Exhibit 10.1
 
 
 
REVOLVING CREDIT AND SECURITY AGREEMENT
 

 

 
PNC BANK, CANADA BRANCH
 
(AS LENDER AND AS AGENT)
 
AND
 
SUCH OTHER LENDERS WHICH ARE NOW OR HEREAFTER A PARTY HERETO
 
WITH
 
ZOCHEM INC., A CANADA CORPORATION
 
(AS BORROWER)
 
AND
 
THE GUARANTORS PARTY HERETO
 

 

 
December 21, 2012
 
 
 
 
 
 

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TABLE OF CONTENTS

Page

ARTICLE 1
   
DEFINITIONS
1
 
1.1
Accounting Terms
1
 
1.2
General Terms
1
 
1.3
PPSA Terms
24
 
1.4
Certain Matters of Construction
24
 
1.5
Permitted Encumbrances
25
       
ARTICLE 2
   
ADVANCES, PAYMENTS
25
 
2.1
Advances
25
 
2.2
Procedure for Advances Borrowing
26
 
2.3
Disbursement of Advance Proceeds
28
 
2.4
Maximum Advances
29
 
2.5
Repayment of Advances
29
 
2.6
Repayment of Excess Advances
30
 
2.7
Statement of Account
30
 
2.8
Letters of Credit
30
 
2.9
[Reserved]
30
 
2.10
[Reserved]
30
 
2.11
Issuance of Letters of Credit
30
 
2.12
Requirements For Issuance of Letters of Credit
31
 
2.13
Disbursements, Reimbursements
32
 
2.14
Repayment of Participation Advances
33
 
2.15
Documentation
34
 
2.16
Determination to Honour Drawing Request
34
 
2.17
Nature of Participation and Reimbursement Obligations
34
 
2.18
Indemnity
35
 
2.19
Liability for Acts and Omissions
36
 
2.20
Additional Payments
37
 
2.21
Manner of Borrowing and Payment
37
 
2.22
Use of Proceeds
39
 
2.23
Defaulting Lender
39
 
2.24
Increase of Maximum Revolving Advance Amount
40
       
ARTICLE 3
   
INTEREST AND FEES
41
 
3.1
Interest
41
 
3.2
Letter of Credit Fees
42
 
3.3
Facility Fee
42
 
3.4
Fee Letter
43
 
3.5
Computation of Interest and Fees
43
 
3.6
Maximum Charges
44

 
 
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TABLE OF CONTENTS
(continued)
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3.7
Increased Costs
44
 
3.8
Basis For Determining Interest Rate Inadequate or Unfair
45
 
3.9
Capital Adequacy
45
 
3.10
Gross Up for Taxes
46
 
3.11
Currency Indemnity
46
       
ARTICLE 4
   
COLLATERAL: GENERAL TERMS
47
 
4.1
Security Interest in the Collateral
47
 
4.2
Perfection of Security Interest
48
 
4.3
Disposition of Collateral
49
 
4.4
Preservation of Collateral
49
 
4.5
Ownership of Collateral
49
 
4.6
Defense of Agent’s and Lenders’ Interests
50
 
4.7
Books and Records
50
 
4.8
Intentionally Omitted
51
 
4.9
Compliance with Laws
51
 
4.10
Inspection of Premises; Appraisals
51
 
4.11
Insurance
51
 
4.12
Failure to Pay Insurance
53
 
4.13
Payment of Taxes
53
 
4.14
Payment of Leasehold Obligations
53
 
4.15
Receivables
53
 
4.16
Inventory
56
 
4.17
Maintenance of Equipment
56
 
4.18
Exculpation of Liability
57
 
4.19
Environmental Matters
57
 
4.20
Financing Statements
58
 
4.21
Attachment
58
       
ARTICLE 5
   
REPRESENTATIONS AND WARRANTIES
58
 
5.1
Authority
58
 
5.2
Formation and Qualification
58
 
5.3
Survival of Representations and Warranties
59
 
5.4
Tax Returns
59
 
5.5
Financial Statements
59
 
5.6
Entity Names
60
 
5.7
Environmental Compliance
60
 
5.8
Solvency; No Litigation, Violation, Indebtedness or Default
61
 
5.9
Patents, Trade-marks, Copyrights and Licenses
62
 
5.10
Licenses and Permits
62
 
5.11
Default of Indebtedness
62

 
 
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TABLE OF CONTENTS
(continued)
Page
 

 
5.12
No Default
62
 
5.13
No Burdensome Restrictions
62
 
5.14
No Labour Disputes
63
 
5.15
[Reserved]
63
 
5.16
[Reserved]
63
 
5.17
Disclosure
63
 
5.18
Swaps
63
 
5.19
Conflicting Agreements
63
 
5.20
Application of Certain Laws and Regulations
63
 
5.21
Business and Property of Borrower Parties
64
 
5.22
[Reserved]
64
 
5.23
Anti-Terrorism Laws
64
 
5.24
[Reserved]
64
 
5.25
Securities Laws
64
       
ARTICLE 6
   
AFFIRMATIVE COVENANTS
64
 
6.1
Payment of Fees
64
 
6.2
Conduct of Business and Maintenance of Existence and Assets
64
 
6.3
Violations
65
 
6.4
Government Receivables
65
 
6.5
Financial Covenants
65
 
6.6
Execution of Supplemental Instruments
65
 
6.7
Payment of Indebtedness
65
 
6.8
Standards of Financial Statements
66
 
6.9
Securities Laws
66
 
6.10
[Reserved]
66
 
6.11
Pensions
66
 
6.12
Post-Closing Undertaking
67
       
ARTICLE 7
   
NEGATIVE COVENANTS
67
 
7.1
Merger, Consolidation, Acquisition and Sale of Assets
67
 
7.2
Creation of Liens
69
 
7.3
Guarantees
69
 
7.4
Investments
69
 
7.5
Loans
69
 
7.6
Dividends/Distributions
70
 
7.7
Indebtedness
70
 
7.8
Nature of Business
71
 
7.9
Transactions with Affiliates
71
 
7.10
Leases
71
 
7.11
Subsidiaries
71

 
 
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TABLE OF CONTENTS
(continued)
Page
 

 
7.12
Fiscal Year and Accounting Changes
71
 
7.13
Pledge of Credit
72
 
7.14
Amendment of Organizational Documents
72
 
7.15
Pensions
72
 
7.16
Prepayment of Indebtedness
72
 
7.17
Anti-Terrorism Laws
72
 
7.18
[Reserved]
72
 
7.19
[Reserved]
72
 
7.20
Other Agreements
73
 
7.21
Double Negative Pledge
73
       
ARTICLE 8
   
CONDITIONS PRECEDENT
73
 
8.1
Conditions to Effectiveness
73
 
8.2
Conditions to Each Advance
76
       
ARTICLE 9
   
INFORMATION AS TO LOAN PARTIES
77
 
9.1
Disclosure of Material Matters
77
 
9.2
Schedules
77
 
9.3
[Reserved]
78
 
9.4
Litigation
78
 
9.5
Material Occurrences
78
 
9.6
Government Receivables
78
 
9.7
Annual Financial Statements
78
 
9.8
Quarterly Financial Statements
79
 
9.9
Monthly Financial Statements
79
 
9.10
Other Reports
79
 
9.11
Additional Information
79
 
9.12
Projected Operating Budget
80
 
9.13
Environmental Matters
80
 
9.14
Notice of Suits, Adverse Events
80
 
9.15
[Reserved]
80
 
9.16
Additional Documents
81
       
ARTICLE 10
   
EVENTS OF DEFAULT
81
 
10.1
Nonpayment
81
 
10.2
Breach of Representation
81
 
10.3
Financial Information
81
 
10.4
Judicial Actions
81
 
10.5
Noncompliance
81
 
10.6
Judgments
82

 
 
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TABLE OF CONTENTS
(continued)
Page
 

 
10.7
Bankruptcy
82
 
10.8
Inability to Pay
82
 
10.9
Affiliate Bankruptcy
82
 
10.10
Material Adverse Effect
83
 
10.11
Lien Priority
83
 
10.12
Cross Default - Indebtedness
83
 
10.13
Cross Default – Other Agreements
84
 
10.14
Breach of Guaranty
84
 
10.15
Change of Ownership
84
 
10.16
Invalidity
84
 
10.17
Licenses
84
 
10.18
Seizures
84
 
10.19
Holding
85
 
10.20
Pension Plans
85
       
ARTICLE 11
   
LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT
85
 
11.1
Rights and Remedies
85
 
11.2
Agent’s Discretion
87
 
11.3
Setoff
88
 
11.4
Rights and Remedies not Exclusive
88
 
11.5
Allocation of Payments After Event of Default
88
       
ARTICLE 12
   
WAIVERS AND JUDICIAL PROCEEDINGS
89
 
12.1
Waiver of Notice
89
 
12.2
Delay
89
 
12.3
Jury Waiver
89
       
ARTICLE 13
   
EFFECTIVE DATE AND TERMINATION
90
 
13.1
Term
90
 
13.2
Termination
90
       
ARTICLE 14
   
REGARDING AGENT
90
 
14.1
Appointment
90
 
14.2
Nature of Duties
91
 
14.3
Lack of Reliance on Agent and Resignation
91
 
14.4
Certain Rights of Agent
92
 
14.5
Reliance
92
 
14.6
Notice of Default
92
 
14.7
Indemnification
93
 
14.8
Agent in its Individual Capacity
93

 
 
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TABLE OF CONTENTS
(continued)
Page
 

 
14.9
Delivery of Documents
93
 
14.10
Borrower’s Undertaking to Agent
93
 
14.11
No Reliance on Agent’s Customer Identification Program
93
 
14.12
Other Agreements
94
 
14.13
Waiver of Subrogation
94
       
ARTICLE 15
   
MISCELLANEOUS
94
 
15.1
Governing Law
94
 
15.2
Entire Understanding
95
 
15.3
Successors and Assigns; Participations; New Lenders
97
 
15.4
Application of Payments
99
 
15.5
Indemnity
99
 
15.6
Notice
100
 
15.7
Survival
102
 
15.8
Severability
102
 
15.9
Expenses
102
 
15.10
Injunctive Relief
102
 
15.11
Consequential Damages
102
 
15.12
Captions
103
 
15.13
Counterparts; Facsimile Signatures
103
 
15.14
Construction
103
 
15.15
Confidentiality; Sharing Information
103
 
15.16
Publicity
104
 
15.17
[Reserved]
104
 
15.18
Joinder of Guarantors
104

 
 
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LIST OF EXHIBITS AND SCHEDULES
 
Exhibits
 
Exhibit 1.2
Borrowing Base Certificate
Exhibit 2.1(a)
Revolving Credit Note
Exhibit 8.1(i)
Financial Condition Certificate
Exhibit 15.3
Commitment Transfer Supplement

 
Schedules
 
Schedule 1.2(B)
Permitted Encumbrances
Schedule 4.5
Equipment and Inventory Locations
Schedule 4.15(h)
Deposit and Investment Accounts
Schedule 4.19
Real Property
Schedule 5.1
Consents
Schedule 5.2(a)
States of Qualification and Good Standing
Schedule 5.2(b)
Subsidiaries
Schedule 5.4
Federal Tax Identification Number
Schedule 5.6
Prior Names
Schedule 5.8(b)
Litigation
Schedule 5.9
Intellectual Property, Source Code Escrow Agreements
Schedule 5.10
Licenses and Permits
Schedule 5.14
Labour Disputes
Schedule 7.3
Guarantees
Schedule 7.7
Indebtedness

 
 
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REVOLVING CREDIT AND SECURITY AGREEMENT
 
Revolving Credit and Security Agreement dated December 21, 2012, among Zochem
Inc., a corporation incorporated pursuant to the Canada Business Corporations
Act (the “Borrower”), the Guarantors (as hereinafter defined), the financial
institutions which are now or which hereafter become a party hereto
(collectively, the “Lenders” and individually a “Lender”) and PNC Bank, Canada
Branch (“PNC”), as agent for the Lenders (PNC, in such capacity, the “Agent”).
 
IN CONSIDERATION of the mutual covenants and undertakings herein contained, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, Borrower, Guarantors, Lenders and Agent hereby agree as
follows:
 
ARTICLE 1
DEFINITIONS.
 
1.1
Accounting Terms.

 
As used in this Agreement, the Other Documents or any certificate, report or
other document made or delivered pursuant to this Agreement, accounting terms
not defined in Section 1.2 or elsewhere in this Agreement and accounting terms
partly defined in Section 1.2 to the extent not defined, shall have the
respective meanings given to them under GAAP; provided, however, whenever such
accounting terms are used for the purposes of determining compliance with
financial covenants in this Agreement, such accounting terms shall be defined in
accordance with GAAP as applied in preparation of the audited financial
statements of Holding for the fiscal year ended December 31, 2011.
 
1.2
General Terms.

 
For purposes of this Agreement the following terms shall have the following
meanings:
 
“Adjusted EBITDA” shall mean, as of any date of determination, EBITDA of the
Borrower and its Subsidiaries, as adjusted (without duplication) to add-back all
non-cash expense items and one-time non-recurring expenses or charges for
discontinued operations, restructuring, impairment and other charges as reviewed
and approved by the Agent, in each case, as consolidated and determined for the
Borrower and its Subsidiaries in accordance with GAAP.
 
“Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(ii)
hereof.
 
“Advances” shall have the meaning set forth in Section 2.1.
 
“Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above.  For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote five percent (5%) or more of the Equity Interests having ordinary voting
power for the election of directors of such Person or other Persons performing
similar functions for any such Person, or (y) to direct or cause the direction
of the management and policies of such Person whether by ownership of Equity
Interests, contract or otherwise.
 
 
 

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“Agent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.
 
“Agreement” shall mean this Revolving Credit and Security Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
 
"Alternate Source" shall have the meaning set forth in the definition of
"Federal Funds Open Rate".
 
"Alternative Source" shall have the meaning set forth in the definition of
"Eurodollar Rate".
 
“Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or
money laundering, including the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act (Canada) and other applicable anti-money laundering,
anti-terrorist financing, government sanction and “know your client” laws.
 
“Applicable Law” shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Other Document or contract in question,
including all applicable common law and equitable principles; all provisions of
all applicable provincial, federal and foreign constitutions, statutes, rules,
regulations, treaties, directives and orders of any Governmental Body, and all
orders, judgments and decrees of all courts and arbitrators.
 
“Authority” shall mean any Governmental Body or other Person responsible in
whole or in part for environmental matters in such Governmental Body in which
any Real Property is located.
 
“Base Rate” shall mean, for any day, a fluctuating per annum rate of interest
equal to the higher of (i) the interest rate per annum established from time to
time by the Agent at its Toronto office as its reference rate of interest for
loans in Canadian Dollars to Canadian borrowers, which rate may not be the
lowest rate then being charged commercial borrowers by the Agent, or (ii) the
one month CDOR Rate plus 150 basis points (1.50%).  The rate of interest in part
(i) above is determined from time to time by the Agent as a means of pricing
some loans to its customers and is neither tied to any external rate of interest
or index nor does it necessarily reflect the lowest rate of interest actually
charged by the Agent to any particular class or category of customers of the
Agent.
 
“Blocked Accounts” shall have the meaning set forth in Section 4.15(h).
 
“Blocked Account Agreements” shall mean each Blocked Account Agreement dated of
even date herewith made by Borrower to Agent for the benefit of the Lenders with
respect to Borrower’s bank accounts described in Section 4.15.
 
“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).
 
“Borrower” shall have the meaning set forth in the preamble to this Agreement
and shall extend to all permitted successors and assigns of such Person.
 
 
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“Borrower’s Account” shall have the meaning set forth in Section 2.7.
 
“Borrower Party” or “Borrower Parties” shall mean, singularly or collectively,
as the context may require, the Borrower and each of its Subsidiaries.
 
“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of Borrower and delivered to Agent, appropriately completed, by which
such officer shall certify to Agent the Formula Amount and calculation thereof
as of the date of such certificate.
 
“Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in Toronto, Ontario and, if the applicable Business Day relates to
any Eurodollar Rate Loans, such day must also be a day on which dealings are
carried on in the London interbank market.
 
“Canadian Benefit Plans” means all plans, arrangements, agreements, programs,
policies, practices or undertakings, whether oral or written, formal or
informal, funded or unfunded, insured or uninsured, registered or unregistered,
to which any Loan Party is a party or bound or in which their employees
participate or under which any Loan Party has, or will have, any liability or
contingent liability, or pursuant to which payments are made, or benefits are
provided to, or an entitlement to payments or benefits may arise with respect
to, any of their employees or former employees, their directors or officers,
individuals working on contract with any Loan Party, or other individuals
providing services to any Loan Party of a kind normally provided by employees
(or any spouses, dependants, survivors or beneficiaries of any such persons),
excluding Statutory Plans.
 
“Canadian Pension Plans” means all Canadian Benefit Plans which are required to
be registered under Canadian provincial or federal pension benefits standards
legislation.
 
“Capital Expenditures” shall mean expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations, which, in
accordance with GAAP, would be classified as capital expenditures; provided that
expenditures made during such period in connection with the replacement,
substitution, restoration or repair of assets to the extent financed with
insurance proceeds paid on account of the loss or damage to the assets being
replaced, substituted, restored or repaired shall not constitute Capital
Expenditures.
 
“Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower Party
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
 
“Cash Dominion Event” shall mean either (a) an Event of Default shall have
occurred and be continuing, or (b) a Testing Event shall have occurred.
 
“Cash Equivalents” shall mean: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or Canadian Government or issued
by any agency thereof and backed by the full faith and credit of the United
States or of Canada, as applicable, in each case maturing within six (6) months
from the date of acquisition thereof; (b) commercial paper maturing no more than
six (6) months from the date issued and, at the time of acquisition, having a
rating of at least A-1 from Standard & Poor’s or at least P-1 from Moody’s
Investors Service, Inc.; and (c) certificates of deposit or bankers’ acceptances
maturing within six (6) months from the date of issuance thereof issued by, or
overnight reverse repurchase agreements from any commercial bank organized under
the laws of the United States of America or of Canada, or any state or province
thereof or the District of Columbia, whose obligations are rated A-1, A or the
equivalent or better by Standard & Poor’s on the date of acquisition and not
subject to setoff rights in favour of such bank.
 
 
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“CDOR Rate” shall mean, on any date, the annual rate of interest which is the
rate based on an average rate applicable to Canadian Dollar bankers’ acceptances
for a specified term appearing on the “Reuters Screen CDOR Page” (as defined in
the International Swaps and Derivatives Association, Inc., definitions, as
modified and amended from time to time) at approximately 10:00 a.m. (Toronto
time), on such date, or if such date is not a Business Day, then on the
immediately preceding Business Day, provided that if such rate does not appear
on the Reuters Screen CDOR Page on such date as contemplated, then the CDOR Rate
on such date shall be the rate for the term referred to above applicable to
Canadian Dollar bankers’ acceptances quoted by the Agent as of 10:00 a.m.
(Toronto time) on such date or, if such date is not a Business Day, then on the
immediately preceding Business Day.
 
“CDOR Rate Loan” shall mean an Advance at any time that bears interest based on
the CDOR Rate.
 
“Change of Ownership” shall mean (a) one hundred percent (100%) of the Equity
Interests of the Borrower is no longer owned or controlled by Holding, (b) one
hundred percent (100%) of the Equity Interests of any Subsidiary of the Borrower
is no longer owned or controlled by the Borrower, or (c) any merger,
amalgamation, consolidation or sale of substantially all of the property or
assets of any Borrower Party. For purposes of this definition, “controlled by”
shall mean the power of any person, direct or indirect (i) to vote one hundred
percent (100%) or more of the Equity Interests having ordinary voting power for
the election of directors (or the individuals performing similar functions) of
any Person or (ii) to direct or cause the direction of the management and
policies of any Person by contract or otherwise.
 
“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital
shares, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts, imposed by any taxing or other authority, domestic or foreign
(including the Pension Benefit Guaranty Corporation or any environmental agency
or superfund), upon the Collateral or the Borrower.
 
“Closing Date” shall mean December 21, 2012 or such other date as may be agreed
to by the parties hereto.
 
“Code” shall mean the Income Tax Act (Canada) and all regulations made
thereunder.
 
 
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“Collateral” shall mean all of a Grantor’s personal property and include:
 
 
(a)
all Receivables;

 
 
(b)
all Equipment;

 
 
(c)
all General Intangibles;

 
 
(d)
all Inventory;

 
 
(e)
all Investment Property;

 
 
(f)
all Subsidiary Shares;

 
 
(g)
all of each Grantor’s right, title and interest in and to, whether now owned or
hereafter acquired and wherever located, (i) its respective goods and other
property including all merchandise returned or rejected by Customers, relating
to or securing any of the Receivables; (ii) all of each Grantor’s rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, setoff, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to each Grantor from any Customer
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing the Obligations; (v) all of each Grantor’s
contract rights, rights of payment which have been earned under a contract
right, instruments (including promissory notes), documents, chattel paper
(including electronic chattel paper), warehouse receipts, deposit accounts,
letters of credit and money; (vi) [reserved]; (vii) if and when obtained by any
Grantor, all real and personal property of third parties in which such Grantor
has been granted a lien or security interest as security for the payment or
enforcement of Receivables; (viii) all letter of credit rights (whether or not
the respective letter of credit is evidenced by a writing); (ix) all supporting
obligations; and (x) any other goods, personal property or real property now
owned or hereafter acquired in which any Grantor has expressly granted a
security interest or may in the future grant a security interest to Agent
hereunder, or in any amendment or supplement hereto or thereto, or under any
other agreement between Agent and such Grantor;

 
 
(h)
all of each Grantor’s ledger sheets, ledger cards, files, correspondence,
records, books of account, business papers, computers, computer software (owned
by such Grantor or in which it has an interest), computer programs, tapes, disks
and documents relating to (a), (b), (c), (d), (e), (f) or (g) of this Paragraph;
and

 
 
(i)
all proceeds and products of (a), (b), (c), (d), (e), (f), (g) and (h) in
whatever form, including:  cash, deposit accounts (whether or not comprised
solely of proceeds), certificates of deposit, insurance proceeds (including
hazard, flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.

 
 
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“Collateral Agent” shall mean the Collateral Agent (as defined in the
Intercreditor Agreement).
 
“Commitment Percentage” of any Lender shall mean the percentage set forth below
such Lender’s name on the signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to Section 15.3(c) or 15.3(d) hereof and by any
increases under Section 2.24.
 
“Commitment Transfer Supplement” shall mean a document in the form of Exhibit
15.3 hereto, properly completed and otherwise in form and substance satisfactory
to Agent by which the Purchasing Lender purchases and assumes a portion of the
obligation of Lenders to make Advances under this Agreement.
 
“Compliance Certificate” shall mean a compliance certificate to be signed by the
Chief Financial Officer or Controller of Borrower, which shall state that, based
on an examination sufficient to permit such officer to make an informed
statement, no Default or Event of Default exists, or if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by the defaulting party with
respect to such default and, such certificate shall have appended thereto
calculations or details, as applicable, which set forth compliance with the
requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.8 and
7.9.
 
“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Borrower
Party’s business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement or any Other
Documents, including any Consents required under all applicable federal,
provincial, state or other Applicable Law.
 
“Consideration” shall mean with respect to any Permitted Acquisition, without
duplication, the aggregate of (i) the cash paid by any of the Borrower Parties,
directly or indirectly, to the seller in connection therewith, (ii) the
Indebtedness incurred or assumed by any of the Borrower Parties, whether in
favour of the seller or otherwise and whether fixed or contingent, in connection
therewith, (iii) any guaranty given or incurred by any Borrower Party in
connection therewith, and (iv) any other consideration given or obligation
incurred by any of the Borrower Parties in connection therewith.
 
“Consigned Inventory” shall mean Inventory of the Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.
 
“Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Grantor,
pursuant to which such Grantor is to deliver any personal property or perform
any services.
 
“Customs” shall have the meaning set forth in Section 2.12(b) hereof.
 
 
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“Default” shall mean an event, circumstance or condition which, with the giving
of notice or passage of time or both, would constitute an Event of Default.
 
“Default Rate” shall have the meaning set forth in Section 3.1 hereof.
 
“Defaulting Lender” shall have the meaning set forth in Section 2.23(a) hereof.
 
“Deposit Account Control Agreement” shall have the meaning set forth in Section
4.15(h).
 
“Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.
 
“Designated Lender” shall have the meaning set forth in Section 5.2(b) hereof.
 
“Dollar” and the sign “$” shall mean lawful money of Canada.
 
“Domestic Person” shall mean any entity organized under the laws of Canada or
any Province of Canada.
 
“Domestic Rate Loan” shall mean any Advance that bears interest based upon the
Base Rate or the U.S. Base Rate.
 
“Drawing Date” shall have the meaning set forth in Section 2.13(b) hereof.
 
“Earnings Before Interest and Taxes” shall mean for any period the sum of (i)
net income (or loss) of the Borrower and its Subsidiaries on a consolidated
basis for such period (excluding extraordinary gains), plus (ii) all interest
expense of the Borrower and its Subsidiaries on a consolidated basis for such
period, plus (iii) all charges against income of the Borrower and its
Subsidiaries on a consolidated basis for such period for federal, provincial and
local taxes.
 
“EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and
Taxes for such period plus (ii) depreciation expenses, plus (iii) amortization
expenses, plus (iv) non-cash share based compensation expenses, plus (v)
non-cash charges deducted from Earnings Before Interest and Taxes as a result of
mark-to-market adjustments, plus (vi) non-cash charges deducted from Earnings
Before Interest and Taxes for fixed asset write-downs/write-offs and any other
non-recurring charges, plus (vii) any gains recognized in connection with the
exercise of any options and not otherwise included in Earnings Before Interest
and Taxes, less (viii) non-cash adjustments added to Earnings Before Interest
and Taxes as a result of mark-to-market adjustments, less (ix) any losses
incurred as a result of the expiration of any unexercised options and not
otherwise deducted from Earnings Before Interest and Taxes, in each case of the
Borrower and its Subsidiaries on a consolidated basis for such period.
 
 
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“Eligible Inventory” shall mean and include Inventory, excluding work in
process, with respect to the Borrower, valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent’s
commercially reasonable opinion, obsolete, slow moving or unmerchantable and
which Agent, in its commercially reasonable discretion, shall not deem
ineligible Inventory, based on such considerations as Agent may from time to
time deem appropriate including whether the Inventory is subject to a perfected,
first priority security interest in favour of Agent and no other Lien (other
than a Permitted Encumbrance).  In addition, Inventory shall not be Eligible
Inventory if it (i) does not conform to all standards imposed by any
Governmental Body which has regulatory authority over such goods or the use or
sale thereof, (ii) is in transit unless such otherwise Eligible Inventory is in
transit from a domestic location owned by the Borrower to a domestic location
owned by the Borrower, (iii) is located outside of Canada or at a location that
is not otherwise in compliance with this Agreement, (iv) constitutes Consigned
Inventory, unless the Borrower can establish with respect to an item of
Consigned Inventory that: (x) all appropriate notices required by the PPSA have
been given by the Borrower to any secured parties of such consignee having a
security interest in Inventory of the consignee prior to delivery of such item
of Inventory to such consignee, (y) all appropriate financing statements have
been filed by the Borrower against such consignee prior to such delivery of such
item of Inventory to the consignee and (z) access agreements, in form and
substance satisfactory to the Agent, have been executed by the consignee and
delivered to the Agent; provided, however, notwithstanding that such Inventory
would otherwise be Eligible Inventory hereunder, such Inventory shall be deemed
to not be Eligible Inventory if the regular reporting with respect to such
Inventory provided by such third Person to the Borrower and the Agent is not
acceptable to the Agent in its reasonable discretion, (v) is the subject of an
Intellectual Property Claim; (vi) is subject to a License Agreement or other
agreement that limits, conditions or restricts the Borrower’s or Agent’s right
to sell or otherwise dispose of such Inventory, unless Agent is a party to a
Licensor/Agent Agreement with the Licensor under such License Agreement; (vii)
or is situated at a location not owned by a Borrower unless the owner or
occupier of such location has executed in favour of Agent a Lien Waiver
Agreement; or (viii) is not otherwise satisfactory to Agent as determined in
good faith by Agent in the exercise of its discretion in a reasonable
manner.  Eligible Inventory shall not include Inventory being acquired pursuant
to a trade Letter of Credit to the extent such trade Letter of Credit remains
outstanding.
 
“Eligible Receivables” shall mean and include with respect to the Borrower, each
Receivable of the Borrower arising in the Ordinary Course of Business and which
Agent, in its commercially reasonable discretion, shall deem to be an Eligible
Receivable, based on such considerations as Agent may from time to time deem
appropriate.  A Receivable shall not be deemed eligible unless such Receivable
is subject to Agent’s first priority perfected security interest and no other
Lien (other than Permitted Encumbrances), and is evidenced by an invoice or
other documentary evidence satisfactory to Agent.  In addition, no Receivable
shall be an Eligible Receivable if:
 
 
(a)
it arises out of a sale made by the Borrower to an Affiliate of the Borrower or
to a Person controlled by an Affiliate of the Borrower, unless such sale was
made on standard, fair and reasonable terms and conditions, no less favourable
to the Borrower than the Borrower could obtain in a comparable arms length
transaction with an unrelated third party; provided that the aggregate amount of
Eligible Receivables based on such Affiliate sales shall not exceed Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00) at any time;

 
 
(b)
it is due or unpaid more than (i) sixty (60) days after the original due date or
(ii) ninety (90) days after the original invoice date;

 
 
(c)
fifty percent (50%) or more of the Receivables from such Customer are not deemed
Eligible Receivables hereunder;

 
 
(d)
any covenant, representation or warranty contained in this Agreement with
respect to such Receivable has been breached;

 
 
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(e)
the Customer shall (i) apply for, suffer, or consent to the appointment of, or
the taking of possession by, a receiver, a received and manager, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any provincial or federal bankruptcy laws
(as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent,
(vi) file a petition seeking to take advantage of any other law providing for
the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any
petition which is filed against it in any involuntary case under such bankruptcy
laws, or (viii) take any action for the purpose of effecting any of the
foregoing;

 
 
(f)
the sale is to a Customer outside the continental United States of America or
Canada, unless the sale is on letter of credit (subject to UCP Publication No.
600, and any amendments or revision thereof, or other standards acceptable to
the Agent, acting reasonably), guaranty or acceptance terms, in each case
acceptable to Agent in its reasonable discretion, or otherwise on terms
acceptable to Agent in its reasonable discretion;

 
 
(g)
the sale to the Customer is on a bill-and-hold (unless pursuant to documentation
in form and substance satisfactory to Agent), guaranteed sale, sale-and-return,
sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;

 
 
(h)
[reserved];

 
 
(i)
the goods giving rise to such Receivable have not been delivered to and accepted
by the Customer or the services giving rise to such Receivable have not been
performed by the Borrower and accepted by the Customer or the Receivable
otherwise does not represent a final sale;

 
 
(j)
the Receivable arises with respect to a Customer whose aggregate amount of
Receivables constitute fifteen percent (15%) or more of the aggregate amount of
all Receivables owed to the Borrower, to the extent such Receivables exceed such
limit;

 
 
(k)
the Receivable is subject to any offset, deduction, defense, dispute, or
counterclaim, only to the extent of such offset, deduction, defense, dispute or
counterclaim,

 
 
(l)
the Customer is also a creditor or supplier of a Borrower or the Receivable is
contingent in any respect or for any reason, only to the extent of any offset,
deduction, defense, dispute, counterclaim or contingency;

 
 
(m)
the Borrower has made any agreement with any Customer for any deduction
therefrom, except for discounts or allowances made in the Ordinary Course of
Business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the face value of each respective invoice related thereto;

 
 
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(n)
any return, rejection or repossession of the merchandise has occurred or the
rendition of services has been disputed;

 
 
(o)
such Receivable is not payable to a Borrower; or

 
 
(p)
such Receivable is not otherwise satisfactory to Agent as determined in good
faith by Agent in the exercise of its discretion in a reasonable manner.

