Document:

Exhibit 10.10

 

 

EXECUTION COPY

 

 

REVOLVING
CREDIT

 

PLEDGE
AND SECURITY AGREEMENT

 

 

dated
as of May 2, 2005

 

 

between

 

 

EACH
OF THE GRANTORS PARTY HERETO

 

 

and

 

JPMorgan
Chase Bank, N.A.

 

as
Collateral Agent

 

 

TABLE OF CONTENTS

 

	
  SECTION 1. DEFINITIONS; GRANT OF
  SECURITY

  	
   

  
	
  1.1

  	
  General
  Definitions

  	
   

  
	
  1.2

  	
  Definitions;
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2. GRANT OF SECURITY

  	
   

  
	
  2.1

  	
  Grant of
  Security

  	
   

  
	
  2.2

  	
  Certain
  Limited Exclusions

  	
   

  
	
  2.3

  	
  Intercreditor
  Agreement

  	
   

  
	
   

  	
   

  
	
  SECTION 3. SECURITY FOR
  OBLIGATIONS; GRANTORS REMAIN LIABLE

  	
   

  
	
  3.1

  	
  Security
  for Obligations

  	
   

  
	
  3.2

  	
  Continuing
  Liability Under Collateral

  	
   

  
	
   

  	
   

  
	
  SECTION 4. REPRESENTATIONS AND
  WARRANTIES AND COVENANTS

  	
   

  
	
  4.1

  	
  Generally

  	
   

  
	
  4.2

  	
  Inventory

  	
   

  
	
  4.3

  	
  Receivables

  	
   

  
	
  4.4

  	
  Investment
  Related Property; Pledged Debt; Investment Accounts

  	
   

  
	
  4.5

  	
  Material
  Contracts

  	
   

  
	
  4.6

  	
  Letter of
  Credit Rights

  	
   

  
	
  4.7

  	
  Commercial
  Tort Claims

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5. ACCESS; RIGHT OF
  INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS

  	
   

  
	
  5.1

  	
  Access;
  Right of Inspection

  	
   

  
	
  5.2

  	
  Further
  Assurances

  	
   

  
	
  5.3

  	
  Additional
  Grantors

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6. COLLATERAL AGENT
  APPOINTED ATTORNEY-IN-FACT

  	
   

  
	
  6.1

  	
  Power of
  Attorney

  	
   

  
	
  6.2

  	
  No Duty on
  the Part of Collateral Agent or Secured Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7. REMEDIES

  	
   

  
	
  7.1

  	
  Generally

  	
   

  
	
  7.2

  	
  Application
  of Proceeds

  	
   

  
	
  7.3

  	
  Sales on
  Credit

  	
   

  
	
  7.4

  	
  Deposit Accounts

  	
   

  
	
  7.5

  	
  Investment Related Property

  	
   

  
	
  7.6

  	
  Intellectual Property

  	
   

  
	
  7.7

  	
  Cash
  Proceeds

  	
   

  
	
   

  	
   

  
	
  SECTION 8. COLLATERAL AGENT

  	
   

  
	
   

  	
   

  
	
  SECTION 9. CONTINUING SECURITY
  INTEREST; TRANSFER OF LOANS

  	
   

  
	
   

  	
   

  
	
  SECTION 10. STANDARD OF CARE;
  COLLATERAL AGENT MAY PERFORM

  	
   

  

 

i

 

	
  SECTION 11. MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 4.1

  	
   

  	
  GENERAL
  INFORMATION

  	
   

  
	
  SCHEDULE 4.2

  	
   

  	
  LOCATION
  OF INVENTORY

  	
   

  
	
  SCHEDULE 4.4

  	
   

  	
  PLEDGED
  DEBT AND INVESTMENT ACCOUNTS

  	
   

  
	
  SCHEDULE 4.5

  	
   

  	
  MATERIAL
  CONTRACTS

  	
   

  
	
  SCHEDULE 4.6

  	
   

  	
  DESCRIPTION
  OF LETTERS OF CREDIT

  	
   

  
	
  SCHEDULE 4.7

  	
   

  	
  COMMERCIAL
  TORT CLAIMS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  PLEDGE
  SUPPLEMENT

  	
   

  
	
  EXHIBIT B

  	
   

  	
  UNCERTIFICATED
  SECURITIES CONTROL AGREEMENT

  	
   

  
	
  EXHIBIT C

  	
   

  	
  SECURITIES
  ACCOUNT CONTROL AGREEMENT

  	
   

  
	
  EXHIBIT D

  	
   

  	
  DEPOSIT
  ACCOUNT CONTROL AGREEMENT

  	
   

  

 

ii

 

This PLEDGE AND SECURITY AGREEMENT, dated as of May 2,
2005 (this “Agreement”), between EACH OF THE UNDERSIGNED, whether as an
original signatory hereto or as an Additional Grantor (as herein defined)
(each, a “Grantor”), and JPMORGAN CHASE BANK, N.A., as collateral agent for the
Secured Parties (as herein defined) (in such capacity as collateral agent, the “Collateral Agent”).

 

RECITALS:

 

WHEREAS, reference is made to that certain Revolving Credit and Guaranty
Agreement, dated as of the date hereof (as it may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among NEWPAGE CORPORATION, a Delaware corporation,
as Borrower (“NewPageCo”), NEWPAGE HOLDING CORPORATION, a Delaware corporation, and CERTAIN
SUBSIDIARIES OF NEWPAGECO, as Guarantors, the various lenders party thereto from time to time
(the “Lenders”), GOLDMAN SACHS CREDIT PARTNERS, L.P., as Joint Lead Arranger, Joint Bookrunner and
Co-Syndication Agent, GOLDMAN SACHS CREDIT
PARTNERS L.P., as Administrative Agent, UBS SECURITIES LLC, as Joint Lead Arranger, Joint Bookrunner
and Co-Syndication Agent, and JPMORGAN CHASE
BANK, N.A., as Collateral Agent;

 

WHEREAS, in consideration of the extensions of credit and other accommodations
of Lenders as set forth in the Credit Agreement, each Grantor has agreed to
secure such Grantor’s obligations under the Credit Documents as set forth
herein.

 

NOW,
THEREFORE, in consideration
of the premises and the agreements, provisions and covenants herein contained
each Grantor and the Collateral Agent:

 

SECTION 1.   DEFINITIONS; GRANT OF
SECURITY. 

 

1.1          General Definitions.  In this Agreement, the following terms shall
have the following meanings:

 

“Account Debtor” shall mean each Person who is obligated on a
Receivable or any Supporting Obligation related thereto.

 

“Accounts” shall mean all “accounts” as defined in Article 9
of the UCC, including Health-Care Insurance Receivables.

 

“Additional Grantors” shall have the meaning assigned in Section 5.3.

 

“Agreement” shall have the meaning set forth in the
preamble.

 

“Assigned Agreements” shall mean, as to each Grantor, all
agreements and contracts to which such Grantor is a party as of the date
hereof, or to which such Grantor becomes a party after the date hereof,
including, without limitation, each Material Contract, as each such agreement
may be amended, supplemented or otherwise modified from time to time.

 

“Bankruptcy Code” shall mean Title 11 of the United States
Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor
statute.

 

“Cash Proceeds” shall have the meaning assigned in Section 7.7.

 

 

“Chattel Paper” shall mean all “chattel paper” as defined in
Article 9 of the UCC, including, without limitation, “electronic chattel
paper” or “tangible chattel paper”, as each term is defined in Article 9
of the UCC.

 

“Collateral” shall have the meaning assigned in Section 2.1.

 

“Collateral Account” shall mean any account established by the
Collateral Agent. 

 

“Collateral Agent” shall have the meaning set forth in the
preamble.

 

“Collateral Records” shall mean books, records, ledger cards,
files, correspondence, customer lists, blueprints, technical specifications, manuals,
computer software, computer printouts, tapes, disks and related data processing
software and similar items that at any time evidence or contain information
relating to any of the Collateral or are otherwise necessary or helpful in the
collection thereof or realization thereupon.

 

“Collateral Support” shall mean all property (real or personal)
assigned, hypothecated or otherwise securing any Collateral and shall include
any security agreement or other agreement granting a lien or security interest
in such real or personal property.

 

“Commercial Tort Claims” shall mean all “commercial tort claims” as
defined in Article 9 of the UCC, including, without limitation, all
commercial tort claims listed on Schedule 4.7 (as such schedule may
be amended or supplemented from time to time).

 

“Copyright Licenses” shall mean any and all written agreements
containing the express grant of any right in or to Copyrights (whether such
Grantor is licensee or licensor thereunder) including, without limitation, each
agreement referred to in Schedule 4.7(B) (as such schedule may
be amended or supplemented from time to time).

 

“Copyrights”
shall mean all United
States, and foreign copyrights (including European Union Community designs),
including but not limited to copyrights in software and databases, whether
registered or unregistered, and, with respect to any and all of the foregoing: (i) all
registrations and applications therefor including, without limitation, the
registrations and applications referred to in Schedule 4.7(A) (as
such schedule may be amended or supplemented from time to time), (ii) all
extensions and renewals thereof, (iii) all rights corresponding thereto
throughout the world, (iv) all rights to sue for past, present and future
infringements thereof, and (v) all Proceeds of the foregoing, including,
without limitation, licenses, royalties, income, payments, claims, damages and
proceeds of suit.

 

“Credit Agreement” shall have the meaning set forth in the
recitals.

 

“Deposit Account Control Agreement” shall have the
meaning assigned in Section 4.4.4(c).

 

“Deposit Accounts” (i) shall mean all “deposit accounts”
as defined in Article 9 of the UCC and (ii) shall include, without
limitation, all of the accounts listed on Schedule 4.4 under the heading “Deposit
Accounts” (as such schedule may be amended or supplemented from time to
time).

 

“Documents” shall mean all “documents” as defined in Article 9
of the UCC.

 

2

 

“Enforcement Notice” shall have the meaning set forth in the Intercreditor Agreement.  

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor thereto.

 

“General Intangibles” (i) shall mean all “general intangibles”
as defined in Article 9 of the UCC, including “payment intangibles” also
as defined in Article 9 of the UCC and (ii) shall include, without
limitation, all interest rate or currency protection or hedging arrangements,
all tax refunds, all licenses, permits, concessions and authorizations, all
Assigned Agreements and all Intellectual Property (in each case, regardless of
whether characterized as general intangibles under the UCC).

 

“Grantors” shall have the meaning set forth in the
preamble.

 

“Health-Care Insurance Receivable” shall mean all “health-care-insurance
receivable” as defined in Article 9 of the UCC.

 

“Instruments” shall mean all “instruments” as defined in Article 9
of the UCC.

 

“Insurance” shall mean (i) all insurance policies
covering any or all of the Collateral (regardless of whether the Collateral
Agent is the loss payee thereof).

 

“Intellectual Property” shall mean, collectively, the Copyrights,
the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the
Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.

 

“Intercompany Notes of
Subsidiaries” means
all indebtedness owing by NewPageHoldCo or any of its Subsidiaries to
NewPageHoldCo or any of its Subsidiaries, whether or not represented by a note
or agreement.

 

“Intercreditor Agreement” means the Intercreditor Agreement dated as
of the date hereof, among NewPageCo, the Guarantors thereunder, the Collateral
Agent, and The Bank of New York, as Collateral Trustee, as it may be amended,
supplemented or otherwise modified from time to time.

 

“Inventory” shall mean (i) all “inventory” as
defined in Article 9 of the UCC and (ii) all goods held for sale or
lease or to be furnished under contracts of service or so leased or furnished,
all raw materials, work in process, finished goods, and materials used or
consumed in the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of such inventory or otherwise used or consumed in any
Grantor’s business; all such goods in which any Grantor has an interest in mass
or a joint or other interest or right of any kind; and all such goods which are
returned to or repossessed by any Grantor, all computer programs embedded in
any such goods and all accessions thereto and products thereof (in each case,
regardless of whether characterized as inventory under the UCC).

 

“Investment Accounts” shall mean the Collateral Account,
Securities Accounts and Deposit Accounts.

 

“Investment Related Property” shall mean: 
(i) all “investment property” (as such term is defined in Article 9
of the UCC) and (ii) all of the following (regardless of whether

 

3

 

classified as investment property under the
UCC):  all Pledged Debt, the Investment
Accounts and certificates of deposit.

 

“Lenders” shall have the meaning set forth in the
recitals.

 

“Letter of Credit” shall mean “letter of credit” as defined in Article 9 of the
UCC.  

 

“Letter of Credit Rights” shall mean “letter-of-credit right” as
defined in Article 9 of the UCC.

 

“Money” shall mean “money” as defined in the UCC.

 

“NewPageCo” shall
have the meaning set forth in the recitals. 

