Exhibit 10.3

EXECUTION COPY

GUARANTEE AND COLLATERAL AGREEMENT (CANADA)

made by

APPVION CANADA, LTD.,

in favour of

JEFFERIES FINANCE LLC,

as Administrative Agent

Dated as of June 28, 2013

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TABLE OF CONTENTS

 

     Page  

SECTION 1. DEFINED TERMS

     1   

1.1 Definitions

     1   

1.2 Other Definitional Provisions

     6   

SECTION 2. GUARANTEE

     6   

2.1 Guarantee

     6   

2.2 Right of Contribution

     7   

2.3 No Subrogation

     7   

2.4 Amendments, etc. with respect to the Borrower Obligations

     7   

2.5 Guarantee Absolute and Unconditional

     8   

2.6 Reinstatement

     9   

2.7 Payments

     9   

SECTION 3. GRANT OF SECURITY INTEREST

     9   

3.1 Grant of Security Interest in Collateral

     9   

3.2 Exception to Last Day

     10   

3.3 Attachment

     10   

SECTION 4. REPRESENTATIONS AND WARRANTIES

     11   

4.1 Representations in Credit Agreement

     11   

4.2 Title; No Other Liens

     11   

4.3 Perfected First Priority Liens

     11   

4.4 Jurisdiction of Organization; Chief Executive Office

     12   

4.5 Inventory and Equipment

     12   

4.6 [Reserved

     12   

4.7 Investment Property

     12   

4.8 Receivables

     12   

 

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4.9 Intellectual Property

     13   

SECTION 5. COVENANTS

     13   

5.1 Covenants in Credit Agreement

     13   

5.2 Delivery of Instruments, Certificated Securities and Chattel Paper

     13   

5.3 Maintenance of Insurance

     13   

5.4 Maintenance of Perfected Security Interest; Further Documentation

     14   

5.5 Changes in Locations, Name, etc.

     14   

5.6 Notices

     14   

5.7 Investment Property

     14   

5.8 Receivables

     15   

5.9 Intellectual Property

     16   

5.10 [Reserved]

     17   

5.11 Cash Management Systems

     17   

SECTION 6. REMEDIAL PROVISIONS

     18   

6.1 Certain Matters Relating to Receivables

     18   

6.2 Communications with Obligors; Grantors Remain Liable

     19   

6.3 Pledged Stock

     19   

6.4 Proceeds to be Turned Over to Administrative Agent

     20   

6.5 Application of Proceeds

     20   

6.6 Other Remedies

     21   

6.7 Private Sales

     22   

6.8 Deficiency

     22   

6.9 Intellectual Property License

     23   

SECTION 7. THE ADMINISTRATIVE AGENT

     23   

7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc.

     23   

7.2 Duty of Administrative Agent

     24   

 

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7.3 Filing of Financing Statements

     25   

7.4 Authority of Administrative Agent

     25   

SECTION 8. MISCELLANEOUS

     25   

8.1 Amendments in Writing

     25   

8.2 Notices

     25   

8.3 No Waiver by Course of Conduct; Cumulative Remedies

     25   

8.4 Enforcement Expenses; Indemnification

     26   

8.5 Successors and Assigns

     26   

8.6 Set-Off

     26   

8.7 Counterparts

     27   

8.8 Severability

     27   

8.9 Section Headings

     27   

8.10 Integration

     27   

8.11 GOVERNING LAW

     27   

8.12 Submission To Jurisdiction; Waivers

     27   

8.13 Acknowledgements

     28   

8.14 Additional Grantors

     28   

8.15 Releases

     28   

8.16 WAIVER OF JURY TRIAL

     29   

8.17 Amalgamation

     29   

8.18 Judgment Currency

     29   

8.19 Interest Act (Canada)

     30   

 

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ANNEX 1 – Form of Assumption Agreement

Schedule 1 – Notes

Schedule 2 – Pledged Collateral

Schedule 3 – Perfected Liens

Schedule 4 – Jurisdiction of Organization

Schedule 5 – Inventory and Equipment

Schedule 6 – Intellectual Property

Schedule 7 – Accounts

 

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GUARANTEE AND COLLATERAL AGREEMENT (CANADA), dated as of June 28, 2013 (as the
same may be amended, restated, supplemented and/or otherwise modified from time
to time, this “Agreement”), made by Appvion Canada, Ltd., a corporation formed
under the laws of Canada (“Appvion Canada”; together with any other entity that
may become a party hereto as provided herein, the “Grantors”), in favour of
Jefferies Finance LLC, as administrative agent (in such capacity, the
“Administrative Agent”) for the banks, financial institutions and other entities
(the “Lenders”) from time to time parties to the Credit Agreement, dated as of
the date hereof (as amended, restated, supplemented and/or otherwise modified
from time to time, the “Credit Agreement”), among Appvion, Inc., a Delaware
corporation (the “Borrower”), Paperweight Development Corp., a Wisconsin
corporation (“Holdings”), the Administrative Agent, Fifth Third Bank, as
Revolver Agent (in such capacity, the “Revolver Agent”), Swing Line Lender and
L/C Issuer, and the Lenders.

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to
make extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein;

WHEREAS, the Borrower is a member of an affiliated group of companies that
includes each Grantor;

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement
will be used in part (i) to repay certain existing indebtedness and (ii) to
enable the Borrower to make valuable transfers to one or more of the other
Grantors in connection with the operation of their respective businesses;

WHEREAS, the Borrower and the Grantors are engaged in related businesses, and
each Grantor will derive substantial direct and indirect benefit from the making
of the extensions of credit under the Credit Agreement; and

WHEREAS, it is a condition precedent to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Credit Agreement
that the Grantors shall have executed and delivered this Agreement to the
Administrative Agent for the ratable benefit of the Administrative Agent, the
Revolver Agent, the Lenders and the other Secured Parties;

NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Revolver Agent, the L/C Issuer and the Lenders to
enter into the Credit Agreement and to induce the Lenders to make their
respective extensions of credit to the Borrower thereunder, each Grantor hereby
agrees with the Administrative Agent for the ratable benefit of the
Administrative Agent, the Revolver Agent, the Lenders and the other Secured
Parties, as follows:

SECTION 1. DEFINED TERMS

1.1 Definitions.

(a) Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein, including in the recitals hereto, shall have the meanings given to
them in the Credit Agreement, and the following terms are used herein as defined
in the PPSA: Accounts, Certificated Security, Chattel Paper, Documents of Title,
Equipment, Financial Assets, Goods, Intangibles, Instruments, Inventory, Money,
Personal Property, Proceeds and Securities Account.

(b) The following terms shall have the following meanings:

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“Borrower Credit Agreement Obligations”: with respect to the Borrower, the
collective reference to the unpaid principal of and interest on the Loans and
Reimbursement Obligations and all other obligations and liabilities of the
Borrower (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and Reimbursement Obligations and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to the Administrative
Agent, the Revolver Agent, the L/C Issuer or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Credit Agreement, this Agreement, the other Loan Documents, any Letter of Credit
or any other document made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Administrative Agent, the Revolver
Agent, the L/C Issuer or the Lenders that are required to be paid by the
Borrower pursuant to the terms of any of the foregoing agreements).

“Borrower Obligations”: with respect to the Borrower, the collective reference
to (i) the Borrower Credit Agreement Obligations, (ii) the Secured Hedge
Agreement Obligations, (iii) Secured Cash Management Obligations and (iv) all
other obligations and liabilities of the Loan Parties to the Administrative
Agent, the Revolver Agent, the L/C Issuer or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent, the Revolver Agent, the L/C Issuer or the Lenders
that are required to be paid by the Borrower pursuant to the terms of this
Agreement). For the avoidance of doubt, Borrower Obligations shall not include
any Excluded Hedge Obligations.

“Collateral”: as defined in Section 3.

“Collateral Account”: any collateral account established by the Administrative
Agent as provided in Section 6.1 or 6.4.

“Contract”: means the total legal obligation which results from the parties’
agreement as affected by the PPSA and any other applicable rules of law.

“Copyrights”: (i) all copyrights arising under the Laws of Canada, any other
country or any political subdivisions thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Schedule 6), all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the Canadian
Intellectual Property Office or any other similar authority throughout the
world, (ii) all rights corresponding thereto throughout the world and (iii) the
right to obtain all extensions and renewals thereof.

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

“Credit Agreement Collateral”: all “Collateral” under, and as defined in, the
Credit Agreement.

 

 

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“Deposit Account”: a demand, savings, passbook, or similar account maintained
with a bank or other deposit taking institution. The Deposit Accounts of the
Grantors as of the Closing Date are listed on Schedule 7.

“Governmental Authority”: the government of Canada or any other nation, or of
any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

“Guarantor Obligations”: with respect to any Guarantor, the collective reference
to (i) the Borrower Credit Agreement Obligations, (ii) the Secured Hedge
Agreement Obligations, (iii) the Secured Cash Management Obligations and
(iv) all other obligations and liabilities of such Guarantor to the
Administrative Agent, the Revolver Agent, the L/C Issuer or any Lender which may
arise under or in connection with this Agreement (including, without limitation,
Section 2) or any other Loan Document to which such Guarantor is a party, in
each case whether on account of guarantee obligations, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent,
the Revolver Agent, the L/C Issuer or the Lenders that are required to be paid
by such Guarantor pursuant to the terms of this Agreement or any other Loan
Document). For the avoidance of doubt, the Guarantor Obligations shall not
include any Excluded Hedge Obligations.

