documents. Notwithstanding
anything to the contrary in this Agreement, the provisions of this Section 7.06
shall remain operative and in full force and effect regardless of the
termination of this Agreement or any other Note Document, the consummation of
the transactions contemplated hereby, the repayment of any of the Obligations,
the invalidity or unenforceability of any term or provision of this Agreement or
any other Note Document, or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this
Section 7.06 shall be payable on written demand therefor.

Section 7.07. Collateral Agent Appointed Attorney-in-Fact. In accordance with,
and to the extent consistent with, the terms of the Secured Notes Intercreditor
Agreement, each Pledgor hereby appoints the Collateral Agent the
attorney-in-fact of such Pledgor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest. The
Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Collateral Agent’s name or in the name of such Pledgor, (a) to receive,
endorse, assign or deliver any and all notes, acceptances, checks, drafts, money
orders or other evidences of payment relating to the Collateral or any part
thereof, (b) to demand, collect, receive payment of, give receipt for and give
discharges and releases of all or any of the Collateral; (c) to ask for, demand,
sue for, collect, receive and give acquittance for any and all moneys due or to
become due under and by virtue of any Collateral; (d) to sign the name of any
Pledgor on any invoice or bill of lading relating to any of the Collateral;

 

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(e) to send verifications of Accounts to any Account Debtor; (f) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (g) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (h) to notify, or to require any
Pledgor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (i) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things necessary to carry out the purposes of this Agreement, as
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment received
by the Collateral Agent, or to present or file any claim or notice, or to take
any action with respect to the Collateral or any part thereof or the moneys due
or to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Parties shall be accountable only for
amounts actually received as a result of the exercise of the powers granted to
them herein, and neither they nor their officers, directors, employees or agents
shall be responsible to any Pledgor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.

Section 7.08. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

Section 7.09. Waivers; Amendment. (a) No failure or delay by the Collateral
Agent, or any Secured Party in exercising any right, power or remedy hereunder
or under any other Note Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy, or any
abandonment or discontinuance of steps to enforce such a right, power or remedy,
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The rights, powers and remedies of the Collateral Agent
and the Secured Parties hereunder and under the other Note Documents are
cumulative and are not exclusive of any rights, powers or remedies that they
would otherwise have. No waiver of any provision of this Agreement or consent to
any departure by any Secured Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section 7.09, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice or demand on any Pledgor in any case
shall entitle any Pledgor to any other or further notice or demand in similar or
other circumstances.

(b) Neither this Agreement, the Secured Notes Intercreditor Agreement, any of
the other Note Documents or any provision of any of the foregoing may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Pledgor or Pledgors with respect to
which such waiver, amendment or modification is to apply, subject to the
limitations in the Secured Notes Intercreditor Agreement or as otherwise
provided in the Secured Notes Intercreditor Agreement.

 

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Section 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER SECURITY DOCUMENT. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.10.

Section 7.11. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Security Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

Section 7.12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 7.04 hereof. Delivery of an executed counterpart to this
Agreement by facsimile transmission shall be as effective as delivery of a
manually signed original.

Section 7.13. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

Section 7.14. Jurisdiction; Consent to Service Of Process. (a) Each party to
this Agreement hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any other Security Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced

 

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in other jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the Collateral
Agent, or any Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or any other Note Documents or Security Documents
against any Pledgor, or its properties, in the courts of any jurisdiction.

(b) Each party to this Agreement hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Note
Documents in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

Section 7.15. Termination or Release. (a) This Agreement, the pledges made
herein, the Security Interest and all other security interests granted hereby
shall terminate when all the Obligations (other than contingent indemnity or
expense reimbursement obligations in respect of which no claim has been made)
have been defeased in accordance with its terms and any other requirements set
forth in the Note Documents then effective are satisfied.

(b) The Liens securing the Note Obligations will be released in whole or in
part, as provided in Section 11.04 of the Indenture.

(c) A Subsidiary Party shall automatically be released from its obligations
hereunder and the security interests in the Collateral of such Subsidiary Party
shall be automatically released if such Subsidiary Party is released from its
guarantee pursuant to Section 12.02(b) of the Indenture.

(d) Upon any sale or other transfer by any Pledgor of any Collateral that is
permitted under the Note Documents, or upon the effectiveness of any written
consent to the release of the security interest granted hereby in any Collateral
pursuant to the Note Documents, the security interest in such Collateral shall
be automatically released.