 

“Non-Assignable Contract” shall mean any agreement, contract or
license to which any Grantor is a party that by its terms purports to restrict
or prevent the assignment or granting of a security interest therein (either by
its terms or by any federal or state statutory prohibition or otherwise
irrespective of whether such prohibition or restriction is enforceable under
Sections 9-406 through 409 of the UCC).

 

“Patent Licenses” shall mean all written agreements containing
the express grant of any right in or to Patents (whether such Grantor is
licensee or licensor thereunder) including, without limitation, each agreement
referred to in Schedule 4.7(D) (as such schedule may be amended
or supplemented from time to time).

 

“Patents” shall
mean all United States and foreign patents and certificates of invention, or
similar industrial property rights, and applications for any of the foregoing,
including, but not limited to: (i) each patent and patent application
referred to in Schedule 4.7(C) hereto (as such schedule may be
amended or supplemented from time to time), (ii) all reissues, divisions,
continuations, continuations-in-part, extensions, renewals, and reexaminations
thereof, (iii) all rights corresponding thereto throughout the world, (iv) all
inventions and improvements described therein, (v) all rights to sue for
past, present and future infringements thereof, (vi) all licenses, claims,
damages, and proceeds of suit arising therefrom, and (vii) all Proceeds of
the foregoing, including, without limitation, licenses, royalties, income,
payments, claims, damages, and proceeds of suit.

 

“Person” shall mean and include natural persons,
corporations, limited partnerships, general partnerships, limited liability
companies, limited liability partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
Governmental Authorities.

 

“Pledge Supplement” shall mean any supplement to this agreement
in substantially the form of Exhibit A.

 

“Pledged Debt” shall mean all Indebtedness owed to such
Grantor, including, without limitation, all Indebtedness described on Schedule 4.4(A) under
the heading “Pledged Debt” (as such schedule may be amended or
supplemented from time to time), issued by the obligors named therein, the
instruments evidencing such Indebtedness, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Indebtedness.

 

4

 

“Proceeds” shall mean: 
(i) all “proceeds” as defined in Article 9 of the UCC, (ii) payments
or distributions made with respect to any Investment Related Property and (iii) whatever
is receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.

 

“Receivables” shall mean all rights to payment, whether or
not earned by performance, for goods or other property sold, leased, licensed,
assigned or otherwise disposed of, or services rendered or to be rendered,
including, without limitation all such rights constituting or evidenced by any
Account, Chattel Paper, Instrument, Revolving Credit General Intangible or
Investment Related Property, together with all of Grantor’s rights, if any, in
any goods or other property giving rise to such right to payment and all
Collateral Support and Supporting Obligations related thereto and all
Receivables Records.

 

“Receivables Records” shall mean (i) all original copies of
all documents, instruments or other writings or electronic records or other
Records evidencing the Receivables, (ii) all books, correspondence, credit
or other files, Records, ledger sheets or cards, invoices, and other papers
relating to Receivables, including, without limitation, all tapes, cards,
computer tapes, computer discs, computer runs, record keeping systems and other
papers and documents relating to the Receivables, whether in the possession or
under the control of Grantor or any computer bureau or agent from time to time
acting for Grantor or otherwise, (iii) all evidences of the filing of
financing statements and the registration of other instruments in connection
therewith, and amendments, supplements or other modifications thereto, notices
to other creditors or secured parties, and certificates, acknowledgments, or
other writings, including, without limitation, lien search reports, from filing
or other registration officers, (iv) all credit information, reports and
memoranda relating thereto and (v) all other written or nonwritten forms
of information related in any way to the foregoing or any Receivable.

 

“Record” shall have the meaning specified in Article 9
of the UCC.

 

“Revolving Credit General
Intangibles” means
all General Intangibles pertaining to any items of Collateral set forth in Section 2.1,
including, without limitation, all contingent rights with respect to warranties
on Inventory or Accounts which are not yet “payment intangibles” (as defined in
Article 9 of the UCC).

 

“Secured Obligations” shall have the meaning assigned in Section 3.1.

 

“Secured Parties” shall mean the Agents and the Lenders and
shall include, without limitation, all former Agents and Lenders to the extent
that any Obligations owing to such Persons were incurred while such Persons
were Agents or Lenders and such Obligations have not been paid or satisfied in
full. 

 

“Securities” shall mean any stock, shares, partnership
interests, voting trust certificates, certificates of interest or participation
in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as “securities”
or any certificates of interest, shares or participations in temporary or
interim certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.

 

“Securities Accounts” (i) shall mean all “securities accounts”
as defined in Article 8 of the UCC and (ii) shall include, without limitation,
all of the accounts listed on Schedule 4.4(A)

 

5

 

under the heading “Securities Accounts” (as such schedule may
be amended or supplemented from time to time).

 

“Separate Collateral” shall have the meaning set forth in the
Intercreditor Agreement.

 

“Shared Collateral”
shall have the meaning set forth in the Intercreditor Agreement.

 

“Supporting Obligation” shall mean all “supporting obligations” as
defined in Article 9 of the UCC.

 

“Tax Code” shall mean the United States Internal
Revenue Code of 1986, as amended from time to time.

 

“Trademark Licenses” shall mean any and all written agreements
containing express grant of any right in or to Trademarks (whether such Grantor
is licensee or licensor thereunder) including, without limitation, each
agreement referred to in Schedule 4.7(F) (as such schedule may
be amended or supplemented from time to time).

 

“Trademarks” shall mean all United States, and foreign
trademarks, trade names, corporate names, company names, business names,
fictitious business names, Internet domain names, service marks, certification
marks, collective marks, logos, other source or business identifiers, designs
and general intangibles of a like nature, all registrations and applications
for any of the foregoing including, but not limited to: (i) the
registrations and applications referred to in Schedule 4.7(E) (as
such schedule may be amended or supplemented from time to time), (ii) all
extensions or renewals of any of the foregoing, (iii) all of the goodwill
of the business connected with the use of and symbolized by the foregoing, (iv) the
right to sue for past, present and future infringement or dilution of any of
the foregoing or for any injury to goodwill, and (v) all Proceeds of the
foregoing, including, without limitation, licenses, royalties, income,
payments, claims, damages, and proceeds of suit.

 

“Trade Secret Licenses” shall mean any and all written agreements
containing the express grant of any right in or to Trade Secrets (whether such
Grantor is licensee or licensor thereunder) including, without limitation, each
agreement referred to in Schedule 4.7(G) (as such schedule may
be amended or supplemented from time to time). 

 

“Trade Secrets” shall mean all trade secrets and all other
confidential or proprietary information and know-how whether or not such trade
secret has been reduced to a writing or other tangible form, including all
documents and things embodying, incorporating, or referring in any way to such
trade secret, including but not limited to: (i) the right to sue for past,
present and future misappropriation or other violation of any Trade Secret, and
(ii) all Proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

“UCC” shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York or, when the context implies,
the Uniform Commercial Code as in effect from time to time in any other
applicable jurisdiction.

 

“United States” shall mean the United States of America.

 

6

 

1.2          Definitions; Interpretation.  All capitalized
terms used herein (including the preamble and recitals hereto) and not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement as in effect on the date hereof without giving effect to any
amendments or modifications thereto or, if not defined therein, in the
UCC.  References to “Sections,” “Exhibits”
and “Schedules” shall be to Sections, Exhibits and Schedules, as the case may
be, of this Agreement unless otherwise specifically provided.  Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive
effect.  Any of the terms defined herein
may, unless the context otherwise requires, be used in the singular or the
plural, depending on the reference.  The
use herein of the word “include” or “including”, when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not nonlimiting language (such
as “without limitation” or “but not limited to” or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that fall within the broadest possible scope of such general statement,
term or matter.  If any conflict or
inconsistency exists between this Agreement and the Credit Agreement, the
Credit Agreement shall govern.  All
references herein to provisions of the UCC shall include all successor
provisions under any subsequent version or amendment to any Article of the
UCC.

 

SECTION 2.   GRANT OF SECURITY.

 

2.1          Grant of Security.  Each Grantor hereby
grants to the Collateral Agent for its benefit and for the benefit of the
Secured Parties a security interest in and continuing lien on all of such
Grantor’s right, title and interest in, to and under all personal property of
such Grantor, subject to the limitations set forth in Section 2.2,
including, but not limited to the following, in each case whether now owned or
existing or hereafter acquired or arising and wherever located (all of which
being hereinafter collectively referred to as the “Collateral”):

 

(a)           Accounts,

 

(b)           All
Inventory;

 

(c)           Documents
relating to or evidencing any Inventory or other item of property described in
this Section 2.1;

 

(d)           Investment
Accounts (including all cash, marketable securities and other funds held in
credited to or on deposit in any Investment Account);

 

(e)           Instruments
(including Intercompany Notes of Subsidiaries);

 

(f)            Chattel
Paper;

 

(g)           Revolving
Credit General Intangibles;

 

(h)           Insurance;

 

(i)            Letter
of Credit Rights;

 

(j)            Records,
including all Collateral Records, “supporting obligations” (as defined in Article 9
of the UCC) and related Letters of Credit, Commercial Tort Claims or other
claims and causes of action, in each case, to the extent related primarily to
any of the foregoing;

 

7

 

(k)           to
the extent not otherwise included above, all Collateral Support relating to any
of the foregoing; and 

 

(l)            to
the extent not otherwise included above, all Proceeds, products, accessions,
rents and profits of or in respect of any of the foregoing.

 

2.2          Certain Limited Exclusions.  Notwithstanding
anything herein to the contrary, in no event shall the Collateral include or
the security interest granted under Section 2.1 hereof attach to any
lease, license, contract, Intellectual Property, property rights or agreement
to which any Grantor is a party or any of its rights or interests thereunder if
and for so long as the grant of such security interest shall constitute or
result in (i) the abandonment, invalidation or unenforceability of any
right, title or interest of any Grantor therein or (ii) in a breach or
termination pursuant to the terms of, or a default under, any such lease,
license, contract, property rights or agreement (other than to the extent that
any such term would be rendered ineffective pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the UCC (or any successor provision or provisions) of any
relevant jurisdiction or any other applicable law (including the Bankruptcy
Code) or principles of equity), provided however that the Collateral shall
include and such security interest shall attach immediately at such time as the
condition causing such abandonment, invalidation or unenforceability shall be
remedied and to the extent severable, shall attach immediately to any portion
of such lease, license, contract, property rights or agreement that does not
result in any of the consequences specified in (i) or (ii) above. 

 

2.3          Intercreditor Agreement.  Notwithstanding anything herein to the
contrary, the lien and security interest granted to the Collateral Agent
pursuant to this Agreement and the exercise of any right or remedy by the
Collateral Agent hereunder are subject to the provisions of the Intercreditor
Agreement.  In the event of any conflict
between the terms of the Intercreditor Agreement and this Agreement, the terms
of the Intercreditor Agreement shall govern and control.  Any reference in this Agreement to a “first
priority lien” or words of similar effect in describing the security interests
created hereunder shall be understood to refer to such priority as set forth in
the Intercreditor Agreement.  All
representations, warranties and covenants in this Agreement shall be subject to
the provisions and qualifications set forth in this Section 2.3.

 

SECTION 3.   SECURITY FOR OBLIGATIONS;
GRANTORS REMAIN LIABLE.

 

3.1          Security for
Obligations.  This Agreement secures, and the Collateral is
collateral security for, the prompt and complete payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. §362(a) (and any successor provision
thereof)), of all Obligations with respect to every Grantor (the “Secured Obligations”).

 

3.2          Continuing
Liability Under Collateral.  Notwithstanding anything herein to the
contrary, (i) each Grantor
shall remain liable for all obligations under the Collateral and nothing
contained herein is intended or shall be a delegation of duties to the
Collateral Agent or any Secured Party, (ii) each Grantor shall remain
liable under each of the agreements included in the Collateral to perform all
of the obligations undertaken by it thereunder all in accordance with and
pursuant to the terms and provisions thereof and neither the Collateral Agent
nor any Secured Party shall have any obligation or liability under any of such
agreements by reason of or arising out of this Agreement or any other document
related thereto nor shall the Collateral Agent nor any Secured Party have any
obligation to make any inquiry as to the nature or sufficiency of any payment
received by it or have any obligation to take any action to collect or enforce
any rights

 

8

 

under any
agreement included in the Collateral and (iii) the exercise by the
Collateral Agent of any of its rights hereunder shall not release any Grantor
from any of its duties or obligations under the contracts and agreements
included in the Collateral.

 

SECTION 4.   REPRESENTATIONS AND
WARRANTIES AND COVENANTS.