“Guarantors”: the collective reference to each Grantor. It is understood and
agreed that in no event shall any Special Purpose Receivables Subsidiary or
Immaterial Subsidiary be deemed to be a Guarantor.

“Intellectual Property”: the collective reference to all rights, priorities and
privileges relating to intellectual property or similar proprietary rights,
whether arising under the Laws of Canada, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark
Licenses, Trade Secrets and Trade Secret Licenses and all rights thereto
throughout the world including, without limitation, all claims, causes of
action, defenses arising out of or related to any of the foregoing and the right
to sue at law or in equity for any past, present and future infringement,
misappropriation, misuse, dilution or other impairment thereof, including the
right to receive all proceeds and damages from all of the foregoing.

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

“Intercreditor Agreement” as defined in Section 3.

“Investment Property”: the collective reference to (i) all “investment property”
as such term is defined in the PPSA and (ii) whether or not constituting
“investment property” as so defined in the preceding clause (i), all Pledged
Notes and all Pledged Stock.

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

“Obligations”: in the case of any Grantor, such Person’s (i) Borrower
Obligations and/or (ii) Guarantor Obligations.

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

 

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“Patents”: (i) all letters patent of Canada, any other country or any political
subdivision thereof, all reissues and extensions thereof, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of Canada or any other country and all reissues,
extensions, renewals, reexaminations, divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, (iii) all invention disclosures, utility
models or similar industrial property rights and (iv) all rights corresponding
thereto, including rights to obtain any reissues or extensions of the foregoing.

“Permitted Unperfected Account”: with respect to any Grantor, any Deposit
Account or Securities Account of such Grantor (a) that contains a balance of
deposits equal to or less than $50,000; provided that such Deposit Account or
Securities Account shall not cease to be a Permitted Unperfected Account if it
contains a balance greater than $50,000 for not longer than 2 consecutive
Business Days and provided that the balance of deposits in all such Deposit
Accounts and Securities Accounts of the Grantors and all other Guarantors
(including U.S. Grantors) combined shall not exceed $200,000 in the aggregate at
any time, (b) with respect to Deposit Accounts only, is used solely as (i) a
payroll account, (ii) an employee benefit account, (iii) an operating expenses
disbursement account that is zero-balanced on a daily basis, (iv) a
sub-concentration account that is zero-balanced on a daily basis, (v) a
fiduciary, escrow or trust account or (vi) a tax account, including with respect
to sales taxes; or (c) as to which the Administrative Agent and the Revolver
Agent otherwise agree that no control agreement need be obtained. The Permitted
Unperfected Accounts of the Grantors as of the Closing Date are so indicated on
Schedule 7.

“Pledged Notes”: all promissory notes listed on Schedule 2, all Intercompany
Notes at any time issued to any Grantor in excess of $1,000,000 (or Intercompany
Notes which, in the aggregate, are in excess of $1,000,000) and all other
promissory notes issued to or held by any Grantor in excess of $1,000,000 (other
than promissory notes issued in connection with extensions of trade credit by
any Grantor in the ordinary course of business).

“Pledged Stock”: the shares of Capital Stock listed on Schedule 2, together with
any other shares, stock certificates, options, interests or rights of any nature
whatsoever in respect of the Capital Stock of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect.

“PPSA”: the Personal Property Security Act (Ontario); provided, that if the
attachment, perfection or priority of the Administrative Agent’s security
interests, for the benefit of the Secured Parties, in any Collateral are
governed by the personal property security laws of any jurisdiction other than
Ontario, PPSA shall mean those personal property laws in such other jurisdiction
in Canada for the purpose of the provisions hereof relating to such attachment,
perfection or priority and for the definitions related to such provisions.

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

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

 

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“Secured Cash Management Obligations”: the collective reference to all
obligations and liabilities of a Loan Party (including, without limitation,
interest accruing at the then applicable rate provided in any Secured Cash
Management Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to a
Loan Party, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) to any Cash Management Bank, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, any
Secured Cash Management Agreement or any other document made, delivered or given
in connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
relevant Lender or affiliate thereof that are required to be paid by any Loan
Party pursuant to the terms of any Secured Cash Management Agreement).

“Secured Hedge Agreement Obligations”: the collective reference to all
obligations and liabilities of a Loan Party (including, without limitation,
interest accruing at the then applicable rate provided in any Secured Hedge
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to such Loan Party,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) to any Hedge Bank, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, any Secured Hedge Agreement or
any other document made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the relevant Lender or affiliate thereof
that are required to be paid by the Borrower pursuant to the terms of any
Secured Hedge Agreement). For the avoidance of doubt, Secured Hedge Agreement
Obligations shall not include any Excluded Hedge Obligation.

“Securities Account”: the Securities Accounts, as defined in the PPSA, of the
Grantors as of the Closing Date are listed on Schedule 7.

“Securities Laws”: applicable federal, provincial, state, territorial or foreign
securities laws and regulations.

“STA”: the Securities Transfer Act, 2006 (Ontario).

“Supporting Obligation”: a secondary obligation that supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument, or investment property.

“Trade Secret Licenses”: any and all written or oral agreements granting any
right in or to Trade Secrets (whether a Grantor is a licensee or licensor
thereunder).

“Trade Secrets”: all trade secrets, as recognized under applicable local Law,
whether or not reduced to a writing or other tangible form, now or hereafter in
force, owned or used in, or contemplated at any time for use in, the business of
any Grantor, including with respect to any and all of the foregoing: (i) all
documents and things embodying, incorporating, or referring in any way thereto,
(ii) all rights to sue for past, present and future infringement thereof,
(iii) all claims, damages, and proceeds of suit arising therefrom, and (iv) all
payments and royalties and rights to payments and royalties arising out of the
sale, lease, license, assignment or other dispositions thereof.

 

 

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

“Trademarks”: (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos
and other source or business identifiers, and all goodwill associated therewith,
now existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the Canadian
Intellectual Property Office or in any similar office or agency of Canada, any
province thereof, any other country or any political subdivision thereof or
otherwise, and all common-law rights related thereto, including, without
limitation, any of the foregoing referred to in Schedule 6, and (ii) the right
to obtain all renewals thereof.

“U.S. Grantors”: the grantors under the Guarantee and Collateral Agreement dated
as of June 28, 2013 (as the same may be amended, restated, supplemented and/or
otherwise modified from time to time), by and among Jefferies Finance LLC, as
administrative agent, and the grantors from time to time party thereto.

1.2 Other Definitional Provisions.

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

(b) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.

(c) Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to a Grantor, shall refer to such Grantor’s
Collateral or the relevant part thereof.

(d) Unless the context otherwise requires, any Cash Management Bank or Hedge
Bank which is party to a Secured Hedge Agreement or a Secured Cash Management
Agreement shall be deemed to be a “Lender” for purposes of this Agreement.

SECTION 2. GUARANTEE

2.1 Guarantee.

(a) Each of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Administrative Agent for the ratable benefit of
the Secured Parties and their respective successors, endorsees, transferees and
assigns, the prompt and complete payment and performance by the Borrower when
due (whether at the stated maturity, by acceleration or otherwise) of all
Obligations.

(b) The guarantee contained in this Section 2 shall remain in full force and
effect until all the Obligations and the obligations of each Guarantor under the
guarantee contained in this Section 2 shall have been satisfied by payment in
full in cash (other than contingent or indemnification obligations for which no
claim has been made), no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Obligations,
provided that any Guarantor shall be released from its guarantee contained in
this Section 2 as provided in Section 8.15.

 

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(c) No payment made by the Borrower, any of the Guarantors, any other guarantor
or any other Person or received or collected by the Administrative Agent, the
Revolver Agent, any Lender or any other Secured Party from the Borrower, any of
the Guarantors, any other guarantor or any other Person by virtue of any action
or proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Borrower Obligations shall be
deemed to release the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Obligations or any payment received or collected from such
Guarantor in respect of the Obligations), remain liable for the Borrower
Obligations up to the maximum liability of such Guarantor hereunder until the
Borrower Obligations are paid in full in cash (other than contingent or
indemnification obligations for which no claim has been made), no Letter of
Credit shall be outstanding and the Commitments are terminated, provided that
any Guarantor shall be released from its guarantee contained in this Section 2
as provided in Section 8.15. Notwithstanding the foregoing, in no event shall
the Guarantors be liable for payment of any amount in excess of the then
outstanding Borrower Obligations and, without duplication, Guarantor
Obligations.

2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that
a Guarantor shall have paid more than its proportionate share of any payment
made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor’s right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent, the Revolver Agent, the Lenders and
any of the other Secured Parties, and each Guarantor shall remain liable to the
Secured Parties for the full amount guaranteed by such Guarantor hereunder.