 
“Environmental Indemnity” shall mean any environmental indemnity agreement made
by the Loan Parties to the Agent relating to any environmental liabilities
associated with the Premises as set forth therein, together with all amendments,
supplements, modifications, substitutions and replacements thereto and thereof.
 
“Environmental Laws” shall mean all federal, provincial and local environmental,
occupational health and safety laws, statutes, ordinances and codes relating to
the protection of the environment and/or governing the use, storage, treatment,
generation, transportation, processing, handling, production or disposal of
Hazardous Substances and the rules, regulations, decisions, orders and
directives of federal, provincial and local governmental agencies and
authorities with respect thereto.
 
“Equipment” shall mean and include as to each Grantor all of such Grantor’s
goods (other than Inventory) whether now owned or hereafter acquired and
wherever located including all equipment, machinery, apparatus, motor vehicles,
fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.
 
“Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common share, preferred share or convertible securities.
 
“Equivalent Amount” shall mean, on any date of determination, with respect to
obligations or valuations denominated in one currency (the “first currency”),
the amount of another currency (the “second currency”) which would result from
Agent converting at the rate quoted under “Current Rates” by Bank of Canada the
first currency into the second currency at approximately 12:00 p.m. (noon)
(Toronto time) on such day in accordance with Agent’s customary practice for
commercial loans being administered by it or at such other rate as may have been
agreed in writing between Borrower and Agent.
 
“Exchange Rate” means the rate of exchange quoted by the Bank of Canada on the
Business Day preceding the day as of which any determination of such rate is
required to be made under the terms hereof, as the noon mid-market spot rate for
conversions of any currency into another currency;
 
 
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"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum (rounded upwards,
if necessary, to the nearest one hundredth (1/100) of one percent (1%))
determined by Agent by dividing (i) the rate which appears on the Bloomberg Page
BBAM1 (or on such other substitute Bloomberg page that displays rates at which
US dollar deposits are offered by leading banks in the London interbank deposit
market), or the rate which is quoted by another source selected by Agent which
has been approved by the British Bankers' Association as an authorized
information vendor for the purpose of displaying rates at which US dollar
deposits are offered by leading banks in the London interbank deposit market (an
"Alternative Source"), at approximately 11:00 a.m., London time two (2) Business
Days prior to the first day of such Interest Period (or if there shall at any
time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute
page) or any Alternative Source, a comparable replacement rate determined by
Agent at such time (which determination shall be conclusive absent manifest
error)) for an amount comparable to such Eurodollar Rate Loan and having a
borrowing date and a maturity comparable to such Interest Period by (ii) a
number equal to 1.00 minus the Reserve Percentage.
 
The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan
that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. Agent shall give prompt notice to Borrower
of the Eurodollar Rate as determined or adjusted in accordance herewith, which
determination shall be conclusive absent manifest error.
 
"Eurodollar Rate Loan" shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.
 
“Event of Default” shall have the meaning set forth in Article 10 hereof.
 
"Federal Funds Open Rate" for any day shall mean the rate per annum (based on a
year of 360 days and actual days elapsed) which is the daily federal funds open
rate as quoted by ICAP North America, Inc. (or any successor) as set forth on
the Bloomberg Screen BTMM for that day opposite the caption "OPEN" (or on such
other substitute Bloomberg Screen that displays such rate), or as set forth on
such other recognized electronic source used for the purpose of displaying such
rate as selected by PNC Bank, National Association (an "Alternate Source") (or
if such rate for such day does not appear on the Bloomberg Screen BTMM (or any
substitute screen) or on any Alternate Source, or if there shall at any time,
for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute
screen) or any Alternate Source, a comparable replacement rate determined by PNC
at such time (which determination shall be conclusive absent manifest error);
provided however, that if such day is not a Business Day, the Federal Funds Open
Rate for such day shall be the "open" rate on the immediately preceding Business
Day.  If and when the Federal Funds Open Rate changes, the rate of interest with
respect to any advance to which the Federal Funds Open Rate applies will change
automatically without notice to Loan Parties, effective on the date of any such
change.
 
“Fee Letter” shall mean the fee letter dated of even date herewith among
Borrower and Agent.
 
“Financial Statements” shall have the meaning set forth in Section 5.5(c).
 
“Fixed Charge Coverage Ratio” shall mean and include, with respect to the
Borrower and its Subsidiaries on a consolidated basis for any fiscal period, the
ratio of (a) Adjusted EBITDA minus the sum of (i) Unfinanced Capital
Expenditures made during such period, (ii) cash taxes paid or required to be
paid during such period, (iii) cash investments in Holding as permitted pursuant
to Section 7.4 hereof, (iv) advances, loans and extensions of credit made in
cash to Holding as permitted pursuant to Section 7.5 hereof and (v) dividends
and distributions paid in cash as permitted pursuant to Section 7.6 hereof, to
(b) the sum of (i) all cash expenses and charges for pension and benefit plans
(to the extent not already included in Adjusted EBITDA) plus (ii) all Senior
Debt Payments during such period.
 
 
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“Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person
that is not organized or incorporated in Canada or any province or territory
thereof.
 
“Formula Amount” shall have the meaning set forth in Section 2.1(a).
 
“GAAP” shall mean generally accepted accounting principles in Canada in effect
from time to time.
 
“General Intangibles” shall mean and include all of each Grantor’s general
intangibles, whether now owned or hereafter acquired, including all payment
intangibles, all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trade-marks,
trade-mark applications, service marks, trade secrets, goodwill, copyrights,
design rights, software, computer information, source codes, codes, records and
updates, registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to such Grantor to secure payment
of any of the Receivables by a Customer (other than to the extent covered by
Receivables) all rights of indemnification and all other intangible property of
every kind and nature (other than Receivables).
 
“Governmental Acts” shall have the meaning set forth in Section 0.
 
“Governmental Body” shall mean any nation or government, any provincial, state
or other political subdivision thereof or any entity, authority, agency,
division or department exercising the legislative, judicial, regulatory or
administrative functions of or pertaining to a government.
 
“Grantor” or “Grantors” shall mean, singularly or collectively, as the context
may require, each Loan Party (other than Holding).
 
“Guarantor” or “Guarantors” shall mean, singularly or collectively, as the
context may require, Holding, each Person which joins this Agreement as a
Guarantor after the date hereof pursuant to Section 15.18 and any other Person
who may hereafter guarantee payment or performance of the whole or any part of
the Obligations and shall extend to all permitted successors and assigns of such
Persons.
 
“Guaranty” shall mean (i) the Guaranty and Suretyship Agreement made by Holding
in favour of Agent for its benefit and for the ratable benefit of Lenders, and
(ii) any other guaranty of the obligations of Borrower executed by a Guarantor
in favour of Agent for its benefit and for the ratable benefit of Lenders, in
form and substance satisfactory to Agent, in each case together with all
amendments, supplements, modifications, substitutions and replacements thereto
and thereof, and “Guarantees” means collectively, all such Guarantees.
 
 
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“Hazardous Discharge” shall mean any Release or threat of Release of any
Hazardous Substance at the Real Property equal to or exceeding a reportable
quantity for which notice must be provided to any Authority pursuant to any
applicable Environmental Laws.
 
“Hazardous Substance” shall mean any flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products, hazardous materials, Hazardous
Wastes, hazardous substances or Toxic Substances as defined in applicable
Environmental Law and in the regulations adopted pursuant thereto.
 
“Hazardous Wastes” shall mean all waste materials subject to regulation under
Applicable Law now in force or hereafter enacted relating to hazardous waste
disposal.
 
“Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.
 
“Holding” shall mean Horsehead Holding Corp., a Delaware corporation.
 
“Holding Bond Issuances” shall mean any unsecured debt securities issuances by
Holding.
 
“Indebtedness” of a Person at a particular date shall mean any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of:  (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit agreement, (iv) obligations under any
currency swap agreement, interest rate swap, cap, collar or floor agreement or
other interest rate management device, (v) Capitalized Lease Obligations, (vi)
operating lease obligations, (vii) any other transaction (including forward sale
or purchase agreements, and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (viii) any Guaranty of Indebtedness for
borrowed money.
 
“Indenture Collateral Documents” shall mean the Indenture Collateral Documents
(as defined in the Intercreditor Agreement).
 
“Indenture Documents” shall mean the Indenture, the Indenture Notes, the
Indenture Collateral Documents and all other agreements, documents, schedules,
exhibits and instruments executed or to be executed or delivered in connection
therewith, together with any and all extensions, renewals, refinancings or
refundings thereof in whole or in part, as amended, modified or supplemented
from time to time in accordance with the terms hereof, thereof and of the
Intercreditor Agreement.
 
“Indenture” shall mean that certain Indenture, dated July 26, 2012, by and among
Holding, the other Grantors (as defined therein) party thereto, the Trustee and
the Collateral Agent.
 
“Indenture Notes” shall mean the Notes (as defined in the Intercreditor
Agreement).
 
 
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“Intercreditor Agreement” shall mean that certain Intercreditor Agreement, dated
of even date herewith, by and between PNC Bank, National Association and the
Collateral Agent and acknowledged and agreed to by the Loan Parties, as the same
may be amended, restated, modified or supplemented in accordance with the terms
thereof.
 
“Intellectual Property” shall mean property constituting under any Applicable
Law a patent, patent application, copyright, trade-mark, service mark, trade
name, mask work, trade secret or license or other right to use any of the
foregoing.
 
“Intellectual Property Claim” shall mean the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
the Borrower’s ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other property or asset is violative of any
ownership of or right to use any Intellectual Property of such Person.
 
“Interest Period” shall mean the period provided for any Eurodollar Loan or CDOR
Loan pursuant to Section 2.2(b).
 
“Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap,
adjustable strike cap, adjustable strike corridor or similar agreements entered
into by any Borrower Party or its Subsidiaries in order to provide protection
to, or minimize the impact upon, such Borrower Party and/or its Subsidiaries of
increasing floating rates of interest applicable to Indebtedness.
 
“Inventory” shall mean and include all of each Grantor’s now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any consignment arrangement, contract of service or held for
sale or lease, all raw materials, work in process, finished goods and materials
and supplies of any kind, nature or description which are or might be used or
consumed in such Grantor’s business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
 
“Inventory Advance Rate” shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
 
“Investment Property” shall mean and include all of each Grantor’s now owned or
hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.
 
“IP Security Agreement” shall mean the Patent, Trade-mark and Copyright Security
Agreement, dated of even date herewith executed and delivered by Borrower in
connection with this Agreement, together with all amendments, supplements,
modifications, substitutions and replacements thereto and thereof.
 
“Issuer” shall mean any Person who issues a Letter of Credit pursuant to the
terms hereof.
 
“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
 
 
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“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which Agent confirms meets the
following requirements: such Interest Rate Hedge (i) is documented in a standard
International Swap Dealer Association Agreement or other similar agreement
acceptable to Agent in its sole discretion, (ii) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner, and (iii) is entered into for hedging (rather
than speculative) purposes.  The liabilities of any Borrower Party to the
provider of any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”)
shall be “Obligations” hereunder, guaranteed obligations under the Guaranty and
otherwise treated as Obligations for purposes of each of the Other Documents.
The Liens securing the Hedge Liabilities shall be pari passu with the Liens
securing all other Obligations under this Agreement and the Other Documents.
 
“Letter of Credit Borrowing” shall have the meaning set forth in Section
2.13(d).
 
“Letter of Credit Fees” shall have the meaning set forth in Section 3.2.
 
“Letter of Credit Sublimit” shall mean Five Million and 00/100 Dollars
($5,000,000.00).
 
“Letters of Credit” shall have the meaning set forth in Section 2.8.
 
“License Agreement” shall mean any agreement between the Borrower and a Licensor
pursuant to which the Borrower is authorized to use any Intellectual Property in
connection with the manufacturing, marketing, sale or other distribution of any
Inventory of the Borrower or otherwise in connection with the Borrower’s
business operations.
 
“Licensor” shall mean any Person from whom the Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property in
connection with the Borrower’s manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with the Borrower’s
business operations.
 
“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of the Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of the Borrower’s default
under any License Agreement with such Licensor.
 
“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the PPSA or comparable law of any jurisdiction.
 
“Lien Waiver Agreement” shall mean an agreement which is executed in favour of
Agent by a Person who owns or occupies premises at which any Collateral may be
located from time to time and by which such Person shall waive any Lien that
such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.
 
 
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“Loan Party” or “Loan Parties” shall mean, singularly or collectively, as the
context may require, the Borrower and each Guarantor and shall extend to all
permitted successors and assigns of each such Person.
 
“Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, results of operations, assets, business or properties of
the Borrower Parties, taken as a whole, (b) any Borrower Party’s ability to duly
and punctually pay or perform the Obligations in accordance with the terms
thereof, (c) the Agent’s Liens on the Collateral or the priority of any such
Lien or (d) the practical realization of the benefits of Agent’s and each
Lender’s rights and remedies under this Agreement and the Other Documents.
 
“Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.
 
“Maximum Revolving Advance Amount” shall mean Fifteen Million and 00/100 Dollars
($15,000,000.00), or such higher amount which may result from the provisions of
Section 2.24 hereof.
 
“Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of
Credit, the amount of such Letter of Credit that is or may become available to
be drawn, including all automatic increases provided for in such Letter of
Credit, whether or not any such automatic increase has become effective.
 
“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 15.3(d).
 
“Month End Financial Statements” shall have the meaning set forth in Section
5.5(c).
 
“Net Orderly Liquidation Value” shall mean, at any time, the aggregate value of
the Borrower’s Inventory at such time in an orderly liquidation, taking into
account all costs, fees and expenses estimated to be incurred by the Agent and
the Lenders in connection with such liquidation, based upon the most recent
appraisal of the Borrower’s Inventory conducted by an appraiser selected by the
Agent.
 
“Note” shall mean each Revolving Credit Note and “Notes” shall collectively mean
all of the Revolving Credit Notes.
 
“Notice of Waiver of Rights” shall mean the Notice of Waiver of Rights Regarding
Warrants of Attorney, Execution Rights and Waiver of Rights to Prior Notice and
Judicial Hearing, dated of even date herewith, made by Loan Parties to Agent,
together with all amendments, supplements, modifications, substitutions and
replacements thereto and thereof.
 
 
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“Obligations” shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by any Borrower Party to
Lenders or Agent or to any other direct or indirect subsidiary or affiliate of
Agent or any Lender of any kind or nature, present or future (including any
interest or other amounts accruing thereon after maturity, or after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to any Borrower Party, whether or not
a claim for post-filing or post-petition interest or other amounts is allowed in
such proceeding), whether or not evidenced by any note, guaranty or other
instrument, whether arising under any agreement, instrument or document,
(including this Agreement and the Other Documents) whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
of a letter of credit, loan, equipment lease or guarantee, under any interest or
currency swap, future, option or other similar agreement, or in any other
manner, whether arising out of overdrafts or deposit or other accounts or
electronic funds transfers (whether through automated clearing houses or
otherwise) or out of Agent’s or any Lenders non-receipt of or inability to
collect funds or otherwise not being made whole in connection with depository
transfer cheque or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including
any and all of any Borrower Party’s Indebtedness and/or liabilities under this
Agreement, the Other Documents or under any other agreement between Agent or
Lenders and any Borrower Party and any amendments, extensions, renewals or
increases and all costs and expenses of Agent and any Lender incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including reasonable legal fees and
expenses and all obligations of any Borrower Party to Agent or Lenders to
perform acts or refrain from taking any action.
 
“Ordinary Course of Business” shall mean with respect to any Borrower Party,
operations in connection with environmental services, metals processing and
metals reclamation and all related activities incidental thereto.
 
“Other Documents” shall mean the Notes, any Guaranty, any Pledge Agreement, any
Lender-Provided Interest Rate Hedge, the IP Security Agreement, the Notice of
Waiver of Rights, any Lien Waiver Agreement, the Fee Letter, the Environmental
Indemnity, the Intercreditor Agreement and any and all other agreements,
instruments and documents, including guaranties, pledges, powers of attorney,
consents, interest or currency swap agreements or other similar agreements and
all other writings heretofore, now or hereafter executed by any Loan Party
and/or delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
 
“Out-of-Formula Loans” shall have the meaning set forth in Section 15.2(b).
 
“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly at least fifty percent (50%) of the shares or other ownership
interests having ordinary voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.
 
“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
 
“Participation Advance” shall have the meaning set forth in Section 2.13(d).
 
 
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“Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.
 
“Payee” shall have the meaning set forth in Section 3.10.
 
“Payment Office” shall mean initially 130 King Street West, Suite 2140, Toronto,
Ontario, M5X 1E4; thereafter, such other office of Agent, if any, which it may
designate by notice to Borrower and to each Lender to be the Payment Office.
 
“Pension Plan Termination Event” means an event which would entitle a Person
(without the consent of any Loan Party) to wind- up or terminate a Canadian
Pension Plan in full or in part, or the institution of any steps by any Person
to withdraw from, terminate participation in, wind- up or order the termination
or wind–up of, in full or in part, any Canadian Pension Plan, or the receipt by
any Loan Party of correspondence from a Governmental Body relating to a
potential or actual, partial or full, termination or wind-up of any Canadian
Pension Plan, or an event respecting any Canadian Pension Plan which could
result in the revocation of the registration of such Canadian Pension Plan or
which could otherwise reasonably be expected to have a Material Adverse Effect
in respect of the tax status of any such Canadian Pension Plan.
 
“Pension Plan Unfunded Liability” means an unfunded liability in respect of any
Canadian Pension Plan, including a going-concern unfunded liability, a solvency
deficiency or a wind-up deficiency.
 
“Permitted Acquisition” shall have the meaning set forth in Section 7.1(a)
hereof.
 
“Permitted Encumbrances” shall mean:
 
 
(a)
Liens in favour of Agent for the benefit of Agent and Lenders;

 
 
(b)
Liens for taxes, assessments or other governmental charges not delinquent or
being Properly Contested;

 
 
(c)
Liens disclosed in the financial statements referred to in Section 5.5, the
existence of which Agent has consented to in writing;

 
 
(d)
deposits or pledges to secure obligations under worker’s compensation, social
security or similar laws, or under unemployment insurance;

 
 
(e)
deposits or pledges to secure bids, tenders, contracts (other than contracts for
the payment of money), leases, statutory obligations, surety and appeal bonds
and other obligations of like nature arising in the Ordinary Course of Business;

 
 
(f)
Liens arising by virtue of the rendition, entry or issuance against any Borrower
Party or any Subsidiary, or any property of any Borrower Party or any
Subsidiary, of any judgment, writ, order, or decree for so long as each such
Lien (x) is in existence for less than twenty (20) consecutive days after it
first arises or is being Properly Contested and (y) is at all times junior in
priority to any Liens in favour of Agent;

 
 
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(g)
mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary
Course of Business with respect to obligations which are not due or which are
being Properly Contested;

 
 
(h)
Liens placed upon fixed assets hereafter acquired to secure a portion of the
purchase price thereof, provided that (x) any such lien shall not encumber any
other property of any Borrower Party and (y) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases during
any fiscal year shall not exceed the amount provided for in Section 7.7(c);

 
 
(i)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, rights-of-way, covenants, consents,
reservations, defects or irregularities in title, variations, zoning, and other
restrictions, charges or encumbrances (whether or not recorded) affecting the
Real Property, if applicable, and which do not, individually or in the aggregate
(i) materially interfere with the occupation, use or enjoyment by the applicable
Borrower Party of its business or property so encumbered and (ii) do not
materially and adversely affect the value of such Real Property;

 
 
(j)
Liens arising from the precautionary PPSA financing statements filed under any
lease or license permitted by this Agreement;

 
 
(k)
Liens of local or state authorities for franchise or other like Taxes, provided
that such liens do not exceed One Hundred Thousand and 00/100 Dollars
($100,000.00) in the aggregate at any time for the Borrower;

 
 
(l)
Liens on insurance policies and the proceeds thereof securing the financing of
the premiums with respect thereto;

 
 
(m)
customary rights of set-off, revocation, refund or chargeback under deposit
agreements or under the PPSA of banks or other financial institutions where any
Borrower Party maintains deposits (other than deposits intended as cash
collateral) in the ordinary course of business;

 
 
(n)
Liens disclosed on Schedule 1.2(B);

 
 
(o)
Liens in favour of the Collateral Agent pursuant to the Indenture Collateral
Documents; provided that such Liens are subject to, or provided pursuant to the
terms of, the Intercreditor Agreement; and

 
 
(p)
other Liens on assets securing Indebtedness not exceeding Five Hundred Thousand
and 00/100 Dollars ($500,000.00) in the aggregate at any time for all Borrower
Parties;

 
 
(q)
Liens in all or any portion of the issued and outstanding capital stock of the
Borrower granted by Holding to PNC Bank, National Association and the Collateral
Agent, which Liens, for greater certainty, are in priority to any Liens granted
in favour of the Agent for the benefit of Lenders; and

 
 
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(r)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in the foregoing
clauses (a) through (n), provided that any such extension, renewal or
replacement Lien shall be limited to all or a part of the property that was the
subject to the Lien so extended, renewed or replaced (plus any improvements on
such property) and provided that any such extension, renewal or replacement Lien
shall not secure an amount (i.e., outstanding principal plus accrued and unpaid
interest and fees and expenses in the case of Indebtedness permitted pursuant to
this Agreement) greater than the amount outstanding immediately prior to such
extension, renewal or replacement Lien.

 
“Person” shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
Governmental Body (whether federal, provincial, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department
thereof).
 
“Pledge Agreement” shall mean (i) the Pledge Agreement dated of even date
herewith made by Holding to Agent for the benefit of Lenders, with respect to
all of the issued and outstanding capital stock of the Borrower (which, for
greater certainty, is subject to the Permitted Encumbrances in favour of PNC
Bank, National Association and the Collateral Agent), and (ii) any other Pledge
Agreement executed and delivered by any Loan Party to Agent for the benefit of
Lenders with respect to the Subsidiary Shares, in each case together with all
amendments, supplements, modifications, substitutions and replacements thereto
and thereof, and “Pledge Agreements” means collectively, all such Pledge
Agreements.
 
“PNC” shall have the meaning set forth in the preamble to this Agreement and
shall extend to all of its successors and assigns.
 
“PPSA” means the Personal Property Security Act (Ontario), provided, however, if
attachment, perfection, or priority of the Agent’s Liens are governed by the
personal property security laws of any jurisdiction other than Ontario, “PPSA”
shall mean those personal property security laws in such other jurisdiction for
the purposes of the provisions of this Agreement relating to such attachment,
perfection or priority and for the definitions related to such provisions;
 
“Priority Payables” shall mean (a) the full amount of the liabilities of any
Loan Party which (i) have a trust imposed to provide for payment or a security
interest, pledge, lien, hypothec or charge ranking senior to or pari passu with
security interests, liens, hypothecs or charges securing the Obligations on any
Collateral under any federal, provincial, state, county, district, municipal,
local or foreign law or (ii) have a right imposed to provide for payment ranking
or capable of ranking senior to or pari passu with the Obligations under local
or national law, regulation or directive, including, but not limited to, claims
for unremitted and/or accelerated rents, taxes, wages, withholdings taxes, value
added taxes and other amounts payable to an insolvency administrator, employee
withholdings or deductions and vacation pay, severance and termination pay,
workers’ compensation obligations, government royalties or pension obligations
in each case to the extent such trust, or security interest, Lien, hypothec or
charge has been or may be imposed and (b) the amount equal to the aggregate
value of the Inventory which the Agent, in good faith, and on a reasonable
basis, considers is or may be subject to retention of title by a supplier or a
right of a supplier to recover possession thereof, where such supplier’s right
has priority over the security interests, Liens, hypothecs or charges securing
the Obligations, including, without limitation, Inventory subject to a right of
a supplier to repossess goods pursuant to Section 81.1 of the Bankruptcy and
Insolvency Act (Canada) or any Applicable Laws granting revendication or similar
rights to unpaid suppliers or any similar laws of Canada or any other applicable
jurisdiction.
 
 
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“Projections” shall have the meaning set forth in Section 5.5(a) hereof.
 
“Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due
or payable by reason of such Person’s bona fide dispute concerning its liability
to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as
applicable, is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) such Person has established
appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Indebtedness will not have a Material Adverse Effect and
will not result in the forfeiture of any assets of such Person; (iv) no Lien is
imposed upon any of such Person’s assets with respect to such Indebtedness
unless such Lien is at all times junior and subordinate in priority to the Liens
in favour of Agent (except only with respect to property taxes that have
priority as a matter of applicable provincial law) and enforcement of such Lien
is stayed during the period prior to the final resolution or disposition of such
dispute; (v) if such Indebtedness or Lien, as applicable, results from, or is
determined by the entry, rendition or issuance against a Person or any of its
assets of a judgment, writ, order or decree, enforcement of such judgment, writ,
order or decree is stayed pending a timely appeal or other judicial review; and
(vi) if such contest is abandoned, settled or determined adversely (in whole or
in part) to such Person, such Person forthwith pays such Indebtedness and all
penalties, interest and other amounts due in connection therewith.
 
“Purchasing CLO” shall have the meaning set forth in Section 15.3(d) hereof.
 
“Purchasing Lender” shall have the meaning set forth in Section 15.3(c) hereof.
 
“Real Property” shall mean all of each Borrower Party’s right, title and
interest in and to the owned and leased premises identified on Schedule 4.19
hereto or which is hereafter owned or leased by any Borrower Party.
 
“Receivables” shall mean and include all of each Grantor’s accounts, contract
rights, instruments (including those evidencing indebtedness owed to such
Grantor by its Affiliates), documents, chattel paper (including electronic
chattel paper), general intangibles relating to accounts, drafts and
acceptances, credit card receivables and all other forms of obligations owing to
such Grantor arising out of or in connection with the sale or lease of Inventory
or the rendition of services, all supporting obligations, guarantees and other
security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Agent hereunder.
 
“Receivables Advance Rate” shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
 
“Register” shall have the meaning set forth in Section 15.3(e).
 
 
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“Reimbursement Obligation” shall have the meaning set forth in Section 2.13(b)
hereof.
 
“Release” shall mean any release, spill, discharge, leak or disposal of any
Hazardous Substance.
 
“Required Lenders” shall mean Lenders holding at least sixty-six and two-thirds
of one percent (662/3%) of the Advances and, if no Advances are outstanding,
shall mean Lenders holding at least sixty-six and two-thirds of one percent
(662/3%) of the Commitment Percentages; provided, however, if there are fewer
than three (3) Lenders, Required Lenders shall mean all Lenders.
 
“Reserve Percentage” shall mean as of any day the maximum percentage in effect
on such day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "Eurocurrency Liabilities").
 
 “Revolving Credit Note” shall mean, collectively, the promissory notes referred
to in Section 2.1(a) hereof.
 
“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Base Rate or the U.S. Base Rate, as applicable, plus one percent
(1.00%) with respect to Domestic Rate Loans and (b) the sum of the CDOR Rate or
the Eurodollar Rate, as applicable, plus two and one half percent (2.50%) with
respect to CDOR Rate Loans and Eurodollar Loans, as applicable.
 
“Securities Act” shall mean the Securities Act (Ontario).
 
“Senior Debt Payments” shall mean and include all cash actually expended by the
Borrower and its Subsidiaries on a consolidated basis to make (a) interest
payments on any Advances hereunder, plus (b) payments for all fees, commissions
and charges set forth herein and with respect to any Advances, excluding any
fees or costs incurred in connection with the closing of this transaction or any
amortization of such fees and costs, plus (c) capitalized lease payments, plus
(d) payments with respect to any other Indebtedness for borrowed money.
 
“Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.
 
“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a division of
The McGraw-Hill Companies, Inc.
 
“Statutory Plans” means statutory benefit plans which a Loan Party is required
to participate in or comply with, including the Canada Pension Plan and Quebec
Pension Plan and plans administered pursuant to applicable health tax, workplace
safety insurance and employment insurance legislation.
 
“Subsidiary” of any Person shall mean a corporation or other entity of whose
Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.
 
 
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“Subsidiary Shares” shall mean all of the issued and outstanding Equity
Interests of any Subsidiary owned by any Borrower Party.
 
“Taxes” shall mean all federal, provincial, municipal and other governmental
taxes, levies, charges, claims and assessments which are or may be owed or
collected by any Borrower Party with respect to its business, operations,
Collateral or otherwise.
 
“Term” shall have the meaning set forth in Section 13.1 hereof.
 
“Testing Event” shall mean any instance in which the Borrower requests that a
Letter of Credit be issued or uses the proceeds of any Revolving Advance other
than to pay fees and/or costs in accordance with Section 15.9.
 
 “Toxic Substance” shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under applicable federal or provincial laws
now in force or hereafter enacted relating to toxic substances. “Toxic
Substance” includes asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
 
“Transactions” shall have the meaning set forth in Section 5.8(a) hereof.
 
“Transferee” shall have the meaning set forth in Section 15.3(d) hereof.
 
“Trustee” shall mean the Trustee (as defined in the Intercreditor Agreement).
 
“U.S. Base Rate” shall mean the base commercial lending rate of PNC Bank,
National Association as publicly announced to be in effect from time to time,
such rate to be adjusted automatically, without notice, on the effective date of
any change in such rate.  This rate of interest is determined from time to time
by PNC Bank, National Association as a means of pricing some loans to its
customers and is neither tied to any external rate of interest or index nor does
it necessarily reflect the lowest rate of interest actually charged by PNC Bank,
National Association to any particular class or category of customers of PNC
Bank, National Association.
 
“U.S. Dollar” and the sign “US$” shall mean lawful money of the United States of
America.
 
“Undrawn Availability” at a particular date shall mean an amount equal to (a)
the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus (b) the sum of (i) the outstanding amount of Advances, plus (ii)
all amounts due and owing to the Borrower’s trade creditors which are sixty (60)
days or more past due, plus (iii) fees and expenses for which Borrower is liable
but which have not been paid or charged to Borrower’s Account.
 
“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of the
Borrower and its Subsidiaries on a consolidated basis other than those made
utilizing financing provided by the applicable seller or third party
lenders.  For the avoidance of doubt, Capital Expenditures made by the Borrower
or any of its Subsidiaries utilizing Advances shall be deemed Unfinanced Capital
Expenditures.
 
 
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“Week” shall mean the time period commencing with the opening of business on a
Wednesday and ending on the end of business the following Tuesday.
 
“Year End Financial Statements” shall have the meaning set forth in Section
5.5(b).
 
1.3
PPSA Terms.

 
All terms used herein and defined in the PPSA shall have the meaning given
therein unless otherwise defined herein. To the extent the definition of any
category or type of collateral is expanded by any amendment, modification or
revision to the PPSA, such expanded definition will apply automatically as of
the date of such amendment, modification or revision.
 
1.4
Certain Matters of Construction.

 
The terms “herein”, “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular section, paragraph
or subdivision.  All references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all
genders.  Wherever appropriate in the context, terms used herein in the singular
also include the plural and vice versa.  All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.  Unless otherwise provided, all references to any instruments or
agreements to which Agent is a party, including references to any of the Other
Documents, shall include any and all modifications or amendments thereto and any
and all extensions or renewals thereof.  All references herein to the time of
day shall mean the time in Toronto, Canada.  Unless otherwise provided, all
financial calculations shall be performed with Inventory valued on a first-in,
first-out basis.  Whenever the words “including” or “include” shall be used,
such words shall be understood to mean “including, without limitation” or
“include, without limitation”.  All references to “province”, “provinces” and
“provincial” shall be understood to include “territory”, “territories” and
“territorial”, respectively.  A Default or Event of Default shall be deemed to
exist at all times during the period commencing on the date that such Default or
Event of Default occurs to the date on which such Default or Event of Default is
waived in writing pursuant to this Agreement or, in the case of a Default, is
cured within any period of cure expressly provided for in this Agreement; and an
Event of Default shall “continue” or be “continuing” until such Event of Default
has been waived in writing by the Required Lenders.  Any Lien referred to in
this Agreement or any of the Other Documents as having been created in favour of
Agent, any agreement entered into by Agent pursuant to this Agreement or any of
the Other Documents, any payment made by or to or funds received by Agent
pursuant to or as contemplated by this Agreement or any of the Other Documents,
or any act taken or omitted to be taken by Agent, shall, unless otherwise
expressly provided, be created, entered into, made or received, or taken or
omitted, for the benefit or account of Agent and Lenders. 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 otherwise within the limitations of, another
covenant shall not avoid the occurrence of a default if such action is taken or
condition exists.  In addition, all representations and warranties hereunder
shall be given independent effect so that if a particular representation or
warranty proves to be incorrect or is breached, the fact that another
representation or warranty concerning the same or similar subject matter is
correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder.
 