 

4.1          Generally.

 

(a)           Representations
and Warranties.  Each Grantor hereby
represents and warrants, on the Closing Date and on each Credit Date, that:

 

(i)            it owns
the Collateral purported to be owned by it or otherwise has the rights it
purports to have in each item of Collateral free and clear of any and all
Liens, rights or claims of all other Persons other than Permitted Liens;

 

(ii)           it has
indicated on Schedule 4.1(A)(as such schedule may be amended or
supplemented from time to time): (w) the type of organization of such Grantor,
(x) the jurisdiction of organization of such Grantor, (y) its organizational
identification number and (z) the jurisdiction where the chief executive office
or its sole place of business is, and for the one-year period preceding the
date hereof has been, located.

 

(iii)          the full
legal name of such Grantor is as set forth on Schedule 4.1(A) and it
has not done in the last five (5) years, and does not do, business under
any other name (including any trade-name or fictitious business name) except
for those names set forth on Schedule 4.1(B) (as such schedule may
be amended or supplemented from time to time);

 

(iv)          except as
provided on Schedule 4.1(C), it has not changed its name, jurisdiction of
organization, chief executive office or sole place of business (or principal
residence if such Grantor is a natural person) or its corporate structure in
any way (e.g., by merger, consolidation, change in corporate form or otherwise)
within the past five (5) years;

 

(v)           other than
in connection with Permitted Liens, it has not within the last five (5) years
become bound (whether as a result of merger or otherwise) as debtor under a
security agreement entered into by another Person, which has not heretofore
been terminated other than the agreements identified on Schedule 4.1(D) hereof
(as such schedule may be amended or supplemented from time to time);

 

(vi)          with
respect to each agreement identified on Schedule 4.1(D), it has indicated
on Schedule 4.1 (A) and Schedule 4.1(B) the information
required pursuant to Section 4.1(a)(ii), (iii) and (iv) with
respect to the debtor under each such agreement;

 

(vii)         (u) upon
the filing of all UCC financing statements naming each Grantor as “debtor” and
the Collateral Agent as “secured party” and describing the Collateral in the
filing offices set forth opposite such Grantor’s name on Schedule 4.1(E) hereof
(as such schedule may be amended or supplemented from time to time) and
other filings delivered by each Grantor, (v) upon delivery of all
Instruments Chattel Paper and certificated Pledged Debt, (w) upon sufficient
identification of Commercial Tort Claims, (x) upon execution of a control
agreement establishing the Collateral Agent’s “control” (within the meaning of Section 8-106,
9-106 or 9-104 of the UCC, as applicable) with

 

9

 

respect to
any Investment Account, and (y) upon consent of the issuer with respect to
Letter of Credit Rights, the security interests granted to the Collateral Agent
hereunder constitute valid and perfected first priority Liens (subject in the
case of priority only to Permitted Liens and to the rights of the United States
government (including any agency or department thereof) with respect to United
States government Receivables) on all of the Collateral;

 

(viii)        after
giving effect to the actions described in subsection (vii) above,
except as may be required, in connection with the disposition of any
Securities, by laws generally affecting the offering and sale of Securities,
all actions and consents, including all filings, notices, registrations and
recordings necessary or desirable for the exercise by the Collateral Agent of
the voting or other rights provided for in this Agreement or the exercise of
remedies in respect of the Collateral have been made or obtained;

 

(ix)           other
than the financing statements filed in favor of the Collateral Agent, no
effective UCC financing statement, fixture filing or other instrument similar
in effect under any applicable law covering all or any part of the Collateral
is on file in any filing or recording office except for (x) financing
statements for which proper termination statements have been delivered to the
Collateral Agent for filing and (y) financing statements filed in connection
with Permitted Liens;

 

(x)            no
authorization, approval or other action by, and no notice to or filing with,
any Governmental Authority or regulatory body (other than those which have been
obtained) is required for either (i) the pledge or grant by any Grantor of
the Liens purported to be created in favor of the Collateral Agent hereunder or
(ii) the exercise by Collateral Agent of any rights or remedies in respect
of any Collateral (whether specifically granted or created hereunder or created
or provided for by applicable law), except (A) for the filings
contemplated by clause (vii) above and (B) as may be required, in
connection with the disposition of any Securities, by laws generally affecting
the offering and sale of Securities;

 

(xi)           all
written information supplied by any Grantor with respect to any of the
Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects;

 

(xii)          none of
the Collateral constitutes, or is the Proceeds of, “farm products” (as defined
in the UCC);

 

(xiii)         it does
not own any “As-extracted collateral” (as defined in the UCC) or any timber to
be cut other than the “As-extracted collateral” and the timber located on the
Real Property as described on Schedule 4.1(F) hereof;

 

(xiv)        except as
described on Schedule 4.1(D), such
Grantor has not become bound as a debtor, either by contract or by operation of
law, by a security agreement previously entered into by another Person; and

 

(xv)         such
Grantor has been duly organized as an entity of the type as set forth opposite
such Grantor’s name on Schedule 4.1(A) solely under the laws of the
jurisdiction as set forth opposite such Grantor’s name on Schedule 4.1(A) and
remains duly existing as such.  Such
Grantor has not filed any certificates of domestication, transfer or
continuance in any other jurisdiction.

 

10

 

(b)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees that:

 

(i)            except
for the security interest created by this Agreement, it shall not create or
suffer to exist any Lien upon or with respect to any of the Collateral, except
Permitted Liens, and such Grantor shall defend the Collateral against all
Persons at any time claiming any interest therein;

 

(ii)           it shall
not produce, use or permit any Collateral to be used unlawfully or in violation
of any provision of this Agreement or any applicable statute, regulation or
ordinance or any policy of insurance covering the Collateral if such violation
could reasonably be expected to have a Material Adverse Effect; 

 

(iii)          it shall
not change such Grantor’s name, identity, corporate structure (e.g., by merger,
consolidation, change in corporate form or otherwise), sole place of business,
chief executive office, type of organization or jurisdiction of organization or
establish any trade names unless it shall have (a) notified the Collateral
Agent in writing, by executing and delivering to the Collateral Agent a
completed Pledge Supplement, substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto, at least
fifteen (15) days prior to any such change or establishment, identifying such
new proposed name, identity, corporate structure, sole place of business, chief
executive office or jurisdiction of organization or trade name and providing
such other information in connection therewith as the Collateral Agent may
reasonably request and (b) taken all actions necessary or advisable to
maintain the continuous validity, perfection and the same or better priority of
the Collateral Agent’s security interest in the Collateral intended to be
granted and agreed to hereby;

 

(iv)          if the
Collateral Agent or any other Secured Party gives value to enable Grantor to
acquire rights in or the use of any Collateral, it shall use such value for
such purposes and such Grantor further agrees that repayment of any Obligation
shall apply on a “first-in, first-out” basis so that the portion of the value
used to acquire rights in any Collateral shall be paid in the chronological
order such Grantor acquired rights therein; 

 

(v)           it shall
pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the
extent the validity thereof is being contested in good faith and as otherwise
provided in the Credit Agreement; provided, such Grantor shall in any event pay
such taxes, assessments, charges, levies or claims not later than five (5) days
prior to the date of any proposed sale under any judgment, writ or warrant of
attachment entered or filed against such Grantor or any of the Collateral as a
result of the failure to make such payment; 

 

(vi)          upon such
Grantor or any Senior Officer of such Grantor obtaining actual knowledge
thereof, it shall promptly notify the Collateral Agent in writing of any event
that would reasonably be expected to have a Material Adverse Effect on the
value of the Collateral or any material portion thereof, the ability of any
Grantor or the Collateral Agent to dispose of the Collateral or any material
portion thereof, or the rights and remedies of the Collateral Agent in relation
thereto, including, without limitation, the levy of any legal process against
the Collateral or any portion thereof; 

 

11

 

(vii)         it shall
not take or permit any action which would reasonably be expected to materially
impair the Collateral Agent’s rights in the Collateral; and

 

(viii)        it shall
not sell, transfer or assign (by operation of law or otherwise) any Collateral
except as otherwise permitted in accordance with the Credit Agreement.

 

4.2          Inventory.

 

(a)           Representations
and Warranties.  Each Grantor
represents and warrants, on the Closing Date and on each Credit Date, that:

 

(i)            all of
the Inventory (other than Inventory in transit) included in the Collateral is
kept for the past four (4) years only at the locations specified in Schedule 4.2
(as such schedule may be amended or supplemented from time to time); 

 

(ii)           any goods
now or hereafter produced by any Grantor included in the Collateral have been
and will be produced in compliance with the requirements of the Fair Labor
Standards Act, as amended; and

 

(iii)          except as
set forth in Schedule 4.2, none of the Inventory is in the possession of
an issuer of a negotiable document (as defined in Section 7-104 of the
UCC) therefor or otherwise in the possession of a bailee or a warehouseman.

 

(b)           Covenants
and Agreements.  Each Grantor
covenants and agrees that:

 

(i)            other
than Inventory in transit or sold to customers in the ordinary course of
business, it shall keep the Inventory and any Documents evidencing Inventory in
the locations specified on Schedule 4.2 (as such schedule may be
amended or supplemented from time to time) unless, with respect to any location
at which Inventory having a value in excess of $500,000 is located, it shall
have (a) notified the Collateral Agent in writing, by executing and
delivering to the Collateral Agent an Officer’s Certificate, and a completed
Pledge Supplement, substantially in the form of Exhibit A attached hereto,
together with all Supplements to Schedules thereto, at least fifteen (15) days
prior to any change in locations, identifying such change in the location of
and the new location of such Collateral, and providing such other information
in connection therewith as the Collateral Agent may reasonably request and (b) taken
all actions necessary or advisable to maintain the continuous validity,
perfection and the same or better priority of the Collateral Agent’s security
interest in the Collateral intended to be granted and agreed to hereby, or to
enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder, with respect to such Inventory; 

 

(ii)           it shall
keep correct and accurate records of the Inventory, as is customarily
maintained under similar circumstances by Persons of established reputation
engaged in a similar business, and in any event in conformity with GAAP;

 

(iii)          it shall
not deliver any Document evidencing any Inventory to any Person other than the
issuer of such Document (or to a shipper or freight forwarder acting on such
Grantor’s behalf in the ordinary course of business) to claim the goods
evidenced therefor or the Collateral Agent; and

 

12

 

(iv)          if any
Inventory having a value in excess of $500,000 in the aggregate is in
possession or control of any third party (other than Inventory in transit and
customers purchasing inventory in the ordinary course of business), each
Grantor shall join with the Collateral Agent in notifying the third party of
the Collateral Agent’s security interest and obtaining an acknowledgment from
the third party that it is holding the Inventory for the benefit of the
Collateral Agent.

 

4.3          Receivables.

 

(a)           Representations
and Warranties.  Each Grantor
represents and warrants, on the Closing Date and on each Credit Date, that:

 

(i)            each
Receivable (a) is the legal, valid and binding obligation of the Account
Debtor in respect thereof, representing an unsatisfied obligation of such
Account Debtor, (b) is enforceable in accordance with its terms except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, (c) is not subject to any setoffs, defenses, taxes
or counterclaims that have not been disclosed to the Collateral Agent (except
with respect to refunds, returns and allowances in the ordinary course of
business) and (d) is in compliance in all material respects with all
applicable laws, whether federal, state, local or foreign; 

 

(ii)           none of
the Account Debtors in respect of any Receivable in excess of $500,000
individually or $1,000,000 in the aggregate is the government of the United
States, any agency or instrumentality thereof, any state or municipality or any
foreign sovereign; and

 

(iii)          no
Receivable is evidenced by, or constitutes, an Instrument or Chattel Paper
which has not been delivered to, or otherwise subjected to the control of, the
Collateral Agent to the extent required by, and in accordance with Section 4.3(c).