2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder
or any set-off or application of funds of any Guarantor by the Administrative
Agent, the Revolver Agent, any Lender or any other Secured Party, no Guarantor
shall be entitled to be subrogated to any of the rights of the Administrative
Agent, the Revolver Agent, any Lender or any other Secured Party against the
Borrower or any other Guarantor or any collateral security or guarantee or right
of offset held by the Administrative Agent, the Revolver Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent, the Revolver Agent, the Lenders
and each other Secured Party by the Borrower on account of the Borrower
Obligations are paid in full in cash (other than contingent or indemnification
obligations for which no claim has been made), no Letter of Credit shall be
outstanding and the Commitments are terminated. If any amount shall be paid to
any Guarantor on account of such subrogation rights at any time when all of the
Borrower Obligations shall not have been paid in full in cash, such amount shall
be held by such Guarantor in trust for the Administrative Agent, the Revolver
Agent, the Lenders and each other Secured Party, segregated from other funds of
such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned
over to the Administrative Agent in the exact form received by such Guarantor
(duly endorsed by such Guarantor to the Administrative Agent, if required), to
be applied against the Borrower Obligations, whether matured or unmatured, in
such order as the Administrative Agent may determine.

2.4 Amendments, etc. with respect to the Borrower Obligations. To the maximum
extent permitted by applicable Law, each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations made by the Administrative

 

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Agent, the Revolver Agent, any Lender or any other Secured Party may be
rescinded by such Secured Party and any of the Borrower Obligations continued,
and the Borrower Obligations, or the liability of any other Person upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent, the Revolver Agent, any
Lender or any other Secured Party, and the Credit Agreement and the other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the respective Secured Parties party thereto may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent, the Revolver Agent, any Lender or any other Secured
Party for the payment of the Borrower Obligations may be sold, exchanged,
waived, surrendered or released. No Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or for the guarantee contained in this Section 2 or
any property subject thereto.

2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to the maximum
extent permitted by applicable Law, each any and all notice of the creation,
renewal, extension or accrual of any of the Borrower Obligations and notice of
or proof of reliance by the Administrative Agent, the Revolver Agent, any Lender
or any other Secured Party upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Borrower
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Section 2; and all dealings between the
Borrower and any of the Guarantors, on the one hand, and among the Secured
Parties, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations. Each Guarantor understands and agrees,
to the maximum extent permitted by applicable Law, that the guarantee contained
in this Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any of the Borrower Obligations or
any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Administrative
Agent, the Revolver Agent, any Lender or any other Secured Party, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent, the Revolver
Agent, any Lender or any other Secured Party, or (c) any other circumstance
whatsoever (other than a defense of payment or performance) (with or without
notice to or knowledge of the Borrower or such Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the
Borrower for the Borrower Obligations, or of such Guarantor under the guarantee
contained in this Section 2, in bankruptcy or in any other instance. When making
any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Administrative Agent, the Revolver Agent, any Lender
and any other Secured Party may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as it may have
against the Borrower, any other Guarantor or any other Person or against any
collateral security or guarantee for the Borrower Obligations or any right of
offset with respect thereto, and any failure by the Administrative Agent, the
Revolver Agent, any Lender or any other Secured Party to make any such demand,
to pursue such other rights or remedies or to collect any payments from the
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Borrower, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent, the Revolver Agent, any Lender or
any other Secured Party against any Guarantor. For the purposes hereof “demand”
shall include, but not be limited to the commencement and continuance of any
legal proceedings.

 

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2.6 Reinstatement. The guarantee contained in this Section 2 shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Borrower Obligations is rescinded or must
otherwise be restored or returned by any Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.

2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be
paid to the Administrative Agent without set-off or counterclaim in Dollars at
the appropriate funding office as set forth in the Credit Agreement.

SECTION 3. GRANT OF SECURITY INTEREST

3.1 Grant of Security Interest in Collateral. Each Grantor hereby assigns and
transfers to the Administrative Agent, and hereby grants to the Administrative
Agent, for the ratable benefit of the Secured Parties, a security interest in,
all present and after-acquired property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
“Collateral”), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor’s Obligations, including without limitation, the
following:

(a) all Accounts;

(b) all Chattel Paper;

(c) all Contracts;

(d) all Deposit Accounts;

(e) all Documents of Title;

(f) all Equipment;

(g) all Financial Assets;

(h) all Goods;

(i) all Intangibles;

(j) all Instruments;

(k) all Intellectual Property;

(l) all Inventory;

(m) all Investment Property;

(n) all Money;

 

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(o) all books and records pertaining to the Collateral; and

(p) to the extent not otherwise included, all Proceeds, Supporting Obligations
and products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing; provided,
however, that notwithstanding any of the other provisions set forth in this
Section 3, this Agreement shall not constitute a grant of a security interest in
and of the following (the “Excluded Property”): (i) any consumer goods, (ii) any
property to the extent that such grant of a security interest is prohibited by
any Requirement of Law, requires a consent not obtained of any Governmental
Authority pursuant to any such Requirement of Law or is prohibited by, or
constitutes a breach or default under, or results in the creation of a right of
termination of (other than with respect to any such right held by the Borrower
or a Guarantor) or requires any consent not obtained under, any contract,
license, agreement, instrument, lease, purchase money security interest or other
document evidencing or giving rise to such property or, in the case of any
Investment Property, Pledged Stock or Pledged Note, any applicable shareholder
or similar agreement, except to the extent that such Requirement of Law or the
applicable terms in such contract, license, agreement, instrument or other
document or shareholder or similar agreement providing for such prohibition,
breach, default or termination or requiring such consent is ineffective under
applicable Law; (iii) any property to the extent that such property constitutes
“Collateral” under and as defined in the Fox River Security Agreement; (iv) any
leasehold interests in real property and fee interests in real property with a
fair market value of less than $1,500,000; (v) motor vehicles and any other
assets subject to certificates of title; (vi) any governmental licenses or state
or provincial or local franchises, charters and authorizations, to the extent
security interests in such licenses, franchises, charters or authorizations are
prohibited or restricted thereby; (vii) any Permitted Unperfected Account;
(viii) any Intercompany Note made in favour of any Loan Party by an Special
Purpose Receivables Subsidiary with respect to the purchase price of Receivables
from such Loan Party in connection with a Permitted Receivables Financing;
(ix) any Receivables Assets related to (including, without limitation, by being
sold, pledged or financed pursuant to) a Permitted Receivables Financing; and
(x) any other assets to the extent that each of the Administrative Agent and the
Revolver Agent shall reasonably agree that the cost of obtaining a security
interest therein or perfection of a security interest thereof (including any
material adverse tax consequences resulting therefrom) outweighs the benefit of
the security interest to be afforded thereby; provided, however, that
(x) Excluded Property shall not include proceeds, products, substitutions or
replacements of Excluded Property and (y) any Excluded Property that at any time
fails to satisfy the above criteria (whether as a result of the applicable
Grantor obtaining any necessary consent, any change in any rule of Law, statute
or regulation, or otherwise) shall no longer constitute Excluded Property for
purposes hereof and shall automatically constitute a portion of the Collateral
subject to the grant of security contained herein.

3.2 Exception to Last Day. The security interest granted hereby shall not extend
or apply to, and Collateral shall not include, the last day of the term of any
lease or agreement therefor, but upon enforcement of the security interest, each
Grantor shall stand possessed of such last day in trust or assign the same to
any person acquiring such term.

3.3 Attachment. Each Grantor acknowledges that (i) value has been given, (ii) it
has rights in the Collateral, (iii) it has not agreed to postpone the time for
attachment of the Lien granted hereunder, and (iv) it has received a copy of
this Agreement.

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, ALL TERMS OF THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, THE REPRESENTATIONS AND WARRANTIES MADE HEREIN,
THE LIENS AND SECURITY INTERESTS GRANTED TO THE ADMINISTRATIVE AGENT PURSUANT TO
THIS AGREEMENT, THE EXERCISE OF ANY RIGHT OR REMEDY BY THE ADMINISTRATIVE AGENT,
THE REVOLVER AGENT AND

 

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LENDERS HEREUNDER, ALL OTHER RIGHTS AND BENEFITS AFFORDED HEREUNDER TO THE
ADMINISTRATIVE AGENT, THE REVOLVER AGENT AND THE LENDERS AND ALL OBLIGATIONS OF
THE GRANTORS HEREUNDER) ARE SUBJECT IN ALL RESPECTS TO THE TERMS, CONDITIONS AND
PROVISIONS OF THE INTERCREDITOR AGREEMENT (AS SUPPLEMENTED BY THE INTERCREDITOR
AGREEMENT JOINDER). IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE
INTERCREDITOR AGREEMENT (AS SUPPLEMENTED BY THE INTERCREDITOR AGREEMENT JOINDER)
AND THE TERMS OF THIS AGREEMENT, THE TERMS OF THE INTERCREDITOR AGREEMENT (AS
SUPPLEMENTED BY THE INTERCREDITOR AGREEMENT JOINDER) SHALL GOVERN AND CONTROL.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Administrative Agent, the Revolver Agent and the Lenders to enter
into the Credit Agreement and to induce the Lenders to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby represents
and warrants to each Agent and each Lender that:

4.1 Representations in Credit Agreement. In the case of each Guarantor, the
representations and warranties set forth in Article V of the Credit Agreement as
they relate to such Guarantor or to the Loan Documents to which such Guarantor
is a party, each of which is hereby incorporated herein by reference, are true
and correct, in all material respects (other than any representation or warranty
that is qualified by materiality or makes reference to Material Adverse Effect,
which representations and warranties shall be true and correct in all respects),
and each Agent and each Lender shall be entitled to rely on each of them as if
they were fully set forth herein, provided that each reference in each such
representation and warranty to the Borrower’s knowledge shall, for the purposes
of this Section 4.1, be deemed to be a reference to such Guarantor’s knowledge.