 
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1.5
Permitted Encumbrances.

 
The inclusion of Permitted Encumbrances in this Agreement is not intended to
subordinate and shall not subordinate any Lien created by any of the security
contemplated by this Agreement and the Other Documents to any Permitted
Encumbrances.
 
ARTICLE 2
ADVANCES, PAYMENTS.
 
2.1
Advances.

 
 
(a)
Amount of Advances.  Subject to the terms and conditions set forth in this
Agreement including Section 2.1(b), each Lender, severally and not jointly, will
make advances (“Advances”) to Borrower in aggregate amounts outstanding at any
time equal to such Lender’s Commitment Percentage of the lesser of (x) the
Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of
all outstanding Letters of Credit and (y) an amount equal to the sum of (or the
Equivalent Amount in US$ of such amount):

 
 
(i)
up to eighty-five percent (85%), subject to the provisions of Section 2.1(b)
hereof (“Receivables Advance Rate”), of Eligible Receivables, plus

 
 
(ii)
subject to the provisions of Section 2.1(b) hereof, up to the lesser of (A) the
lesser of (x) up to sixty-five percent (65%) (“Inventory Advance Rate” and
together with the Receivables Advance Rate, the “Advance Rates”) of the
aggregate value of the Eligible Inventory, valued at the lower of
weighted-average cost or market, or (y) up to eighty-five percent (85%) of the
Net Orderly Liquidation Value of the Eligible Inventory, or (B)  Ten Million and
00/100 Dollars ($10,000,000.00) in the aggregate at any one time, minus

 
 
(iii)
the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus

 
 
(iv)
such reserves (including reserves on account of Priority Payables) as Agent may
reasonably deem proper and necessary from time to time.

 
The amount derived from (x) the sum of Sections 2.1(a)(y)(i) and (ii), minus (y)
Section 2.1(a)(y)(iv), at any time and from time to time shall be referred to as
the “Formula Amount”.  The Advances shall be evidenced by one or more secured
promissory notes (collectively, the “Revolving Credit Note”) substantially in
the form attached hereto as Exhibit 2.1(a).
 
 
(b)
Discretionary Rights.  The Advance Rates may be increased or decreased by Agent
at any time and from time to time in the exercise of its reasonable
discretion.  Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrower.  The rights of
Agent under this subsection are subject to the provisions of Section 15.2(b).

 
 
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2.2
Procedure for Advances Borrowing.

 
 
(a)
Borrower may notify Agent prior to 12:00 p.m. on a Business Day of a Borrower’s
request to incur, on that day, an Advance hereunder and such notice shall
specify whether the Adance shall be in Dollars or U.S. Dollars.  Should any
amount required to be paid as interest hereunder, or as fees or other charges
under this Agreement or any other agreement with Agent or Lenders, or with
respect to any other Obligation, become due, same shall be deemed a request for
an Advance maintained as a Domestic Rate Loan as of the date such payment is
due, in the amount required to pay in full such interest, fee, charge or
Obligation under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable.

 
 
(b)
Notwithstanding the provisions of subsection (a) above, in the event the
Borrower desires to obtain a CDOR Rate Loan or a Eurodollar Rate Loan, Borrower
shall give Agent written notice by no later than 12:00 p.m. on the day which is
three (3) Business Days prior to the date such CDOR Rate Loan or Eurodollar Rate
Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which
shall be a Business Day), (ii) the type of borrowing and the amount on the date
of such Advance to be borrowed, which amount shall be in an aggregate principal
amount that is not less than One Million and 00/100 Dollars ($1,000,000.00) and
integral multiples of One Hundred Thousand and 00/100 Dollars ($100,000.00) in
excess thereof, and (iii) the duration of the first Interest Period
therefor.  Interest Periods for CDOR Rate Loans and Eurodollar Rate Loans shall
be for one, two or three months; provided, if an Interest Period would end on a
day that is not a Business Day, it shall end on the next succeeding Business Day
unless such day falls in the next succeeding calendar month in which case the
Interest Period shall end on the next preceding Business Day.  No CDOR Rate Loan
or Eurodollar Rate Loan shall be made available to the Borrower during the
continuance of a Default or an Event of Default. After giving effect to each
requested CDOR Rate Loan or Eurodollar Rate Loan, including those which are
converted from a Domestic Rate Loan under Section 2.2(d), there shall not be
outstanding more than four (4) CDOR Rate Loans or Eurodollar Rate Loans, in the
aggregate.

 
 
(c)
Each Interest Period of a CDOR Rate Loan or a Eurodollar Rate Loan shall
commence on the date such CDOR Rate Loan or Eurodollar Rate Loan is made and
shall end on such date as Borrower may elect as set forth in subsection (b)(iii)
above provided that the exact length of each Interest Period shall be determined
in accordance with the practice of the interbank market for offshore Dollar
deposits applicable to the CDOR Rate or the Eurodollar Rate and no Interest
Period shall end after the last day of the Term.

 
 
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Borrower shall elect the initial Interest Period applicable to a CDOR Rate Loan
or a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be.  Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not later than 10:00 a.m. on the day which is three (3) Business Days
prior to the last day of the then current Interest Period applicable to such
CDOR Rate Loan or  Eurodollar Rate Loan.  If Agent does not receive timely
notice of the Interest Period elected by Borrower, Borrower shall be deemed to
have elected to convert to a Domestic Rate Loan at either (i) the Base Rate in
the case of a CDOR Rate Loan or (ii) the U.S. Base Rate in the case of a
Eurodollar Loan, subject to Section 2.2(d) herein below.
 
 
(d)
Provided that no Event of Default shall have occurred and be continuing,
Borrower may, on the last Business Day of the then current Interest Period
applicable to any outstanding CDOR Rate Loan or Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a CDOR Rate Loan or a Eurodollar Rate Loan shall be made only on
the last Business Day of the then current Interest Period applicable to such
CDOR Rate Loan or Eurodollar Rate Loan.  If Borrower desires to convert a loan,
Borrower shall give Agent written notice by no later than 10:00 a.m. (i) on the
day which is three (3) Business Days’ prior to the date on which such conversion
is to occur with respect to a conversion from a Domestic Rate Loan to a CDOR
Rate Loan or a Eurodollar Rate Loan, or (ii) on the day which is one (1)
Business Day prior to the date on which such conversion is to occur with respect
to a conversion from a CDOR Rate Loan or Eurodollar Rate Loan to a Domestic Rate
Loan at either (i) the Base Rate in the case of a CDOR Rate Loan or (ii) the
U.S. Base Rate in the case of a Eurodollar Loan, specifying, in each case, the
date of such conversion, the loans to be converted and if the conversion is from
a Domestic Rate Loan to any other type of loan, the duration of the first
Interest Period therefor.

 
 
(e)
At its option and upon written notice given prior to 10:00 a.m. at least three
(3) Business Days’ prior to the date of such prepayment, the Borrower may prepay
the CDOR Rate Loans or the Eurodollar Rate Loans in whole at any time or in part
from time to time with accrued interest on the principal being prepaid to the
date of such repayment.  Borrower shall specify the date of prepayment of
Advances which are CDOR Rate Loans or Eurodollar Rate Loans and the amount of
such prepayment.  In the event that any prepayment of a CDOR Rate Loan or a
Eurodollar Rate Loan is required or permitted on a date other than the last
Business Day of the then current Interest Period with respect thereto, the
Borrower shall indemnify Agent and Lenders therefor in accordance with Section
2.2(f) hereof.

 
 
(f)
Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by the Borrower in the payment of the principal of or interest on any
CDOR Rate Loan or Eurodollar Rate Loan or failure by the Borrower to complete a
borrowing of, a prepayment of or conversion of or to a CDOR Rate Loan or a
Eurodollar Rate Loan after notice thereof has been given, including, but not
limited to, any interest payable by Agent or Lenders to lenders of funds
obtained by it in order to make or maintain its CDOR Rate Loans or Eurodollar
Rate Loans hereunder.  A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Agent or any Lender to Borrower
shall be conclusive absent manifest error.

 
 
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(g)
Notwithstanding any other provision hereof, if any Applicable Law, or any change
therein or in the interpretation or application thereof, shall make it unlawful
for any Lender (for purposes of this subsection (g), the term “Lender” shall
include any Lender and the office or branch where any Lender or any corporation
or bank controlling such Lender makes or maintains any CDOR Rate Loans or
Eurodollar Rate Loans) to make or maintain its CDOR Rate Loans or  Eurodollar
Rate Loans, the obligation of Lenders to make CDOR Rate Loans or  Eurodollar
Rate Loans hereunder shall forthwith be cancelled and Borrower shall, if any
affected CDOR Rate Loans or Eurodollar Rate Loans are then outstanding, promptly
upon request from Agent, either pay all such affected CDOR Rate Loans or
Eurodollar Rate Loans or convert such affected CDOR Rate Loans or  Eurodollar
Rate Loans into loans of another type. If any such payment or conversion of any
CDOR Rate Loan or Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such CDOR Rate Loan or Eurodollar Rate
Loan, Borrower shall pay Agent, upon Agent’s request, such amount or amounts as
may be necessary to compensate Lenders for any loss or expense sustained or
incurred by Lenders in respect of such CDOR Rate Loan or Eurodollar Rate Loan as
a result of such payment or conversion, including, but not limited to, any
interest or other amounts payable by Lenders to lenders of funds obtained by
Lenders in order to make or maintain such CDOR Rate Loan or Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lenders to Borrower shall be conclusive absent
manifest error.

 
2.3
Disbursement of Advance Proceeds.

 
All Advances shall be disbursed from whichever office or other place Agent may
designate from time to time and, together with any and all other Obligations of
Borrower to Agent or Lenders, shall be charged to Borrower’s Account on Agent’s
books.  During the Term, Borrower may use the Advances by borrowing, prepaying
and reborrowing, all in accordance with the terms and conditions hereof.  The
proceeds of each Advance requested by Borrower or deemed to have been requested
by the Borrower under Section 2.2 hereof shall, with respect to requested
Advances to the extent Lenders make such Advances, be made available to the
Borrower on the day so requested in the case of Domestic Rate Loans and three
(3) Business Days thereafter in the case of CDOR Rate Loans or Eurodollar Rate
Loans, by way of credit to the Borrower’s operating account at The Bank of Nova
Scotia, or such other bank as Borrower may designate following notification to
Agent, in immediately available federal funds or other immediately available
funds or, with respect to Advances deemed to have been requested by the
Borrower, be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.
 
 
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2.4
Maximum Advances.

 
The aggregate balance of Advances outstanding at any time shall not exceed the
lesser of (a) the Maximum Revolving Advance Amount or (b) the Formula Amount
less, in each case, the aggregate Maximum Undrawn Amount of all issued and
outstanding Letters of Credit.
 
2.5
Repayment of Advances.

 
 
(a)
The Advances shall be due and payable in full on the last day of the Term
subject to earlier prepayment as herein provided.

 
 
(b)
Each Borrower Party recognizes that the amounts evidenced by cheques, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received.  In consideration of
Agent’s agreement to conditionally credit Borrower’s Account as of the next
Business Day following the Agent’s receipt of those items of payment, each
Borrower Party agrees that, in computing the charges under this Agreement, all
items of payment shall be deemed applied by Agent on account of the Obligations
(i) on the Business Day Agent receives such payments via wire transfer or
electronic depository cheque or (ii) in the case of payments received by Agent
in any other form, one (1) Business Day after the Business Day such payment
constitutes good funds in Agent’s account.  Agent is not, however, required to
credit Borrower’s Account for the amount of any item of payment which is
unsatisfactory to Agent and Agent may charge Borrower’s Account for the amount
of any item of payment which is returned to Agent unpaid.

 
 
(c)
All payments of principal, interest and other amounts payable hereunder, or
under any of the Other Documents shall be made to Agent at the Payment Office
not later than 1:00 P.M. on the due date therefor in lawful money of Canada in
federal funds or lawful money of the United States of America, as applicable, or
other funds immediately available to Agent.  Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrower’s Account or by making Advances as provided in Section 2.2
hereof.

 
 
(d)
Borrower shall pay principal, interest, and all other amounts payable hereunder,
or under any related agreement, without any deduction whatsoever, including any
deduction for any setoff or counterclaim.

 
 
(e)
Where the Agent determines that as a consequence of fluctuations in the Exchange
Rate between Dollars and U.S. Dollars, the sum of all Advances exceeds by more
than 5% of the lesser of the Formula Amount and the Maximum Revolving Advance
Amount the Agent may deliver to the Borrower a written notice requiring the
Borrower to repay such portion of the Advances as will reduce such excess to
nil. The Borrower hereby binds and obliges itself to repay within three (3)
Business Days of receipt of such request such amount, as will reduce such excess
to nil.

 
 
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2.6
Repayment of Excess Advances.

 
The aggregate balance of Advances outstanding at any time in excess of the
maximum amount of Advances permitted hereunder shall be immediately due and
payable without the necessity of any demand, at the Payment Office, whether or
not a Default or Event of Default has occurred.
 
2.7
Statement of Account.

 
Agent shall maintain, in accordance with its customary procedures, a loan
account (“Borrower’s Account”) in the name of Borrower in which shall be
recorded the date and amount of each Advance made by Agent and the date and
amount of each payment in respect thereof; provided, however, the failure by
Agent to record the date and amount of any Advance shall not adversely affect
Agent or any Lender.  Each month, Agent shall send to Borrower a statement
showing the accounting for the Advances made, payments made or credited in
respect thereof, and other transactions between Agent and Borrower during such
month.  The monthly statements shall be deemed correct and binding upon Borrower
in the absence of manifest error and shall constitute an account stated between
Lenders and Borrower unless Agent receives a written statement of Borrower’s
specific exceptions thereto within thirty (30) days after such statement is
received by Borrower.  The records of Agent with respect to the loan account
shall be conclusive evidence absent manifest error of the amounts of Advances
and other charges thereto and of payments applicable thereto.
 
2.8
Letters of Credit.

 
Subject to the terms and conditions hereof, Agent shall issue or cause the
issuance of standby and/or trade letters of credit (such letters of credit are
collectively, the “Letters of Credit”) for the account of the Borrower;
provided, however, that Agent will not be required to issue or cause to be
issued any Letters of Credit to the extent that the issuance thereof would then
cause the sum of (i) the outstanding Advances plus (ii) the Maximum Undrawn
Amount of all outstanding Letters of Credit to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount.  The Maximum Undrawn
Amount of outstanding Letters of Credit shall not exceed in the aggregate at any
time the Letter of Credit Sublimit.  All disbursements or payments related to
Letters of Credit shall be deemed to be Domestic Rate Loans consisting of
Advances and shall bear interest at the applicable Revolving Interest Rate for
Domestic Rate Loans for Dollar or U.S. Dollar Advances; Letters of Credit that
have not been drawn upon shall not bear interest.
 
2.9
[Reserved].

 
2.10
[Reserved].

 
2.11
Issuance of Letters of Credit.

 
 
(a)
Borrower may request Agent to issue or cause the issuance of a Letter of Credit
by delivering to Agent at the Payment Office, prior to 12:00 p.m., at least five
(5)  Business Days’ prior to the proposed date of issuance, Agent’s form of
Letter of Credit Application (the “Letter of Credit Application”) completed to
the satisfaction of Agent; and, such other certificates, documents and other
papers and information as Agent may reasonably request.  Borrower also has the
right to give instructions and make agreements with respect to any application,
any applicable letter of credit and security agreement, any applicable letter of
credit reimbursement agreement and/or any other applicable agreement, any letter
of credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.

 
 
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(b)
Each Letter of Credit shall, among other things, (i) provide for the payment of
sight drafts, other written demands for payment, or acceptances of usance drafts
when presented for honour thereunder in accordance with the terms thereof and
when accompanied by the documents described therein and (ii) have an expiry date
not later than twenty-four (24) months after such Letter of Credit’s date of
issuance and in no event later than the last day of the Term.  Each standby
Letter of Credit shall be subject either to the Uniform Customs and Practice for
Documentary Credits as  most recently published by the International Chamber of
Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (ISP98 International Chamber of Commerce
Publication Number 590) (the “ISP98 Rules”)), and any subsequent revision
thereof at the time a standby Letter of Credit is issued, as determined by
Agent, and each trade Letter of Credit shall be subject to the UCP.

 
 
(c)
Agent shall use its reasonable efforts to notify Lenders of the request by
Borrower for a Letter of Credit hereunder.

 
2.12
Requirements For Issuance of Letters of Credit.

 
 
(a)
Borrower shall authorize and direct any Issuer to name the Borrower as the
“Applicant” or “Account Party” of each Letter of Credit.  If Agent is not the
Issuer of any Letter of Credit, Borrower shall authorize and direct the Issuer
to deliver to Agent all instruments, documents, and other writings and property
received by the Issuer pursuant to the Letter of Credit and to accept and rely
upon Agent’s instructions and agreements with respect to all matters arising in
connection with the Letter of Credit or the application therefor.

 
 
(b)
In connection with all Letters of Credit issued or caused to be issued by Agent
under this Agreement, the Borrower hereby appoints Agent, or its designee, as
its attorney, with full power and authority if an Event of Default shall have
occurred, (i) to sign and/or endorse the Borrower’s name upon any warehouse or
other receipts, letter of credit applications and acceptances, (ii) to sign the
Borrower’s name on bills of lading; (iii) to clear Inventory through the
Canadian customs (“Customs”) in the name of the Borrower or Agent or Agent’s
designee, and to sign and deliver to Customs officials powers of attorney in the
name of the Borrower for such purpose; and (iv) to complete in the Borrower’s
name or Agent’s, or in the name of Agent’s designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof.  Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent’s or its attorney’s willful misconduct.  This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.

 
 
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2.13
Disbursements, Reimbursements.

 
 
(a)
Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
Agent a participation in such Letter of Credit and each drawing thereunder in an
amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount
of such Letter of Credit and the amount of such drawing, respectively.

 
 
(b)
In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, Agent will promptly notify
Borrower.  Provided that Borrower shall have received such notice, Borrower
shall reimburse (such obligation to reimburse Agent shall sometimes be referred
to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon on each date that
an amount is paid by Agent under any Letter of Credit (each such date, a
“Drawing Date”) in an amount equal to the amount so paid by Agent.  In the event
Borrower fail to reimburse Agent for the full amount of any drawing under any
Letter of Credit by 12:00 Noon on the Drawing Date, Agent will promptly notify
each Lender thereof, and Borrower shall be deemed to have requested that an
Advance in the currency denoted on the applicable Letter of Credit maintained as
a Domestic Rate Loan be made by Lenders to be disbursed on the Drawing Date
under such Letter of Credit, subject to the amount of the unutilized portion of
the lesser of Maximum Revolving Advance Amount or the Formula Amount and subject
to Section 8.2 hereof.  Any notice given by Agent pursuant to this Section
2.13(b) may be oral if immediately confirmed in writing; provided that the lack
of such an immediate confirmation shall not affect the conclusiveness or binding
effect of such notice.

 
 
(c)
Each Lender shall upon any notice pursuant to Section 2.13(b) make available to
Agent an amount in immediately available funds equal to its Commitment
Percentage of the amount of the drawing, whereupon the participating Lenders
shall (subject to Section 2.13(d)) each be deemed to have made an Advance
maintained as a Domestic Rate Loan to Borrower in that amount in the currency
denoted on the applicable Letter of Credit.  If any Lender so notified fails to
make available to Agent the amount of such Lender’s Commitment Percentage of
such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall
accrue on such Lender’s obligation to make such payment, from the Drawing Date
to the date on which such Lender makes such payment (i) at a rate per annum
equal to the Federal Funds Effective Rate during the first three days following
the Drawing Date and (ii) at a rate per annum equal to the rate applicable to
Revolving Advances maintained as a Domestic Rate Loans on and after the fourth
day following the Drawing Date.  Agent will promptly give notice of the
occurrence of the Drawing Date, but failure of Agent to give any such notice on
the Drawing Date or in sufficient time to enable any Lender to effect such
payment on such date shall not relieve such Lender from its obligation under
this Section 2.13(c), provided that such Lender shall not be obligated to pay
interest as provided in Section 2.13(c)(i) and (ii) until and commencing from
the date of receipt of notice from Agent of a drawing.

 
 
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(d)
With respect to any unreimbursed drawing that is not converted into an Advance
maintained as a Domestic Rate Loan to Borrower in whole or in part as
contemplated by Section 2.13(b), because of Loan Parties’ failure to satisfy the
conditions set forth in Section 8.2 (other than any notice requirements) or for
any other reason, Borrower shall be deemed to have incurred from Agent a
borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing.
Such Letter of Credit Borrowing shall be due and payable on demand (together
with interest) and shall bear interest at the rate per annum applicable to an
Advance maintained as a Domestic Rate Loan applicable to the currency in which
the Letter of Credit is denoted.  Each Lender’s payment to Agent pursuant to
Section 2.13(c) shall be deemed to be a payment in respect of its participation
in such Letter of Credit Borrowing and shall constitute a “Participation
Advance” from such Lender in satisfaction of its Participation Commitment under
this Section 2.11.

 
 
(e)
Each Lender’s Participation Commitment shall continue until the last to occur of
any of the following events:  (x) Agent ceases to be obligated to issue or cause
to be issued Letters of Credit hereunder; (y) no Letter of Credit issued or
created hereunder remains outstanding and uncancelled and (z) all Persons (other
than Loan Parties) have been fully reimbursed for all payments made under or
relating to Letters of Credit.

 
2.14
Repayment of Participation Advances.

 
 
(a)
Upon (and only upon) receipt by Agent for its account of immediately available
funds from Borrower (i) in reimbursement of any payment made by Agent under the
Letter of Credit with respect to which any Lender has made a Participation
Advance to Agent, or (ii) in payment of interest on such a payment made by Agent
under such a Letter of Credit, Agent will pay to each Lender, in the same funds
as those received by Agent, the amount of such Lender’s Commitment Percentage of
such funds, except Agent shall retain the amount of the Commitment Percentage of
such funds of any Lender that did not make a Participation Advance in respect of
such payment by Agent.

 
 
(b)
If Agent is required at any time to return to the Borrower, or to a trustee,
receiver, liquidator, custodian, or any official in any insolvency proceeding,
any portion of the payments made by Borrower to Agent pursuant to Section
2.14(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the CDOR Rate or the Eurodollar Rate, as applicable.

 
2.15
Documentation.

 
The Borrower agrees to be bound by the terms of the Letter of Credit Application
and by Agent’s interpretations of any Letter of Credit issued on behalf of the
Borrower and by Agent’s written regulations and customary practices relating to
letters of credit, though Agent’s interpretations may be different from the
Borrower’s own.  In the event of a conflict between the Letter of Credit
Application and this Agreement, this Agreement shall govern.  It is understood
and agreed that, except in the case of gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final non-appealable
judgment), Agent shall not be liable for any error, negligence and/or mistakes,
whether of omission or commission, in following Borrower’s or the Borrower’s
instructions or those contained in the Letters of Credit or any modifications,
amendments or supplements thereto.
 
 
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2.16
Determination to Honour Drawing Request.

 
In determining whether to honour any request for drawing under any Letter of
Credit by the beneficiary thereof, Agent shall be responsible only to determine
that the documents and certificates required to be delivered under such Letter
of Credit have been delivered and that they comply on their face with the
requirements of such Letter of Credit and that any other drawing condition
appearing on the face of such Letter of Credit has been satisfied in the manner
so set forth.
 
2.17
Nature of Participation and Reimbursement Obligations.

 
Each Lender’s obligation in accordance with this Agreement to make the Advances
or Participation Advances as a result of a drawing under a Letter of Credit, and
the obligations of Borrower to reimburse Agent upon a draw under a Letter of
Credit, shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Section 2.14(a) under all
circumstances, including the following circumstances:
 
 
(a)
any set-off, counterclaim, recoupment, defense or other right which such Lender
may have against Agent, any Loan Party or any other Person for any reason
whatsoever;

 
 
(b)
the failure of any Loan Party or any other Person to comply, in connection with
a Letter of Credit Borrowing, with the conditions set forth in this Agreement
for the making of a Revolving Advance, it being acknowledged that such
conditions are not required for the making of a Letter of Credit Borrowing and
the obligation of Lenders to make Participation Advances under Section 2.10;

 
 
(c)
any lack of validity or enforceability of any Letter of Credit;

 
 
(d)
any claim of breach of warranty that might be made by Borrower or any Lender
against the beneficiary of a Letter of Credit, or the existence of any claim,
set-off, recoupment, counterclaim, cross-claim, defense or other right which the
Borrower or any Lender may have at any time against a beneficiary, any successor
beneficiary or any transferee of any Letter of Credit or the proceeds thereof
(or any Persons for whom any such transferee may be acting), Agent or any Lender
or any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between the Borrower or any Subsidiaries of the Borrower and the
beneficiary for which any Letter of Credit was procured);

 
 
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(e)
the lack of power or authority of any signer of (or any defect in or forgery of
any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provisions of services
relating to a Letter of Credit, in each case even if Agent or any of Agent’s
Affiliates has been notified thereof;

 
 
(f)
payment by Agent under any Letter of Credit against presentation of a demand,
draft or certificate or other document which does not comply with the terms of
such Letter of Credit;

 
 
(g)
the solvency of, or any acts or omissions by, any beneficiary of any Letter of
Credit, or any other Person having a role in any transaction or obligation
relating to a Letter of Credit, or the existence, nature, quality, quantity,
condition, value or other characteristic of any property or services relating to
a Letter of Credit;

 
 
(h)
any failure by Agent or any of Agent’s Affiliates to issue any Letter of Credit
in the form requested by Borrower, unless Agent has received written notice from
Borrower of such failure within three (3) Business Days after Agent shall have
furnished Borrower a copy of such Letter of Credit and such error is material
and no drawing has been made thereon prior to receipt of such notice;

 
 
(i)
any Material Adverse Effect on any Loan Party;

 
 
(j)
any breach of this Agreement or any Other Document by any party thereto;

 
 
(k)
the occurrence or continuance of an insolvency proceeding with respect to any
Loan Party;

 
 
(l)
the fact that a Default or Event of Default shall have occurred and be
continuing;

 
 
(m)
the fact that the Term shall have expired or this Agreement or the Obligations
hereunder shall have been terminated; and

 
 
(n)
any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing.

 
2.18
Indemnity.

 
In addition to amounts payable as provided in Section 15.5, each Loan Party
hereby agrees to protect, indemnify, pay and save harmless Agent and any of
Agent’s Affiliates that have issued a Letter of Credit from and against any and
all claims, demands, liabilities, damages, taxes, penalties, interest,
judgments, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel and allocated costs of internal counsel)
which Agent or any of Agent’s Affiliates may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit, other
than as a result of (A) the gross negligence or willful misconduct of Agent as
determined by a final and non-appealable judgment of a court of competent
jurisdiction or (b) the wrongful dishonour by Agent or any of Agent’s Affiliates
of a proper demand for payment made under any Letter of Credit, except if such
dishonour resulted from any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto Governmental Body (all such acts or
omissions herein called “Governmental Acts”).
 
 
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2.19
Liability for Acts and Omissions.

 
As between Loan Parties and Agent and Lenders, each Loan Party assumes all risks
of the acts and omissions of, or misuse of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit.  In furtherance and not in
limitation of the respective foregoing, Agent shall not be responsible for: (i)
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged
(even if Agent shall have been notified thereof); (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
any such Letter of Credit, or any other party to which such Letter of Credit may
be transferred, to comply fully with any conditions required in order to draw
upon such Letter of Credit or any other claim of the Borrower against any
beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among the Borrower and any beneficiary of any Letter of Credit or any
such transferee; (iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, facsimile, telex or otherwise,
whether or not they be in cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter
of Credit of the proceeds of any drawing under such Letter of Credit; or (viii)
any consequences arising from causes beyond the control of Agent, including any
governmental acts, and none of the above shall affect or impair, or prevent the
vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding
sentence shall relieve Agent from liability for Agent’s gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment) in connection with actions or omissions described
in such clauses (i) through (viii) of such sentence.  In no event shall Agent or
Agent’s Affiliates be liable to any Loan Party for any indirect, consequential,
incidental, punitive, exemplary or special damages or expenses (including
attorneys’ fees), or for any damages resulting from any change in the value of
any property relating to a Letter of Credit.
 
Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent or  such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit, (ii) may honour any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honour a
previously dishonoured presentation under a Letter of Credit, whether such
dishonour was pursuant to a court order, to settle or compromise any claim of
wrongful dishonour, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honoured, together with
any interest paid by Agent or its Affiliates; (iv) may honour any drawing that
is payable upon presentation of a statement advising negotiation or payment,
upon receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honoured under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Agent or its Affiliate in any way related to any order issued at the
applicant’s request to an air carrier, a letter of guarantee or of indemnity
issued to a carrier or any similar document (each an “Order”) and honour any
drawing in connection with any Letter of Credit that is the subject of such
Order, notwithstanding that any drafts or other documents presented in
connection with such Letter of Credit fail to conform in any way with such
Letter of Credit.
 
 
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In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by Agent under or in connection
with the Letters of Credit issued by it or any documents and certificates
delivered thereunder, if taken or omitted in good faith and without gross
negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
any Loan Party or any Lender.
 
2.20
Additional Payments.

 
Any sums expended by Agent or any Lender due to any Loan Party’s failure to
perform or comply with its obligations under this Agreement or any Other
Document including any Loan Party’s obligations under Sections 4.2, 4.4, 4.12,
4.13, 4.14 and 6.1 hereof, may be charged to Borrower’s Account as an Advance as
a Domestic Rate Loan bearing interest at the Base Rate or the U.S. Base Rate, as
applicable, and added to the Obligations.
 
2.21
Manner of Borrowing and Payment.

 
 
(a)
Each borrowing of Advances shall be advanced according to the applicable
Commitment Percentages of Lenders.

 
 
(b)
Each payment (including each prepayment) by the Borrower on account of the
principal of and interest on the Advances, shall be applied to the Advances pro
rata according to the applicable Commitment Percentages of Lenders and shall be
paid in the currency of such Advance.  Except as expressly provided herein, all
payments (including prepayments) to be made by the Borrower on account of
principal, interest and fees shall be made without set off or counterclaim and
shall be made to Agent on behalf of Lenders to the Payment Office, in each case
on or prior to 1:00 P.M. in Dollars and in immediately available funds.

 
 
(c)
(i)
Notwithstanding anything to the contrary contained in Sections 2.21(a) and (b)
hereof, commencing with the first Business Day following the Closing Date, each
borrowing of Advances shall be advanced by Agent and each payment by the
Borrower on account of Advances shall be applied first to those Advances
advanced by Agent.  On or before 1:00 P.M. on each Settlement Date commencing
with the first Settlement Date following the Closing Date, Agent and Lenders
shall make certain payments as follows: (I) if the aggregate amount of new
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Advances during such preceding Week,
then each Lender shall provide Agent with funds in an amount equal to its
applicable Commitment Percentage of the difference between (w) such Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Advances during such Week exceeds the aggregate amount of new
Advances made during such Week, then Agent shall provide each Lender with funds
in an amount equal to its applicable Commitment Percentage of the difference
between (y) such repayments and (z) such Advances.

 
 
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(d)
Each Lender shall be entitled to earn interest at the applicable Revolving
Interest Rate on outstanding Advances which it has funded.

 
 
(e)
Promptly following each Settlement Date, Agent shall submit to each Lender a
certificate with respect to payments received and Advances made during the Week
immediately preceding such Settlement Date.  Such certificate of Agent shall be
conclusive in the absence of manifest error.

 
 
(f)
If any Lender or Participant (a “Benefited Lender”) shall at any time receive
any payment of all or part of its Advances, or interest thereon, or receive any
Collateral in respect thereof (whether voluntarily or involuntarily or by
set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.  Each Lender so purchasing a portion of another
Lender’s Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.