 

(b)           Covenants
and Agreements:  Each Grantor hereby
covenants and agrees that:

 

(i)            it shall
keep and maintain at its own cost and expense satisfactory and complete records
of the Receivables, including, but not limited to, the originals of all
documentation with respect to all Receivables and records of all payments
received and all credits granted on the Receivables, all merchandise returned
and all other dealings therewith;  

 

(ii)           it shall
mark conspicuously, in form and manner reasonably satisfactory to the
Collateral Agent, all Chattel Paper and Instruments (other than any delivered
to the Collateral Agent as provided herein), as well as the Receivables Records
with an appropriate reference to the fact that the Collateral Agent has a
security interest therein;

 

(iii)          it shall
perform in all material respects all of its obligations with respect to the
Receivables, except to the extent being contested in good faith, so long as
adequate reserve or other appropriate provision, as shall be required in
conformity with GAAP, shall have been made therefor;

 

13

 

(iv)          other than
in the ordinary course of business as generally conducted by it on and prior to
the date hereof, and except as otherwise provided in subsection (v) below,
following an Event of Default, such Grantor shall not (w) grant any extension
or renewal of the time of payment of any Receivable, (x) compromise or settle
any dispute, claim or legal proceeding with respect to any Receivable for less
than the total unpaid balance thereof, (y) release, wholly or partially, any
Person liable for the payment thereof, or (z) allow any credit or discount
thereon;

 

(v)           except as
otherwise provided in this subsection, each Grantor shall continue to collect
all amounts due or to become due to such Grantor under the Receivables and any
Supporting Obligation and diligently exercise each material right it may have
under any Receivable any Supporting Obligation or Collateral Support, in each
case, at its own expense, and in connection with such collections and exercise,
such Grantor shall take such action as such Grantor may deem necessary or
advisable.  Notwithstanding the
foregoing, the Collateral Agent shall have the right following an Event of
Default to notify, or require any Grantor to notify, any Account Debtor of the
Collateral Agent’s security interest in the Receivables and any Supporting
Obligation and, in addition, at any time following the occurrence and during
the continuation of an Event of Default, the Collateral Agent may:  (1) direct the Account Debtors under any
Receivables to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Collateral Agent; (2) notify, or require any
Grantor to notify, each Person maintaining a lockbox or similar arrangement to
which Account Debtors under any Receivables have been directed to make payment
to remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to the Collateral Agent; and (3) enforce, at the expense of such
Grantor, collection of any such Receivables and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as
such Grantor might have done.  If the
Collateral Agent notifies any Grantor that it has elected to collect the Receivables
in accordance with the preceding sentence, any payments of Receivables received
by such Grantor shall be forthwith (and in any event within two (2) Business
Days) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Collateral Agent if required, in the Collateral Account
maintained under the sole dominion and control of the Collateral Agent, and
until so turned over, all amounts and proceeds (including checks and other
instruments) received by such Grantor in respect of the Receivables, any Supporting
Obligation or Collateral Support shall be received in trust for the benefit of
the Collateral Agent hereunder and shall be segregated from other funds of such
Grantor and such Grantor shall not adjust, settle or compromise the amount or
payment of any Receivable, or release wholly or partly any Account Debtor or
obligor thereof, or allow any credit or discount thereon; and

 

(vi)          it shall
use its best efforts to keep in full force and effect any Supporting Obligation
or Collateral Support relating to any Receivable.

 

(c)           Delivery
and Control of Receivables.  With
respect to any Receivables in excess of $100,000 individually or $500,000 in
the aggregate that is evidenced by, or constitutes, Chattel Paper or
Instruments, each Grantor shall cause each originally executed copy thereof to
be delivered to the Collateral Agent (or its agent or designee) appropriately
indorsed to the Collateral Agent or indorsed in blank:  (i) with respect to any such Receivables
in existence on the date hereof, on or prior to the date hereof and (ii) with
respect to any such Receivables hereafter arising, within ten (10) days of
such Grantor acquiring rights therein. 
With respect to any Receivables in excess of $100,000 individually or
$500,000 in the aggregate which would constitute “electronic

 

14

 

chattel
paper” under Article 9 of the UCC, each Grantor shall take all steps
necessary to give the Collateral Agent control over such Receivables (within
the meaning of Section 9-105 of the UCC): 
(i) with respect to any such Receivables in existence on the date
hereof, on or prior to the date hereof and (ii) with respect to any such
Receivables hereafter arising, within ten (10) days of such Grantor
acquiring rights therein.  Any Receivable
not otherwise required to be delivered or subjected to the control of the
Collateral Agent in accordance with this subsection (c) shall be
delivered or subjected to such control upon request of the Collateral Agent.

 

4.4          Investment Related Property; Pledged Debt; Investment Accounts.

 

4.4.1       Investment
Related Property Generally

 

(a)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees that to the extent any of the Collateral includes any
Investment Related Property:

 

(i)            in the
event it acquires rights in any such Investment Related Property after the date
hereof, it shall deliver to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto, reflecting such new Investment Related
Property and all other such Investment Related Property.  Notwithstanding the foregoing, it is
understood and agreed that the security interest of the Collateral Agent shall
attach to all such Investment Related Property immediately upon any Grantor’s
acquisition of rights therein and shall not be affected by the failure of any
Grantor to deliver a supplement to Schedule 4.4 as required hereby;

 

(ii)           except as
provided in the next sentence, in the event such Grantor receives any
dividends, interest or distributions on any such Investment Related Property,
or any securities or other property upon the merger, consolidation, liquidation
or dissolution of any issuer of any such Investment Related Property, then (a) such
dividends, interest or distributions and securities or other property shall be
included in the definition of Collateral without further action and (b) such
Grantor shall immediately take all steps, if any, necessary or advisable to
ensure the validity, perfection, priority and, if applicable, control of the
Collateral Agent over such Investment Related Property (including, without
limitation, delivery thereof to the Collateral Agent) and pending any such
action such Grantor shall be deemed to hold such dividends, interest,
distributions, securities or other property in trust for the benefit of the
Collateral Agent and shall segregate such dividends, distributions, Securities
or other property from all other property of such Grantor.  Notwithstanding the foregoing, so long as no
Event of Default shall have occurred and be continuing, the Collateral Agent
authorizes each Grantor to retain all ordinary cash dividends and distributions
paid by the issuer and all scheduled payments of interest and principal; and

 

(iii)          each
Grantor consents to the grant by each other Grantor of a Security Interest in
all such Investment Related Property to the Collateral Agent.

 

(b)           Delivery
and Control.  

 

(i)            To the
extent any of the Collateral includes any Investment Related Property, unless
prohibited by the Organizational Documents of the Issuer of any such Investment
Related Property with respect to a joint venture of such Grantor, each Grantor
agrees that with respect to any such Investment Related Property in which it

 

15

 

currently
has rights it shall comply with the provisions of this Section 4.4.1(b) on
or before the Closing Date and with respect to any such Investment Related
Property hereafter acquired by such Grantor it shall comply with the provisions
of this Section 4.4.1(b) promptly upon acquiring rights therein, in
each case in form and substance satisfactory to the Collateral Agent.  With respect to any such Investment Related
Property in a principal amount in excess of $5,000 individually that is
represented by a certificate or that is an “instrument” (other than any such
Investment Related Property credited to a Securities Account), subject to the
terms of the Intercreditor Agreement, it shall cause such certificate or
instrument to be delivered to the Collateral Agent, indorsed in blank by an “effective
indorsement” (as defined in Section 8-107 of the UCC), regardless of
whether such certificate constitutes a “certificated security” for purposes of
the UCC.  With respect to any such
Investment Related Property that is an “uncertificated security” for purposes
of the UCC (other than any “uncertificated securities” credited to a Securities
Account), it shall cause the issuer of such uncertificated security to either,
subject to the terms of the Intercreditor Agreement, (i) register the
Collateral Agent as the registered owner thereof on the books and records of
the issuer or (ii) execute an agreement substantially in the form of Exhibit B
hereto, pursuant to which such issuer agrees to comply with the Collateral
Agent’s instructions with respect to such uncertificated security without
further consent by such Grantor.  

 

(c)           Voting
and Distributions.

 

(i)            So long
as no Event of Default shall have occurred and be continuing to the extent any
of the Collateral consists of Investment Related Property: 

 

(1)                                  except as
otherwise provided under the covenants and agreements relating to such
Investment Related Property in this Agreement or elsewhere herein or in the
Credit Agreement, each Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to such
Investment Related Property or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the Credit Agreement;
provided, no Grantor shall exercise or refrain from exercising any such right
if the Collateral Agent shall have notified such Grantor that, in the
Collateral Agent’s reasonable judgment, such action would have a Material
Adverse Effect on the value of such Investment Related Property or any part
thereof; and provided further, such Grantor shall give the Collateral Agent at
least five (5) Business Days prior written notice of the manner in which
it intends to exercise, or the reasons for refraining from exercising, any such
right; it being understood, however, that neither the voting by such Grantor of
any capital stock owned by such Grantor for, or such Grantor’s consent to, the
election of directors (or similar governing body) at a regularly scheduled
annual or other meeting of stockholders or with respect to routine matters at
any such meeting, nor such Grantor’s consent to or approval of any action
otherwise permitted under this Agreement and the Credit Agreement, shall be
deemed inconsistent with the terms of this Agreement or the Credit Agreement
within the meaning of this Section 4.4(c)(i)(1), and no notice of any such
voting or consent need be given to the Collateral Agent; and

 

(2)                                  the
Collateral Agent shall promptly execute and deliver (or cause to be executed
and delivered) to each Grantor all proxies, and other instruments as such
Grantor may from time to time reasonably request for the purpose of enabling
such Grantor

 

16

 

to exercise
the voting and other consensual rights when and to the extent which it is
entitled to exercise pursuant to clause (1) above;

 

(3)                                  Upon the
occurrence and during the continuation of an Event of Default and any Grantors’
receipt of notice of exercise by the Collateral Agent of any powers, rights,
privileges and remedies available upon the occurrence and during the
continuance of an Event of Default, subject to the terms of the Intercreditor
Agreement: 

 

(A)                              all rights of each Grantor to exercise or
refrain from exercising the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant hereto shall cease and all such
rights shall thereupon become vested in the Collateral Agent who shall
thereupon have the sole right to exercise such voting and other consensual
rights; and

 

(B)                                in order to permit the Collateral Agent to
exercise the voting and other consensual rights which it may be entitled to
exercise pursuant hereto and to receive all dividends and other distributions
which it may be entitled to receive hereunder: (1) each Grantor shall
promptly execute and deliver (or cause to be executed and delivered) to the
Collateral Agent all proxies, dividend payment orders and other instruments as
the Collateral Agent may from time to time reasonably request and (2) each
Grantor acknowledges that the Collateral Agent may utilize the power of
attorney set forth in Section 6.1.

 

4.4.2       Pledged Debt

 

(a)           Representations
and Warranties.  Each Grantor hereby
represents and warrants, on the date of this Agreement, that Schedule 4.4
(as such schedule may be amended or supplemented from time to time) sets
forth under the heading “Pledged Debt” all of the Pledged Debt owned by any
Grantor (other than Pledged Debt owned by another Grantor or one of its
Subsidiaries), all of such Pledged Debt has been duly authorized, authenticated
or issued, and delivered and is the legal, valid and binding obligation of the
issuers thereof and is not in default;

 

(b)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees that it shall notify the Collateral Agent of any default
under any Pledged Debt that has caused, either in any individual case or in the
aggregate, a Material Adverse Effect.

 

4.4.3       Investment
Accounts

 

(a)           Representations
and Warranties. Each Grantor hereby represents and warrants, on the Closing
Date and each Credit Date, that:

 

(i)            Schedule 4.4
hereto (as such schedule may be amended or supplemented from time to time)
sets forth under the heading “Securities Accounts” all of the Securities
Accounts in which each Grantor has an interest. 
Each Grantor is the sole entitlement holder of each such Securities
Account on Schedule 4.4, and such Grantor has not consented to, and
is not otherwise aware of, any Person (other than the Collateral Agent pursuant
hereto or the Priority Lien Collateral Trustee (as defined in the Intercreditor
Agreement)) having “control” (within the meanings of Sections 8-106 and 9-106
of the

 

17

 

UCC) over,
or any other interest in, any such Securities Account or securities or other
property credited thereto;

 

(ii)           Schedule 4.4
hereto (as such schedule may be amended or supplemented from time to time)
sets forth under the heading “Deposit Accounts” all of the Deposit Accounts in
which each Grantor has an interest.  Each
Grantor is the sole account holder of each such Deposit Account on Schedule 4.4
and such Grantor has not consented to, and is not otherwise aware of, any
Person (other than the Collateral Agent pursuant hereto or the Priority Lien
Collateral Trustee) having either sole dominion and control (within the meaning
of common law) or “control” (within the meanings of Section 9-104 of the
UCC) over, or any other interest in, any such Deposit Account or any money or
other property deposited therein; and

 

(iii)          Each
Grantor has taken all actions necessary or desirable, including those specified
in Section 4.4.4(c), to: (a) establish Collateral Agent’s “control”
(within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion
of the Collateral constituting Certified Securities, Uncertified Securities,
Securities Accounts, Securities Entitlements (each as defined in the UCC); (b) establish
the Collateral Agent’s “control” (within the meaning of Section 9-104 of
the UCC) over all Deposit Accounts (other than those Deposit Accounts not
subject to such requirement under Section 4.4.4(c)); and (c) deliver
all Instruments to the Collateral Agent.

 

(b)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees with the Collateral Agent and each other Secured Party
that it shall not close or terminate any Investment Account without prior
notice to the Collateral Agent or establish any additional Investment Accounts
unless a control agreement has been entered into by the appropriate Grantor,
Collateral Agent and securities intermediary or depository institution at which
such additional account is to be maintained in accordance with the provisions
of Section 4.4.4(c).