4.2 Title; No Other Liens. Except for the security interest granted to the
Administrative Agent for the ratable benefit of the Secured Parties pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns its Collateral in all material respects free
and clear of any and all Liens or claims of others. For the avoidance of doubt,
it is understood and agreed that any Grantor may, as part of its business, grant
licenses to third parties to use Intellectual Property owned or developed by a
Grantor. For purposes of this Agreement and the other Loan Documents, such
licensing activity shall not constitute a “Lien” or a “claim” on such
Intellectual Property. Each of the Administrative Agent, the Revolver Agent,
each Lender and each other Secured Party understands that any such licenses may
be exclusive to the applicable licensees, and such exclusivity provisions may
limit the ability of the Administrative Agent to utilize, sell, Lease or
transfer the related Intellectual Property or otherwise realize value from such
Intellectual Property pursuant hereto.

4.3 Perfected First Priority Liens. The security interests granted pursuant to
this Agreement (a) upon completion of the filings and other actions specified on
Schedule 3 (including obtaining “control” (within the meaning of the STA) of
Securities Accounts (other than Permitted Unperfected Accounts) and Investment
Property will constitute valid perfected security interests (to the extent
perfection of security interests therein may be perfected by filing of a
financing statement under the PPSA and/or filings with the Canadian Intellectual
Property Office or Canadian Industrial Design Office, as applicable, possession
by the Administrative Agent of the respective Investment Property or “control”
of Securities Accounts) in all of the Collateral in favour of the Administrative
Agent, for the ratable benefit of the Secured Parties, as collateral security
for such Grantor’s Obligations, enforceable in accordance with the terms hereof
against all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor, other than purchasers in the ordinary course of
business, and other than purchasers under transactions permitted under the
Credit Agreement, and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for Liens permitted by the Credit Agreement
and other Liens which have priority over the Liens granted hereunder on the
Collateral by operation of law.

 

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4.4 Jurisdiction of Organization; Chief Executive Office. On the date hereof,
such Grantor’s jurisdiction of organization, identification number from the
jurisdiction of organization (if any), and the location of such Grantor’s chief
executive office or sole place of business or principal residence, as the case
may be, are specified on Schedule 4.

4.5 Inventory and Equipment. On the date hereof, all of the Grantors’ Inventory
and Equipment is kept at the locations listed on Schedule 5, except with respect
to (i) Inventory and Equipment in transit to or from a location listed on
Schedule 5, (ii) locations inside the United States and Canada where the value
of such Inventory (other than consigned Inventory, which is the subject of
clause (iii) below) and Equipment does not exceed in the aggregate for the
Grantors and all other Guarantors (including U.S. Grantors) combined
(x) $250,000 at any one such location, and (y) $1,000,000 at all such locations,
(iii) locations inside the United States and Canada where the value of Inventory
on consignment for the Grantors and all other Guarantors (including U.S.
Grantors) combined does not exceed (x) $300,000 at any one such location and
(y) $2,000,000 at all such locations, and (iv) locations in a jurisdiction
outside the United States and Canada (or any constituent jurisdiction thereof),
provided that the value of all such Inventory and Equipment located in such
jurisdictions does not exceed $8,500,000.

4.6 [Reserved.]

4.7 Investment Property.

(a) The shares of Pledged Stock pledged by such Grantor hereunder constitute all
the issued and outstanding shares of all classes of the Capital Stock of each
Issuer owned by such Grantor.

(b) On the date hereof, all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.

(c) Each of the Pledged Notes issued by a Loan Party constitutes the legal,
valid and binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar Laws
relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

(d) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Investment Property pledged by it hereunder, free of
any and all Liens in favour of, or claims of, any other Person, except the
security interest created by this Agreement and as otherwise would not violate
the applicable requirements of the Credit Agreement.

4.8 Receivables.

(a) Except to the extent that such amounts so payable to Grantors and the other
Guarantors (including U.S. Grantors) combined do not exceed $50,000 in
aggregate, no amount payable to such Grantor under or in connection with any
Receivable is evidenced by any Instrument or Chattel Paper that has not been
delivered to the Administrative Agent.

(b) As of the date hereof, not more than ten percent (10%) of the Receivables
have a Governmental Authority as an obligor.

 

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4.9 Intellectual Property.

(a) Schedule 6 lists all registered and applied for Patents, Trademarks and
Copyrights in Canada and the United States that are owned by such Grantor in its
own name on the date hereof. To each Grantor’s knowledge, as of the date hereof,
all Intellectual Property owned by such Grantor and set forth on Schedule 6 is
valid, in full force and effect, subsisting, unexpired and enforceable, and has
not been abandoned. To each Grantor’s knowledge, the business of such Grantor
and the use of any Intellectual Property in connection therewith, does not
infringe, misappropriate, dilute or violate the intellectual property rights of
any third Person. There are no pending or, to such Grantor’s knowledge,
threatened claims of infringement, misappropriation, dilution or violation by
Grantor of any third Person’s intellectual property rights, and none of the
Grantors is aware of any facts or circumstances that such Grantor reasonably
believes are likely to form the basis for any such claim, and such Grantor has
not received written notice of any such claim.

(b) Except as set forth in Schedule 6, on the date hereof none of the material
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.

SECTION 5. COVENANTS.

Each Grantor covenants and agrees with the Administrative Agent, the Revolver
Agent and the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full in cash (other than contingent or
indemnification obligations for which no claim has been made), no Letter of
Credit shall be outstanding and the Commitments shall have terminated:

5.1 Covenants in Credit Agreement. In the case of each Guarantor, to the extent
applicable, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.

5.2 Delivery of Instruments, Certificated Securities and Chattel Paper. Except
to the extent that such amounts so payable to Grantors and the other Guarantors
(including U.S. Grantors) combined do not exceed $250,000 in aggregate, if any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument, Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper shall be promptly delivered
to the Administrative Agent, duly endorsed in a manner reasonably satisfactory
to the Administrative Agent, to be held as Collateral pursuant to this
Agreement.

5.3 Maintenance of Insurance.

(a) Such Grantor will maintain, with financially sound and reputable companies,
insurance policies, in accordance with the terms of the Credit Agreement,
(i) insuring the Inventory and Equipment against loss by fire, explosion, theft
and such other casualties in accordance with the terms of the Credit Agreement
and (ii) insuring such Grantor against liability for personal injury and
property damage relating to such Inventory and Equipment.

(b) All such insurance shall (i) provide for not less than 30 days’ prior notice
to the Administrative Agent of termination, lapse or cancellation of such
insurance (to the extent such provision is obtainable using commercially
reasonably efforts) and (ii) name the Administrative Agent as an additional
insured and/or loss payee, as applicable.

 

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5.4 Maintenance of Perfected Security Interest; Further Documentation.

(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest (but only to the extent that such security
interest can be perfected by the filing of a financing statement under the PPSA
(or other similar Laws) or obtaining “control” (within the meaning of the STA)
of Deposit Accounts (other than Permitted Unperfected Accounts) or Investment
Property) having at least the priority described in Section 4.3 and shall defend
such security interest against the claims and demands of all Persons whomsoever
(other than Persons with prior Liens permitted under clause (b) of Section 4.3),
subject to the rights of such Grantor under the Loan Documents to dispose of the
Collateral.

(b) Such Grantor will furnish to the Administrative Agent and the Revolver Agent
from time to time statements and schedules further identifying and describing
the assets and property of such Grantor and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.

(c) At any time and from time to time, upon the reasonable written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and shall record or cause to be
recorded, such further instruments and documents and take such further actions
as the Administrative Agent may reasonably request for the purpose of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) filing any financing
statements or financing change statements under the PPSA (or other similar Laws)
in effect in any jurisdiction with respect to the security interests created
hereby, (ii) in the case of Investment Property and Securities Accounts (other
than Permitted Unperfected Accounts) and any other relevant Collateral, taking
any actions necessary to enable the Administrative Agent to obtain “control”
(within the meaning of the STA) with respect thereto and (iii) in the case of
Intellectual Property, filings to the Canadian Intellectual Property Office or
Canadian Industrial Design Office, as applicable, or other similar authority.

5.5 Changes in Locations, Name, etc. Such Grantor will not, except upon 15 days’
prior written notice to the Administrative Agent and delivery to the
Administrative Agent of all additional financing statements and other documents
reasonably requested by the Administrative Agent to maintain the validity,
perfection and priority of the security interests provided for herein:

(i) change its jurisdiction of organization from that referred to in
Section 4.4; or

(ii) change its name.