 
 
(g)
Unless Agent shall have been notified by telephone, confirmed in writing, by any
Lender that such Lender will not make the amount which would constitute its
applicable Commitment Percentage of the Advances available to Agent, Agent may
(but shall not be obligated to) assume that such Lender shall make such amount
available to Agent on the next Settlement Date and, in reliance upon such
assumption, make available to Borrower a corresponding amount.  Agent will
promptly notify Borrower of its receipt of any such notice from a Lender.  If
such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average CDOR Rate (computed on the basis of a year of 360 days)
during such period as quoted by Agent, times (ii) such amount, times (iii) the
number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent.  A certificate of Agent submitted
to any Lender with respect to any amounts owing under this paragraph (e) shall
be conclusive, in the absence of manifest error.  If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Advances
hereunder, on demand from Borrower; provided, however, that Agent’s right to
such recovery shall not prejudice or otherwise adversely affect Borrower’s
rights (if any) against such Lender.

 
 
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2.22
Use of Proceeds.

 
 
(a)
Borrower shall apply the proceeds of Advances to (i) pay fees and expenses
relating to this transaction, (ii) provide for its working capital needs, (iii)
provide for capital improvements, and (iv) provide for all other general
corporate purposes.

 
 
(b)
Without limiting the generality of Section 2.22(a) above, neither Borrower, the
Guarantors nor any other Person which may in the future become party to this
Agreement or the Other Documents as a Borrower or Guarantor, intends to use nor
shall they use any portion of the proceeds of the Advances, directly or
indirectly, for any purpose in violation of Anti-Terrorism Laws.

 
2.23
Defaulting Lender.

 
 
(a)
Notwithstanding anything to the contrary contained herein, in the event any
Lender (x) has refused (which refusal constitutes a breach by such Lender of its
obligations under this Agreement) to make available its portion of any Advance
or (y) notifies either Agent or Borrower that it does not intend to make
available its portion of any Advance (if the actual refusal would constitute a
breach by such Lender of its obligations under this Agreement) (each, a “Lender
Default”), all rights and obligations hereunder of such Lender (a “Defaulting
Lender”) as to which a Lender Default is in effect and of the other parties
hereto shall be modified to the extent of the express provisions of this Section
2.23 while such Lender Default remains in effect.

 
 
(b)
Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”)
which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default.  Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender (other than any Defaulting Lender) pro rata based on the aggregate of the
outstanding Advances of that type of all Lenders at the time of such
application; provided, that, Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender’s
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees).  Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may
hold and, in its discretion, re-lend to a Borrower the amount of such payments
received or retained by it for the account of such Defaulting Lender.

 
 
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(c)
A Defaulting Lender shall not be entitled to give instructions to Agent or to
approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents.  All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have
either Advances outstanding or a Commitment Percentage.

 
 
(d)
Other than as expressly set forth in this Section 2.23, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged.  Nothing in this Section
2.23 shall be deemed to release any Defaulting Lender from its obligations under
this Agreement and the Other Documents, shall alter such obligations, shall
operate as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which the Borrower, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such Defaulting Lender
hereunder.

 
 
(e)
In the event a Defaulting Lender retroactively cures to the satisfaction of
Agent the breach which caused a Lender to become a Defaulting Lender, such
Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as
a Lender under this Agreement.

 
2.24
Increase of Maximum Revolving Advance Amount.

 
If at any time after the Closing Date, and so long as no Event of Default or
Default has occurred and is continuing, the Borrower desires to increase the
Maximum Revolving Advance Amount, the Borrower shall notify the Agent, who will
promptly notify each Lender thereof, provided that (y) Borrower may request an
increase of the Maximum Revolving Advance Amount only one (1) time pursuant to
this Section 2.24, and (z) such increase shall be in the amount of Five Million
and 00/100 Dollars ($5,000,000.00).  The existing Lenders shall have the right
(but not the obligation) at any time or from time to time within fifteen (15)
Business Days following such notice to increase their respective commitments to
make Advances so as to provide such additional commitment to make Advances
pro-rata in accordance with the Commitment Percentages of each, and any portion
of such requested increase which is not provided by any such existing Lender
shall be available to the other existing Lenders; provided, that if more than
one existing Lender desires to increase its commitment to make Advances in
respect of the portion not provided by an existing Lender, such participating
Lenders shall provide such portion of the additional commitments to make
Advances on a pro rata basis in accordance with the proportion that their
respective Commitment Percentage bears to each other, and thereafter, to the
extent not provided by existing Lenders, to any additional lending institution
or institutions proposed by the Borrower and which is approved by the Agent
(which approval will not be unreasonably withheld) and which becomes a party to
this Agreement pursuant to documentation reasonably acceptable to the Agent and
prepared at the Borrower’s expense, which documentation may be executed by the
Loan Parties and the Agent (as administrative agent for the Lenders) without
further consent or action of the Lenders, such consent hereby deemed to be
irrevocably given to the Agent by the Lenders; provided, however, that those
Lenders that are increasing their commitments to make Advances pursuant hereto,
or are becoming party hereto for purposes of effecting such increase, may charge
certain fees in connection with such increase as may be agreed to among the
Borrower and the Lenders.  In the event of any such increase in the Maximum
Revolving Advance Amount and in the commitment to make Advances of any Lender
effected pursuant to the terms of this Section 2.24, new Revolving Credit Notes
shall, to the extent deemed reasonably necessary or appropriate by the Agent (or
as may be reasonably requested by an existing Lender increasing its commitment
to make Advances hereunder or an additional Lender that becomes a party hereto),
be executed and delivered by the Borrower and, to the extent deemed appropriate
by the Agent, the surrender and cancellation of existing Revolving Credit
Note(s) shall be effected; and the Loan Parties shall execute and deliver such
additional documentation setting forth the new commitments to make Advances as
the Agent shall reasonably request (which documentation may be executed by the
Loan Parties and the Agent (as administrative agent for the Lenders) without
further consent or action of the Lenders, such consent herein is deemed to be
irrevocably given to the Agent by the Lenders).
 
 
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ARTICLE 3
INTEREST AND FEES.
 
3.1
Interest.

 
 
(a)
Interest on Advances shall be payable in arrears on the first day of each month
with respect to Domestic Rate Loans and, with respect to CDOR Rate Loans
or  Eurodollar Rate Loans, at the end of each Interest Period.  Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month at a rate per annum equal to the applicable Revolving Interest Rate.

 
 
(b)
Whenever, subsequent to the date of this Agreement, the Base Rate or the U.S.
Base Rate is increased or decreased, the Revolving Interest Rate for Domestic
Rate Loans shall be similarly changed without notice or demand of any kind by an
amount equal to the amount of such change in the Base Rate or U.S. Base Rate, as
applicable, during the time such change or changes remain in effect. Upon and
after the occurrence of an Event of Default, and during the continuation
thereof, at the option of Agent or at the direction of Required Lenders, the
Obligations shall bear interest at the applicable Revolving Interest Rate plus
two percent (2.0%) per annum (the “Default Rate”).

 
 
(c)
Any Advance in Dollars shall either be a Domestic Rate Loan that bears interest
based upon the Base Rate or a CDOR Rate Loan. Any Advance in U.S. Dollars shall
either be Domestic Rate Loan that bears interest based up on the U.S. Base Rate
or a Eurodollar Rate Loan.

 
3.2
Letter of Credit Fees.

 
Borrower shall pay (x) to Agent, for the ratable benefit of Lenders, fees for
each Letter of Credit for the period from and excluding the date of issuance of
same to and including the date of expiration or termination, equal to the
average daily face amount of each outstanding Letter of Credit multiplied by two
and one half of one percent (2.50%) per annum, such fees to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be payable
quarterly in arrears on the first day of each quarter and on the last day of the
Term, and (y) to the Issuer, a fronting fee of one quarter of one percent
(0.25%) per annum, together with any and all administrative, issuance,
amendment, payment and negotiation charges with respect to Letters of Credit and
all fees and expenses as agreed upon by Issuer and Borrower in connection with
any Letter of Credit, including in connection with the opening, amendment or
renewal of any such Letter of Credit and any acceptances created thereunder and
shall reimburse Agent for any and all fees and expenses, if any, paid by Agent
to the Issuer (all of the foregoing fees, the “Letter of Credit Fees”).  All
such charges shall be deemed earned in full on the date when the same are due
and payable hereunder and shall not be subject to rebate or pro-ration upon the
termination of this Agreement for any reason.  Any such charge in effect at the
time of a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in the Issuer’s prevailing charges for
that type of transaction.  All Letter of Credit Fees payable hereunder shall be
deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or pro-ration upon the termination of this
Agreement for any reason.  Upon and after the occurrence of an Event of Default,
and during the continuation thereof, at the option of Agent or at the direction
of Required Lenders, the Letter of Credit Fees described in clause (x) of this
Section 3.2 shall be increased by an additional two percent (2.0%) per annum.
 
 
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On demand upon the occurrence and during the continuance of an Event of Default,
Borrower will cause cash to be deposited and maintained in an account with
Agent, as cash collateral, in an amount equal to one hundred five percent (105%)
of the Maximum Undrawn Amount of all outstanding Letters of Credit, and the
Borrower hereby irrevocably authorizes Agent, in its discretion, on the
Borrower’s behalf and in the Borrower’s name, to open such an account and to
make and maintain deposits therein, or in an account opened by the Borrower, in
the amounts required to be made by the Borrower, out of the proceeds of
Receivables or other Collateral or out of any other funds of the Borrower coming
into any Lender’s possession at any time.  Agent will invest such cash
collateral (less applicable reserves) in such short-term money-market items as
to which Agent and the Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral.  The Borrower may not withdraw amounts credited to any such account
except upon the occurrence of all of the following: (x) payment and performance
in full of all Obligations, (y) expiration of all Letters of Credit and (z)
termination of this Agreement.
 
3.3
Facility Fee.

 
If, for any calendar quarter during the Term, the average daily unpaid balance
of the Advances and undrawn amount of any outstanding Letters of Credit for each
day of such calendar quarter does not equal the Maximum Revolving Advance
Amount, then Borrower shall pay to Agent for the ratable benefit of Lenders a
fee at a rate equal to three quarters of one percent (0.75%) per annum, on the
amount by which the Maximum Revolving Advance Amount exceeds such average daily
unpaid balance.  Such fee shall be payable to Agent in arrears on the first day
of each calendar quarter with respect to the previous calendar quarter.
 
 
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3.4
Fee Letter.

 
Borrower shall pay the amounts required to be paid in the Fee Letter in the
manner and at the times required by the Fee Letter.
 
3.5
Computation of Interest and Fees.

 
In respect of Advances denominated in Dollars, interest and fees hereunder shall
be computed on the basis of a year of 365 or 366 days, as applicable, and for
the actual number of days elapsed and in respect of Advances denominated in U.S.
Dollars, interest and fees hereunder shall be computed on the basis of a year of
360 days and for the actual number of days elapsed.  If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the Revolving Interest Rate for Domestic Rate Loans
during such extension. Each interest rate which is calculated under this
Agreement on any basis other than the actual number of days in a calendar year
(the “deemed interest period”) is, for the purposes of the Interest Act
(Canada), equivalent to a yearly rate calculated by dividing such interest rate
by the number of days in the deemed interest period, then multiplying such
result by the actual number  of days in the calendar year (365 or 366).
 
In no event shall the aggregate “interest” (as defined in Section 347 (the
“Criminal Code Section”) of the Criminal Code (Canada)), payable to any Lender
under this Agreement or any other Credit Document exceed the effective annual
rate of interest lawfully permitted under the Criminal Code Section on the
“credit advanced” (as defined in such section) under this Agreement.  Further,
if any payment, collection or demand pursuant to this Agreement in respect of
such “interest” is determined to be contrary to the provisions of the Criminal
Code Section, such payment, collection, or demand shall be deemed to have been
made by mutual mistake of the affected Lender and the affected Loan Party and
such “interest” shall be deemed to have been adjusted with retroactive effect to
the maximum amount or rate of interest, as the case may be, as would not be so
prohibited by the Criminal Code Section to result in a receipt by such Lender of
interest at a rate not in contravention of the Criminal Code Section, such
adjustment to be effected, to the extent necessary, as follows:
 
 
(a)
firstly, by reducing the amounts or rates of interest required to be paid to
that Lender; and

 
 
(b)
then, by reducing any fees, charges, expenses and other amounts required to be
paid to the affected Lender which would constitute “interest”.

 
Notwithstanding the above, and after giving effect to all such adjustments, if
any Lender shall have received an amount in excess of the maximum permitted by
the Criminal Code Section, then the affected Loan Party shall be entitled, by
notice in writing to the affected Lender, to obtain reimbursement from that
Lender in an amount equal to such excess.  For greater certainty, to the extent
that any charges, fees or expenses are held to be within such meaning of
“interest”, such amounts shall be pro-rated over (i) the period of time to which
they relate or (ii) otherwise over the period from the date of the initial
Advance under the Agreement to the date on which all of the Obligations are
irrevocably repaid.
 
 
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3.6
Maximum Charges.

 
In no event whatsoever shall interest and other charges charged hereunder exceed
the highest rate permissible under law. In the event interest and other charges
as computed hereunder would otherwise exceed the highest rate permitted under
law, such excess amount shall be first applied to any unpaid principal balance
owed by Borrower, and if the then remaining excess amount is greater than the
previously unpaid principal balance, Lenders shall promptly refund such excess
amount to Borrower and the provisions hereof shall be deemed amended to provide
for such permissible rate.
 
3.7
Increased Costs.

 
In the event that any Applicable Law, or any change therein or in the
interpretation or application thereof, or compliance by any Lender (for purposes
of this Section 3.7, the term “Lender” shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any CDOR Rate Loans
or Eurodollar Rate Loans with any request or directive (whether or not having
the force of law) from any central bank or other financial, monetary or other
authority, shall:
 
 
(a)
subject Agent or any Lender to any tax of any kind whatsoever with respect to
this Agreement or any Other Document or change the basis of taxation of payments
to Agent or any Lender of principal, fees, interest or any other amount payable
hereunder or under any Other Documents (except for changes in the rate of tax on
the overall net income of Agent or any Lender by the jurisdiction in which it
maintains its principal office);

 
 
(b)
impose, modify or hold applicable any reserve, special deposit, assessment or
similar requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by, any office of Agent or
any Lender, including pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or

 
 
(c)
impose on Agent or any Lender or the CDOR Rate or Eurodollar Rate market any
other condition with respect to this Agreement or any Other Document;

 
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be, provided that the foregoing shall
not apply to increased costs which are reflected in the CDOR Rate or the
Eurodollar Rate, as the case may be.  Agent or such Lender shall certify the
amount of such additional cost or reduced amount to Borrower, and such
certification shall be conclusive absent manifest error.
 
 
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3.8
Basis For Determining Interest Rate Inadequate or Unfair.

 
In the event that Agent or any Lender shall have determined that:
 
 
(a)
reasonable means do not exist for ascertaining the CDOR Rate or the Eurodollar
Rate for any Interest Period; or

 
 
(b)
Dollar deposits in the relevant amount and for the relevant maturity are not
available in the CDOR Rate or the Eurodollar Rate market, with respect to an
outstanding CDOR Rate Loan or Eurodollar Rate Loan, a proposed CDOR Rate Loan or
Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a
CDOR Rate Loan or a Eurodollar Rate Loan, then Agent shall give Borrower prompt
written notice of such determination.  If such notice is given, (i) any such
requested CDOR Rate Loan or Eurodollar Rate Loan shall be made as a Domestic
Rate Loan, unless Borrower shall notify Agent no later than 10:00 a.m. two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of CDOR Rate
Loan or Eurodollar Rate Loan, (ii) any Domestic Rate Loan or CDOR Rate Loan or
Eurodollar Rate Loan which was to have been converted to an affected type of
CDOR Rate Loan or Eurodollar Rate Loan shall be continued as or converted into a
Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 a.m.
two (2) Business Days prior to the proposed conversion, shall be maintained as
an unaffected type of CDOR Rate Loan or Eurodollar Rate Loan, and (iii) any
outstanding affected CDOR Rate Loans or Eurodollar Rate Loans shall be converted
into a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than
10:00 a.m. two (2) Business Days prior to the last Business Day of the then
current Interest Period applicable to such affected CDOR Rate Loan or Eurodollar
Rate Loan, shall be converted into an unaffected type of CDOR Rate Loan or
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected CDOR Rate Loans or Eurodollar Rate Loans. Until such
notice has been withdrawn, Lenders shall have no obligation to make an affected
type of CDOR Rate Loan or or Eurodollar Rate Loan or maintain outstanding
affected CDOR Rate Loans or Eurodollar Rate Loans and the Borrower shall not
have the right to convert a Domestic Rate Loan or an unaffected type of CDOR
Rate Loan or Eurodollar Rate Loan into an affected type of CDOR Rate Loan or
Eurodollar Rate Loan.

 
3.9
Capital Adequacy.

 
 
(a)
In the event that Agent or any Lender shall have determined that any Applicable
Law or guideline regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any Governmental Body,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Agent or any Lender (for purposes of
this Section 3.9, the term “Lender” shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any CDOR Rate Loans
or Eurodollar Rate Loans with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Agent or any Lender’s capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent’s
and each Lender’s policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrower shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction. In determining such
amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods.  The protection of this Section 3.9 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law or condition.

 
 
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(b)
A certificate of Agent or such Lender setting forth such amount or amounts as
shall be necessary to compensate Agent or such Lender with respect to Section
3.9(a) hereof when delivered to Borrower shall be conclusive absent manifest
error.

 
3.10
Gross Up for Taxes.

 
If any Loan Party shall be required by Applicable Law to withhold or deduct any
taxes from or in respect of any sum payable under this Agreement or any of the
Other Documents to Agent, or any Lender, assignee of any Lender, or Participant
(each, individually, a “Payee” and collectively, the “Payees”), (a) the sum
payable to such Payee or Payees, as the case may be, shall be increased as may
be necessary so that, after making all required withholding or deductions, the
applicable Payee or Payees receives an amount equal to the sum it would have
received had no such withholding or deductions been made (the “Gross-Up
Payment”), (b) such Loan Party shall make such withholding or deductions, and
(c) such Loan Party shall pay the full amount withheld or deducted to the
relevant taxation authority or other authority in accordance with Applicable
Law. Notwithstanding the foregoing, no Loan Party shall be obligated to make any
portion of the Gross-Up Payment that is attributable to any withholding or
deductions that would not have been paid or claimed had the applicable Payee or
Payees properly claimed a complete exemption with respect thereto pursuant to
Section 3.9 hereof.
 
3.11
Currency Indemnity.

 
If, for the purposes of obtaining judgment in any court in any jurisdiction with
respect to this Agreement or any Other Document, it becomes necessary to convert
into a particular currency (the “Judgment Currency”) any amount due under this
Agreement or under any Other Document in any currency other than the Judgment
Currency (the “Currency Due”), then conversion shall be made at the rate of
exchange prevailing on the Business Day before the day on which judgment is
given.  For this purpose “rate of exchange” means the rate at which the Agent is
able, on the relevant date, to purchase the Currency Due with the Judgment
Currency in accordance with its normal practices.  In the event that there is a
change in the rate of exchange prevailing between the Business Day before the
day on which the judgment is given and the date of receipt by the Agent of the
amount due, Loan Parties will, on the date of receipt by the Agent, pay such
additional amounts, if any, or be entitled to receive reimbursement of such
amount, if any, as may be necessary to ensure that the amount received by the
Agent on such date is the amount in the Judgment Currency which when converted
at the rate of exchange prevailing on the date of receipt by the Agent is the
amount then due under this Agreement or such Other Document in the Currency
Due.  If the amount of the Currency Due which the Agent is so able to purchase
is less than the amount of the Currency Due originally due to it, Loan Parties
shall indemnify and save the Agent and the Lenders harmless from and against all
loss or damage arising as a result of such deficiency.  This indemnity shall
constitute an obligation separate and independent from the other obligations
contained in this Agreement and the Other Documents, shall give rise to a
separate and independent cause of action, shall apply irrespective of any
indulgence granted by the Agent from time to time and shall continue in full
force and effect notwithstanding any judgment or order for a liquidated sum in
respect of an amount due under this Agreement or any Other Document or under any
judgment or order.
 
 
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ARTICLE 4
COLLATERAL: GENERAL TERMS.
 
4.1
Security Interest in the Collateral.

 
 
(a)
Subject to the terms of the Intercreditor Agreement, to secure the prompt
payment and performance to Agent and each Lender of its Obligations, each
Grantor hereby assigns, pledges and grants to Agent for its benefit and for the
ratable benefit of each Lender a specific, fixed and continuing security
interest in and to and Lien on all of its Collateral, whether now owned or
existing or hereafter acquired or arising and wheresoever located.  Subject to
the terms of the Intercreditor Agreement, each Grantor shall mark its books and
records as may be necessary or appropriate to evidence, protect and perfect
Agent’s security interest and shall cause its financial statements to reflect
such security interest.  Notwithstanding the foregoing, the grant by each
Grantor of security in trade-marks (as defined in the Trade-marks Act (Canada))
under this Agreement and any Other Document shall be limited to a grant by such
Person of a security interest in all of such Person’s right, title and interest
in such trade-marks.  The security interest is intended to operate as a fixed
and specific charge of all of the Collateral presently existing, and with
respect to all future Collateral, to operate as a fixed and specific charge of
such future Collateral. Each Grantor  acknowledges that value has been
given.  The security interest is intended to attach, as to all of the
Collateral, upon the execution by each Grantor of this Agreement.

 
 
(b)
The last day of any term reserved by any real property lease, written or
unwritten, or any agreement to lease real property, now held or subsequently
acquired by any Grantor is excepted out of the security interest. As further
security for the payment of the Obligations, each Grantor agrees that it will
stand possessed of the reversion of such last day of the term and shall hold it
in trust for the Agent for the purpose of this Agreement.  Each Grantor shall
assign and dispose of the same in such manner as the Agent may from time to time
direct in writing without cost or expense to the Agent. Upon any sale,
assignment, sublease or other disposition of such lease or agreement to lease,
the Agent shall, for the purpose of vesting the residue of any such term in any
purchaser, sublessee or such other acquiror of the real property lease,
agreement to lease or any interest in any of them, be entitled by deed or other
written instrument to assign to such other person, the residue of any such term
in place of the Agent and to vest the residue freed and discharged from any
obligation whatsoever respecting the same.

 
 
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(c)
Nothing in this Agreement shall constitute an assignment or attempted assignment
of any contract or agreement to the extent that such contract or agreement is
not assignable or requires the consent of a third party to its assignment unless
such consent has been obtained, due to (a) its provisions (other than a contract
or agreement that is the whole of an account or chattel paper for money due or
to become due), or (b) Applicable Law. In each such case, the Agent shall,
unless the Agent otherwise agrees in writing, promptly, upon written request by
the Agent, attempt to obtain the consent of any necessary third party to its
assignment under this Agreement and to its further assignment by the Agent to
any third party as a result of the exercise by the Agent of remedies after
demand. Upon such consent being obtained or waived, this Agreement shall apply
to the applicable contract or agreement without regard to this section and
without the necessity of any further assurance to effect such
assignment.  Unless and until the consent to assignment is obtained as provided
above, each Grantor shall, to the extent it may do so at law or pursuant to the
provisions of the contract or interest in question hold all benefit to be
derived from such contracts or agreements in trust for the Agent (including,
without limitation, each Grantor’s beneficial interest in any contract or
agreement which may be held in trust for such Grantor by a third party), as
additional security for payment of Obligations and shall deliver up all such
benefit to the Agent, promptly upon demand by the Agent.

 
4.2
Perfection of Security Interest.

 
Subject to the terms of the Intercreditor Agreement, each Grantor shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent’s security interest in and Lien on the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering to Agent,
endorsed or accompanied by such instruments of assignment as Agent may specify,
and stamping or marking, in such manner as Agent may specify, any and all
chattel paper, instruments, letters of credits and advices thereof and documents
evidencing or forming a part of the Collateral, (iv) entering into warehousing,
lockbox and other custodial arrangements satisfactory to Agent, and (v)
executing and delivering financing statements, control agreements, instruments
of pledge, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent’s security interest and Lien under the PPSA
or other Applicable Law.  By its signature hereto, each Grantor hereby
authorizes Agent to file against such Grantor, one or more financing,
continuation or amendment statements pursuant to the PPSA in form and substance
satisfactory to Agent (which statements may have a description of collateral
which is broader than that set forth herein).  All charges, expenses and fees
Agent may incur in doing any of the foregoing, and any local taxes relating
thereto, shall be charged to Borrower’s Account as an Advance of a Domestic Rate
Loan and added to the Obligations, or, at Agent’s option, shall be paid to Agent
for its benefit and for the ratable benefit of Lenders promptly upon written
demand but in any event no later than ten (10) days after such demand.
 
 
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4.3
Disposition of Collateral.

 
Each Grantor will safeguard and protect all Collateral for Agent’s general
account and make no disposition thereof whether by sale, lease or otherwise
except as otherwise permitted under this Agreement.
 
4.4
Preservation of Collateral.

 
In addition to the rights and remedies set forth in Section 11.1 hereof, upon
the occurrence and during the continuance of an Event of Default, Agent: (a) may
at any time take such steps as Agent deems necessary to protect Agent’s interest
in and to preserve the Collateral, including the hiring of such security guards
or the placing of other security protection measures as Agent may deem
appropriate; (b) may employ and maintain at any of any Grantor’s premises a
custodian who shall have full authority to do all acts necessary to protect
Agent’s interests in the Collateral; (c) may lease warehouse facilities to which
Agent may move all or part of the Collateral; (d) may use any Grantor’s owned or
leased lifts, hoists, trucks and other facilities or equipment for handling or
removing the Collateral; (e) shall have, and is hereby granted, a right of
ingress and egress to the places where the Collateral is located, and may
proceed over and through any of any Grantor’s owned or leased property; and (f)
appoint by instrument in writing a receiver (which term shall include a receiver
and manager or agent) of any Grantor and of all or any part of the Collateral
and remove or replace such receiver from time to time or may institute
proceedings in any court of competent jurisdiction for the appointment of a
receiver (any such receiver appointed by the Agent, with respect to
responsibility for its acts, shall, to the extent permitted by Applicable Law,
be deemed the agent of such Grantor and not of the Agent).  Each Grantor shall
cooperate fully with all of Agent’s efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct.  All of
Agent’s expenses of preserving the Collateral, including any expenses relating
to the bonding of a custodian, shall be charged to Borrower’s Account as an
Advance maintained as a Domestic Rate Loan and added to the Obligations.
 
4.5
Ownership of Collateral.

 
 
(a)
With respect to the Collateral, at the time the Collateral becomes subject to
Agent’s security interest:  (i) each Grantor shall be the sole owner of and
fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of its respective Collateral
to Agent; and, except for Permitted Encumbrances the Collateral shall be free
and clear of all Liens and encumbrances whatsoever; (ii) each document and
agreement executed by any Grantor or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all respects; (iii)
all signatures and endorsements of any Grantor that appear on such documents and
agreements shall be genuine and the applicable Grantor shall have full capacity
to execute same; and (iv) each Grantor’s Equipment and Inventory shall be
located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except with respect to
the sale of Inventory in the Ordinary Course of Business and except as otherwise
permitted under this Agreement.

 
 
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(b)
(i) There is no location at which any Grantor has any Inventory (except for
Inventory in transit) other than those locations listed on Schedule 4.5; (ii)
Schedule 4.5 hereto contains a correct and complete list, as of the Closing
Date, of the legal names and addresses of each warehouse at which Inventory of
any Grantor is stored; none of the receipts received by any Grantor from any
warehouse states that the goods covered thereby are to be delivered to bearer or
to the order of a named Person or to a named Person and such named Person’s
assigns;  (iii) Schedule 4.5 hereto sets forth a correct and complete list as of
the Closing Date of (A) each place of business of each Grantor and (B) the chief
executive office of each Grantor; and (iv) Schedule 4.5 hereto sets forth a
correct and complete list as of the Closing Date of the location, by province
and street address, of all Real Property owned or leased by each Grantor,
together with the names and addresses of any landlords.

 
4.6
Defense of Agent’s and Lenders’ Interests.

 
Until (a) payment and performance in full of all of the Obligations and (b)
termination of this Agreement, Agent’s interests in the Collateral shall
continue in full force and effect.  During such period no Grantor shall, without
Agent’s prior written consent, pledge, sell (except as otherwise permitted under
this Agreement), assign, transfer, create or suffer to exist a Lien upon or
encumber or allow or suffer to be encumbered in any way except for Permitted
Encumbrances, any part of the Collateral.  Each Grantor shall defend Agent’s
interests in the Collateral against any and all Persons whatsoever.  At any time
following demand by Agent for payment of all Obligations upon the occurrence and
during the continuance of an Event of Default, Agent shall have the right to
take possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including:  labels, stationery, documents, instruments
and advertising materials.  If Agent exercises this right to take possession of
the Collateral, the applicable Grantor shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent.  In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the PPSA or other Applicable Law.  Each Grantor shall, and
Agent may, at its option, instruct all suppliers, carriers, forwarders,
warehousers or others receiving or holding cash, cheques, Inventory, documents
or instruments in which Agent holds a security interest to deliver same to Agent
and/or subject to Agent’s order and if they shall come into such Grantor’s
possession, they, and each of them, shall be held by such Grantor in trust as
Agent’s trustee, and such Grantor will immediately deliver them to Agent in
their original form together with any necessary endorsement.
 
4.7
Books and Records.

 
Each Grantor shall (a) keep proper books of record and account in which full,
true and correct entries will be made of all dealings or transactions of or in
relation to its business and affairs; (b) set up on its books accruals with
respect to all taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books, from its earnings, allowances
against doubtful Receivables, advances and investments and all other proper
accruals (including by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business.  All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied
in the opinion of such independent public accountant as shall then be regularly
engaged by the applicable Grantor.
 
 
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4.8
Intentionally Omitted.

 
4.9
Compliance with Laws.

 
Each Grantor shall comply with all Applicable Laws with respect to the
Collateral or any part thereof or to the operation of such Grantor’s business
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect.  The assets of each Grantor at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the assets of such Grantor so that such insurance
shall remain in full force and effect.
 
4.10
Inspection of Premises; Appraisals.

 
At all reasonable times and upon prior notice to the applicable Grantor if no
Event of Default has occurred and is continuing, Agent and each Lender (at such
Lender’s sole expense) shall have full access to and the right to audit, check,
inspect and make abstracts and copies from each Grantor’s books, records,
audits, correspondence and all other papers relating to the Collateral and the
operation of such Grantor’s business.  Agent, any Lender (at such Lender’s sole
expense) and their agents may enter upon any premises of any Grantor at any time
during business hours and at any other reasonable time, and from time to time,
for the purpose of inspecting the Collateral and any and all records pertaining
thereto and the operation of any Grantor’s business.  Further, at such times as
Agent deems advisable or necessary, Agent shall cause to be conducted an
appraisal of the Inventory of any Grantor and/or a field examination of any
Grantor; provided that the Grantors shall be responsible for the expense of any
such appraisal and/or field examination no more than (i) one (1) time per year
with respect to the Grantors’ Inventory, and (ii) one (1) time per year with
respect to field examinations, unless in any case an Event of Default has
occurred and is continuing, in which event no such frequency limitation shall
apply and the Grantors shall be responsible for any expenses associated with any
and all appraisals and field examinations conducted pursuant to this Section
4.10.
 