 

(c)           Delivery
and Control

 

(i)            With
respect to any Investment Accounts consisting of Securities Accounts or
Securities Entitlements, it shall cause the securities intermediary maintaining
such Securities Account or Securities Entitlement to enter into an agreement
substantially in the form of Exhibit C hereto (or otherwise reasonably
acceptable to the Collateral Agent) pursuant to which it shall agree to comply
with the Collateral Agent’s “entitlement orders” without further consent by
such Grantor.  With respect to any
Investment Related Property that is a “Deposit Account,” it shall cause the
depositary institution maintaining such account to enter into an agreement
substantially in the form of Exhibit D hereto (or otherwise reasonably
acceptable to the Collateral Agent) (a “Deposit Account Control
Agreement”), pursuant to which the Collateral Agent shall have both
sole dominion and control over such Deposit Account (within the meaning of the
common law), subject to the terms of the Intercreditor Agreement, and “control”
(within the meaning of Section 9-104 of the UCC) over such Deposit
Account; provided that the Grantors shall not be required to comply with this
sentence with respect to Deposit Accounts that (A) are used exclusively to
fund payroll or (B) have an aggregate balance for all such Deposit
Accounts of $2,500,000 or less.  Subject
to the proviso to the immediately preceding sentence, each Grantor shall have
entered into such control agreement or agreements with respect to: (i) any
Securities Accounts, Securities Entitlements or Deposit Accounts that exist on
the Closing Date, as of or prior to the Closing Date and (ii) any
Securities Accounts, Securities Entitlements or Deposit Accounts that are
created or acquired after the

 

18

 

Closing Date,
as of or prior to the deposit or transfer of any such Securities Entitlements
or funds, whether constituting moneys or investments, into such Securities
Accounts or Deposit Accounts.  If any
Grantor fails to comply with this covenant with respect to Deposit Accounts,
such Grantor shall have ten (10) days to either (x) transfer funds in an
amount sufficient to bring such Grantor into compliance with this covenant from
Deposit Accounts not covered by Deposit Account Control Agreements to Deposit
Accounts covered by Deposit Account Control Agreements or (y) enter into one or
more Deposit Account Control Agreements with the Collateral Agent and the
depository institutions at which such Deposit Accounts are not covered by
Deposit Account Control Agreements maintained in accordance with the provisions
of this Section 4.4.4(c) such that Grantors will then be in
compliance with this covenant.  Failure
to comply within such ten (10) day period shall constitute an Event of
Default.

 

(ii)           In
addition to the foregoing, if any issuer of any Investment Related Property
included in the Collateral is located in a jurisdiction outside of the United
States, each Grantor shall take such additional actions, including, without
limitation, causing the issuer to register the pledge on its books and records
or making such filings or recordings, in each case as may be necessary or
advisable, under the laws of such issuer’s jurisdiction to insure the validity,
perfection and priority of the security interest of the Collateral Agent, unless
the Collateral Agent, in its reasonable judgment, determines that the cost of
such actions is excessive relative to the value of such Investment Related
Property or that such actions would materially interfere with the Grantor’s
ability to use a Securities Account or Deposit Account in the ordinary course
of business.   Upon the occurrence and
during the continuation of an Event of Default, the Collateral Agent shall have
the right, without notice to any Grantor, to transfer all or any portion of such
Investment Related Property to its name or the name of its nominee or
agent.  In addition, the Collateral Agent
shall have the right at any time, without notice to any Grantor, to exchange
any certificates or instruments representing any such Investment Related
Property for certificates or instruments of smaller or larger denominations.

 

4.5          Material Contracts.

 

(a)           Representations
and Warranties.  Each Grantor hereby
represents and warrants, on the Closing Date and on each Credit Date, that:

 

(i)            Schedule 4.5
(as such schedule may be amended or supplemented from time to time) sets
forth all of the Material Contracts to which such Grantor has rights; 

 

(ii)           the
Material Contracts, true and complete copies (including any amendments or
supplements thereof) of which have been furnished to the Collateral Agent, have
been duly authorized, executed and delivered by Grantors and all other parties
thereto, are in full force and effect and are binding upon and enforceable
against all parties thereto in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws.  There
exists no material default under any Material Contract by any Grantor or any
other party thereto and neither such Grantor, nor to its knowledge, any other
Person party thereto is likely to become in default thereunder and no Person
party thereto has any defenses, counterclaims or right of set-off with respect
to any Material Contract; and

 

19

 

(iii)          no
Material Contract prohibits assignment or requires consent of or notice to any
Person in connection with the assignment to the Collateral Agent hereunder,
except such as has been given or made or which such Grantor is using its
commercially reasonable efforts to obtain.

 

(b)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees that:

 

(i)            After the
occurrence and during the continuance of an Event of Default, in addition to
any rights under the Section of this Agreement relating to Receivables,
the Collateral Agent may at any time notify, or require any Grantor to so
notify, the counterparty on any Material Contract of the security interest of
the Collateral Agent therein and may upon written notice to the applicable
Grantor, notify, or require any Grantor to notify, the counterparty to make all
payments under the Material Contracts directly to the Collateral Agent;

 

(ii)           each
Grantor shall deliver promptly to the Collateral Agent notice of any Material
Contract as required pursuant to Section 5.1 of the Credit Agreement;

 

(iii)          each
Grantor shall deliver promptly to the Collateral Agent, and in any event within
ten (10) Business Days, after (1) any Material Contract of such
Grantor is terminated or amended in a manner that is materially adverse to such
Grantor or (2) any new Material Contract is entered into by such Grantor,
a written statement describing such event, with copies of such material
amendments or new contracts, delivered to the Collateral Agent (to the extent
such delivery is permitted by the terms of any such Material Contract,
provided, no prohibition on delivery shall be effective if it were bargained
for by such Grantor with the intent of avoiding compliance with this Section 4.5(b)(iii)),
and an explanation of any actions being taken with respect thereto;

 

(iv)          it shall
perform in all material respects all of its obligations with respect to the
Material Contracts except to the extent contested in good faith, so long as
adequate reserve or other appropriate provision, as shall be required in
conformity with GAAP, shall have been made therefor;

 

(v)           it shall
promptly and diligently exercise each material right it may have under any
Material Contract, any Supporting Obligation or Collateral Support, in each
case, at its own expense, and in connection with such collections and exercise,
such Grantor shall take such action as such Grantor may deem necessary or
advisable; and

 

(vi)          it shall
use its best efforts to keep in full force and effect any Supporting Obligation
or Collateral Support relating to any Material Contract, except where, in its
business judgment, it concludes that loss or relinquishment will not have a
Material Adverse Effect.  

 

4.6          Letter of Credit Rights.

 

(a)           Representations
and Warranties.  Each Grantor hereby
represents and warrants, on the Closing Date and on each Credit Date, that:

 

20

 

(i)            all
material letters of credit to which such Grantor has rights are listed on Schedule 4.6
(as such schedule may be amended or supplemented from time to time)
hereto; and

 

(ii)           it has
obtained the consent of each issuer of any letter of credit in an undrawn face
amount of $250,000 or more in the aggregate to the assignment of the proceeds
of the letter of credit to the Collateral Agent.

 

(b)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees that with respect to any letter of credit hereafter
arising in an undrawn face amount of $250,000 or more in the aggregate it shall
obtain the consent of the issuer thereof to the assignment of the proceeds of
the letter of credit to the Collateral Agent and shall deliver to the
Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto.

 

4.7          Commercial Tort Claims

 

(a)           Representations
and Warranties.  Each Grantor hereby
represents and warrants, on the Closing Date and on each Credit Date, that Schedule 4.7
(as such schedule may be amended or supplemented from time to time) sets
forth all Commercial Tort Claims of each Grantor relating primarily to the
Collateral in excess of $500,000 in the aggregate; and

 

(b)           Covenants
and Agreements.  Each Grantor hereby
covenants and agrees that with respect to any Commercial Tort Claim relating
primarily to the Collateral in excess of $500,000 in the aggregate hereafter
arising it shall deliver to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto, identifying such new Commercial Tort Claims.

 

SECTION 5.   ACCESS; RIGHT OF INSPECTION
AND FURTHER ASSURANCES; ADDITIONAL GRANTORS.

 

5.1          Access; Right of
Inspection.  The Collateral Agent shall at all times have
full and free access during normal business hours and upon reasonable prior
notice to all the books, correspondence and records of each Grantor, and the
Collateral Agent and its representatives may examine the same, take extracts
therefrom and make photocopies thereof, and each Grantor agrees to render to
the Collateral Agent, at such Grantor’s cost and expense, such clerical and
other assistance as may be reasonably requested with regard thereto.  The Collateral Agent and its representatives
shall at all times also have the right to enter any premises of each Grantor
during normal business hours and upon reasonable prior notice and inspect any
property of each Grantor where any of the Collateral of such Grantor granted
pursuant to this Agreement is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.

 

5.2          Further Assurances.

 

(a)           Each
Grantor agrees that from time to time, at the expense of such Grantor, that it
shall promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary, or that the Collateral Agent
may reasonably request, in order to create and/or maintain the validity,
perfection or priority of and protect any security interest granted hereby or
to enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of
the foregoing, each Grantor shall:

 

21

 

(i)            file such
financing or continuation statements, or amendments thereto, and execute and
deliver such other agreements, instruments, endorsements, powers of attorney or
notices, as may be necessary, or as the Collateral Agent may reasonably
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby;

 

(ii)           at any
reasonable time, upon prior written notice and upon request by the Collateral
Agent, and subject to Sections 5.6 and 9.2 of the Credit Agreement, allow
inspection of the Collateral by the Collateral Agent, or persons designated by
the Collateral Agent; and 

 

(iii)          at the
Collateral Agent’s reasonable request, appear in and defend any action or
proceeding that may affect such Grantor’s title to or the Collateral Agent’s
security interest in all or any part of the Collateral.  

 

(b)           Each
Grantor hereby authorizes the Collateral Agent to file a Record or Records,
including, without limitation, financing or continuation statements, and
amendments thereto, in any jurisdictions and with any filing offices as the
Collateral Agent may determine, in its sole discretion, are necessary or
advisable to perfect the security interest granted to the Collateral Agent
herein.  Such financing statements may
describe the Collateral in the same manner as described herein or may contain
an indication or description of collateral that describes such property in any
other manner as the Collateral Agent may determine, in its sole discretion, is
necessary, advisable or prudent to ensure the perfection of the security
interest in the Collateral granted to the Collateral Agent herein, including,
without limitation, describing such property as “all assets” or “all personal
property, whether now owned or hereafter acquired.”  Each Grantor shall furnish to the Collateral
Agent from time to time the statements and schedules further identifying and
describing the Collateral and the other reports in connection with the
Collateral as are provided in Section 5.17 of the Credit Agreement.

 

(c)           Each
Grantor hereby authorizes the Collateral Agent to modify this Agreement after
obtaining such Grantor’s approval of or signature to such modification by
amending Schedule 4.7 (as such schedule may be amended or
supplemented from time to time) to include reference to any right, title or
interest in any existing Intellectual Property or any Intellectual Property
acquired or developed by any Grantor after the execution hereof or to delete
any reference to any right, title or interest in any Intellectual Property in
which any Grantor no longer has or claims any right, title or interest.

 

5.3          Additional Grantors.  From time to time
subsequent to the date hereof, additional Persons may become parties hereto as
additional Grantors (each, an “Additional Grantor”), by executing a Counterpart
Agreement.  Upon delivery of any such
counterpart agreement to the Collateral Agent, notice of which is hereby waived
by Grantors, each Additional Grantor shall be a Grantor and shall be as fully a
party hereto as if the Additional Grantor were an original signatory
hereto.  Each Grantor expressly agrees
that its obligations arising hereunder shall not be affected or diminished by
the addition or release of any other Grantor hereunder, nor by any election of
Collateral Agent not to cause any Subsidiary of NewPageCo to become an
Additional Grantor hereunder.  This
Agreement shall be fully effective as to any Grantor that is or becomes a party
hereto regardless of whether any other Person becomes or fails to become or
ceases to be a Grantor hereunder.

 

22

 

SECTION 6.   COLLATERAL AGENT APPOINTED
ATTORNEY-IN-FACT.