5.6 Notices. Such Grantor will advise the Administrative Agent, the Revolver
Agent and the Lenders promptly, in reasonable detail, of the occurrence of any
event which could reasonably be expected to have a material adverse effect on
the aggregate value of the Credit Agreement Collateral or on the security
interests created hereby.

5.7 Investment Property.

(a) If such Grantor shall become entitled to receive or shall receive any
certificate (including, without limitation, any certificate representing a
dividend or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights in respect of the Capital Stock of any Issuer,
whether in addition to, in substitution of, as a conversion of, or in exchange
for, any shares of the Pledged Stock, or otherwise in

 

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respect thereof, such Grantor shall accept the same as the agent of the
Administrative Agent, the Revolver Agent, the Lenders and the other Secured
Parties, hold the same in trust for such Persons and deliver the same forthwith
to the Administrative Agent in the exact form received, duly endorsed by such
Grantor to the Administrative Agent, if required, together with an undated stock
power covering such certificate duly executed in blank by such Grantor to be
held by the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Obligations. If an Event of Default has occurred and
is continuing, any sums paid upon or in respect of the Investment Property upon
the liquidation or dissolution of, or as a distribution of capital by, any
Issuer shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the Obligations, and in case any property
(if an Event of Default has occurred and is continuing) or any Investment
Property shall be distributed upon or with respect to the Investment Property
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favour of
the Administrative Agent, be delivered to the Administrative Agent to be held by
it hereunder as additional collateral security for the Obligations. If any sums
of money or property so paid or distributed in respect of the Investment
Property shall be received by such Grantor (when otherwise required to be paid
or delivered over to the Administrative Agent as set forth above), such Grantor
shall, until such money or property is paid or delivered to the Administrative
Agent, hold such money or property in trust for the Administrative Agent, the
Revolver Agent, the Lenders and the other Secured Parties, segregated from other
funds of such Grantor, as additional collateral security for the Obligations.

(b) Without the prior written consent of the Administrative Agent, such Grantor
will not (i) if an Event of Default has occurred and is continuing, vote to
enable, or take any other action to permit, any Issuer to issue any Capital
Stock of any nature or to issue any other securities convertible into or
granting the right to purchase or exchange for any Capital Stock of any nature
of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of,
or grant any option with respect to, the Investment Property or Proceeds thereof
(except pursuant to a transaction permitted by the Credit Agreement),
(iii) create, incur or permit to exist any Lien or option in favour of, or any
claim of any Person with respect to, any of the Investment Property or Proceeds
thereof, or any interest therein, except for the security interests created by
this Agreement or otherwise permitted in the Credit Agreement or (iv) enter into
any agreement or undertaking, other than as permitted under the Credit
Agreement, restricting the right or ability of such Grantor or the
Administrative Agent to sell, assign or transfer any of the Investment Property
or Proceeds thereof.

(c) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Investment
Property issued by it and will comply with such terms insofar as such terms are
applicable to it and (ii) the terms of Section 6.3(c) shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it pursuant to
Section 6.3(c) with respect to the Investment Property issued by it.

5.8 Receivables.

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

 

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(b) Such Grantor will deliver to the Administrative Agent a copy of each
material demand, notice or document received by it that challenges the validity
or enforceability of more than five percent (5%) of the aggregate amount of the
then outstanding Receivables.

(c) If, as of any fiscal quarter end occurring after the Closing Date, the
Grantors determine that more than ten percent (10%) of Receivables (in the
aggregate for all Grantors) have a Governmental Authority as an obligor, then
the Grantors shall so notify the Administrative Agent and the Revolver Agent
(such notice to be given substantially concurrently with the delivery of the
quarterly financial statements required pursuant to Section 6.01(b) of the
Credit Agreement) and, upon the reasonable request of the Administrative Agent,
promptly take such steps as may be necessary to comply with any applicable
assignment of claims Laws and other comparable Laws.

(d) This Section 5.8 shall not apply to any Receivables sold or financed
pursuant to a Permitted Receivables Financing.

5.9 Intellectual Property.

(a) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will (i) continue to use each
Trademark on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of abandonment for
non-use, (ii) maintain as in the past the quality of products and services
offered under such Trademark, (iii) use such Trademark with the appropriate
notice of registration and all other notices and legends required by applicable
Requirements of Law, (iv) not adopt or use any new mark which is confusingly
similar or a colorable imitation of such Trademark unless the Administrative
Agent, for the ratable benefit of the Administrative Agent, the Revolver Agent,
the Lenders and the other Secured Parties, shall obtain a perfected security
interest in such new mark pursuant to this Agreement, and (v) not do any act or
knowingly omit to do any act whereby such Trademark may become invalidated or
impaired in any way.

(b) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will not do any act, or omit to do
any act, whereby any Patent may become forfeited, abandoned or dedicated to the
public.

(c) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will not do any act or knowingly
omit to do any act whereby any Copyright may become invalidated or otherwise
impaired. Such Grantor will not do any act whereby any Copyright may fall into
the public domain, to the extent such Copyright is material to the aggregate
value of the Credit Agreement Collateral.

(d) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will not do any act that knowingly
uses any Intellectual Property to infringe the intellectual property rights of
any other Person.

(e) Such Grantor will promptly notify the Administrative Agent, the Revolver
Agent and the Lenders if it knows, or has reason to know, that any application
or registration relating to any Intellectual Property may become forfeited,
abandoned or dedicated to the public, or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any cancellation or invalidation proceeding in
the Canadian Intellectual Property Office, the Canadian Industrial Design Office
or any court or tribunal in any country, but specifically excluding any official
actions or search reports issued by any intellectual property office around the
world during the normal course of prosecution of any applications for
Intellectual Property) regarding such Grantor’s ownership of, or the validity
of, any Intellectual Property or such Grantor’s right to register the same or to
own and maintain the same, in each case to the extent such Intellectual Property
is material to the aggregate value of the Credit Agreement Collateral.

 

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(f) Whenever such Grantor, either by itself or through the Administrative Agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the Canadian Intellectual Property Office, the
Canadian Industrial Design Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent in accordance with Section 6.02(a)(iii)(y) of
the Credit Agreement. Upon reasonable request of the Administrative Agent, such
Grantor shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Administrative Agent may request to
evidence the Administrative Agent’s security interest in any Copyright, Patent
or Trademark and the goodwill and intangibles of such Grantor relating thereto
or represented thereby.

(g) Except as otherwise determined in the exercise of such Grantor’s reasonable
business judgment, Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the Canadian
Intellectual Property Office, the Canadian Industrial Design Office or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of Intellectual Property,
including, without limitation, filing of applications for renewal, affidavits of
use and affidavits of incontestability, in each case to the extent such
Intellectual Property is material to the aggregate value of the Credit Agreement
Collateral.

(h) In the event that any Intellectual Property is infringed, misappropriated or
diluted by a third party, such Grantor shall (i) take such actions as such
Grantor shall reasonably deem appropriate under the circumstances to protect
such Intellectual Property and (ii) notify the Administrative Agent after it
learns thereof, in each case to the extent such Intellectual Property is
material to the aggregate value of the Credit Agreement Collateral.

(i) Upon the occurrence and during the continuance of an Event of Default, each
Grantor shall use its best efforts to obtain all requisite consents or approvals
from the licensor of each Copyright License, Patent License, Trade Secret
License or Trademark License to effect the assignment or sublicense of all of
such Grantor’s right, title and interest thereunder to the Administrative Agent
or its designee for the benefit of the Secured Parties in accordance with this
Agreement or the Credit Agreement.

(j) For the avoidance of doubt, no Grantor shall be required to take any steps
to perfect the Administrative Agent’s security interest in any Intellectual
Property in any jurisdiction outside of the United States or Canada unless and
until the Administrative Agent shall have requested such Grantor to do so in
writing.

5.10 [Reserved].

5.11 Cash Management Systems.

(a) Each Deposit Account or Securities Account of any Grantor that is not a
Permitted Unperfected Account (each such Deposit Account, a “Controlled Deposit
Account,” and each such Securities Account, a “Controlled Securities Account,”
Controlled Securities Accounts together with Controlled Deposit Accounts may
sometimes be referred to herein individually as a “Controlled Account” and,
collectively, as “Controlled Accounts”) shall be maintained with the
Administrative Agent or such other Lender as shall be reasonably acceptable to
the Administrative Agent (each, a “Depositary Account Bank”).

 

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(b) Within the time period prescribed under Section 6.15 of the Credit
Agreement, each Grantor shall have entered into a deposit account control
agreement or securities account control agreement in form and substance
satisfactory to the Administrative Agent with respect to each Controlled Account
with the respective Depositary Account Bank and in favour of the Administrative
Agent (each an “Account Control Agreement”), which, in the case of Account
Control Agreements with respect to Controlled Deposit Accounts, shall provide
that, among other things, upon the occurrence and during the continuance of an
Event of Default, at the instruction of the Administrative Agent, all available
amounts held in each Controlled Deposit Account maintained at such Depositary
Account Bank shall be wired on each Business Day into an account (the
“Administrative Agent Account”) maintained by the Administrative Agent;
provided, that the Administrative Agent hereby agrees that it will not give any
instructions under any Account Control Agreement unless and until an Event of
Default shall have occurred and be continuing.