4.11
Insurance.

 
The assets and properties of each Grantor at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the assets and properties of such Grantor so that such
insurance shall remain in full force and effect.  Each Grantor shall bear the
full risk of any loss of any nature whatsoever with respect to the
Collateral.  At the Grantor’s own cost and expense in amounts and with carriers
reasonably acceptable to Agent, each Grantor shall (a) keep all its insurable
properties and properties in which such Grantor has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to such Grantor’s
including business interruption insurance; (b) maintain a bond in such amounts
as is customary in the case of companies engaged in businesses similar to such
Grantor insuring against theft, fraud or other criminal misappropriation of
insured’s officers and employees who may either singly or jointly with others at
any time have access to the assets or funds of such
 
 
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Grantor either directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker’s compensation or similar
insurance as may be required under the laws of any province or jurisdiction in
which such Grantor is engaged in business; and (e) furnish Agent with (i)
evidence of the maintenance of such policies by the renewal thereof before any
expiration date, and (ii) subject to the terms of the Intercreditor Agreement,
appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as an additional named insured and lender loss payee as its
interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall
be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless prior written notice is given to Agent in accordance with the
terms and provisions of the applicable insurance policy(ies). Each Grantor shall
provide copies of all such insurance policies (including the appropriate lender
loss payee, mortgagee and additional insured endorsements) within thirty (30)
days after Agent’s reasonable request, however, only certificates of insurance
shall be required on the Closing Date.  In the event of any loss thereunder and
subject to the terms of the Intercreditor Agreement, the carriers named therein
hereby are directed by Agent and each Grantor to make payment for such loss to
Agent and not to such Grantor and Agent jointly.  If any insurance losses are
paid by cheque, draft or other instrument payable to any Grantor and Agent
jointly, Agent may endorse such Grantor’s name thereon and do such other things
as Agent may deem advisable to reduce the same to cash.  Agent is hereby
authorized during the existence of an Event of Default to adjust and compromise
claims under insurance coverage referred to in clauses (a) and (b) above.  All
loss recoveries received by Agent upon any such insurance may be applied to the
Obligations, in such order as Agent in its sole discretion shall determine.  Any
surplus shall be paid by Agent to the applicable Grantor or applied as may be
otherwise required by law.  Any deficiency thereon shall be paid by the Grantors
to Agent, on demand.  Anything hereinabove to the contrary notwithstanding, and
subject to the fulfillment of the conditions set forth below, Agent shall remit
to the Grantors insurance proceeds received by Agent during any calendar year
under insurance policies procured and maintained by the Grantors which insure
the Grantors’ insurable properties to the extent (i) no Event of Default or
Default shall have occurred and be continuing and (ii) Undrawn Availability,
both prior to and after giving effect to any such payment, is equal to or
greater than Five Million and 00/100 Dollars ($5,000,000.00).  In the event
either (i) an Event of Default or Default shall have occurred and be continuing
or (ii) Undrawn Availability, both prior to and after giving effect to any such
payment, is less than Five Million and 00/100 Dollars ($5,000,000.00), then
Agent may, in its sole discretion, either remit the insurance proceeds to
Grantors upon Grantors providing Agent with evidence reasonably satisfactory to
Agent that the insurance proceeds will be used by the Grantors to repair,
replace or restore the insured property which was the subject of the insurable
loss, or apply the proceeds to the Obligations, as aforesaid.  The agreement of
Agent to remit insurance proceeds in the manner above provided shall be subject
in each instance to satisfaction of the condition that the Grantors shall use
such insurance proceeds to repair, replace or restore the insurable property
which was the subject of the insurable loss and for no other purpose.
 
 
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4.12
Failure to Pay Insurance.

 
If any Grantor fails to obtain insurance as hereinabove provided, or to keep the
same in force, Agent, if Agent so elects, may obtain such insurance and pay the
premium therefor on behalf of such Grantor, and charge Borrower’s Account
therefor as an Advance of a Domestic Rate Loan and such expenses so paid shall
be part of the Obligations.
 
4.13
Payment of Taxes.

 
Each Grantor will pay, when due, all taxes, assessments and other Charges
lawfully levied or assessed upon such Grantor or any of the Collateral including
real and personal property taxes, assessments and charges and all franchise,
income, employment, social security benefits, withholding, and sales taxes.  If
any tax by any Governmental Body is or may be imposed on or as a result of any
transaction between any Grantor and Agent or any Lender which Agent or any
Lender may be required to withhold or pay or if any taxes, assessments, or other
Charges remain unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent’s or any Lender’s opinion, may possibly create a
valid Lien on the Collateral, Agent may without notice to any Grantor pay the
taxes, assessments or other Charges and each Grantor hereby indemnifies and
holds Agent and each Lender harmless in respect thereof.  Agent will not pay any
taxes, assessments or Charges to the extent that any Grantor has Properly
Contested those taxes, assessments or Charges.  The amount of any payment by
Agent under this Section 4.13 shall be charged to Borrower’s Account as an
Advance maintained as a Domestic Rate Loan and added to the Obligations and,
until the Grantors shall furnish Agent with an indemnity therefor (or supply
Agent with evidence satisfactory to Agent that due provision for the payment
thereof has been made), Agent may hold without interest any balance standing to
the Borrower’s credit and Agent shall retain its security interest in and Lien
on any and all Collateral held by Agent.
 
4.14
Payment of Leasehold Obligations.

 
Each Grantor shall at all times pay, when and as due, its rental obligations
under all leases under which it is a tenant, and shall otherwise comply, in all
material respects, with all other terms of such leases and keep them in full
force and effect and, at Agent’s request will provide evidence of having done
so.
 
4.15
Receivables.

 
 
(a)
Nature of Receivables.  Each of the Receivables shall be a bona fide and valid
account representing a bona fide indebtedness incurred by the Customer therein
named, for a fixed sum as set forth in the invoice relating thereto (provided
immaterial or unintentional invoice errors shall not be deemed to be a breach
hereof) with respect to an absolute sale or lease and delivery of goods upon
stated terms of the applicable Grantor, or work, labour or services theretofore
rendered by the applicable Grantor as of the date each Receivable is
created.  Same shall be due and owing in accordance with each Grantor’s standard
terms of sale without dispute, set-off or counterclaim except as may be stated
on the accounts receivable schedules delivered by such Grantor to Agent.

 
 
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(b)
Solvency of Customers. Each Customer, to the actual knowledge of each Grantor,
as of the date each Receivable is created, is and will be solvent and able to
pay all Receivables on which the Customer is obligated in full when due or with
respect to such Customers of such Grantor who are not solvent such Grantor has
set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables.

 
 
(c)
Location of the Borrower.  Each Grantor’s chief executive office is located at
the address specified on Schedule 4.5 with respect to such Grantor.  Until
written notice is given to Agent by any Grantor of any other office at which
such Grantor keeps its books and records, all such books and records shall be
kept at 1 Tilbury Court, Brampton, Ontario, L6V 2L8, Canada.

 
 
(d)
Collection of Receivables.  Prior to a Cash Dominion Event, each Grantor will,
at such Grantor’s sole cost and expense, collect all amounts due on Receivables;
provided, however, that to the extent such Grantor deposits such amounts in an
account, such account shall be an account with respect to which a Blocked
Account Agreement has been entered into but will not go into effect until the
occurrence of a Cash Dominion Event.  Subject to the terms of the Intercreditor
Agreement, upon the occurrence of a Cash Dominion Event and, in the event such
Cash Dominion Event occurred pursuant to clause (a) of the definition of Cash
Dominion Event, until no Event of Default shall have occurred and be continuing,
each Grantor shall deliver to the Agent, or deposit in the Blocked Account, on
Agent’s behalf and for Agent’s account, in original form and on the date of
receipt thereof, all cheques, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness payable to such Grantor on Receivables, and
shall not commingle such collections with such Grantor’s funds or use the same
except to pay Obligations.

 
 
(e)
Notification of Assignment of Receivables.  Subject to the terms of the
Intercreditor Agreement, at any time upon the occurrence and during the
continuance of an Event of Default, Agent shall have the right to send notice of
the assignment of, and Agent’s security interest in and Lien on, the Receivables
to any and all Customers or any third party holding or otherwise concerned with
any of the Collateral.  Thereafter, Agent shall have the sole right to collect
the Receivables, take possession of the Collateral, or both.  Agent’s actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrower’s
Account and added to the Obligations.

 
 
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(f)
Power of Agent to Act on the Borrower’s Behalf.  Subject to the terms of the
Intercreditor Agreement, at any time after the occurrence and during the
continuance of an Event of Default, Agent shall have the right to receive,
endorse, assign and/or deliver in the name of Agent or any Grantor any and all
cheques, drafts and other instruments for the payment of money relating to the
Receivables, and each Grantor hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed.  Each Grantor hereby constitutes
Agent or Agent’s designee as such Grantor’s attorney with power, at any time
after the occurrence and during the continuance of an Event of Default, (i) to
endorse such Grantor’s name upon any notes, acceptances, cheques, drafts, money
orders or other evidences of payment or Collateral; (ii) to sign such Grantor’s
name on any invoice or bill of lading relating to any of the Receivables, drafts
against Customers, assignments and verifications of Receivables; (iii) to send
verifications of Receivables to any Customer; (iv) to sign such Grantor’s name
on all financing statements or any other documents or instruments deemed
necessary or appropriate by Agent to preserve, protect, or perfect Agent’s
interest in the Collateral and to file same; (v) to demand payment of the
Receivables; (vi) to enforce payment of the Receivables by legal proceedings or
otherwise; (vii) to exercise all of such Grantor’s rights and remedies with
respect to the collection of the Receivables and any other Collateral; (viii) to
settle, adjust, compromise, extend or renew the Receivables; (ix) to settle,
adjust or compromise any legal proceedings brought to collect Receivables; (x)
to prepare, file and sign such Grantor’s name on a proof of claim in bankruptcy
or similar document against any Customer; (xi) to prepare, file and sign such
Grantor’s name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables; and (xii) to do all other
acts and things necessary to carry out this Agreement.  All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or of law, unless done maliciously or with
gross (not mere) negligence (as determined by a court of competent jurisdiction
in a final non-appealable judgment); this power being coupled with an interest
is irrevocable while any of the Obligations remain unpaid.  Subject to the terms
of the Intercreditor Agreement, Agent shall have the right at any time, after
the occurrence and during the continuance of an Event of Default, to change the
address for delivery of mail addressed to any Grantor to such address as Agent
may designate and to receive, open and dispose of all mail addressed to any
Grantor.

 
 
(g)
No Liability. Neither Agent nor any Lender shall, under any circumstances or in
any event whatsoever, have any liability for any error or omission or delay of
any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof, or for any damage
resulting therefrom, except to the extent that any of the foregoing arises out
of the willful misconduct or gross negligence of Agent or any Lender.  At any
time after the occurrence and during the continuance of an Event of Default,
Agent may, without notice or consent from any Grantor, sue upon or otherwise
collect, extend the time of payment of, compromise or settle for cash, credit or
upon any terms any of the Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof.  At any time
after the occurrence and during the continuance of an Event of Default, Agent is
authorized and empowered to accept the return of the goods represented by any of
the Receivables, without notice to or consent by any Grantor, all without
discharging or in any way affecting any Grantor’s liability hereunder.

 
 
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(h)
Establishment of a Lockbox Account, Dominion Account.  Subject to the terms of
the Intercreditor Agreement, upon the occurrence of a Cash Dominion Event and,
in the event such Cash Dominion Event occurred pursuant to clause (a) of the
definition of Cash Dominion Event, until no Event of Default shall have occurred
and be continuing, all proceeds of Collateral shall be remitted directly by the
customers of each Grantor to (or, to the extent such Grantor received such
proceeds directly, they shall be deposited by such Grantor into) either a
lockbox account, dominion account or such other “blocked account” (“Blocked
Accounts”) established at a bank or banks (each such bank, a “Blocked Account
Bank”) pursuant to an arrangement with such Blocked Account Bank as may be
selected by such Grantor and be acceptable to Agent.  Each Grantor, Agent and
each Blocked Account Bank shall enter into a deposit account control agreement
(each, a “Deposit Account Control Agreement”) in form and substance satisfactory
to Agent directing such Blocked Account Bank to transfer such funds so deposited
to Agent, either to any account maintained by Agent at said Blocked Account Bank
or by wire transfer to appropriate account(s) of Agent.  All funds deposited in
such Blocked Accounts shall immediately become the property of Agent and each
Grantor shall obtain the agreement by such Blocked Account Bank to waive any
offset rights against the funds so deposited.  Neither Agent nor any Lender
assumes any responsibility for such blocked account arrangement, including any
claim of accord and satisfaction or release with respect to deposits accepted by
any Blocked Account Bank thereunder.  Alternatively, upon the occurrence of a
Cash Dominion Event and, in the event such Cash Dominion Event occurred pursuant
to clause (a) of the definition of Cash Dominion Event, until no Event of
Default shall have occurred and be continuing, Agent may establish depository
accounts (“Depository Accounts”) in the name of Agent at a bank or banks for the
deposit of such funds and each Grantor shall deposit all proceeds of Collateral
or cause same to be deposited, in kind, in such Depository Accounts of Agent in
lieu of depositing same to the Blocked Accounts.  All deposit accounts and
investment accounts of each Grantor and its Subsidiaries are set forth on
Schedule 4.15(h).

 
 
(i)
Adjustments.  No Grantor shall, without Agent’s consent (which consent shall not
be unreasonably withheld, conditioned or delayed), compromise or adjust any
Receivables (or extend the time for payment thereof) or accept any returns of
merchandise or grant any additional discounts, allowances or credits thereon
except for those compromises, adjustments, returns, discounts, credits and
allowances as have been heretofore customary in the business of such Grantor.

 
4.16
Inventory.

 
To the extent Inventory held for sale or lease has been produced by any Grantor,
it has been and will be produced by such Grantor in accordance with Applicable
Law.
 
4.17
Maintenance of Equipment.

 
The Equipment shall be maintained in good operating condition and repair
(reasonable wear and tear excepted) and all necessary replacements of and
repairs thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved.  No Grantor shall use or operate
the Equipment in violation of any Applicable Law.
 
 
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4.18
Exculpation of Liability.

 
Nothing herein contained shall be construed to constitute Agent or any Lender as
any Grantor’s agent for any purpose whatsoever, nor shall Agent or any Lender be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof.  Neither Agent nor any Lender, whether by anything herein or
in any assignment or otherwise, assume any of any Grantor’s obligations under
any contract or agreement assigned to Agent or such Lender, and neither Agent
nor any Lender shall be responsible in any way for the performance by any
Grantor of any of the terms and conditions thereof.
 
4.19
Environmental Matters.

 
 
(a)
Each Grantor shall ensure that the Real Property and all operations and
businesses conducted thereon remains in compliance with all Environmental Laws
except to the extent any such failure to comply is not reasonably likely to have
a Material Adverse Effect and they shall not place or permit to be placed any
Hazardous Substances on any Real Property except as permitted by Applicable Law
or appropriate governmental authorities.

 
 
(b)
Each Grantor shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs,
judgments, suits, fines and penalties and disbursements of any kind, including
reasonable legal fees, suffered or incurred by Agent or Lenders under or on
account of any Environmental Laws, including the assertion of any Lien
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge or to the presence of any Hazardous Substances resulting
from actions on the part of Agent or any Lender.  Each Grantor’s obligations
under this Section 4.19(b) shall arise upon the discovery of the presence of any
Hazardous Substances at the Real Property, whether or not any federal,
provincial, or local environmental agency has taken or threatened any action in
connection with the presence of any Hazardous Substances.  Each Grantor’s
obligations and the indemnifications hereunder shall survive the termination of
this Agreement for a period of five (5) years.

 
 
(c)
For purposes of Sections 4.19 and 5.7, all references to Real Property shall be
deemed to include all of each Grantor’s right, title and interest in and to its
owned and leased premises.

 
 
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4.20
Financing Statements.

 
Except as respects the financing statements filed by Agent and the financing
statements described on Schedule 1.2(B), no financing statement covering any of
the Collateral or any proceeds thereof is on file in any public office.
 
4.21
Attachment.

 
The security interest created hereby is intended to attach when this Agreement
is executed by the Grantor and delivered to Agent and the Lenders.
 
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.
 
Borrower represents and warrants as follows:
 
5.1
Authority.

 
Borrower has full power, authority and legal right to enter into this Agreement
and the Other Documents and to perform all its respective Obligations hereunder
and thereunder.  This Agreement and the Other Documents have been duly executed
and delivered by Borrower and this Agreement and the Other Documents constitute
the legal, valid and binding obligation of Borrower, enforceable in accordance
with their terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights
generally.  The execution, delivery and performance of this Agreement and of the
Other Documents (a) are within Borrower’s corporate powers, have been duly
authorized by all necessary corporate action, are not in contravention of law or
the terms of Borrower’s by-laws, certificate or articles of incorporation or
other applicable documents relating to Borrower’s formation or to the conduct of
Borrower’s business or of any material agreement or undertaking to which
Borrower is a party or by which Borrower is bound, (b) will not conflict with or
violate any law or regulation, or any judgment, order or decree of any
Governmental Body, (c) will not require the Consent of any Governmental Body or
any other Person, except those Consents set forth on Schedule 5.1 hereto, all of
which will have been duly obtained, made or compiled prior to the Closing Date
and which are in full force and effect and (d) will not conflict with, nor
result in any breach in any of the provisions of or constitute a default under
or result in the creation of any Lien except Permitted Encumbrances upon any
asset of Borrower under the provisions of any agreement, charter document,
instrument, by-law or other instrument to which Borrower is a party or by which
it or its property is a party or by which it may be bound.
 
5.2
Formation and Qualification.

 
 
(a)
Each Borrower Party is duly incorporated and in good standing under the laws of
the province listed on Schedule 5.2(a) and is qualified to do business and is in
good standing in the provinces listed on Schedule 5.2(a) which constitute all
provinces in which qualification and good standing are necessary for such
Borrower Party to conduct its business and own its property and where the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect on such Borrower Party.  Borrower has delivered to Agent true and
complete copies of its certificate or articles of incorporation and by-laws, and
will promptly notify Agent of any amendment or changes thereto.

 
 
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(b)
The only Subsidiaries of each Borrower Party are listed on Schedule 5.2(b).

 
5.3
Survival of Representations and Warranties.

 
All representations and warranties of Borrower contained in this Agreement and
the Other Documents shall be true at the time of Borrower’s execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.
 
5.4
Tax Returns.

 
Each Borrower Party’s federal tax identification number is set forth on Schedule
5.4.  Each Borrower Party has filed all federal, provincial and local tax
returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable.  Federal, provincial and local income tax returns of each Borrower
Party have been examined and reported upon by the appropriate taxing authority
or closed by applicable statute and satisfied for all fiscal years prior to and
including the fiscal year ending 2007.  The provision for taxes on the books of
each Borrower Party is adequate for all years not closed by applicable statutes,
and for its current fiscal year, and no Borrower Party has any knowledge of any
deficiency or additional assessment in connection therewith not provided for on
its books.
 
5.5
Financial Statements.

 
 
(a)
The twelve-month cash flow projections of Holding and its Subsidiaries on a
consolidated basis and the Borrower and its Subsidiaries on a consolidated and
consolidating basis and their projected balance sheets as of the Closing Date
(the “Projections”), copies of which have been delivered to Agent, were prepared
by the Chief Financial Officer of Holding and/or the Borrower, are based on
underlying assumptions which provide a reasonable basis for the projections
contained therein and reflect Holding’s and/or the Borrower’s judgment based on
present circumstances of the most likely set of conditions and course of action
for the projected period.

 
 
(b)
The balance sheets of Holding and its Subsidiaries on a consolidated basis as of
the fiscal year ending December 31, 2011, and the related statements of income,
changes in shareholder’s equity, and changes in cash flow for the period ended
on such date (collectively, the “Year End Financial Statements”),copies of which
have been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial position of Holding and its
Subsidiaries at such date and the results of their operations for such
period.  Since December 31, 2011 there has been no change in the condition,
financial or otherwise, of Holding or its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Holding and its Subsidiaries,
except changes in the Ordinary Course of Business and changes described in
Holdings’ public filings with the U.S. Securities and Exchange Commission since
January 1, 2012.

 
 
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(c)
The balance sheets of Holding and its Subsidiaries on a consolidating basis as
of the months ending January 31, 2012 through June 30, 2012, and the related
statements of income, changes in shareholder’s equity, and changes in cash flow
for the period ended on such date (collectively, the “Month End Financial
Statements” and together with the Year End Financial Statements, the “Financial
Statements”), copies of which have been delivered to Agent, have been prepared
in accordance with GAAP, consistently applied and present fairly the financial
position of Holding and its Subsidiaries at such date and the results of their
operations for such period.

 
5.6
Entity Names.

 
No Borrower Party has been known by any other corporate name in the past five
years and no Borrower Party sells Inventory under any other name except as set
forth on Schedule 5.6, nor has any Borrower Party been the surviving company of
a merger or consolidation or acquired all or substantially all of the assets of
any Person during the preceding five (5) years, other than the amalgamation
among the former Zochem Inc. (Corporation No. 728607-4) and Horsehead Canada
Holding Corp. to form the Borrower on June 28, 2012.
 
5.7
Environmental Compliance.

 
 
(a)
Except as could not reasonably be expected to have a Material Adverse Effect,
(i) none of the operations of any Borrower Party are the subject of any federal,
provincial or local investigation to determine whether any remedial action is
needed to address the presence or disposal of any environmental pollution,
hazardous material or environmental removal, response or remedial action on any
Borrower Party’s owned or leased real property and no such investigations are,
to the best of such Borrower Party’s knowledge, threatened against such Borrower
Party, and (ii) no enforcement proceeding, complaint, summons, citation, notice,
order, claim, litigation, investigation, letter or other written communication
from a federal, provincial or local authority has been filed against or
delivered to such Borrower Party, regarding or involving any threat of release
or release of any environmental pollution or hazardous material on any real
property now or previously owned or operated by such Borrower Party or, to such
Borrower Party’s knowledge, at any off-site location.

 
 
(b)
Except as could not reasonably be expected to have a Material Adverse Effect, no
Borrower Party has any known contingent liability with respect to any release or
threat of release of any environmental pollution or hazardous material or other
violation of Environmental Laws on any real property now or previously owned or
operated by such Borrower Party or to such Borrower Party’s knowledge, at any
off-site location.

 
 
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(c)
Each Borrower Party is and has been in compliance with all Environmental Laws
applicable to the operation of such Borrower Party’s business, except to the
extent that the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.

 
5.8
Solvency; No Litigation, Violation, Indebtedness or Default.

 
 
(a)
After giving effect to the transactions contemplated under this Agreement
(collectively, the “Transactions”), each Borrower Party will be solvent, able to
pay its debts as they mature, will have capital sufficient to carry on its
business and all businesses in which it is about to engage, and (i) as of the
Closing Date, the fair present saleable value of its assets, calculated on a
going concern basis, is in excess of the amount of its liabilities and (ii)
subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount of its
liabilities.

 
 
(b)
Except as disclosed in Schedule 5.8(b), no Borrower Party has (i) any pending or
threatened litigation, arbitration, actions or proceedings which involve the
possibility of having a Material Adverse Effect.

 
 
(c)
No Borrower Party is in violation of any applicable statute, law, rule,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect, nor is any Borrower Party in violation of any
order of any court, Governmental Body or arbitration board or tribunal which
could reasonably be expected to have a Material Adverse Effect.

 
 
(d)
The Canadian Benefit Plans are, and have been, established, registered, amended,
funded, invested and administered in compliance with the terms of such Canadian
Benefit Plans, all Applicable Laws and any applicable collective agreements.
There is no investigation by a Governmental Body or claim (other than routine
claims for payment of benefits) pending or, to the knowledge of any Borrower
Party, threatened involving any Canadian Benefit Plan or its assets, and no
facts exist which could reasonably be expected to give rise to any such
investigation or claim (other than routine claims for payment of benefits). All
employer and employee payments, contributions and premiums required to be
remitted, paid to or paid in respect of each Canadian Pension Plan have been
paid or remitted in accordance with its terms and all Applicable Laws. No
Pension Plan Termination Event has occurred. The Borrower Parties do not, and
have not ever, sponsored, administered, participated in or contributed to a
retirement or pension arrangement that provides defined benefits to employees or
former employees of the a Borrower Party. None of the Canadian Benefit Plans,
other than the Canadian Pension Plans, provide benefits beyond retirement or
other termination of service to employees or former employees of the Borrower
Parties or to the beneficiaries or dependants of such employees.

 
 
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5.9
Patents, Trade-marks, Copyrights and Licenses.

 
All patents, patent applications, trade-marks, trade-mark applications, service
marks, service mark applications, copyrights, copyright applications, design
rights, tradenames, assumed names, trade secrets and licenses owned or utilized
by any Borrower Party are set forth on Schedule 5.9, are valid and have been
duly registered or filed with all appropriate Governmental Bodies and constitute
all of the intellectual property rights which are necessary for the operation of
its business; there is no objection to or pending challenge to the validity of
any such patent, trade-mark, copyright, design rights, tradename, trade secret
or license and no Borrower Party is aware of any grounds for any challenge,
except as set forth in Schedule 5.9 hereto.  Each patent, patent application,
patent license, trade-mark, trade-mark application, trade-mark license, service
mark, service mark application, service mark license, design rights, copyright,
copyright application and copyright license owned or held by any Borrower Party
and all trade secrets used by any Borrower Party consist of original material or
property developed by such Borrower Party or was lawfully acquired by such
Borrower Party from the proper and lawful owner thereof.  Each of such items has
been maintained so as to preserve the value thereof from the date of creation or
acquisition thereof.  With respect to all software used by any Borrower Party,
such Borrower Party is in possession of all source and object codes related to
each piece of software or is the beneficiary of a source code escrow agreement,
each such source code escrow agreement being listed on Schedule 5.9 hereto.
 
5.10
Licenses and Permits.

 
Except as set forth in Schedule 5.10, each Borrower Party (a) is in material
compliance with and (b) has procured and is now in possession of, all material
licenses or permits required by any applicable federal, provincial or local law,
rule or regulation for the operation of its business in each jurisdiction
wherein it is now conducting or proposes to conduct business and where the
failure to procure such licenses or permits could have a Material Adverse
Effect.
 
5.11
Default of Indebtedness.

 
No Borrower Party is in default in the payment of the principal of or interest
on any Indebtedness or under any instrument or agreement under or subject to
which any Indebtedness has been issued and no event has occurred under the
provisions of any such instrument or agreement which with or without the lapse
of time or the giving of notice, or both, constitutes or would constitute an
event of default thereunder.
 
5.12
No Default.

 
No Borrower Party is in default in the payment or performance of any of its
contractual obligations which could reasonably be expected to have a Material
Adverse Effect and no Default has occurred.
 
5.13
No Burdensome Restrictions.

 
No Borrower Party is party to any contract or agreement the performance of which
could have a Material Adverse Effect.  Each Borrower Party has heretofore
delivered to Agent true and complete copies of all material contracts to which
it is a party or to which it or any of its properties is subject.  No Borrower
Party has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
 
 
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5.14
No Labour Disputes.

 
No Borrower Party is involved in any labour dispute; there are no strikes or
walkouts or union organization of any Borrower Party’s employees threatened or
in existence and all labour contracts of each Borrower Party are set forth on
Schedule 5.14 hereto.
 
5.15
[Reserved].

 
5.16
[Reserved].

 
5.17
Disclosure.

 
No representation or warranty made by any Borrower Party in this Agreement, any
Other Document or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of fact or omits to state any fact necessary to make the statements
herein or therein not misleading.  There is no fact known to any Borrower Party
or which reasonably should be known to such Borrower Party which such Borrower
Party has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement or any Other Document which could reasonably be
expected to have a Material Adverse Effect.
 
5.18
Swaps.

 
No Borrower Party is a party to, nor will it be a party to, any swap agreement
whereby such Borrower Party has agreed or will agree to swap interest rates or
currencies unless same provides that damages upon termination following an event
of default thereunder are payable on an unlimited “two-way basis” without regard
to fault on the part of either party.
 
5.19
Conflicting Agreements.

 
No provision of any mortgage, indenture, contract, agreement, judgment, decree
or order binding on any Borrower Party or affecting the Collateral conflicts
with, or requires any Consent which has not already been obtained to, or would
in any way prevent the execution, delivery or performance of, the terms of this
Agreement or the Other Documents.
 
5.20
Application of Certain Laws and Regulations.

 
Neither any Borrower Party nor any Affiliate of any Borrower Party is subject to
any law, statute, rule or regulation which prohibits the incurrence of any
Indebtedness under this Agreement, including laws, statutes, rules or
regulations relative to common or interprovincial carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.
 
 
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5.21
Business and Property of Borrower Parties.

 
Upon and after the Closing Date, Borrower Parties do not propose to engage in
any business other than its Ordinary Course of Business and activities necessary
to conduct the foregoing.  On the Closing Date, each Borrower Party will own all
the property and possess all of the rights and Consents necessary for the
conduct of the business of such Borrower Party.
 
5.22
[Reserved].

 
5.23
Anti-Terrorism Laws.

 
Neither any Loan Party nor any Affiliate of any Loan Party is in violation of
any Anti-Terrorism Law or engages in or conspires to engage in any
transaction  that evades or avoids, or has the purpose of evading or avoiding,
or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.
 
5.24
[Reserved].

 
5.25
Securities Laws.

 
Neither any Borrower Party nor any of its Subsidiaries (i) is required to file
periodic reports under the Securities Act, (ii) is a reporting issuer under the
Securities Act or (iii) has filed a prospectus for which a receipt has not been
issued under the Securities Act.
 
ARTICLE 6
AFFIRMATIVE COVENANTS.
 
Borrower shall, and shall cause each other Borrower Party to, until payment in
full of the Obligations and termination of this Agreement:
 
6.1
Payment of Fees.

 
Pay to Agent on demand all usual and customary fees and expenses which Agent
incurs in connection with (a) the forwarding of Advance proceeds and (b) the
establishment and maintenance of any Blocked Accounts or Depository Accounts as
provided for in Section 4.15(h).  Agent may, without making demand, charge
Borrower’s Account for all such fees and expenses.
 
6.2
Conduct of Business and Maintenance of Existence and Assets.

 
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trade-marks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of Canada or any
political subdivision thereof.
 
 
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6.3
Violations.

 
Promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to any Borrower Party which could reasonably be expected to have a
Material Adverse Effect.
 
6.4
Government Receivables.

 
Take all steps necessary to protect Agent’s interest in the Collateral under the
PPSA and all other applicable provincial or local statutes or ordinances and
deliver to Agent appropriately endorsed, any instrument or chattel paper
connected with any Receivable arising out of contracts between the Borrower and
the Crown.
 
6.5
Financial Covenants.

 
 
(a)
Fixed Charge Coverage Ratio.  Maintain a Fixed Charge Coverage Ratio of not less
than 1.15 to 1.00 calculated as of the last day of the month ending October 31,
2012 and as of the last day of each month thereafter for the period equal to the
twelve (12) consecutive months then ending

 
 
(b)
Without limiting any other term or provision of this Agreement, the Borrower
Parties shall not be required to comply with the financial covenant set forth in
clause (a) above unless and until, beginning on the Closing Date through the end
of the Term, a Testing Event occurs, in which case the Borrower Parties shall be
required to have complied with such financial covenant for the relevant period
ended as of the last day of the prior month and to comply with such financial
covenant for the relevant period ending as of the last day of the current month
and for each relevant period thereafter.

 
6.6
Execution of Supplemental Instruments.

 
Execute and deliver to Agent from time to time, upon demand, such supplemental
agreements, statements, assignments and transfers, or instructions or documents
relating to the Collateral, and such other instruments as Agent may request, in
order that the full intent of this Agreement may be carried into effect.
 
6.7
Payment of Indebtedness.

 
Pay, discharge or otherwise satisfy at or before maturity (subject, where
applicable, to specified grace periods and, in the case of the trade payables,
to normal payment practices) all its obligations and liabilities of whatever
nature, except when the failure to do so could not reasonably be expected to
have a Material Adverse Effect or when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and the
applicable Borrower Party shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favour of Lenders.
 
 
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6.8
Standards of Financial Statements.

 
Cause all financial statements referred to in Sections 9.7, 9.8, 9.9 and 9.12 as
to which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
 
6.9
Securities Laws.

 
Promptly notify Agent in writing if any Borrower Party or any of its
Subsidiaries (i) is required to file periodic reports under the Securities Act,
(ii) becomes a reporting issuer under the Securities Act or (iii) files a
preliminary prospectus.
 
6.10
[Reserved].