 

6.1          Power of Attorney.  Each Grantor hereby
irrevocably appoints the Collateral Agent (such appointment being coupled with
an interest) as such Grantor’s attorney-in-fact, with full authority in the
place and stead of such Grantor and in the name of such Grantor, the Collateral
Agent or otherwise, from time to time in the Collateral Agent’s discretion to
take any action and to execute any instrument that the Collateral Agent may
deem reasonably necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, the following: 

 

(a)           upon
the occurrence and during the continuance of any Event of Default, to obtain
and adjust insurance required to be maintained by such Grantor or paid to the
Collateral Agent pursuant to the Credit Agreement; 

 

(b)           upon
the occurrence and during the continuance of any Event of Default, to ask for,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; 

 

(c)           upon
the occurrence and during the continuance of any Event of Default, to receive,
endorse and collect any drafts or other instruments, documents and chattel
paper in connection with clause (b) above; 

 

(d)           upon
the occurrence and during the continuance of any Event of Default, to file any
claims or take any action or institute any proceedings that the Collateral
Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Collateral Agent with
respect to any of the Collateral; 

 

(e)           to
prepare and file any UCC financing statements against such Grantor as debtor;

 

(f)            to
prepare, sign, and file for recordation in any intellectual property registry,
appropriate evidence of the lien and security interest granted herein in the
Intellectual Property in the name of such Grantor as debtor;

 

(g)           to
take or cause to be taken all actions necessary to perform or comply or cause
performance or compliance with the terms of this Agreement, including, without
limitation, access to pay or discharge taxes or Liens (other than Permitted
Liens) levied or placed upon or threatened against the Collateral, and which
the applicable Grantor has not paid or discharged when required hereunder, the
legality or validity thereof and the amounts necessary to discharge the same to
be determined by the Collateral Agent in its sole discretion, any such payments
made by the Collateral Agent to become obligations of such Grantor to the
Collateral Agent, due and payable immediately without demand; and 

 

(h)           upon
the occurrence and during the continuance of an Event of Default, generally to
sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do, at the
Collateral Agent’s option and such Grantor’s expense, all acts and things that
the Collateral Agent deems reasonably necessary to protect, preserve or realize
upon the Collateral and the Collateral Agent’s security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.

 

6.2          No Duty on the Part of
Collateral Agent or Secured Parties.   The powers conferred on the Collateral Agent
hereunder are solely to protect the interests of the Secured Parties in the
Collateral and shall not impose any duty upon the Collateral Agent or any
Secured Party to

 

23

 

exercise any
such powers.  The Collateral Agent and
the Secured Parties shall be accountable only for amounts that they actually
receive as a result of the exercise of such powers, and neither they nor any of
their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.

 

SECTION 7.   REMEDIES.

 

7.1          Generally.  

 

(a)           If
any Event of Default shall have occurred and be continuing, the Collateral
Agent may exercise in respect of the Collateral, in addition to all other
rights and remedies provided for herein or otherwise available to it at law or
in equity, all the rights and remedies of the Collateral Agent on default under
the UCC (whether or not the UCC applies to the affected Collateral) to collect,
enforce or satisfy any Secured Obligations then owing, whether by acceleration
or otherwise, and also may pursue any of the following separately, successively
or simultaneously:

 

(i)            require
any Grantor to, and each Grantor hereby agrees that it shall at its expense and
promptly upon request of the Collateral Agent forthwith, assemble all or part
of the Collateral as directed by the Collateral Agent and make it available to
the Collateral Agent at a place to be designated by the Collateral Agent that
is reasonably convenient to both parties; 

 

(ii)           enter
onto the property where any Collateral is located and take possession thereof
with or without judicial process;

 

(iii)          prior to
the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent the Collateral Agent deems appropriate; and

 

(iv)          without
notice except as specified below or under the UCC, sell, assign, lease, license
(on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Collateral Agent’s offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Collateral Agent may deem commercially reasonable.

 

(b)           The
Collateral Agent or any Secured Party may be the purchaser of any or all of the
Collateral at any public or private (to the extent to the portion of the
Collateral being privately sold is of a kind that is customarily sold on a
recognized market or the subject of widely distributed standard price
quotations) sale in accordance with the UCC and the Collateral Agent, as
collateral agent for and representative of the Secured Parties, shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such sale
made in accordance with the UCC, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by the Collateral Agent at such sale. 
Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of any Grantor, and each Grantor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted.  Each Grantor agrees that, to
the extent notice of sale shall be required by law, at least ten (10) days
notice to such Grantor of the time and place of any public sale or the time
after

 

24

 

which any
private sale is to be made shall constitute reasonable notification.  The Collateral Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given.  The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. 
Each Grantor agrees that it would not be commercially unreasonable for
the Collateral Agent to dispose of the Collateral or any portion thereof by
using Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets. 
Each Grantor hereby waives any claims against the Collateral Agent and
each Secured Party arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if the Collateral Agent
accepts the first offer received and does not offer such Collateral to more
than one offeree.  If the proceeds of any
sale or other disposition of the Collateral are insufficient to pay all the
Secured Obligations, Grantors shall be liable for the deficiency and the fees of
any attorneys employed by the Collateral Agent to collect such deficiency.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section will cause irreparable
injury to the Collateral Agent, that the Collateral Agent has no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants
except for a defense that no default has occurred giving rise to the Secured
Obligations becoming due and payable prior to their stated maturities.  Nothing in this Section shall in any way
alter the rights of the Collateral Agent hereunder. 

 

(c)           The
Collateral Agent may sell the Collateral without giving any warranties as to
the Collateral.  The Collateral Agent may
specifically disclaim or modify any warranties of title or the like.  This procedure will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.

 

(d)           The
Collateral Agent shall have no obligation to marshal any of the Collateral. 

 

7.2          Application of
Proceeds.  Except as expressly provided elsewhere in
this Agreement, all proceeds received by the Collateral Agent in respect of any
sale, any collection from, or other realization upon all or any part of the
Collateral shall be applied in full or in part by the Collateral Agent against,
the Secured Obligations in the following order of priority:  first, to the payment of all costs and
expenses of such sale, collection or other realization, including reasonable
compensation to the Collateral Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by the Collateral Agent in
connection therewith, and all amounts for which the Collateral Agent is
entitled to indemnification hereunder (in its capacity as the Collateral Agent
and not as a Lender) and all advances made by the Collateral Agent hereunder
for the account of the applicable Grantor, and to the payment of all costs and
expenses paid or incurred by the Collateral Agent in connection with the
exercise of any right or remedy hereunder or under the Credit Agreement, all in
accordance with the terms hereof or thereof; second, to the extent of any
excess of such proceeds, to the payment of all Secured Obligations (other than
obligations with respect to any purchasing card or similar program owed to any
Lender, any Affiliate of any Lender, the Administrative Agent or the Collateral
Agent); third, ratably, to all Obligations (not to exceed $1,500,000 in the
aggregate) owed to any Lender, any Affiliate of any Lender, the Administrative
Agent or the Collateral Agent arising from any purchasing card or similar
program; and fourth, to the extent of any excess of such proceeds, to the
payment to or upon the order of such Grantor or to whosoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.

 

25

 

7.3          Sales on Credit.  If Collateral Agent
sells any of the Collateral upon credit, Grantor will be credited only with
payments actually made by purchaser and received by Collateral Agent and
applied to indebtedness of the purchaser. 
In the event the purchaser fails to pay for the Collateral, Collateral
Agent may resell the Collateral and Grantor shall be credited with proceeds of
the sale.

 

7.4          Deposit Accounts.

 

If any Event of Default
shall have occurred and be continuing, the Collateral Agent may apply the
balance from any Deposit Account or instruct the bank at which any Deposit
Account is maintained to pay the balance of any Deposit Account to or for the
benefit of the Collateral Agent. 

 

7.5          Investment Related Property.  

 

Each Grantor recognizes
that, by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws, the Collateral Agent may be compelled, with
respect to any sale of all or any part of the Collateral consisting of
Investment Related Property conducted without prior registration or
qualification of such Investment Related Property under the Securities Act
and/or such state securities laws, to limit purchasers to those who will agree,
among other things, to acquire such Investment Related Property for their own
account, for investment and not with a view to the distribution or resale
thereof.  Each Grantor acknowledges that
any such private sale may be at prices and on terms less favorable than those
obtainable through a public sale without such restrictions (including a public
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances, each Grantor agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner and
that the Collateral Agent shall have no obligation to engage in public sales
and no obligation to delay the sale of any such Investment Related Property for
the period of time necessary to permit the issuer thereof to register it for a
form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree
to so register it.  If the Collateral
Agent determines to exercise its right to sell any or all of such Investment
Related Property, upon written request, each Grantor shall and shall cause each
issuer of any of the shares of capital stock owned by any such Grantor to be
sold hereunder, each partnership and each limited liability company from time
to time to furnish to the Collateral Agent all such information as the
Collateral Agent may request in order to determine the number and nature of
interest, shares or other instruments included in such Investment Related
Property which may be sold by the Collateral Agent in exempt transactions under
the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect. 

 

7.6          Intellectual Property.  

 

For the purpose of enabling
the Collateral Agent, during the continuance of an Event of Default, to
exercise rights and remedies herein at such time as the Collateral Agent shall
be lawfully entitled to exercise such rights and remedies, and for no other
purpose, each Grantor hereby grants to the Collateral Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to such Grantor) to use, assign, license or
sublicense any of the Intellectual Property now owned or hereafter acquired by
such Grantor, wherever the same may be located, including in such license
access to all media in which any of the licensed items may be recorded or
stored and to all computer programs used for the compilation or printout
thereof. 

 

26

 

7.7          Cash Proceeds.  In addition to the
rights of the Collateral Agent specified in Section 4.3 with respect to
payments of Receivables, from and after the receipt of an Activation Notice
from the Collateral Agent in accordance with the Credit Agreement, all proceeds
of any Collateral received by any Grantor consisting of cash, checks and other
non-cash items (collectively, “Cash Proceeds”)
in the Concentration Account shall be forwarded daily to the Collection
Account, which shall be under the exclusive dominion and control of the
Collateral Agent, and shall, forthwith upon receipt by such Grantor, unless
otherwise provided pursuant to Section 4.4.1(a)(ii), be forwarded to the
Collection Account in the exact form received by such Grantor (duly indorsed by
such Grantor to the Collateral Agent, if required).  Any Cash Proceeds received by the Collateral
Agent (whether from a Grantor or otherwise) shall be applied as set forth in Section 9.1
of the Credit Agreement.

 

SECTION 8.   COLLATERAL AGENT.

 

The Collateral Agent has
been appointed to act as Collateral Agent hereunder by Lenders and, by their
acceptance of the benefits hereof, the other Secured Parties. The Collateral
Agent shall be obligated, and shall have the right hereunder, to make demands,
to give notices, to exercise or refrain from exercising any rights, and to take
or refrain from taking any action (including, without limitation, the release or
substitution of Collateral), solely in accordance with this Agreement and the
Credit Agreement.  In furtherance of the
foregoing provisions of this Section, each Secured Party, by its acceptance of
the benefits hereof, agrees that it shall have no right individually to realize
upon any of the Collateral hereunder, it being understood and agreed by such
Secured Party that all rights and remedies hereunder may be exercised solely by
the Collateral Agent for the benefit of Secured Parties in accordance with the
terms of this Section. Collateral Agent may resign at any time by giving thirty
(30) days’ prior written notice thereof to Lenders and the Grantors, and
Collateral Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to the Grantors and
Collateral Agent signed by Requisite Lenders. 
Upon any such notice of resignation or any such removal, Requisite
Lenders shall have the right, upon five (5) Business Days’ notice to the
Administrative Agent, to appoint a successor Collateral Agent.  Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Collateral
Agent under this Agreement, and the retiring or removed Collateral Agent under
this Agreement shall promptly (i) transfer to such successor Collateral
Agent all sums, Securities and other items of Collateral held hereunder,
together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Collateral Agent
under this Agreement, and (ii) execute and deliver to such successor
Collateral Agent or otherwise authorize the filing of such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Collateral
Agent of the security interests created hereunder, whereupon such retiring or
removed Collateral Agent shall be discharged from its duties and obligations
under this Agreement.  After any retiring
or removed Collateral Agent’s resignation or removal hereunder as the
Collateral Agent, the provisions of this Agreement shall inure to its benefit
as to any actions taken or omitted to be taken by it under this Agreement while
it was the Collateral Agent hereunder.

 

SECTION 9.   CONTINUING SECURITY INTEREST;
TRANSFER OF LOANS.

 

This Agreement shall create
a continuing security interest in the Collateral and shall remain in full force
and effect until the payment in full of all Secured Obligations and the
cancellation or termination of the Commitments, be binding upon each Grantor,
its successors and assigns, and inure, together with the rights and remedies of
the Collateral Agent hereunder, to the benefit of the

 

27

 

Collateral Agent and its successors,
transferees and assigns.  Without
limiting the generality of the foregoing, but subject to the terms of the
Credit Agreement, any Lender may assign or otherwise transfer any Loans held by
it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or
otherwise.  Upon the payment in full of
all Secured Obligations and the cancellation or termination of the Commitments,
the security interest granted hereby shall terminate hereunder and of record
and all rights to the Collateral shall revert to Grantors.  Upon any such termination the Collateral
Agent shall, at Grantors’ expense, execute and deliver to Grantors or otherwise
authorize the filing of such documents as Grantors shall reasonably request,
including financing statement amendments to evidence such termination.   