(c) The closing of any Controlled Deposit Account and the termination of any
Account Control Agreement, except in connection with a release of Liens under
Section 8.15 hereof or Section 9.12 of the Credit Agreement, shall require in
each case the prior written consent of the Administrative Agent and the Revolver
Agent.

SECTION 6. REMEDIAL PROVISIONS

6.1 Certain Matters Relating to Receivables.

(a) If an Event of Default shall have occurred and be continuing, (x) the
Administrative Agent shall have the right to make test verifications of the
Receivables in any reasonable manner and through any medium that it reasonably
considers advisable, and each Grantor shall furnish all such assistance and
information as the Administrative Agent may require in connection with such test
verifications and (y) upon the Administrative Agent’s reasonable request and at
the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.

(b) The Administrative Agent hereby authorizes each Grantor to collect such
Grantor’s Receivables and the Administrative Agent may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly endorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section 6.5, and (ii) until so turned
over, shall be held by such Grantor in trust for the Secured Parties segregated
from other funds of such Grantor.

(c) If an Event of Default shall have occurred and be continuing, at the
Administrative Agent’s reasonable request, (i) each Grantor shall deliver to the
Administrative Agent all original (to the extent such Grantor has original
copies) and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Receivables, including, without limitation,
all original (to the extent such Grantor has original copies) orders, invoices
and shipping receipts and (ii) at the reasonable request of the Administrative
Agent the applicable Grantor shall use its commercially

 

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reasonable efforts to take such steps as may be necessary to comply with any
applicable assignment of claims Laws and other comparable Laws. Notwithstanding
anything to the contrary in this Agreement, no Grantor will be required to
disclose any document, information or other matter that (i) constitutes
non-financial trade secrets or non-financial proprietary information with
respect to any account debtors related to any Receivables, (ii) in respect of
which disclosure to the Administrative Agent or any Lender (or their respective
representatives or contractors) is prohibited by Law or (iii) is subject to
attorney-client or similar privilege or constitutes attorney work product.

6.2 Communications with Obligors; Grantors Remain Liable.

(a) The Administrative Agent in its own name or in the name of others may at any
time after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Administrative Agent’s satisfaction the existence,
amount and terms of any Receivables or Contracts.

(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables and parties to the Contracts that the
Receivables and the Contracts have been assigned to the Administrative Agent for
the ratable benefit of the Secured Parties and that payments in respect thereof
shall be made directly to the Administrative Agent.

(c) Anything herein to the contrary notwithstanding, each Grantor shall remain
liable under each of the Receivables and Contracts to observe and perform all
the conditions and obligations to be observed and performed by it thereunder,
all in accordance with the terms of any agreement giving rise thereto. No Agent
or Lender shall have any obligation or liability under any Receivable (or any
agreement giving rise thereto) or Contract by reason of or arising out of this
Agreement or the receipt by the Administrative Agent, the Revolver Agent, any
Lender or any other Secured Party of any payment relating thereto, nor shall the
Administrative Agent, the Revolver Agent, any Lender or any other Secured Party
be obligated in any manner to perform any of the obligations of any Grantor
under or pursuant to any Receivable (or any agreement giving rise thereto) or
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

6.3 Pledged Stock.

(a) Unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have given notice to the relevant Grantor of the
Administrative Agent’s intent to exercise its corresponding rights pursuant to
Section 6.3(b), each Grantor shall be permitted to receive all dividends paid in
respect of the Pledged Stock and all payments made in respect of the Pledged
Notes and to exercise all voting and corporate or other organizational rights
with respect to the Investment Property; provided, however, that no vote shall
be cast or corporate or other organizational right exercised or other action
taken which would materially impair the Collateral in a manner not expressly
permitted by the Credit Agreement, this Agreement or any other Loan Document or
which would be inconsistent with or result in any violation of any provision of
the Credit Agreement, this Agreement or any other Loan Document.

 

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(b) If an Event of Default shall occur and be continuing and the Administrative
Agent shall give notice of its intent to exercise such rights to the relevant
Grantor or Grantors, (i) the Administrative Agent shall have the right to
receive any and all cash dividends, payments or other Proceeds paid in respect
of the Investment Property and make application thereof to the Obligations in
the order set forth in Section 6.5, and (ii) any or all of the Investment
Property shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter, during the
continuance of such Event of Default, exercise (x) all voting, corporate and
other rights pertaining to such Investment Property at any meeting of
shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all
rights of conversion, exchange and subscription and any other rights, privileges
or options pertaining to such Investment Property as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all of the Investment Property upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other organizational structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Investment Property, and in connection therewith, the
right to deposit and deliver any and all of the Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability (except liabilities resulting from the gross negligence or
willful misconduct of the Administrative Agent (as determined by a court of
competent jurisdiction in a final, non-appealable judgment)) except to account
for property actually received by it, but the Administrative Agent shall have no
duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.

(c) Each Grantor hereby authorizes and instructs each Issuer of any Investment
Property pledged by such Grantor hereunder to (i) comply with any instruction
received by it from the Administrative Agent in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Investment Property directly to the Administrative Agent.

6.4 Proceeds to be Turned Over to Administrative Agent. In addition to the
rights of the Secured Parties specified in Section 6.1 with respect to payments
of Receivables, if an Event of Default shall occur and be continuing, upon
receipt by such Grantor of notice from the Administrative Agent or the Revolver
Agent, all Proceeds received by any Grantor consisting of cash, cheques and
other similar near-cash items shall be held by such Grantor in trust for the
Administrative Agent, the Revolver Agent and the Lenders, segregated from other
funds of such Grantor, and shall, upon the request of the Administrative Agent,
be turned over to the Administrative Agent forthwith upon receipt by such
Grantor in the exact form received by such Grantor (duly endorsed by such
Grantor to the Administrative Agent, if required). All Proceeds received by the
Administrative Agent hereunder shall be held by the Administrative Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the Administrative Agent in a Collateral Account (or by such
Grantor in trust for the Administrative Agent, the Revolver Agent, the Lenders
and the other Secured Parties) shall continue to be held as collateral security
for all the Obligations and shall not constitute payment thereof until applied
as provided in Section 6.5.

6.5 Application of Proceeds. If an Event of Default shall have occurred and be
continuing, (but the Obligations shall not have been accelerated pursuant to
Section 8.01 of the Credit Agreement, the Administrative Agent may (and, at the
request of the Revolver Agent, the Administrative Agent shall) apply all or any
part of Proceeds constituting Collateral, whether or not held in any Collateral
Account, and any proceeds of the guarantee set forth in Section 2, in payment of
the Obligations in the order set forth in Section 8.02(b) of the Credit
Agreement.

 

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6.6 Other Remedies.

(a) PPSA Remedies. If an Event of Default shall occur and be continuing, the
Administrative Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the PPSA or any
other applicable Law. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by Law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, have assigned to
it, appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, license, sublicense, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker’s board or office of the
Administrative Agent, the Revolver Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. Upon written demand from the Administrative Agent, each Grantor
shall grant, assign, convey or otherwise transfer to the Administrative Agent an
absolute assignment of all of such Grantor’s right, title and interest in and to
the Intellectual Property and shall execute and deliver to the Administrative
Agent such documents as are necessary or appropriate to carry out the intent and
purposes of this Agreement. The Administrative Agent, the Revolver Agent or any
Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by Law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released
to the extent permitted by Law. Each Grantor further agrees, at the
Administrative Agent’s request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at such Grantor’s premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent, the Revolver Agent, the Lenders and the
other Secured Parties hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Obligations, in the order set forth in Section 6.5 hereof, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of Law need the Administrative Agent account
for the surplus, if any, to any Grantor. To the extent permitted by applicable
Law, each Grantor waives all claims, damages and demands it may acquire against
the Administrative Agent, the Revolver Agent, any Lender or any other Secured
Party arising out of the exercise by them of any rights hereunder, except for
gross negligence, bad faith or willful misconduct on the part of any such
Person. If any notice of a proposed sale or other disposition of Collateral
shall be required by Law, such notice shall be deemed reasonable and proper if
given at least 20 days before such sale or other disposition.