 
6.11
Pensions.

 
 
(a)
Each Loan Party will promptly notify the Agent on becoming aware of: (i) a
Pension Plan Termination Event; (ii) the failure to make a required contribution
to or payment under any Canadian Pension Plan when due in accordance with its
terms and Applicable Laws; (iii) the occurrence of any event which is reasonably
likely to result in such Loan Party incurring any  liability, fine or penalty
with respect to any Canadian Benefit Plan; (iv) the existence of any report that
discloses a Pension Plan Unfunded Liability, prior to the filing of such report
with any Governmental Authority; (v) the establishment of any new plan which, if
it currently existed, would be a Canadian Benefit Plan, or any change to an
existing Canadian Benefit Plan; or (vi) the acquisition of an interest in any
Person if such Person sponsors, administers, or participates in, or has any
liability in respect of, any retirement or pension arrangement that provides
defined benefits. In the notice to the Agent of the foregoing, copies of all
documentation relating thereto shall be provided.

 
 
(b)
Each Loan Party will, with respect to each Canadian Benefit Plan, in a timely
fashion perform in all respects all obligations (including funding, investment
and administration obligations) required to be performed in connection with such
Canadian Benefit Plan.

 
 
(c)
Each Loan Party will, with respect to each Canadian Pension Plan, pay all
contributions, premiums and payments when due in accordance with its terms and
all Applicable Laws.

 
 
(d)
If requested by the Agent, each Loan Party will promptly deliver to the Agent,
for delivery to the Agent, copies of: (i) annual information returns, actuarial
valuations and any other reports which have been filed with a Governmental Body
with respect to each Canadian Pension Plan; and (ii) any direction, order,
notice, ruling or opinion that such Loan Party may receive from a Governmental
Authority with respect to any Canadian Benefit Plan.

 
 
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6.12
Post-Closing Undertaking.

 
The Borrower shall use commercially reasonable efforts to cause The Bank of Nova
Scotia to enter into a blocked account agreement or similar agreement in form
and substance satisfactory to the Agent in respect of the Borrower’s accounts
with numbers 476968870918 and 476961125117 within thirty (30) days of the date
hereof; provided that, if The Bank of Nova Scotia refuses to or is unable to
enter into a blocked account agreement or similar agreement in form and
substance satisfactory to the Agent witching thirty (30) days of the date
hereof, the Borrower shall move such accounts to another financial institution
and enter into a blocked account agreement or similar agreement in form and
substance satisfactory to the Agent within sixty (60) days of the date hereof.
 
ARTICLE 7
NEGATIVE COVENANTS.
 
No Borrower Party shall, until satisfaction in full of the Obligations and
termination of this Agreement:
 
7.1
Merger, Consolidation, Acquisition and Sale of Assets.

 
 
(a)
Enter into any merger, amalgamation, consolidation or other reorganization with
or into any other Person or acquire all or a substantial portion of the assets
or Equity Interests of any Person or permit any other Person to consolidate with
or merge with it; provided however, that any Borrower Party may purchase or
acquire all or a substantial portion of the assets or Equity Interests of any
Domestic Person or a business or division of another Domestic Person (a
“Permitted Acquisition”), provided that, each of the following requirements is
met:

 
 
(i)
if such Borrower Party is acquiring the ownership interests in such Person, such
Person shall on or before the date of such Permitted Acquisition join this
Agreement as a Guarantor pursuant to Section 15.18 and the Agent shall have
received all documents, including organizational documents and legal opinions,
it may reasonably require in connection therewith (including, without
limitation, such documentation as is required pursuant to Section 15.18);

 
 
(ii)
such Borrower Party, such Person and its owners, as applicable, shall grant and
cause to be perfected first priority Liens to the Agent for the benefit of the
Lenders in the assets of or acquired from such Person covering the same type of
assets as the Collateral in accordance with the terms and provisions of Section
15.18, subject to no other Liens except Permitted Encumbrances, on or before the
date of such Permitted Acquisition;

 
 
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(iii)
the applicable Borrower Party shall pledge all of the Equity Interests of such
Person owned by such Borrower Party to the Agent for the benefit of the Lenders
pursuant to a Pledge Agreement;

 
 
(iv)
the board of directors or other equivalent governing body of such Person shall
have approved such Permitted Acquisition and the Borrower Parties also shall
have delivered to the Lenders written evidence of the approval of the board of
directors (or equivalent body) of such Person for such Permitted Acquisition;

 
 
(v)
each applicable Governmental Body shall have approved such Permitted Acquisition
and the Borrower Parties shall have delivered to the Lenders written evidence of
the approval of such Governmental Body or such Permitted Acquisition;

 
 
(vi)
the business acquired, or the business conducted by the Person whose ownership
interests are being acquired, as applicable, shall be substantially the same as
one or more line or lines of business conducted by the Loan Parties and shall
comply with Section 7.8;

 
 
(vii)
the Borrower shall demonstrate the following, each after giving effect to such
Permitted Acquisition, by delivering at least five (5) Business Days prior to
such Permitted Acquisition a certificate in the form of Exhibit 7.1 evidencing
such compliance: (y) the aggregate Consideration paid for all Permitted
Acquisitions does not exceed Two Million and 00/100 Dollars ($2,000,000.00), and
(z) Undrawn Availability of at least Five Million and 00/100 Dollars
($5,000,000.00);

 
 
(viii)
the Borrower Parties shall deliver to the Agent at least ten (10) Business Days
before such Permitted Acquisition copies of (x) any agreements entered into or
proposed to be entered into by such Borrower Parties in connection with such
Permitted Acquisition, (y) such other information about such Person or its
assets as any Loan Party may reasonably require, and (z) pro forma projections
(including a pro forma balance sheet, statements of operations and cash flow)
and assumptions used by the Borrower Parties to prepare such projections and all
such items shall be in form and substance satisfactory to the Agent; and

 
 
(ix)
no Event of Default or Default shall exist immediately prior to or after giving
effect to such Permitted Acquisition.

 
 
(b)
Sell, lease, transfer or otherwise dispose of any of its properties or assets,
except (i) dispositions of Inventory in the Ordinary Course of Business, (ii)
the disposition or transfer of obsolete and worn-out Equipment in the Ordinary
Course of Business during any fiscal year having an aggregate fair market value
of not more than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) and
only to the extent that the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent’s first priority security
interest and (iii) any other sales or dispositions expressly permitted by this
Agreement.

 
 
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7.2
Creation of Liens.

 
Create or suffer to exist any Lien or transfer upon or against any of its
property or assets now owned or hereafter acquired, except Permitted
Encumbrances.
 
7.3
Guarantees.

 
Become liable upon the obligations or liabilities of any Person by assumption,
endorsement or guaranty thereof or otherwise (other than to Lenders) except (a)
as disclosed on Schedule 7.3, (b) guarantees in respect of any Indebtedness or
obligations of a Borrower Party to the extent that such Indebtedness or other
obligations would not otherwise be prohibited by Section 7.7, (c) the
endorsement of cheques in the Ordinary Course of Business, (d) so long as such
guarantee is unsecured, the guaranty of the Indebtedness of Holding under any
Holding Bond Issuances by any Borrower Party and (e) the guaranty of the
Indebtedness of Holding under the Indenture Documents by any Borrower Party in
the aggregate principal amount for all Borrower Parties not to exceed Two
Hundred Fifty Million and 00/100 Dollars ($250,000,000.00) at any time
(including any extensions, renewals or refinancings thereof as permitted
pursuant to the terms of the Intercreditor Agreement).
 
7.4
Investments.

 
Purchase or acquire obligations or Equity Interests of, or any other interest
in, any Person, except (a) obligations issued or guaranteed by the government of
Canada or any agency thereof, (b) commercial paper with maturities of not more
than 180 days and a published rating of not less than A-1 or P-1 (or the
equivalent rating), (c) certificates of time deposit and bankers’ acceptances
having maturities of not more than 180 days and repurchase agreements backed by
Canadian or United States government securities of a commercial bank if (i) such
bank has a combined capital and surplus of at least Five Hundred Million and
00/100 Dollars ($500,000,000.00), or (ii) its debt obligations, or those of a
holding company of which it is a Subsidiary, are rated not less than A (or the
equivalent rating) by a nationally recognized investment rating agency, (d) U.S.
or Canadian money market funds that invest solely in obligations issued or
guaranteed by the government of Canada or the United States of America or an
agency thereof, (e) investments by a Borrower Party in a Borrower Party, (f)
investments by any Borrower Party in Holding permitted under Sections 7.3 and
7.5 hereof, (g) investments consisting of promissory notes acquired as non-cash
consideration in connection with obsolete or surplus Equipment or surplus real
estate, (h) investments received in connection with good faith settlement of
delinquent accounts and disputes with any customer or supplier arising in the
Ordinary Course of Business, (i) Permitted Acquisitions and (j) other
investments not to exceed Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) in the aggregate at any time for all Borrower Parties.
 
7.5
Loans.

 
Make advances, loans or extensions of credit to any Person, including any
Parent, Subsidiary or Affiliate, except with respect to (a) the extension of
commercial trade credit in connection with the sale of Inventory in the Ordinary
Course of Business, (b) advances, loans or extensions of credit to a Borrower
Party, (c) loans to its employees in the Ordinary Course of Business not to
exceed the aggregate amount of Fifty Thousand and 00/100 Dollars ($50,000.00) at
any time outstanding, (d) advances, loans and extensions of credit from any
Borrower Party to Holding to enable Holding to make payments and/or prepayments
as required or permitted under the terms and provisions of any applicable
Holding Bond Issuances or under any Indenture Document so long as no Event of
Default shall have occurred or shall occur as a result of giving effect to any
such advance, loan or extension of credit and (e) other advances, loans or
extensions of credit in an aggregate amount at any time not to exceed Five
Hundred Thousand and 00/100 Dollars ($500,000.00) for all Borrower Parties.
 
 
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7.6
Dividends/Distributions.

 
Declare, pay or make any dividend or distribution on any shares of the common
shares, preferred shares, membership interests or partnership interests of any
Borrower Party or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common shares, preferred shares,
membership interests or partnership interests or of any options to purchase or
acquire any such shares of common or preferred shares, membership interests or
partnership interests of any Borrower Party, except that (i) any Borrower Party
may make any such payment or distribution to another Borrower Party, (ii) so
long as no Event of Default shall have occurred and be continuing or shall occur
as a result of giving effect to any such payment, the Borrower Parties shall be
permitted to pay dividends or distributions to Holding to enable Holding to make
payments as required or permitted under any Holding Bond Issuance or under any
Indenture Document and (iii) so long as (y) no Event of Default or Default shall
have occurred and be continuing or shall occur as a result of giving effect to
any such payment and (z) Undrawn Availability, both prior to and after giving
effect to any such payment, is equal to or greater than One Million Five Hundred
Thousand and 00/100 Dollars ($1,500,000.00), the Borrower Parties shall be
permitted to pay dividends or distributions.
 
7.7
Indebtedness.

 
Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade
debt) except in respect of:
 
 
(a)
Indebtedness existing on the Closing Date and set forth on Schedule 7.7
(including any extensions or renewals thereof), provided that the principal
amount of such Indebtedness shall not be increased without the prior written
consent of the Required Lenders;

 
 
(b)
Indebtedness to Agent or Lenders under or pursuant to this Agreement or the
Other Documents;

 
 
(c)
Indebtedness incurred for Capital Expenditures in an aggregate principal amount
not to exceed One Million and 00/100 Dollars ($1,000,000.00) at any time;

 
 
(d)
[Reserved];

 
 
(e)
any guarantee permitted under Section 7.3 hereof; and

 
 
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(f)
any Indebtedness of any Borrower Party owed to a Loan Party.

 
7.8
Nature of Business.

 
Substantially change the nature of the business in which it is presently
engaged, nor except as specifically permitted hereby purchase or invest,
directly or indirectly, in any assets or property other than in the Ordinary
Course of Business for assets or property which are useful in, necessary for and
are to be used in its business as presently conducted.
 
7.9
Transactions with Affiliates.

 
Directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or otherwise enter into any transaction or
deal with, any Affiliate, except transactions:  (i) between or among the Loan
Parties and/or their respective Subsidiaries not otherwise prohibited hereunder;
and (ii) disclosed to Agent, which are in the Ordinary Course of Business, on an
arm’s-length basis on terms and conditions no less favourable than terms and
conditions which would have been obtainable from a Person other than an
Affiliate.
 
7.10
Leases.

 
Enter as lessee into any operating lease arrangement for real or personal
property (except for rail car leases) if after giving effect thereto, aggregate
annual rental payments for all such leased property would exceed Five Hundred
Thousand and 00/100 Dollars ($500,000.00) in any one fiscal year in the
aggregate for all Borrower Parties.
 
7.11
Subsidiaries.

 
 
(a)
Form any Subsidiary unless (i) such Subsidiary becomes a Guarantor for the
Obligations and among other things, executes a Guaranty in form and substance
satisfactory to Agent, (ii) Agent shall have received all documents, including
organizational documents and legal opinions, it may reasonably require in
connection therewith and (iii) the Subsidiary created by such Borrower Party
shall grant first priority, perfected Liens in its assets to Agent for the
benefit of Lenders covering the same type of assets as the Collateral, and the
applicable Borrower Party shall pledge all of the Equity Interests in such
Subsidiary owned by such Borrower Party to Agent for the benefit of Lenders
pursuant to a Pledge Agreement.

 
 
(b)
Enter into any partnership, joint venture or similar arrangement.

 
7.12
Fiscal Year and Accounting Changes.

 
Change its fiscal year from the twelve-month period beginning January 1 and
ending December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
 
 
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7.13
Pledge of Credit.

 
Now or hereafter (i) pledge Agent’s or any Lender’s credit on any purchases or
for any purpose whatsoever or (ii) use any portion of any Advance in or for any
business other than in the Ordinary Course of Business or as permitted under
Sections 7.3, 7.4, 7.5 and 7.6 of this Agreement).
 
7.14
Amendment of Organizational Documents.

 
Amend, modify or waive any term or provision of its Certificate or Articles of
Incorporation or By-Laws unless required by law.
 
7.15
Pensions.

 
Establish or commence contributing to or otherwise participate in any retirement
or pension arrangement that provides defined benefits; or acquire an interest in
any Person if such Person sponsors, administers, participates in, or has any
liability in respect of, any retirement or pension arrangement that provides
defined benefits.
 
7.16
Prepayment of Indebtedness.

 
At any time, directly or indirectly, prepay any Indebtedness (other than
Indebtedness to Agent or Lenders pursuant to this Agreement or the Other
Documents), or repurchase, redeem, retire or otherwise acquire any Indebtedness,
in each case of any Borrower Party,  if any Event of Default shall have occurred
and be continuing or shall occur as a result of giving effect to any such
payment.
 
7.17
Anti-Terrorism Laws.

 
No Borrower Party shall, until satisfaction in full of the Obligations and
termination of this Agreement, nor shall it permit any Affiliate or agent to:
 
 
(a)
[Reserved].

 
 
(b)
[Reserved].

 
 
(c)
Engage in or conspire to engage in any transaction that evades or avoids, or has
the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law. Each Borrower Party shall
deliver or shall cause to be delivered to Lenders any certification or other
evidence requested from time to time by any Lender in its sole discretion,
confirming such Borrower Party’s compliance with this Section 7.17.

 
7.18
[Reserved].

 
7.19
[Reserved].

 
 
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7.20
Other Agreements.

 
Enter into any amendment, waiver or modification of any (i) Indenture Document,
except as permitted by the terms of the Intercreditor Agreement, or (ii) other
contract, document or agreement in a manner that would be materially adverse to
Agent or any Lender.
 
7.21
Double Negative Pledge.

 
Enter into or suffer to exist any agreement with any Person, other than in
connection with this Agreement, any Holding Bond Issuances or the Indenture
Documents, which prohibits or limits the ability of such Borrower Party to
create, incur, assume or suffer to exist any Lien upon or with respect to any
property or assets of any kind, real or personal, tangible or intangible
(including, but not limited to, shares or other equity interests, as the case
may be) of such Borrower Party.
 
ARTICLE 8
CONDITIONS PRECEDENT.
 
8.1
Conditions to Effectiveness.

 
The effectiveness of this Agreement is subject to the satisfaction or waiver by
Agent of the following conditions precedent:
 
 
(a)
Credit Agreement and Other Documents.  Agent shall have received this Agreement
and each Other Document duly executed and delivered by an authorized officer of
each Loan Party and any third parties, as applicable (including, without
limitation, all original share certificates or other certificates evidencing the
Subsidiary Shares and appropriate transfer powers with respect thereto);

 
 
(b)
Filings, Registrations and Recordings. (i)  Each document (including any PPSA
financing statement) required by this Agreement, any related agreement or under
law or reasonably requested by Agent to be filed, registered or recorded in
order to create, in favour of Agent, a perfected security interest in or lien
upon the Collateral shall have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation thereof is so
required  or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto; and (ii) Agent shall have received the results of
searches listing all effective financing statements which name any of the Loan
Parties as debtor, together with copies of such financing statements, none of
which, except for Permitted Encumbrances, shall cover any of the Collateral;

 
 
(c)
Authorization Proceedings of Loan Parties.  Agent shall have received a copy of
the resolutions in form and substance reasonably satisfactory to Agent, of the
Board of Directors of each Loan Party authorizing (i) the execution, delivery
and performance of this Agreement, the Notes, and any other Other Document and
(ii) with respect to the Borrower, the granting by the Borrower of the security
interests in and liens upon the Collateral certified by the Secretary or an
Assistant Secretary of the Borrower as of the Closing Date; and, such
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such certificate;

 
 
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(d)
Incumbency Certificates of Loan Parties. Agent shall have received a certificate
of the Secretary or an Assistant Secretary of each Loan Party, dated the Closing
Date, as to the incumbency and signature of the officers of each Loan Party
executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;

 
 
(e)
Certificates.  Agent shall have received a copy of the Certificate or Articles
of Incorporation of each Loan Party, and all amendments thereto, certified by
the appropriate official of its jurisdiction of incorporation together with
copies of the By-Laws of each Loan Party and all agreements of the Borrower’s
shareholders, in each case certified as accurate and complete by the Secretary
of each Loan Party;

 
 
(f)
Good Standing and Tax Lien Certificates.  Agent shall have received good
standing and tax lien certificates for each Loan Party dated not more than
thirty (30) days prior to the Closing Date, issued by the appropriate official
of each Loan Party’s jurisdiction of incorporation and each jurisdiction where
the conduct of each Loan Party’s business activities or the ownership of its
properties necessitates qualification;

 
 
(g)
Legal Opinion.  Agent shall have received the executed legal opinion of Aird &
Berlis LLP and of Gary Whitaker in form and substance satisfactory to Agent
which shall cover such matters incident to the transactions contemplated by this
Agreement, the Notes and any other Other Document as Agent may reasonably
require and each Loan Party hereby authorizes and directs such counsel to
deliver such opinions to Agent and Lenders;

 
 
(h)
No Litigation.  (i) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Body shall be continuing or threatened against any
Loan Party or against the respective officers or directors of any Loan Party in
connection with this Agreement, the Other Documents or any of the transactions
contemplated thereby and which could reasonably be expected to have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Borrower Party or the conduct of its
respective business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;

 
 
(i)
Financial Condition Certificates.  Agent shall have received an executed
Financial Condition Certificate in the form of Exhibit 8.1(i);

 
 
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(j)
Collateral Examination. Agent shall have completed Collateral examinations and
received appraisals, the results of which shall be satisfactory in form and
substance to Lenders, of the Receivables, Inventory and Equipment of the
Borrower and all books and records in connection therewith;

 
 
(k)
Fees. Agent shall have received all fees payable to Agent and Lenders on or
prior to the Closing Date hereunder, including pursuant to Article 3 hereof and
the Fee Letter;

 
 
(l)
Existing Indebtedness. Agent shall have received (i) a payoff letter, in form
and substance satisfactory to Agent, pursuant to which any existing Indebtedness
that is to be paid by initial Advances hereunder will be paid in full, and (ii)
evidence satisfactory to Agent that all necessary termination statements,
satisfaction documents and any other applicable releases in connection with any
existing Indebtedness and all other Liens with respect to Borrower that are not
Permitted Encumbrances have been filed or arrangements satisfactory to Agent
have been made for such filing;

 
 
(m)
Financial Statements. Agent shall have received a copy of (i) the Financial
Statements, and (ii) the Projections, which in each case shall be satisfactory
in all respects to Agent and Lenders;

 
 
(n)
Insurance.  Agent shall have received in form and substance satisfactory to
Agent, certified copies of Borrower Parties’ casualty insurance policies,
together with loss payable endorsements on Agent’s standard form of loss payee
endorsement naming Agent as lender loss payee, and certified copies of Borrower
Parties’ liability insurance policies, together with endorsements naming Agent
as a co-insured or loss payee (as applicable);

 
 
(o)
Payment Instructions. Agent shall have received written instructions from
Borrower directing the application of proceeds of the initial Advances made
pursuant to this Agreement;

 
 
(p)
Blocked Accounts.  Agent shall have received duly executed agreements
establishing the Blocked Accounts or Depository Accounts with financial
institutions acceptable to Agent for the collection or servicing of the
Receivables and proceeds of the Collateral or, alternatively, the Borrower shall
have established with Agent all of its bank accounts with Agent, all in a manner
to the satisfaction of Agent in its sole discretion;

 
 
(q)
Consents.  Agent shall have received any and all Consents necessary to permit
the effectuation of the transactions contemplated by this Agreement and the
Other Documents; and, Agent shall have received such Consents and waivers of
such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall deem necessary;

 
 
(r)
No Adverse Material Change.  (i) Since December 31, 2011, there shall not have
occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect and (ii) no representations made or
information supplied to Agent or Lenders shall have been proven to be inaccurate
or misleading in any material respect;

 
 
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(s)
Waivers.  Agent shall have received fully executed copies of all Lien Waiver
Agreements required by the Agent to be executed on or prior to the Closing Date;

 
 
(t)
Contract Review. Agent shall have reviewed all material contracts of Borrower
Parties including leases, union contracts, labour contracts, vendor supply
contracts, license agreements and distributorship agreements and such contracts
and agreements shall be satisfactory in all respects to Agent;

 
 
(u)
Closing Certificate.  Agent shall have received a closing certificate signed by
the Chief Financial Officer of each Loan Party dated as of the date hereof,
stating that (i) all representations and warranties set forth in this Agreement
and the Other Documents are true and correct on and as of such date, (ii) each
Loan Party is on such date in compliance with all the terms and provisions set
forth in this Agreement and the Other Documents and (iii) on such date no
Default or Event of Default has occurred or is continuing;

 
 
(v)
[Reserved];

 
 
(w)
Undrawn Availability.  After giving effect to the initial Advances hereunder,
Borrower shall have Undrawn Availability of at least Five Million 00/100 Dollars
($5,000,000.00);

 
 
(x)
Compliance with Laws.  Agent shall be reasonably satisfied that the Borrower is
in compliance with all pertinent federal, provincial, local or territorial
regulations;

 
 
(y)
[Reserved]; and

 
 
(z)
Other.  All corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the Transactions shall be satisfactory in
form and substance to Agent and its counsel.

 
8.2
Conditions to Each Advance.

 
The agreement of Lenders to make any Advance requested to be made on any date
(including the initial Advance), is subject to the satisfaction of the following
conditions precedent as of the date such Advance is made:
 
 
(a)
Representations and Warranties.  Each of the representations and warranties made
by any Loan Party in or pursuant to this Agreement, the Other Documents and any
related agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement, the
Other Documents or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;

 
 
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(b)
No Default.  No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Agent, in its sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default;

 
 
(c)
Maximum Advances.  In the case of any type of Advance requested to be made,
after giving effect thereto, the aggregate amount of such type of Advance shall
not exceed the maximum amount of such type of Advance permitted under this
Agreement; and

 
 
(d)
Borrowing Base.  Agent shall have received evidence from Borrower that the
aggregate amount of Eligible Inventory and Eligible Receivables is sufficient in
value and amount to support Advances under this Agreement;

 
Each request for an Advance by the Borrower hereunder shall constitute a
representation and warranty by each Loan Party as of the date of such Advance
that the conditions contained in this subsection shall have been satisfied.
 
ARTICLE 9
INFORMATION AS TO LOAN PARTIES.
 
Until satisfaction in full of the Obligations and the termination of this
Agreement:
 
9.1
Disclosure of Material Matters.

 
Each Borrower Party shall, immediately upon learning thereof, report to Agent
all matters materially affecting the value, enforceability or collectibility of
any portion of the Collateral, including the Borrower’s reclamation or
repossession of, or the return to the Borrower of, a material amount of goods or
claims or disputes asserted by any Customer or other obligor.
 
9.2
Schedules.

 
The Borrower shall, deliver to Agent on or before the twenty-fifth (25th) day of
each month as and for the prior month (a) accounts receivable agings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger, (c) Inventory reports and
(d) a Borrowing Base Certificate in form and substance satisfactory to Agent,
(which shall be calculated as of the last day of the prior month and which shall
not be binding upon Agent or restrictive of Agent’s rights under this
Agreement); provided, however, for any period when a Cash Dominion Event has
occurred and is continuing, then, during all such periods the Borrower shall
deliver a Borrowing Base Certificate in form and substance satisfactory to the
Agent on a weekly basis as and for the prior week (consisting of the seven (7)
days commencing on Monday of such prior week and ending on Sunday of such prior
week).  In addition, the Borrower will deliver to Agent at such intervals as
Agent may require:  (i) confirmatory assignment schedules, (ii) copies of
Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including trial balances and test verifications.  Agent shall
have the right to confirm and verify all Receivables by any manner and through
any medium it considers advisable during the course of any field examination
conducted pursuant to Section 4.10 and do whatever it may deem reasonably
necessary to protect its interests hereunder.  The items to be provided under
this Section 9.2 are to be in form satisfactory to Agent and executed by the
Borrower and delivered to Agent from time to time solely for Agent’s convenience
in maintaining records of the Collateral, and the Borrower’s failure to deliver
any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent’s Lien with respect to the Collateral.
 
 
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9.3
[Reserved].

 
9.4
Litigation.

 
Each Borrower Party shall promptly notify Agent in writing of any claim,
litigation, suit or administrative proceeding affecting any Loan Party whether
or not the claim is covered by insurance, and of any litigation, suit or
administrative proceeding, which in any such case affects a material portion of
the Collateral or which could reasonably be expected to have a Material Adverse
Effect.
 
9.5
Material Occurrences.

 
Each Borrower Party shall promptly notify Agent in writing upon the occurrence
of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any Loan
Party as of the date of such statements; (c) [Reserved] (d) each and every
default by any Loan Party which might result in the acceleration of the maturity
of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness and which could reasonably be expected to have a Material Adverse
Effect; and (e) any other development in the business or affairs of any Loan
Party, which could reasonably be expected to have a Material Adverse Effect; in
each case describing the nature thereof and the action Loan Parties propose to
take with respect thereto.
 
9.6
Government Receivables.

 
Each Borrower Party shall notify Agent immediately if any of its Receivables
arise out of contracts between any Borrower Party and the Crown.
 
9.7
Annual Financial Statements.

 
Each Loan Party, as applicable, shall furnish Agent and Lenders within one
hundred five (105) days after the end of each fiscal year of Holding, financial
statements of Holding and its Subsidiaries on a consolidated basis and the
Borrower and its Subsidiaries on a consolidated and consolidating basis
including statements of income and shareholders’ equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by Grant Thornton LLP, or such
other independent certified public accounting firm selected by Loan Parties and
satisfactory to Agent.  In addition, the reports shall be accompanied by a
Compliance Certificate.
 
 
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9.8
Quarterly Financial Statements.

 
Each Loan Party, as applicable, shall furnish Agent and Lenders within
forty-five (45) days after the end of each fiscal quarter, an unaudited balance
sheet of Holding and its Subsidiaries on a consolidated basis and the Borrower
and its Subsidiaries on a consolidated and consolidating basis and unaudited
statements of income and shareholders’ equity and cash flow of Holding and its
Subsidiaries on a consolidated basis and the Borrower and its Subsidiaries on a
consolidated and consolidating basis reflecting results of operations from the
beginning of the fiscal year to the end of such quarter and for such quarter,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal and recurring year-end adjustments that
individually and in the aggregate are not material to Loan Parties’ business or
Borrower Parties’ business, as applicable, and accompanied by comparative
financial statements of Holding and its Subsidiaries and the Borrower and its
Subsidiaries, as applicable, for the same quarter and same fiscal year-to-date
period in the prior fiscal year.  The reports shall be accompanied by a
Compliance Certificate.
 
9.9
Monthly Financial Statements.

 
The Borrower shall, furnish Agent and Lenders within thirty (30) days after the
end of each month, an unaudited balance sheet of the Borrower and its
Subsidiaries on a consolidated and consolidating basis and unaudited statements
of income and shareholders’ equity and cash flow of the Borrower and its
Subsidiaries on a consolidated and consolidating basis reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal and recurring year-end
adjustments that individually and in the aggregate are not material to the
Borrower or any of its Subsidiaries’ business, and accompanied by comparative
financial statements of the Borrower and its Subsidiaries for the same month and
same fiscal year-to-date period in the prior fiscal year.
 
9.10
Other Reports.

 
Each Borrower Party shall furnish Agent as soon as available, but in any event
within ten (10) days after the written request of the Agent, with copies of such
financial statements, reports and returns as each Borrower Party shall send to
its shareholders, members or partners, as applicable.
 
9.11
Additional Information.

 
Each Borrower Party shall furnish Agent with such additional information as
Agent shall reasonably request in order to enable Agent to determine whether the
terms, covenants, provisions and conditions of this Agreement, the Notes and any
other Other Document have been complied with by Loan Parties including, without
the necessity of any request by Agent, (a) at least thirty (30) days prior
thereto, notice of any Borrower Party’s opening of any new principal office or
any Borrower Party’s closing of any principal office, and (b) promptly upon any
Borrower Party’s learning thereof, notice of any labour dispute to which any
Borrower Party may become a party, any strikes or walkouts relating to any of
its plants or other facilities, and the expiration of any labour contract to
which any Borrower Party is a party or by which any Borrower Party is bound.
 
 
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9.12
Projected Operating Budget.

 
The Borrower shall furnish Agent and Lenders, no later than January 31st of each
fiscal year of the Borrower and its Subsidiaries during the Term a month by
month projected operating budget and cash flow of the Borrower and its
Subsidiaries on a consolidated and consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by the President or Chief Financial Officer of the Borrower
to the effect that such projections have been prepared on the basis of sound
financial planning practice consistent with past budgets and financial
statements.
 
9.13
Environmental Matters.

 
Each Borrower Party shall promptly notify Agent in writing upon the occurrence
of (a) any expenditure (actual or anticipated, individually or in the aggregate
during a fiscal year) in excess of One Hundred Thousand and 00/100 Dollars
($100,000.00) for environmental response, removal or remedial action or for
responses to environmental violations or environmental testing and the impact of
said expenses on the affected Borrower Party’s working capital, which
expenditure is not identified in any Phase I or other environmental report
previously delivered to the Agent, and (b) any Borrower Party’s receipt of
written notice from any local, provincial or federal authority advising such
Borrower Party of any environmental liability (real or potential) arising from
such Borrower Party’s operations, its owned or leased real property, its
environmental management practices, or off-site waste disposal sites used by
such Borrower Party, which liability could reasonably be expected to result in
expenditures in excess of One Hundred Thousand and 00/100 Dollars ($100,000.00).
 
9.14
Notice of Suits, Adverse Events.

 
Each Borrower Party shall furnish Agent with prompt written notice of (i) any
lapse or other termination of any Consent issued to any Loan Party by any
Governmental Body or any other Person that could reasonably be expected to have
a Material Adverse Effect, (ii) any refusal by any Governmental Body or any
other Person to renew or extend any such Consent that could reasonably be
expected to have a Material Adverse Effect; and (iii) copies of any periodic or
special reports filed by any Borrower Party with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Borrower Party, or if copies thereof are
requested by Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
any Loan Party that could reasonably be expected to have a Material Adverse
Effect.
 
9.15
[Reserved].

 
 
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9.16
Additional Documents.

 
Each Borrower Party shall execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.
 