 

SECTION 10.   STANDARD OF CARE; COLLATERAL
AGENT MAY PERFORM.

 

The powers conferred on the
Collateral Agent hereunder are solely to protect its interest in the Collateral
and shall not impose any duty upon it to exercise any such powers.  Except for the exercise of reasonable care in
the custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Collateral Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.  The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property.  Neither the Collateral Agent nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Grantor or otherwise.  If any Grantor fails to perform any agreement
contained herein, the Collateral Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by each Grantor under Section 10.2
of the Credit Agreement.

 

SECTION 11.   MISCELLANEOUS.

 

Any notice required or
permitted to be given under this Agreement shall be given in accordance with Section 11.1
of the Credit Agreement.  No failure or
delay on the part of the Collateral Agent in the exercise of any power, right
or privilege hereunder or under any other Credit Document shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other power, right or privilege.  All
rights and remedies existing under this Agreement and the Credit Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.  In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.  All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.  This
Agreement shall be binding upon and inure to the benefit of the Collateral
Agent and Grantors and their respective successors and assigns.  No Grantor shall, without the prior written
consent of the Collateral Agent given in accordance with the Credit Agreement,
assign any right, duty or obligation hereunder. 
This Agreement and the other Credit Documents embody the entire
agreement and understanding between Grantors and the Collateral Agent and
supersede all prior agreements and understandings

 

28

 

between such parties relating to the subject
matter hereof and thereof.  Accordingly,
the Credit Documents may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.  There are no unwritten oral agreements
between the parties.  This Agreement may
be executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.

 

THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS
(OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATION LAWS).

 

Each party to this Agreement
waives its rights to a jury trial of any claim or cause of action based upon or
arising under this Agreement or any of the other Security Documents or any
dealings between them relating to the subject matter of this Agreement or the
intents and purposes of the other Security Documents.  The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this Agreement and the other Security
Documents, including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. 
Each party to this Agreement acknowledges that this waiver is a material
inducement to enter into a business relationship, that each party hereto has
already relied on this waiver in entering into this Agreement, and that each
party hereto will continue to rely on this waiver in its related future
dealings.  Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel.  This
waiver is irrevocable, meaning that it may not be modified either orally or in
writing (other than by a mutual written waiver specifically referring to this Section 11
and executed by each of the parties hereto), and this waiver will apply to any
subsequent amendments, renewals, supplements or modifications of or to this
Agreement or any of the other Security Documents or to any other documents or
agreements relating thereto.  In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.

 

In no event shall the Collateral
Agent be responsible or liable for any failure or delay in the performance of
its obligations hereunder arising out of or caused by, directly or indirectly,
forces beyond its control, including, without limitation, strikes, work
stoppages, accidents, acts of war or terrorism, civil or military disturbances,
nuclear or natural catastrophes or acts of God, and interruptions, loss or
malfunctions of utilities, communications or computer (software and hardware)
services; it being understood that the Collateral Agent shall use reasonable
efforts which are consistent with accepted practices in the banking industry to
resume performance as soon as practicable under the circumstances.  

 

29

 

IN WITNESS WHEREOF, each
Grantor and the Collateral Agent have caused this Agreement to be duly executed
and delivered by their respective officers thereunto duly authorized as of the
date first written above.

 

 

	
   

  	
  NEWPAGE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda M. Sheffield

  	
   

  
	
   

  	
   

  	
  Name: Linda M. Sheffield

  
	
   

  	
   

  	
  Title:   Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEWPAGE
  HOLDING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda M. Sheffield

  	
   

  
	
   

  	
   

  	
  Name: Linda M. Sheffield

  
	
   

  	
   

  	
  Title:   Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHILLICOTHE
  PAPER INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda M. Sheffield

  	
   

  
	
   

  	
   

  	
  Name: Linda M. Sheffield

  
	
   

  	
   

  	
  Title:   Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ESCANABA
  PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H. Vogel

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEADWESTVACO
  MARYLAND, INC.

  
	
   

  	
  (to
  be named LUKE PAPER COMPANY)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H. Vogel

  
	
   

  	
   

  	
  Title:   President

  

 

 

	
   

  	
  MEADWESTVACO
  OXFORD

  CORPORATION

  
	
   

  	
  (to
  be named RUMFORD PAPER

  
	
   

  	
  COMPANY)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H.
  Vogel

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEADWESTVACO
  ENERGY SERVICES

  LLC

  
	
   

  	
  (to
  be named NEWPAGE ENERGY

  SERVICES LLC)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H.
  Vogel

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUMFORD
  COGENERATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H.
  Vogel

  
	
   

  	
   

  	
  Title:   Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUMFORD
  FALLS POWER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H.
  Vogel

  
	
   

  	
   

  	
  Title:   Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UPLAND
  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  	
   

  
	
   

  	
   

  	
  Name: Peter H. Vogel

  
	
   

  	
   

  	
  Title:   President

  

 

 

	
   

  	
  WICKLIFFE
  PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda M. Sheffield

  	
   

  
	
   

  	
   

  	
  Name: Linda M. Sheffield

  
	
   

  	
   

  	
  Title:   Treasurer

  

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
  as the Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter S. Predun

  	
   

  
	
   

  	
   

  	
  Name: Peter S. Predun

  
	
   

  	
   

  	
  Title:   Vice PresidentExhibit 10.11

 

 

EXECUTION
COPY

 

ALLOCATION AND SERVICES AGREEMENT

 

THIS ALLOCATION AND SERVICES AGREEMENT (the “Agreement”), effective as
of April 30, 2005, is made by and between Escanaba Timber LLC (formerly
known as Maple Acquisition LLC), a Delaware limited liability company (“Escanaba”),
and NewPage Corporation, a Delaware corporation and an indirect wholly-owned
Subsidiary of Escanaba (“NewPage”).

 

WHEREAS, Escanaba and MeadWestvaco Corporation (“MWV”) have entered
into that certain Equity and Asset Purchase Agreement, dated as of January 14,
2005 (as amended, modified or supplemented from time to time, the “Purchase
Agreement”), which contemplates that MWV and its Subsidiaries will sell, assign
and transfer to Escanaba and/or one or more of its Designated Affiliates, and
that Escanaba and/or one or more of its Designated Affiliates will purchase and
acquire from MWV and its Subsidiaries, the Paper Business and Timber Business
of MWV and its Subsidiaries, in each case, upon the terms and subject to the conditions
set forth in the Purchase Agreement;

 

WHEREAS, in accordance with the Purchase Agreement, Escanaba has
designated itself to acquire the Timber Business from MWV and its Subsidiaries
and has designated NewPage and certain of its Subsidiaries to acquire the Paper
Business from MWV and its Subsidiaries;

 

WHEREAS, Escanaba and NewPage desire to operate their respective
businesses on a separate and independent basis and thereby establish a
mechanism by which the payment of the Closing Date Cash Consideration will be
allocated between Escanaba, as the purchaser of the Timber Business, and
NewPage, as the purchaser of the Paper Business, and how any post-Closing
adjustment payments made by or to MWV thereunder, as provided in the Purchase
Agreement, will be allocated among the Timber Business and the Paper Business;

 

WHEREAS, NewPage and its Subsidiaries will be providing certain
services to Escanaba from and after the closing of the transactions
contemplated by the Purchase Agreement, whether pursuant to one or more
Transition Agreements or otherwise, Escanaba will be providing certain services
to NewPage and its Subsidiaries, and NewPage and Escanaba desire to set forth
the terms and conditions on which such services will be provided, including the
allocation of costs to Escanaba and NewPage associated therewith; and

 

WHEREAS, capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Purchase Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Escanaba and NewPage hereby agree
as follows:

 

1.                                       Allocation of Responsibilities.

 

a.                                       Escanaba and NewPage agree that the Closing
Date Cash Consideration payable to MWV on the Closing Date shall be allocated
and paid as follows: for the Timber Business, Escanaba shall pay $252,194,000
of the Closing Date Cash Consideration and for the Paper Business, NewPage
shall pay $1,985,113,000 of the Closing Date Cash

 

 

Consideration. Escanaba and
NewPage agree that of the total Closing Date Cash Consideration, $37,307,000,
represented an upward adjustment to the Initial Cash Consideration based on the
estimates of Closing Date Cash, Assumed Indebtedness, Closing Working Capital
and Closing Capital Expenditures provided by MWV prior to Closing, allocated
between Escanaba and NewPage based on their good faith preliminary
determination of the amount of each of the foregoing estimates that were
attributable to the Timber Business and the Paper Business, in each case as set
forth on Exhibit 1a hereto. If, after the final determination of Final Closing
Date Cash, Final Assumed Indebtedness, Final Closing Date Working Capital and
Final Closing Date Capital Expenditures is made in accordance with Section 2.3
of the Purchase Agreement, the initial allocation of the adjustment to the
Initial Cash Consideration, as set forth in Exhibit 1a, are ultimately
incorrect, Escanaba and NewPage agree to pay the other, as applicable, within
five (5) Business Days of the final determinations under Section 2.3 of
the Purchase Agreement, the difference between the adjusted amount that was
actually paid to MWV based on the foregoing estimates and the amounts that
would have been paid had the parties been able to establish the final amounts
as of the Closing Date, plus simple interest thereon at a rate equal to 8% per
annum.

 

b.                                      Escanaba and NewPage agree that all fees,
costs and expenses incurred by the Purchaser in connection with the
negotiation, diligence, execution and financing of the transactions
contemplated by the Purchase Agreement, to the extent related to the
acquisition and financing of the Timber Business, shall be borne exclusively by
Escanaba and, to the extent related to the acquisition and financing of the
Paper Business, shall be borne exclusively by NewPage. To the extent any such
fees, costs and expenses cannot be classified as part of the acquisition and
financing of the Timber Business or the Paper Business exclusively, or the
parties cannot agree on the proper classification of any such fees, costs and
expenses, the parties agree that such fees, costs and expenses shall be
allocated based on the following percentages: 10.8% shall be allocated to
Escanaba as the purchaser of the Timber Business and 89.2% shall be allocated
to NewPage as the purchaser of the Paper Business, subject to reallocation as
set forth in the immediately succeeding sentence. In the event there is any
dispute between Escanaba and NewPage as to the proper classification of any
such fees, costs and expenses, the parties agree to submit such matter to
binding arbitration in accordance with Section 5 hereof.

 

c.                                       Escanaba and NewPage agree to cooperate and
coordinate in good faith in the preparation and delivery of the Closing Date
Working Capital Statement and all other calculations and deliverables required
to be delivered to MWV by the Purchaser under Section 2.3 of the Purchase
Agreement (the “Section 2.3 Deliverables”). Any statements or other items prepared
and delivered to MWV that constitute Section 2.3 Deliverables shall
include an allocation showing the classification of each item into two
categories – one relating to the Timber Business and one relating to the Paper
Business. For purposes of each of the Section 2.3 Deliverables, Escanaba
shall control all calculations, determinations and resolution of all disputes
relating to the Timber Business and NewPage shall control all calculations, determinations
and resolutions of all disputes relating to the Paper Business. In the event
any payments are to be made to MWV under Section 2.3 of the Purchase
Agreement, Escanaba shall be solely responsible for such payments as they
relate to the Timber Business and NewPage shall be solely responsible for all
payments as they relate to the Paper Business.  In the event any

 

2

 

payments
are to be made by MWV under Section 2.3 of the Purchase Agreement,
Escanaba shall be entitled to all such payments as they relate to the Timber
Business and NewPage shall be entitled to all such payments as they relate to
the Paper Business. To the extent any items subject to determination under Section 2.3
of the Purchase Agreement cannot be classified as part of the Timber Business
or the Paper Business or the parties cannot agree on the proper classification
of any such items, the parties agree that the item shall be allocated based on
the following percentages: 10.8% shall be allocated to Escanaba as the
purchaser of the Timber Business and 89.2% shall be allocated to NewPage as the
purchaser of the Paper Business, subject to reallocation as set forth in the
immediately succeeding sentence. In the event there is any dispute between
Escanaba and NewPage as to the proper classification of any item that
constitutes a Section 2.3 Deliverable, the parties agree to submit such
matter to binding arbitration in accordance with Section 5 hereof.

 

d.                                      In addition to and not by way of limitation
of the foregoing provisions of this Section 1, the parties acknowledge and
agree that, except as they may otherwise mutually agree in writing, (i) all
rights, assets, benefits, properties, liabilities, responsibilities and
obligations Related to the Timber Business (including any of the foregoing under
the Purchase Agreement, including indemnification obligations under Article XI
thereof, the Exhibits and the other agreements or instruments referenced
therein) shall be solely for the benefit of and the responsibility of Escanaba
and (b) all rights, assets, benefits, properties, liabilities, responsibilities
and obligations Related to the Paper Business (including any of the foregoing
under the Purchase Agreement, including indemnification obligations under Article XI
thereof, the Exhibits and the other agreements or instruments referenced
therein) shall be solely for the benefit of and the responsibility of NewPage
(or the Subsidiary of NewPage that acquires all or any portion of the Paper
Business pursuant to the Purchase Agreement).