(b) Appointment of Receiver. Upon the occurrence and during the continuance of
any Event of Default, the Administrative Agent may appoint or reappoint by
instrument in writing, any Person or Persons, whether an officer or officers or
an employee or employees of the Administrative Agent or not, to be an interim
receiver, receiver or receivers (hereinafter called a “Receiver,” which term
when used herein shall include a receiver and manager) of Collateral (including
any interest, income or profits therefrom) and may remove any Receiver so
appointed and appoint another in his/her/its stead. Any such Receiver shall, so
far as concerns responsibility for his/her/its acts, be deemed the agent of the
applicable Grantor and not the Administrative Agent, the Revolver Agent or any
other Secured Party, and none of the Administrative Agent, the Revolver Agent or
any other Secured Party shall be in any way responsible for any misconduct,
negligence or nonfeasance on the part of any such Receiver or his/her/its
servants, agents or employees. Subject to the provisions of the instrument
appointing him/her/it and the provisions of applicable law, any such Receiver
shall have power to take possession of Collateral, to

 

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preserve Collateral or its value, to carry on or concur in carrying on all or
any part of the business of the applicable Grantor and to sell, lease, license
or otherwise dispose of or concur in selling, leasing, licensing or otherwise
disposing of Collateral. To facilitate the foregoing powers, any such Receiver
may, to the exclusion of all others, including the applicable Grantor, enter
upon, use and occupy all premises owned or occupied by the applicable Grantor
wherein Collateral may be situated, maintain Collateral upon such premises,
borrow money on a secured or unsecured basis and use Collateral directly in
carrying on the applicable Grantor’s business or as security for loans or
advances to enable the Receiver to carry on the applicable Grantor’s business or
otherwise, as such Receiver shall, in its discretion, determine. Except as may
be otherwise directed by the Agent, all Money received from time to time by such
Receiver in carrying out his/her/its appointment shall be received in trust for
and be paid over to the Administrative Agent. Every such Receiver may, in the
discretion of the Administrative Agent, be vested with all or any of the rights
and powers of the Administrative Agent.

(i) The Administrative Agent may, either directly or through its agents or
nominees, exercise any or all of the powers and rights given to a Receiver by
virtue of this Section 6.6(b).

6.7 Private Sales.

(a) Each Grantor recognizes that the Administrative Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Laws, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers which will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favourable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Laws, even if such
Issuer would agree to do so.

(b) Each Grantor agrees to use its best efforts to do or cause to be done all
such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this Section 6.7 valid and binding and
in compliance with any and all other applicable Requirements of Law. Each
Grantor further agrees that a breach of any of the covenants contained in this
Section 6.7 will cause irreparable injury to the Administrative Agent, the
Revolver Agent, the Lenders and each of the other Secured Parties, that the
Administrative Agent, the Revolver Agent, the Lenders and each of the other
Secured Parties have no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section 6.7 shall
be specifically enforceable against such Grantor, and such Grantor hereby
waives, to the extent permitted by applicable Law, and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.

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

 

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6.9 Intellectual Property License. The Grantors hereby grant the Administrative
Agent a non-exclusive, transferable, sublicensable, worldwide license and right,
effective solely during an Event of Default, to the maximum extent permitted by
applicable Law and to the extent of the Grantors’ interest therein, exercisable
without payment of royalty or other compensation, under and to any and all of
the Intellectual Property now or hereafter owned by, licensed to, or otherwise
used by the Grantors to purchase, use, market, repossess, possess, store,
assemble, manufacture, process, sell, transfer, distribute, lease, license and
otherwise exploit and dispose of any asset included in the Collateral to the
extent the Administrative Agent takes possession of such in accordance with the
terms and conditions of this Agreement and the Credit Agreement. For the
avoidance of doubt, in the event that any such Event of Default is cured in
accordance with the terms and conditions of this Agreement and the Credit
Agreement, the foregoing license shall automatically be suspended.

SECTION 7. THE ADMINISTRATIVE AGENT

7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc.

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

(i) in the name of such Grantor or its own name, or otherwise, take possession
of and endorse and collect any cheques, drafts, notes, acceptances or other
instruments for the payment of moneys due under any Receivable or Contract or
with respect to any other Collateral and file any claim or take any other action
or proceeding in any court of law or equity or otherwise deemed appropriate by
the Administrative Agent for the purpose of collecting any and all such moneys
due under any Receivable or Contract or with respect to any other Collateral
whenever payable;

(ii) in the case of any Intellectual Property, execute and deliver, and have
recorded, any and all agreements, instruments, documents and papers as the
Administrative Agent may reasonably request to evidence the Administrative
Agent’s security interest in such Intellectual Property and the goodwill and
intangibles of such Grantor relating thereto or represented thereby;

(iii) pay or discharge taxes and Liens levied or placed on or threatened against
the Collateral, effect any repairs or any insurance called for by the terms of
this Agreement and pay all or any part of the premiums therefor and the costs
thereof;

(iv) execute, in connection with any sale provided for in Section 6.6, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and

(v) (1) direct any party liable for any payment under any of the Collateral to
make payment of any and all moneys due or to become due thereunder directly to
the Administrative Agent or as the Administrative Agent shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (3) sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other

 

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documents in connection with any of the Collateral; (4) commence and prosecute
any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce any
other right in respect of any Collateral; (5) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral;
(6) settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Administrative
Agent may deem appropriate; and (7) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or realize upon
the Collateral and the Administrative Agent’s security interests therein and to
effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.

Anything in this Section 7.1 to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.1 unless an Event of Default shall have occurred
and be continuing.

(b) If any Grantor fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.

(c) The expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this Section 7.1, together with interest thereon
(which shall accrue only from the time upon which written demand therefor is
made by the Administrative Agent) at a rate per annum equal to the rate per
annum at which interest would then be payable on Revolving Credit Loans that are
Base Rate Loans (which rate shall increase to the rate applicable to such Loans
that are past due for periods after the date that is 10 days after written
demand for payment has been made upon the Borrower by the Administrative Agent)
under the Credit Agreement, from the date of payment by the Administrative Agent
to the date reimbursed by the relevant Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.

(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

7.2 Duty of Administrative Agent. The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under the PPSA, shall be to deal with it in the same manner
as the Administrative Agent deals with similar property for its own account.
None of the Administrative Agent, the Revolver Agent, any Lender, any other
Secured Party or any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative
Agent, the Revolver Agent and the Lenders hereunder are solely to protect the
Administrative Agent’s, the Revolver Agent’s, the Lenders’ and each other
Secured Party’s interests in the Collateral and shall not impose any duty upon
any of such Persons to exercise any such powers. The Administrative Agent, the
Revolver Agent, the Lenders and the other Secured Parties shall be accountable
only for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.

 

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7.3 Filing of Financing Statements. Pursuant to any applicable Law, each Grantor
authorizes the Administrative Agent (or its designees) to file or record
financing statements and other filing or recording documents or instruments with
respect to the Collateral without the signature of such Grantor in such form and
in such offices as the Administrative Agent determines appropriate to perfect
the security interests of the Administrative Agent under this Agreement. Each
Grantor authorizes the Administrative Agent to use the collateral description
“all personal property” or similar language containing an equally effective
description in any such financing statements. Each Grantor hereby ratifies and
authorizes the filing by the Administrative Agent (or its designees) of any
financing statement with respect to the Collateral made prior to the date
hereof.

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

SECTION 8. MISCELLANEOUS

8.1 Amendments in Writing. None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except in accordance with
Section 11.01 of the Credit Agreement.

8.2 Notices. All notices, requests and demands to or upon the Administrative
Agent or any Grantor hereunder shall be effected in the manner provided for in
Section 11.02 of the Credit Agreement; provided that any such notice, request or
demand to or upon any Guarantor shall be addressed to such Guarantor at its
notice address set forth on Schedule 1.

8.3 No Waiver by Course of Conduct; Cumulative Remedies. No Agent or Lender
shall by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of the
Administrative Agent, the Revolver Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent, the Revolver Agent, any Lender or any
other Secured Party of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which such Agent or such Lender
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by Law.

 

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8.4 Enforcement Expenses; Indemnification.

(a) To the same extent that the Borrower is required under such circumstances to
do so pursuant to Section 11.04(a) of the Credit Agreement, each Guarantor
agrees to pay or reimburse each of the Secured Parties for all reasonable
invoiced, out-of-pocket costs and expenses (including the reasonable fees,
charges and disbursements of counsel) incurred in collecting against such
Guarantor under the guarantee contained in Section 2 or otherwise enforcing or
preserving any rights under this Agreement and the other Loan Documents to which
such Guarantor is a party.

(b) Each Grantor agrees to pay, and to hold each of the Secured Parties harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.

(c) To the same extent that the Borrower is required to do so under such
circumstances pursuant to Section 11.04(b) of the Credit Agreement, each
Guarantor agrees to pay, and to hold each Indemnitee harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement and each of the other Loan Documents.

(d) Any amounts received by the Secured Parties as a consequence of the exercise
of the Administrative Agent’s rights provided for herein, including in respect
of an Event of Default shall be applied pursuant to the terms of this Agreement.
Where applicable, such amounts will be converted into U.S. Dollars at the
reasonable market rates in force on the day of such conversion and then remitted
(minus any commission or other amounts charged in connection with such
conversion, if applicable) to the Administrative Agent for the benefit of the
Lenders or directly to the Lenders, provided that if such conversion or
remittance is not legally permitted or possible for any reason outside the
Administrative Agent’s control at the time, such amounts may, at the sole
discretion of each of the Secured Parties, and if so permitted under applicable
law and regulations, be received in Canadian Dollars by each of the Secured
Parties.

(e) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.