ARTICLE 10
EVENTS OF DEFAULT.
 
The occurrence of any one or more of the following events shall constitute an
“Event of Default”:
 
10.1
Nonpayment.

 
Failure by the Borrower to pay any principal or interest on the Obligations when
due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or by notice of intention to prepay, or by required prepayment or
failure to pay any other liabilities or make any other payment, fee or charge
provided for herein when due or in any Other Document;
 
10.2
Breach of Representation.

 
Any representation or warranty made or deemed made by any Loan Party in this
Agreement, any Other Document or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
 
10.3
Financial Information.

 
Failure by any Loan Party to (i) furnish financial information when due or when
otherwise required to do so pursuant to the terms and conditions of this
Agreement and any of the Other Documents, or (ii) permit the inspection of its
books or records in accordance with this Agreement;
 
10.4
Judicial Actions.

 
Issuance of a notice of Lien, levy, assessment, injunction or attachment against
the Borrower’s Inventory or Receivables or against a material portion of the
Borrower’s other property, other than Permitted Encumbrances, which is not
stayed or lifted within thirty (30) days;
 
10.5
Noncompliance.

 
Except as otherwise provided for in Sections 10.1, 10.3 and 10.5 (ii), (i)
failure or neglect of any Loan Party to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any Other
Document or any other agreement or arrangement, now or hereafter entered into
between any Loan Party and Agent or any Lender related to the transactions
described herein, or (ii) failure or neglect of any Borrower Party to perform,
keep or observe any term, provision, condition or covenant, contained in
Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured
within thirty (30) days from the occurrence of such failure or neglect;
 
 
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10.6
Judgments.

 
Any judgment or judgments are rendered against the Loan Parties, singularly or
collectively, (a) for an aggregate amount in excess of One Million and 00/100
Dollars ($1,000,000.00), and where (i) enforcement proceedings shall have been
commenced by a creditor upon such judgment, or (ii) there shall be any period of
thirty (30) consecutive days during which a stay of enforcement of such
judgment, by reason of a pending appeal or otherwise, shall not be in effect, or
(b) where such judgment results in the creation of a Lien upon any of the
Collateral (other than a Permitted Encumbrance);
 
10.7
Bankruptcy.

 
Any Loan Party shall (i) apply or file for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, interim receiver, sequestrator,
administrator, monitor, custodian, trustee, liquidator or any other Person with
similar powers or fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii) be
issued or enforced upon or against all of the Collateral, or any substantial
part of the Collateral a distress, warrant, garnishment, attachment,
sequestration, execution, levy, writ, or any other similar process or any third
party demand issued by any Governmental Body, administrative body or taxation
authority or any other seizure is made by any such authorities on any part of
the Collateral, (iv) commence a voluntary case or proceeding under any
provincial, state or federal bankruptcy laws (as now or hereafter in effect) or
other Applicable Law in relation to bankruptcy, insolvency, reorganization,
relief, or imposition for debtors including any application for a plan of
compromise or arrangement or other corporate proceeding involving or affecting
its creditors, (v) be declared or be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) file any proposal or notice of intention to make a
proposal or a notice of intention to enforce security is issued under the
Bankruptcy and Insolvency Act (Canada), (viii) be issued any notice of intention
to enforce against the Collateral or any part thereof nor suffer the enforcement
against same by any holder of any security, interest, mortgage, lien, charge,
claim or any other encumbrance, (ix) be wound up, dissolved or liquidated under
any Applicable law or otherwise,  or become subject to the Winding-up and
Restructuring Act (Canada) or have its existence terminated or pass any
resolution in connection with the foregoing, (x) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws,  or (xi) take any action for the
purpose of effecting any of the foregoing;
 
10.8
Inability to Pay.

 
Any Loan Party shall admit in writing its inability, or be generally unable, to
pay its obligations as they become due or cease or threaten to cease operations
of its present business;
 
10.9
Affiliate Bankruptcy.

 
Holding or any Borrower Party shall (i) apply or file for, consent to or suffer
the appointment of, or the taking of possession by, a receiver, interim
receiver, sequestrator, administrator, monitor, custodian, trustee, liquidator
or any other Person with similar powers or fiduciary of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of creditors, (iii) admit in writing its inability, or be generally unable, to
pay its obligations as they become due or cease or threaten to cease operations
of its present business (iv) be issued or enforced upon or against all of the
Collateral, or any substantial part of the Collateral a distress, warrant,
garnishment, attachment, sequestration, execution, levy, writ, or any other
similar process or any third party demand issued by any Governmental Body,
administrative body or taxation authority or any other seizure is made by any
such authorities on any part of the Collateral, (v) commence a voluntary case or
proceeding under any provincial, state or federal bankruptcy laws (as now or
hereafter in effect) or other Applicable Law in relation to bankruptcy,
insolvency, reorganization, relief, or imposition for debtors including any
application for a plan of compromise or arrangement or other corporate
proceeding involving or affecting its creditors, (vi) be declared or be
adjudicated a bankrupt or insolvent, (vii) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (viii) file any
proposal or notice of intention to make a proposal or a notice of intention to
enforce security is issued under the Bankruptcy and Insolvency Act (Canada),
(ix) be issued any notice of intention to enforce against the Collateral or any
part thereof nor suffer the enforcement against same by any holder of any
security, interest, mortgage, lien, charge, claim or any other encumbrance, (x)
be wound up, dissolved or liquidated under any Applicable law or otherwise,  or
become subject to the Winding-up and Restructuring Act (Canada) or have its
existence terminated or pass any resolution in connection with the foregoing,
(xi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy
laws,  or (xii) take any action for the purpose of effecting any of the
foregoing;
 
 
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10.10
Material Adverse Effect.

 
Any change in any Loan Party’s results of operations or financial condition
which in Agent’s opinion has a Material Adverse Effect;
 
10.11
Lien Priority.

 
Any Lien created hereunder or provided for hereby or under any related agreement
for any reason ceases to be or is not a valid and perfected Lien (subject only
to the Permitted Encumbrances that are specifically entitled pursuant to
Applicable Law, or specifically acknowledged in writing by Agent, to have
priority over Agent’s Liens);
 
10.12
Cross Default - Indebtedness.

 
A default or event of default has occurred under any document under which there
is any Indebtedness for borrowed money of any Loan Party in a principal amount
outstanding in excess of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00), if such default or event of default (a) is caused by a failure
of a Loan Party to make a payment of principal or interest prior to the
expiration of the applicable grace period provided in such document with respect
to such Indebtedness and such default or event of default permits the
acceleration of such Indebtedness or the termination of any commitment to lend
prior to the stated maturity thereof, or (b) results in the acceleration of such
Indebtedness or the termination of any commitment to lend prior to the stated
maturity thereof;
 
 
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10.13
Cross Default – Other Agreements.

 
A default or event of default has occurred under any agreement of any Loan Party
which it is a party, other than any default or event of default addressed under
Section 10.12 hereof, which is continuing after the expiration of any applicable
cure period, and which would reasonably be expected to have a Material Adverse
Effect;
 
10.14
Breach of Guaranty.

 
Termination or breach of any Guaranty or similar agreement executed and
delivered to Agent in connection with the Obligations of any Loan Party, or if
any Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty or similar agreement;
 
10.15
Change of Ownership.

 
Any Change of Ownership shall occur;
 
10.16
Invalidity.

 
Any material provision of this Agreement or any Other Document shall, for any
reason, cease to be valid and binding on any Loan Party, or any Loan Party shall
so claim in writing to Agent or any Lender;
 
10.17
Licenses.

 
Any Governmental Body shall (A) revoke, terminate, suspend or adversely modify
any license, permit, patent trade-mark or tradename of the Borrower, the
continuation of which is material to the continuation of the Borrower’s
business, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such license, permit, trade-mark, tradename or patent and such
proceedings shall not be dismissed or discharged within sixty (60) days, or (C)
schedule or conduct a hearing on the renewal of any license, permit, trade-mark,
tradename or patent necessary for the continuation of the Borrower’s business
and the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trade-mark, tradename or patent; (ii) any agreement which is
necessary or material to the operation of the Borrower’s business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect.
 
10.18
Seizures.

 
Any material portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower Party or the title and rights of any Borrower
Party which is the owner of any material portion of the Collateral shall have
become the subject matter of claim, litigation, suit or other proceeding which,
in the opinion of Agent, upon final determination, could reasonably be expected
to result in impairment or loss of the security provided by this Agreement or
the Other Documents.
 
 
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10.19
Holding.

 
At any time, Holding ceases to be a publicly held corporation.
 
10.20
Pension Plans.

 
A Pension Plan Termination Event occurs, or a Loan Party fails to make a
required contribution to or payment under any Canadian Pension Plan when due.
 
ARTICLE 11
LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.
 
11.1
Rights and Remedies.

 
 
(a)
Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all
Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any
of the other Events of Default and at any time thereafter (such default not
having previously been cured), at the option of Required Lenders all Obligations
shall be immediately due and payable and Lenders shall have the right to
terminate this Agreement and to terminate the obligation of Lenders to make
Advances and (iii) a filing of a petition against any Loan Party in any
involuntary case under any provincial or federal bankruptcy laws, all
Obligations shall be immediately due and payable and the obligation of Lenders
to make Advances hereunder shall be terminated other than as may be required by
an appropriate order of the bankruptcy court having jurisdiction over such Loan
Party.  Upon the occurrence of any Event of Default, Agent shall have the right
to exercise any and all rights and remedies provided for herein, under the Other
Documents, under the PPSA and at law or equity generally, including the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process.  Agent may
enter any of the Borrower’s premises or other premises without legal process and
without incurring liability to the Borrower therefor, and Agent may thereupon,
or at any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require the Borrower to make the Collateral available to Agent at a
convenient place.  With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may
elect.  Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Agent shall give the Borrower reasonable notification of such
sale or sales, it being agreed that in all events written notice mailed to
Borrower at least ten (10) days prior to such sale or sales is reasonable
notification.  At any public sale Agent or any Lender may bid for and become the
purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and all such
claims, rights and equities are hereby expressly waived and released by the
Borrower.  In connection with the exercise of the foregoing remedies, including
the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free,
nonexclusive license and Agent is granted permission to use all of the
Borrower’s (a) trade-marks, trade styles, trade names, patents, patent
applications, copyrights, service marks, licenses, franchises and other
proprietary rights which are used or useful in connection with Inventory for the
purpose of marketing, advertising for sale and selling or otherwise disposing of
such Inventory and (b) Equipment for the purpose of completing the manufacture
of unfinished goods and, in furtherance of the foregoing grant, to the extent
any such trade-marks, trade styles, trade names, patents, patent applications,
copyrights, service marks, licenses, franchises and other proprietary rights
which are used or useful in connection with Inventory for the purpose of
marketing, advertising for sale and selling or otherwise disposing of such
Inventory are not able to be licensed by the Borrower to the Agent, the Borrower
shall use its best commercial efforts to cause all necessary consents to be
given for the  purposes set forth above.  The cash proceeds realized from the
sale of any Collateral shall be applied to the Obligations in the order set
forth in Section 11.5 hereof.  Noncash proceeds will only be applied to the
Obligations as they are converted into cash.  If any deficiency shall arise,
Loan Parties shall remain liable to Agent and Lenders therefor.

 
 
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(b)
Agent may seek the appointment of a receiver, receiver-manager or keeper (a
“Receiver”) under the laws of Canada or any Province thereof to take possession
of all or any portion of the Collateral of Loan Parties or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing.  Any such
Receiver shall, so far as concerns responsibility for his/her acts, be deemed
agent of Loan Parties and not Agent and the Lenders, and Agent and the Lenders
shall not be in any way responsible for any misconduct, negligence or
non-feasance on the part of any such Receiver, his/her servants or
employees.  Subject to the provisions of the instrument appointing him/her, any
such Receiver shall have power to take possession of Collateral of the Loan
Parties, to preserve Collateral of the Loan Parties or its value, to carry on or
concur in carrying on all or any part of the business of the Loan Parties and to
sell, lease, license or otherwise dispose of or concur in selling, leasing,
licensing or otherwise disposing of Collateral of the Loan Parties.  To
facilitate the foregoing powers, any such Receiver may, to the exclusion of all
others, including the Loan Parties, enter upon, use and occupy all premises
owned or occupied by the Loan Parties wherein Collateral of the Loan Parties may
be situated, maintain Collateral of the Loan Parties upon such premises, borrow
money on a secured or unsecured basis and use Collateral of the Loan Parties
directly in carrying on the Loan Parties’ business or as security for loans or
advances to enable the Receiver to carry on the Loan Parties’ business or
otherwise, as such Receiver shall, in its discretion, determine.  Except as may
be otherwise directed by Agent, all money received from time to time by such
Receiver in carrying out his/her appointment shall be received in trust for and
paid over to Agent.  Every such Receiver may, in the discretion of Agent, be
vested with all or any of the rights and powers of Agent and the Lenders.  Agent
may, either directly or through its nominees, exercise any or all powers and
rights given to a Receiver by virtue of the foregoing provisions of this
paragraph.

 
 
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(c)
To the extent that Applicable Law imposes duties on Agent to exercise remedies
in a commercially reasonable manner, the Borrower acknowledges and agrees that
it is not commercially unreasonable for Agent (i) to fail to incur expenses
reasonably deemed significant by Agent to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Customers or other Persons
obligated on Collateral or to remove Liens on or any adverse claims against
Collateral, (iv) to exercise collection remedies against Customers and other
Persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (v) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (vi) to contact other Persons,
whether or not in the same business as the Borrower, for expressions of interest
in acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure Agent against risks of loss, collection or disposition of
Collateral or to provide to Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Agent,
to obtain the services of other brokers, investment bankers, consultants and
other professionals to assist Agent in the collection or disposition of any of
the Collateral.  The Borrower acknowledges that the purpose of this Section
11.1(c) is to provide non-exhaustive indications of what actions or omissions by
Agent would not be commercially unreasonable in Agent’s exercise of remedies
against the Collateral and that other actions or omissions by Agent shall not be
deemed commercially unreasonable solely on account of not being indicated in
this Section 11.1(c).  Without limitation upon the foregoing, nothing contained
in this Section 11.1(c) shall be construed to grant any rights to any Loan Party
or to impose any duties on Agent that would not have been granted or imposed by
this Agreement or by Applicable Law in the absence of this Section 11.1(c).

 
11.2
Agent’s Discretion.

 
Agent shall have the right in its sole discretion to determine which rights,
Liens, security interests or remedies Agent may at any time pursue, relinquish,
subordinate, or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent’s or Lenders’
rights hereunder.
 
 
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11.3
Setoff.

 
Subject to Section 14.12, in addition to any other rights which Agent or any
Lender may have under Applicable Law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right, immediately and without
notice of any kind, to apply any Borrower Party’s property held by Agent and
such Lender to reduce the Obligations.
 
11.4
Rights and Remedies not Exclusive.

 
The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any rights or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.
 
11.5
Allocation of Payments After Event of Default.

 
Notwithstanding any other provisions of this Agreement to the contrary, after
the occurrence and during the continuance of an Event of Default, all amounts
collected or received by Agent on account of the Obligations or any other
amounts outstanding under any of the Other Documents or in respect of the
Collateral may, at Agent’s discretion, be paid over or delivered as follows:
 
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable legal fees) of Agent in connection with enforcing its
rights and the rights of Lenders under this Agreement and the Other Documents
and any protective advances made by Agent with respect to the Collateral under
or pursuant to the terms of this Agreement;
 
SECOND, to payment of any fees owed to Agent;
 
THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable legal fees) of each of Lenders to the extent owing to such
Lender pursuant to the terms of this Agreement;
 
FOURTH, to the payment of all of the Obligations consisting of accrued fees and
interest;
 
FIFTH, to the payment of the outstanding principal amount of the Obligations
(including the payment or cash collateralization of any outstanding Letters of
Credit);
 
SIXTH, to all other Obligations and other obligations which shall have become
due and payable under the Other Documents or otherwise and not repaid pursuant
to clauses “FIRST” through “FIFTH” above; and
 
SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
 
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of Lenders shall receive (so long as it is not a
Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any
amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by Agent in a cash collateral account and applied (A)
first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses “FIFTH” and
“SIXTH” above in the manner provided in this Section 11.5.
 
 
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ARTICLE 12
WAIVERS AND JUDICIAL PROCEEDINGS.
 
12.1
Waiver of Notice.

 
Each Loan Party hereby waives notice of non-payment of any of the Receivables,
demand, presentment, protest and notice thereof with respect to any and all
instruments, notice of acceptance hereof, notice of loans or advances made,
credit extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.
 
12.2
Delay.

 
No delay or omission on Agent’s or any Lender’s part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy or
option or of any Default or Event of Default.
 
12.3
Jury Waiver.

 
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
 
 
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ARTICLE 13
EFFECTIVE DATE AND TERMINATION.
 
13.1
Term.

 
This Agreement, which shall inure to the benefit of and shall be binding upon
the respective successors and permitted assigns of each Loan Party, Agent and
each Lender, shall become effective on the date hereof and shall continue in
full force and effect until September 28, 2016 (the “Term”) unless sooner
terminated as herein provided.  Borrower may terminate this Agreement at any
time upon ninety (90) days’ prior written notice upon payment in full of the
Obligations.
 
13.2
Termination.

 
The termination of the Agreement shall not affect any Loan Party’s, Agent’s or
any Lender’s rights, or any of the Obligations having their inception prior to
the effective date of such termination, and the provisions hereof shall continue
to be fully operative until all transactions entered into, rights or interests
created or Obligations have been fully and indefeasibly paid, disposed of,
concluded or liquidated.  The security interests, Liens and rights granted to
Agent and Lenders hereunder and the financing statements filed hereunder shall
continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that Borrower’s Account may from time to time be
temporarily in a zero or credit position, until all of the Obligations of the
Borrower have been indefeasibly paid and performed in full after the termination
of this Agreement or the Borrower has furnished Agent and Lenders with an
indemnification satisfactory to Agent and Lenders with respect
thereto.  Accordingly, the Borrower waives any rights which it may have under
the PPSA to demand the filing of termination statements with respect to the
Collateral, and Agent shall not be required to send such termination statements
to the Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations have been indefeasibly paid in full in immediately available
funds.  All representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof until all Obligations are
indefeasibly paid and performed in full.
 
ARTICLE 14
REGARDING AGENT.
 
14.1
Appointment.

 
Each Lender hereby designates PNC to act as Agent for such Lender under this
Agreement and the Other Documents.  Each Lender hereby irrevocably authorizes
Agent to take such action on its behalf under the provisions of this Agreement
and the Other Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of Agent
by the terms hereof and thereof and such other powers as are reasonably
incidental thereto and Agent shall hold all Collateral, payments of principal
and interest, fees (except the fees set forth in the Fee Letter), charges and
collections (without giving effect to any collection days) received pursuant to
this Agreement, for the ratable benefit of Lenders.  Agent may perform any of
its duties hereunder by or through its agents or employees.  As to any matters
not expressly provided for by this Agreement (including collection of the Notes)
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however, that Agent
shall not be required to take any action which exposes Agent to liability or
which is contrary to this Agreement or the Other Documents or Applicable Law
unless Agent is furnished with an indemnification reasonably satisfactory to
Agent with respect thereto.
 
 
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14.2
Nature of Duties.

 
Agent shall have no duties or responsibilities except those expressly set forth
in this Agreement and the Other Documents.  Neither Agent nor any of its
officers, directors, employees or agents shall be (i) liable for any action
taken or omitted by them as such hereunder or in connection herewith, unless
caused by their gross (not mere) negligence or willful misconduct (as determined
by a court of competent jurisdiction in a final non-appealable judgment), or
(ii) responsible in any manner for any recitals, statements, representations or
warranties made by any Loan Party or any officer thereof contained in this
Agreement, or in any of the Other Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any of the Other Documents or for
the value, validity, effectiveness, genuineness, due execution, enforceability
or sufficiency of this Agreement, or any of the Other Documents or for any
failure of any Loan Party to perform its obligations hereunder.  Agent shall not
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect the properties,
books or records of any Loan Party.  The duties of Agent as respects the
Advances to Borrower shall be mechanical and administrative in nature; Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Agreement except as expressly set forth herein.
 
14.3
Lack of Reliance on Agent and Resignation.

 
Independently and without reliance upon Agent or any other Lender, each Lender
has made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of each Loan Party in connection with the making
and the continuance of the Advances hereunder and the taking or not taking of
any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Loan Party.  Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before making of the Advances or at any time or times thereafter
except as shall be provided by any Loan Party pursuant to the terms
hereof.  Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Loan Party, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Notes, the other Other Documents or the
financial condition of any Loan Party, or the existence of any Event of Default
or any Default.
 
 
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Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Loan Parties.
 
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent.  After any Agent’s resignation as Agent, the provisions of this Article
14 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
 
14.4
Certain Rights of Agent.

 
If Agent shall request instructions from Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any Other
Document, Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from the Required
Lenders; and Agent shall not incur liability to any Person by reason of so
refraining.  Without limiting the foregoing, Lenders shall not have any right of
action whatsoever against Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.
 
14.5
Reliance.

 
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, statement, certificate, telex, teletype
or telecopier message, cablegram, order or other document or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person or entity, and, with respect to all legal matters
pertaining to this Agreement and the Other Documents and its duties hereunder,
upon advice of counsel selected by it.  Agent may employ agents and
attorneys-in-fact and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by Agent with reasonable care.
 
14.6
Notice of Default.

 
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder or under the Other Documents, unless Agent
has received notice from a Lender or Borrower referring to this Agreement or the
Other Documents, describing such Default or Event of Default and stating that
such notice is a “notice of default”.  In the event that Agent receives such a
notice, Agent shall give notice thereof to Lenders.  Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided, that, unless and until Agent shall
have received such directions, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of Lenders.
 
 
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14.7
Indemnification.

 
To the extent Agent is not reimbursed and indemnified by Loan Parties, each
Lender will reimburse and indemnify Agent in proportion to its respective
portion of the Advances (or, if no Advances are outstanding, according to its
Commitment Percentage), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in performing its duties hereunder, or in any way
relating to or arising out of this Agreement or any Other Document; provided
that, Lenders shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent’s gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment).
 
14.8
Agent in its Individual Capacity.

 
With respect to the obligation of Agent to lend under this Agreement, the
Advances made by it shall have the same rights and powers hereunder as any other
Lender and as if it were not performing the duties as Agent specified herein;
and the term “Lender” or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its individual capacity as a
Lender.  Agent may engage in business with any Loan Party as if it were not
performing the duties specified herein, and may accept fees and other
consideration from any Loan Party for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.
 
14.9
Delivery of Documents.

 
To the extent Agent receives financial statements required under Sections 9.7,
9.8, 9.9, 9.12 and  9.12 or Borrowing Base Certificates from the Borrower
pursuant to the terms of this Agreement which the Borrower is not obligated to
deliver to each Lender, Agent will promptly furnish such documents and
information to Lenders.
 
14.10
Borrower’s Undertaking to Agent.

 
Without prejudice to their respective obligations to Lenders under the other
provisions of this Agreement, the Borrower hereby undertakes with Agent to pay
to Agent from time to time on demand all amounts from time to time due and
payable by it for the account of Agent or Lenders or any of them pursuant to
this Agreement to the extent not already paid.  Any payment made pursuant to any
such demand shall pro tanto satisfy the relevant Borrower’s obligations to make
payments for the account of Lenders or the relevant one or more of them pursuant
to this Agreement.
 
14.11
No Reliance on Agent’s Customer Identification Program.

 
Each Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on Agent to carry out such
Lender’s, Affiliate’s, participant’s or assignee’s customer identification
program, or other obligations required or imposed under or pursuant to any
Anti-Terrorism Law, including any programs involving any of the following items
relating to or in connection with any Loan Party, its Affiliates or its agents,
this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under Anti-Terrorism Laws.
 
 
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14.12
Other Agreements.

 
Each Lender agrees that it shall not, without the express consent of Agent, and
that it shall, to the extent it is lawfully entitled to do so, upon the request
of Agent, set off against the Obligations, any amounts owing by such Lender to
any Loan Party or any deposit accounts of any Loan Party now or hereafter
maintained with such Lender.  Anything in this Agreement to the contrary
notwithstanding, each Lender further agrees that it shall not, unless
specifically requested to do so by Agent, take any action to protect or enforce
its rights arising out of this Agreement or the Other Documents, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Other Documents shall be taken in concert and at the direction
or with the consent of Agent or Required Lenders.
 
14.13
  Waiver of Subrogation.

 
Each Loan Party expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution of any other claim which
such Loan Party may now or hereafter have against the other Loan Party or other
Person directly or contingently liable for the Obligations hereunder, or against
or with respect to the other Loan Party’s property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until termination of this
Agreement and repayment in full of the Obligations.
 
ARTICLE 15
MISCELLANEOUS.
 
15.1
Governing Law.

 
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable therein. Any
judicial proceeding brought by or against any Loan Party with respect to any of
the Obligations, this Agreement, the Other Documents or any related agreement
may be brought in any court of competent jurisdiction in the Province of
Ontario, and, by execution and delivery of this Agreement, each Loan Party
accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement.   Nothing herein shall affect the right to serve process in
any manner permitted by law or shall limit the right of Agent or any Lender to
bring proceedings against any Loan Party in the courts of any other
jurisdiction. Each Loan Party waives any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens.  Each Loan Party
waives the right to move any judicial proceeding brought against such Loan Party
in any provincial court to any federal court.  Any judicial proceeding by any
Loan Party against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or
provincial court located in the Province of Ontario.
 
 
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15.2
Entire Understanding.

 
 
(a)
This Agreement and the documents executed concurrently herewith contain the
entire understanding between each Loan Party, Agent and each Lender and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof.  Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Loan Party’s, Agent’s and each Lender’s respective
officers.  Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged.  Each Loan Party
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.

 
 
(b)
The Required Lenders, Agent with the consent in writing of the Required Lenders,
and Loan Parties may, subject to the provisions of this Section 15.2(b), from
time to time enter into written supplemental agreements to this Agreement or the
Other Documents executed by Loan Parties, for the purpose of adding or deleting
any provisions or otherwise changing, varying or waiving in any manner the
rights of Lenders, Agent or Loan Parties thereunder or the conditions,
provisions or terms thereof or waiving any Event of Default thereunder, but only
to the extent specified in such written agreements; provided, however, that no
such supplemental agreement shall, without the consent of all Lenders:

 
 
(i)
increase the Commitment Percentage, the maximum dollar commitment of any Lender
or the Maximum Revolving Advance Amount other than pursuant to the provisions of
Section 2.24.

 
 
(ii)
extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest or reduce any fee payable by Loan
Parties to Lenders pursuant to this Agreement.

 
 
(iii)
alter the definition of the term Required Lenders or alter, amend or modify this
Section 15.2(b).

 
 
(iv)
release any Collateral during any calendar year (other than in accordance with
the provisions of this Agreement) having an aggregate value in excess of One
Hundred Thousand and 00/100 Dollars ($100,000.00).

 
 
(v)
change the rights and duties of Agent.

 
 
(vi)
permit any Advance to be made or issued if after giving effect thereto the total
of Advances outstanding hereunder would exceed the Formula Amount for more than
sixty (60) consecutive Business Days or exceed one hundred ten percent (110%) of
the Formula Amount.

 
 
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(vii)
increase the Advance Rates above the Advance Rates in effect on the Closing
Date.

 
 
(viii)
release any Guarantor.

 
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Loan Parties, Lenders and Agent and all future holders of the
Obligations.  In the case of any waiver, Loan Parties, Agent and Lenders shall
be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
 
In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such consent is denied, then PNC may, at its option, require
such Lender to assign its interest in the Advances to PNC or to another Lender
or to any other Person designated by Agent (the “Designated Lender”), for a
price equal to (i) the then outstanding principal amount thereof plus (ii)
accrued and unpaid interest and fees due such Lender, which interest and fees
shall be paid when collected from Borrower.  In the event PNC elects to require
any Lender to assign its interest to PNC or to the Designated Lender, PNC will
so notify such Lender in writing within forty five (45) days following such
Lender’s denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the
Designated Lender, as appropriate, and Agent.
 
Notwithstanding (a) the existence of a Default or an Event of Default, (b) that
any of the other applicable conditions precedent set forth in Section 8.2 hereof
have not been satisfied or (c) any other provision of this Agreement, Agent may
at its discretion and without the consent of the Required Lenders, voluntarily
permit the sum of the outstanding Advances and the Maximum Undrawn Amount at any
time to exceed the Formula Amount hereof at such time by up to ten percent (10%)
of the Formula Amount for up to sixty (60) consecutive Business Days (the
“Out-of-Formula Loans”); provided, that, such outstanding Advances do not exceed
the Maximum Revolving Advance Amount.  If Agent is willing in its sole and
absolute discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans
shall be payable on demand and shall bear interest at the Default Rate for
Advances consisting of Domestic Rate Loans; provided that, if Lenders do make
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have
changed the limits of Section 2.1(a).  For purposes of this paragraph, the
discretion granted to Agent hereunder shall not preclude involuntary
overadvances that may result from time to time due to the fact that the Formula
Amount was unintentionally exceeded for any reason, including Collateral
previously deemed to be “Eligible Inventory”, or “Eligible Receivable”, as
applicable, becomes ineligible, collections of Receivables applied to reduce
outstanding Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral.  In the event Agent
involuntarily permits the outstanding Advances to exceed the Formula Amount by
more than ten percent (10%), Agent shall use its efforts to have Borrower
decrease such excess in as expeditious a manner as is practicable under the
circumstances and not inconsistent with the reason for such excess.  Advances
made after Agent has determined the existence of involuntary overadvances shall
be deemed to be involuntary overadvances and shall be decreased in accordance
with the preceding sentence.
 
 
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In addition to (and not in substitution of) the discretionary Advances permitted
above in this Section 15.2, Agent is hereby authorized by Loan Parties and
Lenders, from time to time in Agent’s sole discretion, (A) after the occurrence
and during the continuation of a Default or an Event of Default, or (B) at any
time that any of the other applicable conditions precedent set forth in Section
8.2 hereof have not been satisfied, to make Advances to Borrower on behalf of
Lenders which Agent, in its reasonable business judgment, deems necessary or
desirable (a) to preserve or protect the Collateral, or any portion thereof, (b)
to enhance the likelihood of, or maximize the amount of, repayment of the
Advances and other Obligations, or (c) to pay any other amount chargeable to
Borrower pursuant to the terms of this Agreement; provided, that at any time
after giving effect to any such Advances the outstanding Advances do not exceed
one hundred percent (100%) of the Formula Amount.
 
15.3
Successors and Assigns; Participations; New Lenders.

 
 
(a)
This Agreement shall be binding upon and inure to the benefit of Loan Parties,
Agent, each Lender, all future holders of the Obligations and their respective
successors and permitted assigns, except that no Loan Party may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.

 
 
(b)
Each Loan Party acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a
“Participant”).  Each Participant may exercise all rights of payment (including
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Participant were the
direct holder thereof provided that Borrower shall not be required to pay to any
Participant more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Participant had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Participant.  Each Loan Party hereby grants to any
Participant a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Participant as security for the
Participant’s interest in the Advances.

 
 
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(c)
Any Lender, with the consent of Agent which shall not be unreasonably withheld
or delayed, may sell, assign or transfer all or any part of its rights and
obligations under or relating to Advances under this Agreement and the Other
Documents to one or more additional banks or financial institutions and one or
more additional banks or financial institutions may commit to make Advances
hereunder (each a “Purchasing Lender”), in minimum amounts of not less than Five
Million and 00/100 Dollars ($5,000,000.00), pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording.  Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose.  Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents.  Each Loan Party
hereby consents to the addition of such Purchasing Lender and the resulting
adjustment of the Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents.  Loan Parties
shall execute and deliver such further documents and do such further acts and
things in order to effectuate the foregoing.