(e) In connection with any termination or release pursuant to paragraph (a),
(b), (c) or (d) of this Section 7.15, the Collateral Agent shall execute and
deliver to any Pledgor, at such Pledgor’s expense, all documents that such
Pledgor shall reasonably request to evidence such termination or release and
will duly assign and transfer to such Pledgor such of the Pledged Collateral
that may be in the possession of the Collateral Agent and has not theretofore
been sold or otherwise applied or released pursuant to this Agreement; provided,
that the Collateral Agent shall not be required to take any action under this
Section 7.15(e) unless such Pledgor shall have delivered to the Collateral Agent
together with such request, which may be incorporated into such request, an
Officers’ Certificate of the Company or such Pledgor certifying that the
transaction giving rise to such termination or release is permitted by the Note
Documents and was consummated in compliance with the Note Documents. Any
execution and

 

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delivery of documents pursuant to this Section 7.15 shall be without recourse to
or warranty by the Collateral Agent. In connection with any termination or
release pursuant to paragraph (a), (b), (c) or (d) above, the Pledgors shall be
permitted to take any action in connection therewith consistent with such
release including, without limitation, the filing of UCC termination statements.

Section 7.16. Additional Subsidiaries. Upon execution and delivery by the
Collateral Agent and any Subsidiary that is required to become a party hereto by
any Note Document of an instrument in the form of Exhibit I hereto, such
Subsidiary shall become a Subsidiary Party hereunder with the same force and
effect as if originally named as a Subsidiary Party herein. The execution and
delivery of any such instrument shall not require the consent of any other party
to this Agreement. The rights and obligations of each party to this Agreement
shall remain in full force and effect notwithstanding the addition of any new
party to this Agreement.

Section 7.17. Right of Set-off. If an Event of Default shall have occurred and
be continuing, each Secured Party is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Secured Party to or
for the credit or the account of any party to this Agreement against any of and
all the obligations of such party now or hereafter existing under this Agreement
owed to such Secured Party, irrespective of whether or not Secured Party shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Secured Party under this Section 7.17 are in
addition to other rights and remedies (including other rights of set-off) that
such Secured Party may have.

Section 7.18. Intercreditor Agreements. Notwithstanding anything herein to the
contrary, (i) the liens and security interests granted to the Collateral Agent
pursuant to this Agreement are expressly subject and subordinate to the liens
and security interests granted to the Senior Priority Agents (as defined in the
Secured Notes Intercreditor Agreement) or any agent or trustee for any other
Senior Lenders, and (ii) the exercise of any right or remedy by the Collateral
Agent hereunder or the application of proceeds (including insurance proceeds and
condemnation proceeds) of any Collateral are subject to the limitations and
provisions of the Secured Notes Intercreditor Agreement. In the event of any
conflict between the terms of the Secured Notes Intercreditor Agreement and the
terms of this Agreement, the terms of the Secured Notes Intercreditor Agreement
shall govern.

Section 7.19. Other Senior Documents. The Collateral Agent acknowledges and
agrees, on behalf of itself and any Secured Party, that any provision of this
Agreement to the contrary notwithstanding, until the First Lien Termination
Date, the Pledgors shall not be required to act or refrain from acting pursuant
to the Security Documents or with respect to any Collateral on which the
Applicable Agent or any other Senior Priority Agent has a Lien superior in
priority to the Collateral Agent’s Lien thereon in any manner that would result
in a default under the terms and provisions of the Senior Lender Documents.

 

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Section 7.20. Other Pari Passu Obligations. On or after the date hereof and so
long as the obligations are permitted to be incurred under the Note Documents
and are not prohibited by any Other Pari Passu Documents then in effect, the
Company may from time to time designate obligations in respect of Indebtedness
to be secured on a pari passu basis with the Obligations as Other Pari Passu
Obligations hereunder and under the other Security Documents by delivering to
the Collateral Agent, Trustee and each other Authorized Representative (a) a
certificate signed by an Authorized Officer of the Company (i) identifying the
obligations so designated and the initial aggregate principal amount or face
amount thereof, (ii) stating that such obligations are designated as Other Pari
Passu Obligations for purposes hereof and of the other Security Documents,
(iii) representing that such designation of such obligations as Other Pari Passu
Obligations complies with the terms of the Indenture and any Other Pari Passu
Document then in effect, (iv) specifying the name and address of the Authorized
Representative for such obligations and (v) identifying the documents to be
designated as the related Other Pari Passu Obligations Documents and (b) a fully
executed Other Pari Passu Obligations Secured Party Joinder Agreement. The
Collateral Agent, Trustee and each Authorized Representative agree that upon the
satisfaction of all conditions set forth in the preceding sentence, the
Collateral Agent shall act as agent under and subject to the terms of the
Security Documents for the benefit of all Secured Parties, including without
limitation, any Secured Parties that hold any such Other Pari Passu Obligations,
and the Collateral Agent and each Authorized Representative agree to the
appointment, and acceptance of the appointment, of the Collateral Agent as agent
for the holders of such Other Pari Passu Obligations as set forth in each Other
Pari Passu Obligations Secured Party Joinder Agreement and agree, on behalf of
itself and each Secured Party it represents, to be bound by this Agreement, the
other Security Documents, and the Secured Notes Intercreditor Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