 

e.                                       (i)                                     In furtherance of the foregoing, except as to
matters covered by any other agreement between Escanaba, on the one hand, and
NewPage, NewPage Holding Corporation (“NewPage Holdings”) and their respective
Subsidiaries, on the other hand, Escanaba agrees to indemnify and hold NewPage,
NewPage Holding and their respective Subsidiaries, together with their
successors and assigns, and their officers, directors, employees and agents
harmless from and against any and all claims, judgments, causes of action,
liabilities, obligations, damages, losses, deficiencies, costs, penalties,
interest and expenses (including the reasonable fees and expenses of counsel)
(collectively, “Losses”) arising out of or resulting from or relating to the
Timber Business, including, without limitation, claims made by MWV under the
Purchase Agreement to the extent related to the Timber Business.

 

(ii)                                  Except as to matters covered by any other
agreement between Escanaba, on the one hand, and NewPage, NewPage Holdings and
their respective Subsidiaries, on the other hand, NewPage agrees to indemnify
and hold Escanaba and, together with its successors and assigns, and their
officers, directors, employees and agents harmless from and against any and all
Losses arising out of or resulting from or relating to the Paper Business,
including, without limitation, claims made by MWV under the Purchase Agreement
to the extent related to the Paper Business.

 

2.                                       Wrong-Pockets. Subject to the terms of this Agreement, to
the extent that at any time or from time to time after the Closing Date,
Escanaba receives payments in respect of

 

3

 

any
services performed by or products delivered by NewPage or any of its
Subsidiaries or that are attributable to the Paper Business (whether performed
or delivered before, on or after the date hereof), Escanaba shall be deemed to
have received such payment for the account of NewPage and shall promptly remit
such payment to NewPage. Subject to the terms of this Agreement, to the extent
that at any time or from time to time after the Closing Date, NewPage or any of
its Subsidiaries receives payments in respect of any services performed by or
products delivered by Escanaba or that are attributable to the Timber Business
(whether performed or delivered before, on or after the date hereof), NewPage
(or its relevant Subsidiary) shall be deemed to have received such payment for
the account of Escanaba and shall promptly remit such payment to Escanaba.

 

3.                                       Transition Services.

 

a.                                       The parties acknowledge and agree that
NewPage shall enter into with MWV, effective as of the Closing Date, a General
Transition Services Agreement, an Information Technology Transition
Services Agreement and a Human Resources Services Agreement (collectively, the “Basic
Transition Agreements”), pursuant to which MWV will provide certain services to
NewPage and its Subsidiaries (the “Basic Transition Services”) on and subject
to the terms and conditions contained therein. NewPage and Escanaba agree that NewPage
shall or shall cause MWV to provide those Basic Transition Services described
on Exhibit 3a hereto (the “Designated Basic Transition Services”) to Escanaba.
The provision of such services to Escanaba shall be on the same terms and
conditions as such Designated Basic Transition Services are provided to NewPage
under the Basic Transition Services Agreements and all terms and conditions
regarding the provision of such Basic Transition Services, including terms and
conditions regarding payments, notifications, termination rights, performance standards,
limitations on liability and dispute resolution shall apply mutatis mutandis with respect to the Basic
Transition Services provided to Escanaba hereunder. The costs of such Basic
Transition Services to Escanaba shall be as set forth on Exhibit 3a hereto.

 

b.                                      In addition to the Designated Basic
Transition Services provided under Section 3a above, NewPage shall provide
to Escanaba the services described in Exhibit 3b hereto (the “Additional
NewPage Services”) for the time, manner and costs described in Exhibit 3b
hereto. Except as otherwise provided in Exhibit 3b, the Additional NewPage
Services shall be provided in the same manner and upon the same terms and
conditions that services are provided to NewPage under the Basic Transition
Services Agreement and all terms and conditions regarding the provision of such
Additional NewPage Services, including regarding payments, termination rights,
performance standards, limitations on liability and dispute resolution shall
apply mutatis mutandis with
respect to the Additional NewPage Services provided to Escanaba hereunder.

 

c.                                       Escanaba shall provide to NewPage
and its Subsidiaries the services described in Exhibit 3c hereto (the “Escanaba
Services”) for the time, manner and costs described in Exhibit 3c hereto.
Except as otherwise provided in Exhibit 3c, the Additional NewPage Services
shall be provided in the same manner and upon the same terms and conditions that
services are provided to NewPage under the Basic Transition Services Agreement
and all terms and conditions regarding the provision of such Escanaba Services,
including regarding payments, termination rights, performance standards,
limitations on liability and dispute

 

4

 

resolution
shall apply mutatis mutandis with
respect to the Escanaba Services provided to NewPage hereunder.

 

d.                                      Escanaba shall have the right to terminate
its receipt of any Basic Transition Services at any time but only to the extent
(and in the same manner, including the provision of notice) that such Basic
Transition Service is capable of being terminated by NewPage under the
applicable Basic Transition Services Agreement without NewPage incurring any
additional costs relating to such termination (unless NewPage otherwise agrees
or Escanaba agrees to bear sole responsibility for any such costs). With
respect to Additional NewPage Services, Escanaba shall be entitled to terminate
any or all such Additional NewPage Services at any time but only to the extent
such Additional NewPage Service could be terminated if it were part of the
services provided by MWV to NewPage under the General Transition Services Agreement.
With respect to Escanaba Services, NewPage shall be entitled to terminate any
or all such Escanaba Services at any time but only to the extent such Escanaba
Service could be terminated if it were part of the services provided by MWV to
NewPage under the General Transition Services Agreement.

 

e.                                       Escanaba and NewPage agree that, unless such
services have been previously terminated by Escanaba in accordance with the
terms of this Section 3, NewPage shall continue to provide to Escanaba all
Basic Transition Services and Additional Services following termination or
expiration of the Basic Transition Services Agreement. The terms of the Basis
Transition Services Agreement and this Agreement shall continue to apply with
respect to the continuation of such services as if such agreements had not
expired or terminated, subject to Escanaba’s right to terminate any or all of
such Basic Transition Services and Additional Services in accordance with the
terms hereof and thereof; provided that the cost of such Basic Transition
Services shall be mutually agreed by NewPage and Escanaba at the time such services are terminated or expire under the applicable Basic Transition Services
Agreement, it being understood and agreed that the cost allocated to Escanaba
is intended to be the proportionate cost to NewPage of providing such services
to Escanaba, which may be more or less than the cost for such services as
provided by MWV under the Basic Transition Services Agreements. For the avoidance
of doubt, upon the expiration or termination of any Basic Transition Services Agreement,
Escanaba shall have the right to terminate the provision of all or some of the applicable
services at such time upon written notice delivered to NewPage not less than 10
days prior to the expiration of the applicable Basic Transition Services
Agreement.

 

f.                                         Until such time as Escanaba has notified
NewPage in writing of its intention to terminate all of the Designated Basic
Transition Services, NewPage agrees that it shall not terminate prior to the
expiration of its term or amend the Basic Transition Service Agreements in a
manner that adversely affects Escanaba without the prior written consent of Escanaba,
which consent shall not be unreasonably withheld, conditioned or delayed.
NewPage agrees that it will consult with Escanaba as to the extension of the
term of the provision of any services to NewPage under the Basic Transition
Services Agreements and, unless and until NewPage is capable of providing any
such services directly to Escanaba (to the extent not previously terminated by
Escanaba), it shall seek to extend the term of provision of such services by
MWV to the maximum extent provided under the applicable Basic Transition
Services Agreement.

 

5

 

4.                                       Term and Termination.  Except
as otherwise provided herein, the term of this Agreement shall be indefinite
unless terminated by consent of both parties hereto.

 

5.                                       Dispute Resolution.  Disputes
under this Agreement shall be resolved as follows, it being understood that
each party shall work in good faith at each step of the process to try to
resolve the dispute as expeditiously and fairly as possible:

 

a.                                       Each of Escanaba and NewPage
shall designate an appropriate individual to meet and seek amicably to resolve
all disputes under this Agreement.

 

b.                                      If any difference remains unresolved five (5)
Business Days after the start of the process referenced in Subsection 5a,
or such longer period as the persons referenced in subsection 5a
shall have agreed, then the parties shall submit such matter to arbitration,
pursuant to the Rules of Commercial Arbitration of the American Arbitration Association,
which arbitration shall take place in New York City, New York, unless otherwise
mutually agreed to by the parties. Any such arbitration shall be conducted by a
single arbitrator, whose decision shall be final. The parties shall first
attempt to agree on the selection of the arbitrator, and, if they cannot agree
within five (5) days after it becomes necessary to submit the dispute to
arbitration, either party may request the American Arbitration Association to
appoint the arbitrator. In all cases, the parties shall ensure that the
arbitrator shall be a person knowledgeable about the matters subject to the
dispute. The arbitrator shall be instructed to schedule all proceedings so
that, if possible, a decision may be reached and communicated to the parties
within twenty (20) days after the appointment of the arbitrator. All expenses
of the arbitration shall be divided equally between the parties, except that
each party shall bear the expense of its own counsel and the expense of the
preparation of its presentation. The parties shall provide to the arbitrator
such information as the arbitrator shall reasonably request to facilitate the
determinations to be made by the arbitrator hereunder.

 

c.                                       Notwithstanding the existence of a dispute or
the progress of the arbitration proceeding, the parties shall continue to
perform their respective obligations under this Agreement during such period.
This Section 5 shall not preclude any party from seeking injunctive relief
or such other interim equitable remedies as may be required to preserve any claims
hereunder.

 

6.                                       General Provisions.

 

a.                                       Entire Agreement.  This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any and all prior agreements
between them relating to the subject matter hereof, and may not be amended
except in a writing signed by the party to be bound.

 

b.                                      Waiver of Provisions.  The
terms, of this Agreement may be waived only by a written instrument executed by
the party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right at a later date to enforce the same. No waiver by any party of
any condition or the breach of any provision contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed
to be or construed as a further or

 

6

 

continuing
waiver of any such condition or of the breach of any other provision of this Agreement.

 

c.                                       Law Governing.  This
Agreement shall be governed by, construed and enforced in accordance with the
laws of the State of New York, without regard to conflicts of law principles
applicable thereto.

 

d.                                      Captions.  The captions of paragraphs of
this Agreement are for convenience
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.

 

e.                                       Assignment.  This Agreement shall be
legally binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns. The parties may not assign,
delegate or subcontract this Agreement or any of its obligations hereunder
without the other parties’ express prior written consent; provided, however,
that each of Escanaba and NewPage may, without the consent of the other, grant
a security interest in its respective rights under this Agreement to one of
more lenders or noteholders, or agents or trustees for their benefit, in
connection with the financing for the acquisition contemplated by the Purchase
Agreement (or any refinancing thereof). Any purported assignment, subcontract
or delegation in violation of this Agreement shall be void.

 

f.                                         Severability.  If
any provision of this Agreement or portion thereof shall be held void or
unenforceable, all other provisions and portions thereof shall
continue in full force and effect.

 

g.                                      Counterparts.  This
Agreement may be executed simultaneously in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
of which counterparts shall together constitute but one agreement.

 

h.                                      Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally or by overnight mail or to the extent receipt is confirmed, facsimile
or other electronic transmission service, or five calendar days after being
mailed by registered mail, return receipt requested, to a party at the
following address (or to such other address as such party may have specified by
notice given to the other parties pursuant to this Section):

 

If to Escanaba, to:

 

Escanaba Timber LLC

P.O. Box 1008

Escanaba, Michigan 49829

Attention: Brad Homeier

Fax: (906) 789-3276

 

With a copy to:

 

c/o Cerberus Capital Management, L.P.

 

7

 

299 Park Avenue, 22nd Floor

New York, New York 10022

Attention: Lenard Tessler

Fax: (212) 421-2958

 

If to NewPage, to:

 

NewPage Corporation

Courthouse Plaza NE

Dayton, OH 45463

Attention: President and General Counsel

Fax: (937) 495-9228

 

8

 

IN WITNESS WHEREOF, the parties
hereto have executed this Agreement through a duly authorized officer.

 

 

	
  ESCANABA
  TIMBER LLC

  
	
   

  
	
   

  
	
  /s/ Linda Sheffield

  	
   

  
	
  Name:

  	
  Linda Sheffield

  
	
  Title:

  	
  Treasurer

  
	
   

  
	
   

  
	
  NEWPAGE
  CORPORATION

  
	
   

  
	
   

  
	
  /s/ Linda Sheffield

  	
   

  
	
  Name:

  	
  Linda Sheffield

  
	
  Title:

  	
  Treasurer

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