 
 
(d)
Any Lender, with the consent of Agent which shall not be unreasonably withheld
or delayed, may directly or indirectly sell, assign or transfer all or any
portion of its rights and obligations under or relating to Advances under this
Agreement and the Other Documents to an entity, whether a corporation,
partnership, trust, limited liability company or other entity that (i) is
engaged in making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and (ii) is
administered, serviced or managed by the assigning Lender or an Affiliate of
such Lender (a “Purchasing CLO” and together with each Participant and
Purchasing Lender, each a “Transferee” and collectively the “Transferees”),
pursuant to a Commitment Transfer Supplement modified as appropriate to reflect
the interest being assigned (“Modified Commitment Transfer Supplement”),
executed by any intermediate purchaser, the Purchasing CLO, the transferor
Lender, and Agent as appropriate and delivered to Agent for recording.  Upon
such execution and delivery, from and after the transfer effective date
determined pursuant to such Modified Commitment Transfer Supplement, (i)
Purchasing CLO thereunder shall be a party hereto and, to the extent provided in
such Modified Commitment Transfer Supplement, have the rights and obligations of
a Lender thereunder and (ii) the transferor Lender thereunder shall, to the
extent provided in such Modified Commitment Transfer Supplement, be released
from its obligations under this Agreement, the Modified Commitment Transfer
Supplement creating a novation for that purpose.  Such Modified Commitment
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing
CLO.  Each Loan Party hereby consents to the addition of such Purchasing
CLO.  Loan Parties shall execute and deliver such further documents and do such
further acts and things in order to effectuate the foregoing.

 
 
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(e)
Agent shall maintain at its address a copy of each Commitment Transfer
Supplement and Modified Commitment Transfer Supplement delivered to it and a
register (the “Register”) for the recordation of the names and addresses of each
Lender and the outstanding principal, accrued and unpaid interest and other fees
due hereunder.  The entries in the Register shall be conclusive, in the absence
of manifest error, and the Borrower, Agent and Lenders may treat each Person
whose name is recorded in the Register as the owner of the Advance recorded
therein for the purposes of this Agreement.  The Register shall be available for
inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.  Agent shall receive a fee in the amount of
Three Thousand Five Hundred and 00/100 Dollars ($3,500.00) payable by the
applicable Purchasing Lender and/or Purchasing CLO upon the effective date of
each transfer or assignment (other than to an intermediate purchaser) to such
Purchasing Lender and/or Purchasing CLO.

 
 
(f)
Each Loan Party authorizes each Lender to disclose to any Transferee and any
prospective Transferee any and all financial information in such Lender’s
possession concerning such Loan Party which has been delivered to such Lender by
or on behalf of such Loan Party pursuant to this Agreement or in connection with
such Lender’s credit evaluation of such Loan Party.

 
15.4
Application of Payments.

 
Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any payment and any and all proceeds of Collateral to any portion of
the Obligations.  To the extent that any Loan Party makes a payment or Agent or
any Lender receives any payment or proceeds of the Collateral for any Loan
Party’s benefit, which are subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Agent or such Lender.
 
15.5
Indemnity.

 
Each Loan Party shall indemnify Agent, each Lender and each of their respective
officers, directors, Affiliates, attorneys, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against Agent or any Lender in any claim,
litigation, proceeding or investigation instituted or conducted by any
Governmental Body or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Agent or any
Lender is a party thereto, except to the extent that any of the foregoing arises
out of the willful misconduct or gross negligence of the party being indemnified
(as determined by a court of competent jurisdiction in a final and
non-appealable judgment).  Additionally, if any taxes (excluding taxes imposed
upon or measured solely by the net income of Agent and Lenders, but including
any intangibles taxes, stamp tax, recording tax or franchise tax) shall be
payable by Agent, Lenders or Loan Parties on account of the execution or
delivery of this Agreement, or the execution, delivery, issuance or recording of
any of the Other Documents, or the creation or repayment of any of the
Obligations hereunder, by reason of any Applicable Law now or hereafter in
effect, Loan Parties will pay (or will promptly reimburse Agent and Lenders for
payment of) all such taxes, including interest and penalties thereon, and will
indemnify and hold the indemnitees described above in this Section 15.5 harmless
from and against all liability in connection therewith.
 
 
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15.6
Notice.

 
Any notice or request hereunder may be given to Borrower or any Loan Party or to
Agent or any Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section 15.6.  Any notice, request, demand,
direction or other communication (for purposes of this Section 15.6 only, a
“Notice”) to be given to or made upon any party hereto under any provision of
this Loan Agreement shall be given or made by telephone or in writing (which
includes by means of electronic transmission (i.e., “e-mail”) or facsimile
transmission or by setting forth such Notice on a site on the World Wide Web (a
“Website Posting”) if Notice of such Website Posting (including the information
necessary to access such site) has previously been delivered to the applicable
parties hereto by another means set forth in this Section 15.6) in accordance
with this Section 15.6.  Any such Notice must be delivered to the applicable
parties hereto at the addresses and numbers set forth under their respective
names on Section 15.6 hereof or in accordance with any subsequent unrevoked
Notice from any such party that is given in accordance with this Section
15.6.  Any Notice shall be effective:
 
 
(a)
In the case of hand-delivery, when delivered;

 
 
(b)
If given by mail, four days after such Notice is deposited with Canada Post,
with first-class postage prepaid, return receipt requested;

 
 
(c)
In the case of a telephonic Notice, when a party is contacted by telephone, if
delivery of such telephonic Notice is confirmed no later than the next Business
Day by hand delivery, a facsimile or electronic transmission, a Website Posting
or an overnight courier delivery of a confirmatory Notice (received at or before
noon on such next Business Day);

 
 
(d)
In the case of a facsimile transmission, when sent to the applicable party’s
facsimile machine’s telephone number, if the party sending such Notice receives
confirmation of the delivery thereof from its own facsimile machine;

 
 
(e)
In the case of electronic transmission, when actually received;

 
 
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(f)
In the case of a Website Posting, upon delivery of a Notice of such posting
(including the information necessary to access such site) by another means set
forth in this Section 15.6; and

 
 
(g)
If given by any other means (including by overnight courier), when actually
received.

 
Any Lender giving a Notice to Borrower or any Loan Party shall concurrently send
a copy thereof to Agent, and Agent shall promptly notify the other Lenders of
its receipt of such Notice.
 
If to Agent or PNC at:
 
PNC Bank, Canada Branch
130 King Street West, Suite 2140
Toronto, ON  M5X 1E4
   
Attention:
Michael Etienne
Telephone:
416-361-1744 x243
Facsimile:
416-361-0085
 
If to a Lender other than Agent, as specified on the signature pages hereof.
 
If to Borrower or any Loan Party:
 
4955 Steubenville Pike, Suite 405
Pittsburgh, PA  14205
   
Attention:
Vice President and CFO
Telephone:
724-773-9000
Facsimile:
412-788-1812
 
with a copy to:
 
Horsehead Holding Corp.
4955 Steubenville Pike, Suite 405
Pittsburgh, PA  14205
   
Attention:
General Counsel
Telephone:
724-773-2270
Facsimile:
412-788-1812
 
and a copy to:
 
Aird & Berlis LLP
Brookfield Place
181 Bay Street, Suite 1800
Toronto, ON  M5J 2T9
   
Attention:
Martin Kovnats
Telephone:
416-865-3419
Facsimile:
416-863-1515

 
 
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15.7
Survival.

 
The obligations of Loan Parties under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(b)
and 15.5 and the obligations of Lenders under Section 14.7, shall survive
termination of this Agreement and the Other Documents and payment in full of the
Obligations for a period of five (5) years.
 
15.8
Severability.

 
If any part of this Agreement is contrary to, prohibited by, or deemed invalid
under Applicable Laws, such provision shall be inapplicable and deemed omitted
to the extent so contrary, prohibited or invalid, but the remainder hereof shall
not be invalidated thereby and shall be given effect so far as possible.
 
15.9
Expenses.

 
All costs and expenses including reasonable legal fees and disbursements
incurred by Agent on its behalf or on behalf of Lenders (a) in all efforts made
to enforce payment of any Obligation or effect collection of any Collateral, or
(b) in connection with the entering into, modification, amendment,
administration and enforcement of this Agreement and any Other Document or any
consents or waivers hereunder or thereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent’s security interest in or Lien on any of the
Collateral, or maintaining, preserving or enforcing any of Agent’s or any
Lender’s rights hereunder and under any Other Document and under all related
agreements, documents and instruments, whether through judicial proceedings or
otherwise, or (d) in defending or prosecuting any actions or proceedings arising
out of or relating to Agent’s or any Lender’s transactions with any Loan Party
and any third party that is a party to any Other Document or (e) in connection
with any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement and any Other Document and all related
agreements, documents and instruments, may be charged to Borrower’s Account and
shall be part of the Obligations.
 
15.10
Injunctive Relief.

 
Each Loan Party recognizes that, in the event any Loan Party fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement,
or threatens to fail to perform, observe or discharge such obligations or
liabilities, any remedy at law may prove to be inadequate relief to Lenders;
therefore, Agent, if Agent so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
that actual damages are not an adequate remedy.
 
15.11
Consequential Damages.

 
Neither Agent nor any Lender, nor any agent or attorney for any of them, shall
be liable to any Loan Party (or any Affiliate of any such Person) for indirect,
punitive, exemplary or consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or
collection of the Obligations or as a result of any transaction contemplated
under this Agreement or any Other Document.
 
 
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15.12
Captions.

 
The captions at various places in this Agreement are intended for convenience
only and do not constitute and shall not be interpreted as part of this
Agreement.
 
15.13
Counterparts; Facsimile Signatures.

 
This Agreement may be executed in any number of and by different parties hereto
on separate counterparts, all of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same
agreement.  Any signature delivered by a party by facsimile transmission shall
be deemed to be an original signature hereto.
 
15.14
Construction.

 
The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.
 
15.15
Confidentiality; Sharing Information.

 
Agent, each Lender and each Transferee shall hold all non-public information
obtained by Agent, such Lender or such Transferee pursuant to the requirements
of this Agreement in accordance with Agent’s, such Lender’s and such
Transferee’s customary procedures for handling confidential information of this
nature; provided, however, Agent, each Lender and each Transferee may disclose
such confidential information (a) to its examiners, Affiliates, outside
auditors, counsel and other professional advisors, (b) to Agent, any Lender or
to any prospective Transferees, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by Applicable Law,
Agent, each Lender and each Transferee shall use its reasonable best efforts
prior to disclosure thereof, to notify the applicable Loan Party of the
applicable request for disclosure of such non-public information (A) by a
Governmental Body or representative thereof (other than any such request in
connection with an examination of the financial condition of a Lender or a
Transferee by such Governmental Body) or (B) pursuant to legal process and (ii)
in no event shall Agent, any Lender or any Transferee be obligated to return any
materials furnished by any Loan Party other than those documents and instruments
in possession of Agent or any Lender in order to perfect its Lien on the
Collateral once the Obligations have been paid in full and this Agreement has
been terminated.  Each Loan Party acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Loan Party or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Loan Party hereby authorizes each Lender to
share any information delivered to such Lender by such Loan Party and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provisions of this
Section 15.15 as if it were a Lender hereunder.  Such authorization shall
survive the repayment of the other Obligations and the termination of this
Agreement.
 
 
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15.16
Publicity.

 
Each Loan Party and each Lender hereby authorizes Agent to make appropriate
announcements of the financial arrangement entered into among Loan Parties,
Agent and Lenders, including announcements which are commonly known as
tombstones, in such publications and to such selected parties as Agent shall in
its sole and absolute discretion deem appropriate.
 
15.17
[Reserved].

 
15.18
Joinder of Guarantors.

 
Any Subsidiary of any Borrower Party which is required to join this Agreement as
a Guarantor pursuant to Section 7.1(a) and which has not yet done so shall
execute and deliver to the Agent (i) a joinder agreement, in form and substance
satisfactory to the Bank, pursuant to which it shall join as a Guarantor each of
the documents to which the Guarantors are parties; (ii) documents in the forms
described in Section 8.1 modified as appropriate to relate to such Subsidiary;
and (iii) documents necessary to grant and perfect first priority security
interests to the Agent for the benefit of the Lenders in all Collateral held by
such Subsidiary.  The Borrower Parties shall deliver such joinder agreement and
related documents to the Agent within five (5) Business Days after the date of
the filing of such Subsidiary’s articles of incorporation if the Subsidiary is a
corporation, the date of the filing of its certificate of limited partnership if
it is a limited partnership or the date of its organization if it is an entity
other than a limited partnership or corporation.
 
[INTENTIONALLY LEFT BLANK]
 
 
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Each of the parties, with the intent to be legally bound, has signed this
Agreement as of the day and year first above written, as a document under seal.
 

 

   
BORROWER:
 
Zochem Inc.
 
 
By:
/Robert D. Scherich/
 
Name:
 
Title:

 

 

   
GUARANTOR:
 
Horsehead Holding Corp.
 
 
By:
/Robert D. Scherich/
 
Name:
 
Title:

 

 

   
AGENT AND LENDERS:
 
PNC Bank Canada Branch, as Agent and as Lender
 
 
By:
   
Name:
 
Title:
           
Commitment Percentage:  100%

 
 

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EXHIBIT 1.2
 
FORM OF BORROWING BASE CERTIFICATE
 
This Borrowing Base Certificate (the "Certificate") is delivered pursuant to
Section 9.2 of the Revolving Credit and Security Agreement, dated December __,
2012, (as the same may hereafter be amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), by and among Zochem Inc., a
Canada Corporation (the "Borrower"), the Guarantors (as defined therein) party
thereto, PNC Bank, Canada Branch ("PNC Bank") and various other financial
institutions from time to time (PNC Bank and such other financial institutions
are each a "Lender" and collectively, the "Lenders"), and PNC Bank, as
administrative agent for the Lenders (in such capacity, the "Agent").  Unless
otherwise defined herein, capitalized terms used herein have the meanings
provided in the Credit Agreement.
 
The undersigned hereby certifies that [he/she] is the [President] [Chief
Financial Officer] [Controller] of the Borrower and that, as such, [he/she] is
authorized to execute this Certificate on behalf of the Borrower and further
certifies that:
 
For purposes of this Certificate, the date for which the Formula Amount is being
calculated is _______________, 201_ (the "Calculation Date").
 
1.           The calculation of the Formula Amount is attached hereto as Exhibit
A.
 
2.           As of the Calculation Date, the aggregate outstanding principal
amount of all Advances on such date does not (and, after giving effect to any
Advance being requested in conjunction with the delivery of this Certificate,
will not) exceed the lesser of (a) the Maximum Revolving Advance Amount or (b)
the Formula Amount.
 
3.           All Receivables set forth herein as Eligible Receivables meet each
of the requirements of Eligible Receivables as set forth in the Credit
Agreement.  All Inventory set forth herein as Eligible Inventory meet each of
the requirements of Eligible Inventory as set forth in the Credit Agreement.
 
IN WITNESS WHEREOF, the undersigned has hereunto set [his/her] hand this _____
day of ______________, 201_.
 

 

 

   
ZOCHEM INC.
 
 
By:
   
Name:
 
Title:

 
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT A

FORMULA AMOUNT

(see attached)
 

 
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT 2.1(a)
 

 
FORM OF
REVOLVING CREDIT NOTE
 
 

$___________.00  Date:___________ ___, 201_    Toronto, Ontario

  
This Revolving Credit Note (this "Note") is executed and delivered under and
pursuant to the terms of that certain Revolving Credit and Security Agreement,
dated December __, 2012 (as amended, restated, supplemented or modified from
time to time, the "Credit Agreement"), by and among Zochem Inc., a Canada
Corporation (the "Borrower"), the Guarantors party thereto, PNC Bank, Canada
Branch ("PNC") and various other financial institutions from time to time (PNC
and such other financial institutions are each, a "Lender" and collectively, the
"Lenders"), and PNC, as agent for the Lenders (in such capacity, the
"Agent").  Capitalized terms not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
 
FOR VALUE RECEIVED, the Borrower hereby promises to pay to the order of PNC
Bank, Canada Branch, at the office of Agent located at The Exchange Tower, 130
King Street West, Suite 2140 P.O. Box 462, Toronto, ON M5X 1E4, or at such other
place as Agent may from time to time designate to the Borrower in writing:
 
(i)           the principal sum of [_________________ and 00/100 Dollars
($______________.00)] or, if different from such amount, the unpaid principal
balance of [_________________'s] Commitment Percentage of the Advances as may be
due and owing under the Credit Agreement, payable in accordance with the
provisions of the Credit Agreement and subject to acceleration upon the
occurrence of an Event of Default under the Credit Agreement or earlier
termination of the Credit Agreement pursuant to the terms thereof; and
 
(ii)           interest on the principal amount of this Note from time to time
outstanding until such principal amount is paid in full at the applicable
Revolving Interest Rate in accordance with the provisions of the Credit
Agreement.  In no event, however, shall interest exceed the maximum interest
rate permitted by law.  Upon and after the occurrence of an Event of Default,
and during the continuance thereof, at the option of Agent or at the direction
of Required Lenders, interest shall be payable at the Default Rate.
 
This Note is one of the Notes referred to in the Credit Agreement and is secured
by the Liens granted pursuant to the Credit Agreement and the Other Documents,
is entitled to the benefits of the Credit Agreement and the Other Documents and
is subject to all of the agreements, terms and conditions therein contained.
 
This Note may be voluntarily prepaid, in whole or in part, on the terms and
conditions set forth in the Credit Agreement.
 
If an Event of Default under Section 10.7 of the Credit Agreement shall occur or
a petition against any Loan Party in any involuntary case under any provincial
or federal bankruptcy laws shall be filed, then this Note shall become
immediately due and payable, without notice, together with reasonable legal
fees.  If any other Event of Default shall occur under the Credit Agreement or
any of the Other Documents, then this Note may, as provided in the Credit
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable legal fees.
 
 
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This Note shall be construed and enforced in accordance with the laws of the
Province of Ontario.
 
The Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Credit
Agreement.
 
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned hereby
executed this Revolving Credit Note on the date set forth above.
 

 
WITNESS
 
 
 
 
 
ZOCHEM INC.
 
 
By:
   
Name:
 
Title:

 
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EXHIBIT 8.1(i)
 
FORM OF FINANCIAL CONDITION CERTIFICATE
 
The undersigned, as the Chief Financial Officer of Zochem Inc., a Canada
Corporation (the "Borrower"), hereby certifies that:
 
I am the Chief Financial Officer of the Borrower, as indicated above.  Each Loan
Party (as defined in the Credit Agreement (as hereinafter defined)) is duly
organized, existing and in good standing under the laws of the jurisdiction of
its organization.
 
I am familiar with the business and financial affairs of Loan Parties including,
without limiting the generality of the foregoing, all of the matters hereinafter
described.
 
This certificate is made and delivered to PNC Bank, Canada Branch ("PNC"), and
various other financial institutions from time to time (PNC and such other
financial institutions are each a "Lender" and collectively, the "Lenders"), and
PNC, as agent for the Lenders (in such capacity, the "Agent"), pursuant to the
terms of that Revolving Credit and Security Agreement, dated of even date
herewith, by and among the Borrower, the Guarantors party thereto, Lenders and
Agent (as amended, restated, supplemented or modified from time to time, the
"Credit Agreement"), for the purpose of inducing Lenders, now and from time to
time hereafter, to make Advances to Borrower pursuant to the Credit Agreement
together with all notes, security agreements, agreements, guarantees,
instruments and documents heretofore now and from time to time hereafter
executed by any Loan Party and delivered to Agent and/or Lenders (all
hereinafter collectively referred to as the "Other Documents").  I understand
that you are relying on this certificate.  All capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
 
I have reviewed the twelve month cash flow projections of the Borrower and its
Subsidiaries on a consolidated basis and their projected balance sheets, copies
of which are attached hereto as Exhibit A (the "Projections"), and am familiar
with the process pursuant to which they were generated.  The Projections are
based on underlying assumptions which provide a reasonable basis for the
Projections and which reflect Loan Parties' judgment at the time prepared, based
on present circumstances of the most likely set of conditions and course of
action for the period projected.
 
Immediately following the execution of the Credit Agreement and the Other
Documents, the assets of each Loan Party, at a fair valuation, will be in excess
of the total amount of such Loan Party's liabilities (including contingent and
unmatured liabilities), each Loan Party will be able to pay its respective debts
as they become due and no Loan Party will have unreasonably small capital in
order to carry on its respective businesses.  All material undisputed debts
owing to third parties by each Loan Party are current and not past due.
 
The Credit Agreement was and the Other Documents were and will be executed and
delivered by Loan Parties to Agent and Lenders in good faith and in exchange for
reasonably equivalent value and fair consideration.
 
 
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I have reviewed the relevant terms of the Credit Agreement and the Other
Documents and have made or have caused to be made under our supervision a review
of the transactions and conditions of the Borrower and its Subsidiaries from
April 1, 2012, or the beginning of the accounting period covered by the
documents set forth in Paragraph 4, to the date of this Certificate and such
review has not disclosed the existence during such period of any condition or
event which constitutes or would constitute a Default or Event of Default.
 
Dated: December __, 2012

WITNESS:
 
 
 
 
 
ZOCHEM INC.
 
 
By:
   
Name:
 
Title: Chief Financial Officer

 

 
 
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EXHIBIT 15.3
 
COMMITMENT TRANSFER SUPPLEMENT
 
COMMITMENT TRANSFER SUPPLEMENT, dated as of ______________ __, 201_, among
________________ (the "Transferor Lender"), each Purchasing Lender executing
this Commitment Transfer Supplement (each, a "Purchasing Lender"), and PNC Bank,
Canada Branch ("PNC") as agent for the Lenders (as defined below) under the
Credit Agreement (as defined below).
 
W I T N E S S E T H:
 
WHEREAS, in accordance with Section 15.3 of the Revolving Credit and Security
Agreement dated December __, 2012 (as from time to time amended, restated,
supplemented or otherwise modified in accordance with the terms thereof, the
"Credit Agreement") among Zochem Inc., a Canada Corporation (the "Borrower"),
the Guarantors party thereto (the Borrower and the Guarantors are collectively,
the "Loan Parties"), PNC and the various other financial institutions named in
or which hereafter become a party to the Credit Agreement (collectively, the
"Lenders") and PNC as agent for Lenders (in such capacity, "Agent"), this
Commitment Transfer Supplement is being executed and delivered by the Transferor
Lender and each Purchasing Lender, and consented to by Agent in accordance with
Section 15.3(c) of the Credit Agreement;
 
WHEREAS, each Purchasing Lender wishes to become a Lender party to the Credit
Agreement; and
 
WHEREAS, the Transferor Lender is selling and assigning to each Purchasing
Lender, rights, obligations and commitments under the Credit Agreement.
 
NOW, THEREFORE, the parties hereto hereby agree as follows:
 
1.           All capitalized terms used herein which are not defined shall have
the meanings given to them in the Credit Agreement,
 
2.           Upon receipt by Agent of four (4) counterparts of this Commitment
Transfer Supplement, to each of which is attached a fully completed Schedule I,
and each of which has been executed by the Transferor Lender and Agent, Agent
will transmit to Transferor Lender and each Purchasing Lender a Transfer
Effective Notice, substantially in the form of Schedule II to this Commitment
Transfer Supplement (a "Transfer Effective Notice"). Such Transfer Effective
Notice shall set forth, inter alia, the date on which the transfer effected by
this Commitment Transfer Supplement shall become effective (the "Transfer
Effective Date"), which date shall not be earlier than the first (1st) Business
Day following the date such Transfer Effective Notice is received. From and
after the Transfer Effective Date, each Purchasing Lender shall be a Lender
party to the Credit Agreement for all purposes thereof.
 
 
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3.           At or before 12:00 noon (Toronto, Ontario time) on the Transfer
Effective Date each Purchasing Lender shall pay to Transferor Lender, in
immediately available funds, an amount equal to the purchase price, as agreed
between Transferor Lender and such Purchasing Lender (the "Purchase Price"), of
the portion of the Advances being purchased by such Purchasing Lender (such
Purchasing Lender's "Purchased Percentage") of the outstanding Advances and
other amounts owing to the Transferor Lender under the Credit Agreement and the
Other Documents. Effective upon receipt by Transferor Lender of the Purchase
Price from a Purchasing Lender, Transferor Lender hereby irrevocably sells
assigns and transfers to such Purchasing Lender, without recourse,
representation or warranty, and each Purchasing Lender hereby irrevocably
purchases, takes and assumes from Transferor Lender, such Purchasing Lender's
Purchased Percentage of the Advances and other amounts owing to the Transferor
Lender under the Credit Agreement and the Other Documents together with all
instruments, documents and collateral security pertaining thereto.
 
4.           Transferor Lender has made arrangements with each Purchasing Lender
with respect to (i) the portion, if any, to be paid, and the date or dates for
payment, by Transferor Lender to such Purchasing Lender of any fees heretofore
received by Transferor Lender pursuant to the Credit Agreement prior to the
Transfer Effective Date and (ii) the portion, if any, to be paid, and the date
or dates for payment, by such Purchasing Lender to Transferor Lender of fees or
interest received by such Purchasing Lender pursuant to the Credit Agreement
from and after the Transfer Effective Date.
 
5.           (a)  All principal payments that would otherwise be payable from
and after the Transfer Effective Date to or for the account of Transferor Lender
pursuant to the Credit Agreement and the Other Documents shall, instead, be
payable to or for the account of Transferor Lender and Purchasing Lender, as the
case may be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement.
 
(b)  All interest, fees and other amounts that would otherwise accrue for the
account of Transferor Lender from and after the Transfer Effective Date pursuant
to the Credit Agreement and the Other Documents shall, instead, accrue for the
account of, and be payable to, Transferor Lender and Purchasing Lender, as the
case may be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement. In the event that any amount of interest, fees
or other amounts accruing prior to the Transfer Effective Date was included in
the Purchase Price paid by any Purchasing Lender, Transferor Lender and each
Purchasing Lender will make appropriate arrangements for payment by Transferor
Lender to such Purchasing Lender of such amount upon receipt thereof from the
Borrower.
 
6.           Concurrently with the execution and delivery hereof, Transferor
Lender will provide to each Purchasing Lender conformed copies of the Credit
Agreement and all related documents delivered to Transferor Lender.
 
7.           Each of the parties to this Commitment Transfer Supplement agrees
that at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.
 
 
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8.           By executing and delivering this Commitment Transfer Supplement,
Transferor Lender and each Purchasing Lender confirm to and agree with each
other and Agent and Lenders as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned hereby free and clear of any adverse claim, Transferor Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, the Other Documents
or any other instrument or document furnished pursuant thereto; (ii) Transferor
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Loan Parties or the performance or
observance by Loan Parties of any of their Obligations under the Credit
Agreement, the Other Documents or any other instrument or document furnished
pursuant hereto; (iii) each Purchasing Lender confirms that it has received a
copy of the Credit Agreement, together with copies of such financial statements
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Commitment Transfer
Supplement; (iv) each Purchasing Lender will, independently and without reliance
upon Agent, Transferor Lender or any other Lenders and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement;
(v) each Purchasing Lender appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to Agent by the terms thereof; (vi) each Purchasing Lender agrees
that it will perform all of its respective obligations as set forth in the
Credit Agreement to be performed by each as a Lender; and (vii) each Purchasing
Lender represents and warrants to Transferor Lender, Lenders, Agent and the
Borrower that it deals at arm's length (within the meaning of the Income Tax Act
(Canada)) with the Borrower.
 
9.           Schedule I hereto sets forth the revised Commitment Percentages of
Transferor Lender and the Commitment Percentage of each Purchasing Lender as
well as administrative information with respect to each Purchasing Lender.
 
10.           This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the Province of Ontario.
 
IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement to be executed and delivered by their respective duly authorized
officers on the date set forth above.
 
 
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l, as Transferor Lender
 
 
By:
   
Name:
 
Title:

   
l, as a Purchasing Lender
 
 
By:
   
Name: l
 
Title: l

Consented to as of the date set forth above:
 
PNC BANK, CANADA BRANCH, as Agent
By:
   
Name:
 
Title:

 
 
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SCHEDULE 1.2(B)
PERMITTED ENCUMBRANCES
 
HORSEHEAD HOLDING CORP.
Delaware
 
Registration Number
Registration Date
Expiry Date
Debtor
Secured Party
Collateral Description
1.
22880013
July 26, 2012
July 26, 2017
Horsehead Holding Corp.
U.S. Bank National Association, as Collateral Agent
All personal property of the debtor, whether now owned or hereafter acquired.
2.
13958041
Sept 30, 2011
Sept 30, 2016
Horsehead Holding Corp.
PNC Bank, National Association, as Agent for itself and various financial
institutions
See below
Collateral:  One hundred percent (100%) of the issued and outstanding capital
stock of Horsehead Corporation, a Delaware corporation, owned by the Debtor, now
or hereafter acquired, the interest thereon, and all products, proceeds,
substitutions, additions, dividends and other distributions in respect thereof,
and all books, records and papers relating to the foregoing.

 
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SCHEDULE 4.5
EQUIPMENT AND INVENTORY LOCATIONS
 
Principal Place of Business and Chief Executive Office
 
1 Tilbury Court
Brampton, ON
L6T 3T4
 
Warehouses
 
Warehouseman Name:
Address of Warehouse:
Robert Warehouse
300 Statesman Drive, Mississauga, Ontario, L5S 2A2
La Sarge Warehouse & Distribution
500 South Acacia Avenue, Fullerton, California, USA, 92831
Chicagoland-Quad Cities Express
7715 South 78th Avenue, Building 3, Bridgeview, Illinois, USA, 60455
Murray Industrial Warehouse
1939 Melvin Henley Drive, Murray, Kentucky, USA, 42071
The Cotter Merchandise Storage Company
1564 Firestone Parkway, Akron, Ohio, USA, 44301
American Distribution Centers, Inc.
5445 Harold Gatty, Salt Lake City, Utah, USA, 84116
Simard Warehouses Inc.
1212 -32nd Avenue, Lachine QC, Canada H8K 3K7

 
 
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SCHEDULE 4.15(h)
DEPOSIT AND INVESTMENT ACCOUNTS
 
 
OWNER
 
TYPE OF ACCOUNT
 
BANK OR INTERMEDIARY
 
ACCOUNT NUMBERS
Zochem Inc.
US Business account
The Bank of Nova Scotia
476968870918
Zochem Inc.
Business account
The Bank of Nova Scotia
476961125117

 
 
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SCHEDULE 4.19
REAL PROPERTY
 
1 Tilbury Court
Brampton, ON
L6T 3T4
 
This location is owned by the Borrower.
 

 
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SCHEDULE 5.1
CONSENTS
 
None.
 

 
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SCHEDULE 5.2(a)
PROVINCES OF QUALIFICATION AND GOOD STANDING
 
Ontario and British Columbia.
 
 
 
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SCHEDULE 5.2(B)
SUBSIDIARIES
 
None.
 
 
 
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SCHEDULE 5.4
FEDERAL TAX IDENTIFICATION NUMBER
 
Zochem Inc.’s tax identification number: 836850263RC0002.
 
 
 
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SCHEDULE 5.6
PRIOR NAMES
 
Horsehead Canada Holding Corp. (predecessor, amalgamated with Zochem Inc. on
June 28, 2012 to form the current Zochem Inc.).
 
 
 
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SCHEDULE 5.8(b)
LITIGATION
 
None.
 
 
 
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SCHEDULE 5.9
INTELLECTUAL PROPERTY, SOURCE CODE ESCROW AGREEMENTS
 
CANADIAN TRADE-MARKS REGISTERED
 
Trade-mark
TMA Registration No.
ZOCHEM
TMA737096
AGRAZINC
TMA484507
ZOCOFAX
TMA159215
ZOCODUST
TMA181329
ZOCO
UCA1513

 
US TRADE-MARKS REGISTERED
 
Trade-mark
TMA Registration No.
Registration Date
ZOCHEM
3471990
July 22, 2008
AGRAZINC
2073983
June 24, 1997

 
 
 
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SCHEDULE 5.10
EXCEPTIONS TO COMPLIANCE WITH LICENSES AND PERMITS
 
None.
 
 
 
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SCHEDULE 5.14
LABOUR DISPUTES
 
None.
 
 
 
- 23 -

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SCHEDULE 7.3
GUARANTEES
 
None.
 
 
 
- 24 -

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SCHEDULE 7.7
INDEBTEDNESS
 
None.