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

8.6 Set-Off. Each Grantor hereby irrevocably authorizes each Agent and each
Lender at any time after the Loans and other amounts payable under the Credit
Agreement shall have become due and payable pursuant to Article VIII of the
Credit Agreement, without notice to such Grantor or any other Grantor, any such
notice being expressly waived by each Grantor, to set-off and appropriate and
apply any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Agent or such Lender to
or for the credit or the account of such Grantor, or any part thereof in such
amounts as such Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to such Agent or such Lender
hereunder and claims of every nature and description of such Agent or such
Lender against such Grantor, in any currency, whether arising hereunder, under
the Credit Agreement, any other Loan Document or otherwise, as such Agent or
such Lender may elect, whether or not the Administrative

 

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Agent, the Revolver Agent, any Lender or any other Secured Party has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. Each Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by such Agent or such
Lender of the proceeds thereof, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Agent and each Lender under this Section 8.6 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which such Agent or such Lender may have.

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

8.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

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

8.10 Integration. This Agreement and the other Loan Documents represent the
agreement of the Grantors, the Administrative Agent, the Revolver Agent, the
Lenders and each of the other Secured Parties with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent, the Revolver Agent, any Lender or any
other Secured Party relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.

8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE PROVINCE OF ONTARIO AND THE
FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

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

(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
exclusive general jurisdiction of the courts of the Province of Ontario;

(b) consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

 

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(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by Law or shall limit the right to sue in
any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by Law, any right it may have
to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.

8.13 Acknowledgements. Each Grantor hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents to which it is a party;

(b) no Agent or Lender has any fiduciary relationship with or duty to any
Grantor arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Grantors, on the one hand, and
the Administrative Agent, the Revolver Agent, Lenders and the other Secured
Parties, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Grantors and the Lenders.

8.14 Additional Grantors. Each Subsidiary of the Borrower that is required to
become a party to this Agreement pursuant to Section 6.09 of the Credit
Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.

8.15 Releases.

(a) At such time as the Loans, the Reimbursement Obligations and the other
Obligations (other than Secured Hedge Agreement Obligations and Secured Cash
Management Obligations to the extent (x) such Obligations have been secured or
backstopped to the satisfaction of the Lender holding such Obligations or
(y) the Lender holding such Obligations has otherwise consented to such
exclusion) shall have been paid in full in cash, the Commitments have been
terminated and no Letters of Credit shall be outstanding (other than those
Letters of Credit secured or backstopped to the satisfaction of the L/C Issuer),
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination
and to authorize the filing by Grantors of any necessary PPSA financing change
statements evidencing the termination of the Liens so released or other
terminations or releases.

(b) If any of the Collateral shall be sold, transferred or otherwise disposed of
by any Grantor in a transaction permitted by the Credit Agreement, then the
security interests in such Collateral shall be automatically released without
further action by any party and the Administrative Agent, at the request and
sole expense of such Grantor, shall execute and deliver to such Grantor all
releases or other documents reasonably necessary or desirable for the release of
the Liens created hereby on such Collateral. For the avoidance of doubt, the
Administrative Agent shall promptly (and the Lenders hereby

 

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authorize the Administrative Agent to) take such action and execute any such
documents as may be reasonably requested by the Borrower (at the Borrower’s
expense) to evidence the release of any Liens created by any Loan Document in
respect of Collateral constituting Receivables Assets in connection with any
Permitted Receivables Financing. At the request and sole expense of the
Borrower, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Subsidiary Guarantor
shall be sold, transferred or otherwise disposed of in a transaction permitted
by the Credit Agreement; provided that the Borrower shall have delivered to the
Administrative Agent a certification by the Borrower stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.

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

8.17 Amalgamation. Each Grantor acknowledges and agrees that, in the event it
amalgamates with any other corporation or corporations, it is the intention of
the parties hereto that the term “Grantor,” when used herein, shall apply to
each of the amalgamating corporations and to the amalgamated corporation, such
that the security interest granted hereby:

(a) Shall extend to the Collateral owned by each of the amalgamating
corporations and the amalgamated corporation at the time of amalgamation and to
any Collateral thereafter owned or acquired by the amalgamated corporation, and

(b) Shall secure all Obligations of each of the amalgamating corporations and
the amalgamated corporation to Administrative Agent and Secured Parties
thereafter arising. The security interest shall attach to all Collateral owned
by each corporation amalgamating with any debtor and by the amalgamated company,
at the time of the amalgamation, and shall attach to all Collateral thereafter
owned or acquired by the amalgamated corporation when such becomes owned or is
acquired.

8.18 Judgment Currency.

(a) Each of the Grantors’ obligations hereunder, and the obligations of the Loan
Parties under the other Loan Documents, to make payments in Dollars (pursuant to
such obligation, the “Obligation Currency”) shall not be discharged or satisfied
by any tender or recovery pursuant to any judgment expressed in or converted
into any currency other than the Obligation Currency, except to the extent that
such tender or recovery results in the effective receipt by the Secured Parties
of the full amount of the Obligation Currency expressed to be payable to the
Secured Parties under this Agreement or the other Loan Documents. If, for the
purpose of obtaining or enforcing judgment against any Grantor or any other Loan
Party in any court or in any jurisdiction, it becomes necessary to convert into
or from any currency other than the Obligation Currency (such other currency
being hereinafter referred to as the “Judgment Currency”) an amount due in the
Obligation Currency, the conversion shall be made at the Dollar Equivalent
thereof, determined as of the Business Day immediately preceding the day on
which the judgment is given (such Business Day being hereinafter referred to as
the “Judgment Currency Conversion Date”). For the purposes of this Section 8.18,
“Dollar Equivalent” means, as to any amount denominated in a currency other than
Dollars as of any date of determination, the amount of Dollars that would be
required to purchase the amount of such other currency based upon the customary
rate used by the Administrative Agent for commercial loans administered by it or
at such other rate as may have been agreed in writing between the Borrower and
Administrative Agent.

 

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(b) If there is a change in the rate of exchange prevailing between the Judgment
Currency Conversion Date and the date of actual payment of the amount due, each
Grantor covenants and agrees to pay, or cause to be paid, such additional
amounts, if any (but in any event not a lesser amount) as may be necessary to
ensure that the amount paid in the Judgment Currency, when converted at the rate
of exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.

8.19 Interest Act (Canada).

For purposes of disclosure pursuant to the Interest Act (Canada), for the
purposes of this Agreement and the other Loan Documents, whenever interest to be
paid hereunder is to be calculated on the basis of 360 days or any other period
of time that is less than a calendar year, the yearly rate of interest to which
the rate determined pursuant to such calculation is equivalent is the rate so
determined multiplied by the actual number of days in the calendar year in which
the same is to be ascertained and divided by 360 or such other number of days in
such period, as the case may be.

[Signature Pages Follow]

 

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

 

APPVION CANADA, LTD., By:   /s/ Jeffrey Fletcher Name:   Jeffrey Fletcher Title:
  Controller/Treasurer

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL AGREEMENT (CANADA)]

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Accepted and agreed to as of the date first above written.

 

JEFFERIES FINANCE LLC,

As Administrative Agent

By:   /s/ E. J. Hess Name:   E. J. Hess Title:   Managing Director

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL AGREEMENT (CANADA)]

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Annex I

to

Canadian Guarantee and Collateral Agreement

ASSUMPTION AGREEMENT, dated as of                     , 20                     ,
made by                     , a [corporation] (the “Additional Grantor”), in
favour of Jefferies Finance LLC, as administrative agent (in such capacity, the
“Administrative Agent”) for the banks and other financial institutions (the
“Lenders”) parties to the Credit Agreement referred to below. All capitalized
terms not defined herein shall have the meaning ascribed to them in such Credit
Agreement.

W I T N E S S E T H:

WHEREAS, Appvion, Inc., a Delaware corporation (the “Borrower”), Paperweight
Development Corp., a Wisconsin corporation (“Holdings”), the Lenders, Jefferies
Finance LLC, as administrative agent (in such capacity, the “Administrative
Agent”) and Fifth Third Bank, as revolver agent (in such capacity, the “Revolver
Agent”), Swing Line Lender and L/C Issuer have entered into a Credit Agreement,
dated as of June 28, 2013 (as amended, restated, supplemented and/or otherwise
modified from time to time, the “Credit Agreement”);

WHEREAS, in connection with the Credit Agreement, certain of Borrower’s
Subsidiaries (other than the Additional Grantor) have entered into the guarantee
and collateral agreement, dated as of June 28, 2013 (as amended, restated,
supplemented and/or otherwise modified from time to time, the “Canadian
Guarantee and Collateral Agreement”) in favour of the Administrative Agent for
the benefit of the Lenders;

WHEREAS, the Credit Agreement requires the Additional Grantor to become a party
to the Canadian Guarantee and Collateral Agreement; and

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

NOW, THEREFORE, IT IS AGREED:

1. Canadian Guarantee and Collateral Agreement. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 8.14 of the
Canadian Guarantee and Collateral Agreement, hereby becomes a party to the
Canadian Guarantee and Collateral Agreement as a Grantor thereunder and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set forth
in Annex 1-A hereto is hereby added to the information set forth in Schedules (•
*) to the Canadian Guarantee and Collateral Agreement. The Additional Grantor
hereby represents and warrants that each of the representations and warranties
contained in Section 4 of the Canadian Guarantee and Collateral Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.

2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED

BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE PROVINCE OF
ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

 

* 

Refer to each Schedule which needs to be supplemented.

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

 

[ADDITIONAL GRANTOR] By:       Name:   Title:

 

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