VERSO PAPER HOLDINGS LLC

VERSO PAPER LLC

VERSO PAPER INC.

VERSO ANDROSCOGGIN LLC

VERSO BUCKSPORT LLC

VERSO SARTELL LLC

VERSO QUINNESEC REP HOLDING INC.

VERSO QUINNESEC LLC

VERSO MAINE ENERGY LLC

VERSO FIBER FARM LLC

NEXTIER SOLUTIONS CORPORATION

By:

 

/s/ Robert P. Mundy

Name:

 

Robert P. Mundy

Title:

 

Senior Vice President and

Chief Financial Officer

[Signature Page – Notes Collateral Agreement]

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WILMINGTON TRUST, NATIONAL ASSOCIATION, as Collateral Agent

By:

 

/s/ Jane Schweiger

Name:

 

Jane Schweiger

Title:

 

Vice President

[Signature Page – Notes Collateral Agreement]

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Exhibit I

to Collateral Agreement

SUPPLEMENT NO.                      dated as of                      (this
“Supplement”), to the Collateral Agreement dated as of 11, 2012 (the “Collateral
Agreement”), among VERSO PAPER HOLDINGS LLC, a Delaware limited liability
company (the “Company”), VERSO PAPER INC. (“Finance Co” and, together with the
Company, the “Issuers”), each Subsidiary of the Company identified on Schedule I
or otherwise identified therein as a party (each, a “Subsidiary Party”), and
Wilmington Trust, National Association, as collateral agent (in such capacity,
together with any successor collateral agent, the “Collateral Agent”) for the
Secured Parties (as defined therein).

Section 7.16 of the Collateral Agreement provides that additional Subsidiaries
may become Subsidiary Parties under the Collateral Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned
Subsidiary (the “New Subsidiary”) is executing this Supplement to become a
Subsidiary Party under the Collateral Agreement in order to induce the Secured
Parties to make or continue extensions of credit.

Accordingly, the Collateral Agent and the New Subsidiary agree as follows:

SECTION 1. In accordance with Section 7.16 of the Collateral Agreement, the New
Subsidiary by its signature below becomes a Subsidiary Party and a Pledgor under
the Collateral Agreement with the same force and effect as if originally named
therein as a Subsidiary Party and a Pledgor, and the New Subsidiary hereby
(a) agrees to all the terms and provisions of the Collateral Agreement
applicable to it as a Subsidiary Party and a Pledgor thereunder and
(b) represents and warrants that the representations and warranties made by it
as a Pledgor thereunder are true and correct, in all material respects, on and
as of the date hereof. In furtherance of the foregoing, the New Subsidiary, as
security for the payment and performance in full of the Obligations (as defined
in the Collateral Agreement), does hereby create and grant to the Collateral
Agent, for the ratable benefit of the Secured Parties, a security interest in
and Lien on all the New Subsidiary’s right, title and interest in and to the
Collateral (as defined in the Collateral Agreement) of the New Subsidiary. Each
reference to a “Subsidiary Party” or a “Pledgor” in the Collateral Agreement
shall be deemed to include the New Subsidiary. The Collateral Agreement is
hereby incorporated herein by reference.

SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, subject to
(i) the effects of bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or other similar laws affecting creditors’ rights
generally, (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
(iii) implied covenants of good faith and fair dealing.

 

I-1

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SECTION 3. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one contract. This Supplement shall become effective when (a) the
Collateral Agent shall have received a counterpart of this Supplement that bears
the signature of the New Subsidiary and (b) the Collateral Agent has executed a
counterpart hereof.

SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth
on Schedule I attached hereto is a true and correct schedule of all the Pledged
Debt Securities of the New Subsidiary as of the date hereof, (b) set forth on
Schedule II attached hereto is a true and correct schedule of all of the
material Patents, Trademarks and Copyrights of the New Subsidiary as of the date
hereof, (c) set forth on Schedule III attached hereto is a true and correct
schedule of all Commercial Tort Claims of the New Subsidiary individually in
excess of $5.0 million as of the date hereof and (d) set forth under its
signature hereto, is the true and correct legal name of the New Subsidiary, its
jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Collateral Agreement
shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Collateral Agreement shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and
given as provided in Section 7.01 of the Collateral Agreement.

SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, disbursements and other charges of counsel for the
Collateral Agent.

 

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IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly
executed this Supplement to the Collateral Agreement as of the day and year
first above written.

 

[Name of New Subsidiary]

By:

 

 

Name:

 

Title:

 

Legal Name:

Jurisdiction of Formation:

Location of Chief Executive Office:

WILMINGTON TRUST, National Association,

as Collateral Agent

By:

 

 

Name:

 

Title:

 

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Schedule I

to Supplement No.              to the

Collateral Agreement

Pledged Debt Securities of the New Subsidiary

 

Issuer

  

Principal Amount

  

Date of Note

  

Maturity Date

        

 

I-2

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Schedule II

to Supplement No.              to the

Collateral Agreement

PATENTS, TRADEMARKS AND COPYRIGHTS

 

I-3

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Schedule III

to Supplement No.              to the

Collateral Agreement

COMMERCIAL TORT CLAIMS

 

I-4

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Exhibit II

to Collateral Agreement

Form of Other Pari Passu Obligations Secured Party Joinder Agreement

[Name of Additional Secured Creditor]

[Address of Additional Secured Creditor]

[Date]

 

 

 

 

 

 

 

 

The undersigned is the agent or trustee (the “Authorized Representative”) for
persons wishing to become “Secured Parties” (the “New Secured Parties”) under
the Collateral Agreement dated as of May 11, 2012 (as heretofore amended and/or
supplemented, the “Collateral Agreement” (capitalized terms used without
definition herein have the meanings assigned to such term by the Collateral
Agreement)) among VERSO PAPER HOLDINGS LLC, a Delaware limited liability company
(the “Company”), VERSO PAPER INC. (“Finance Co” and, together with the Company,
the “Issuers”), each subsidiary of the Company identified therein as a party
(each, a “Subsidiary Pledgor”) and Wilmington Trust, National Association, as
collateral agent (in such capacity, the “Collateral Agent”) for the Secured
Parties (as defined therein).

In consideration of the foregoing, the undersigned hereby:

(i) represents that the Authorized Representative has been authorized by the New
Secured Parties to become a party to the Collateral Agreement on behalf of the
New Secured Parties under that [DESCRIBE OPERATIVE AGREEMENT] (the “New Secured
Obligation”) and to act as the Authorized Representative for the New Secured
Parties;

(ii) acknowledges that the New Secured Parties has received a copy of the
Collateral Agreement;

(iii) appoints and authorizes the Collateral Agent to take such action as agent
on its behalf and on behalf of all other Secured Parties and to exercise such
powers under the Collateral Agreement as are delegated to the Collateral Agent
by the terms thereof, together with all such powers as are reasonably incidental
thereto; and

(iv) accepts and acknowledges the terms of the Collateral Agreement and agrees
to serve as Authorized Representative for the New Secured

 

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Parties with respect to the New Secured Obligations and agrees on its own behalf
and on behalf of the New Secured Parties to be bound by the terms hereof
applicable to holders of Other Second-Lien Obligations, with all the rights and
obligations of a Secured Party thereunder and bound by all the provisions
thereof as fully as if it had been a Secured Party on the effective date of the
Collateral Agreement.

The Collateral Agent, by acknowledging and agreeing to this Additional Secured
Party Consent, accepts the appointment set forth in clause (iii) above.

The name and address of the Authorized Representative for purposes of
Section 6.01 of the Collateral Agreement are as follows:

[name and address of Authorized Representative]

THIS ADDITIONAL SECURED PARTY CONSENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the undersigned has caused this Additional Secured Party
Consent to be duly executed by its authorized officer as of the      day of
20    .

 

[NAME OF AUTHORIZED REPRESENTATIVE] By:  

 

  Name:   Title: ACKNOWLEDGED AND AGREED WILMINGTON TRUST, NATIONAL ASSOCIATION
By:  

 

  Name:   Title:

 

I-6

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VERSO PAPER HOLDINGS LLC. By:  

 

  Name:   Title:

 

I-7