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Exhibit 10.7
 
EXECUTION VERSION
 
 
GUARANTEE AND COLLATERAL AGREEMENT
 
made by
 
APPLETON PAPERS CANADA LTD.,
 
in favor of
 
FIFTH THIRD BANK,
 
as Administrative Agent
 
Dated as of February 8, 2010
 
 

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TABLE OF CONTENTS
 
 
Page
 
 
ANNEX I - Form of Assumption Agreement
 
 
 
Schedule 1 - Notices
 
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, dated as of February 8, 2010, made by
Appleton Papers Canada Ltd., a corporation formed under the laws of the Province
of Ontario, Canada ("Appleton Canada"; together with any other entity that may
become a party hereto as provided herein, the "Grantors"), in favor of Fifth
Third Bank, 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 Appleton Papers Inc., a Delaware corporation (the
"Borrower"), Paperweight Development Corp., a Wisconsin corporation
("Holdings"), the Administrative Agent 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 and the
Lenders;
 
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative 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 agrees with the Administrative Agent for the
ratable benefit of the Administrative Agent and the Lenders as follows:
 
SECTION 1.                                                        DEFINED TERMS
 
1.1                                               Definitions.
 
(a)                                  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein 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
 

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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:
 
"Agreement": this Guarantee and Collateral Agreement, as the same may be
amended, restated, supplemented and/or otherwise modified from time to time.
 
"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 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 or to 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 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 or to the Lenders
that are required to be paid by the Borrower pursuant to the terms of this
Agreement).
 
"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.
 
"Copyrights": (i) all copyrights arising under the laws of Canada, any other
country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished (including, without limitation, those
listed in Schedule 6), all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation, all
registrations, recordings and applications in the 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.
 
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"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.
 
"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 8.
 
"Excluded Stock": all interests of any Grantor in any of their respective
Subsidiaries that are not a Domestic Subsidiary and are not a Guarantor (as such
term is defined in the Credit Agreement).
 
"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 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 or the Lenders that are required to be
paid by such Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
 
"Guarantors": the collective reference to each Grantor.
 
"Intellectual Property": the collective reference to all rights, priorities and
privileges relating to intellectual property or similar proprietary rights,
whether arising under Canadian, 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.
 
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"Intercreditor Agreement" as defined in Section 3.
 
"Investment Property": the collective reference to (i) a security, whether
certificated or uncertificated, security entitlement, securities account,
commodity contract or commodity account 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.
 
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 throughout the world, 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 $10,000; provided that such Deposit Account or
Securities Account shall not cease to be a Permitted Unperfected Account if it
contains a balance greater than $10,000 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
combined shall not exceed $100,000 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, (ii) an operating expenses disbursement
account that is zero-balanced on a daily basis, (iii) a sub-concentration
account that is zero-balanced on a daily basis, or (iii) a fiduciary or trust
account; or (c) as to which the Administrative Agent otherwise agrees that no
control agreement need be obtained. The Permitted Unperfected Accounts of the
Grantors as of the Closing Date are so indicated on Schedule 8. Notwithstanding
the foregoing, no "Notes Priority Collateral Account" (as such term is defined
in the First Lien Note Indenture) shall in any event constitute a "Permitted
Unperfected Account" for purposes of this Agreement.
 
"Pledged Notes": all promissory notes listed on Schedule 2, all Intercompany
Notes at any time issued to any Grantor and all other promissory notes issued to
or held by any Grantor (other than promissory notes issued in connection with
extensions of trade credit by any Grantor in the ordinary course of business).
 
"Pledged Stock": the shares of Capital Stock listed on Schedule 2, together with
any other shares, stock certificates, options, interests or rights of any nature
whatsoever in
 
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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; provided that such term
shall not, in any case, include any Excluded Stock.
 
"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 Lenders, 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.
 
"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).
 
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"Securities Account": the Securities Accounts, as defined in the PPSA, of the
Grantors as of the Closing Date are listed on Schedule 8.
 
"Securities Laws": applicable federal, provincial, state, territorial or foreign
securities laws and regulations.
 
"STA": the Securities Transfer Act, 2006 (Ontario).
 
"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.
 
"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 or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation, any of the foregoing referred to in Schedule 6, and (ii) the right
to obtain all renewals thereof.
 
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.
 
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(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 Administrative Agent and the Lenders 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, 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.
 
(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 or any Lender 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, no Letter of Credit shall be outstanding and the Commitments
are terminated. 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 and the Lenders, and each Guarantor shall remain liable to
the Administrative Agent and the Lenders 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 or any Lender,
no Guarantor shall be entitled to be subrogated to any of the rights of the
 
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Administrative Agent or any Lender against the Borrower or any other Guarantor
or any collateral security or guarantee or right of offset held by the
Administrative 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 and the Lenders by the Borrower on account of the Borrower Obligations are
paid in full, 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, such amount shall be held by such Guarantor in trust for
the Administrative Agent and the Lenders, 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. 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 Agent or any
Lender may be rescinded by such Agent or such Lender 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 or any
Lender, 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 Administrative
Agent (or the Required Lenders or all Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the Borrower Obligations may be sold, exchanged, waived, surrendered
or released. Neither the Administrative Agent nor the Lenders 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 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 or any Lender 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 the Administrative Agent and the Lenders, 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 that the
 
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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 or any Lender, (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 or any Lender, or (c) any other circumstance whatsoever
(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 or any Lender
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 or any Lender 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 or any Lender against any Guarantor.
For the purposes hereof "demand" shall include the commencement and continuance
of any legal proceedings.
 
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
the Administrative Agent or any Lender 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 Administrative Agent and the Lenders, a security interest in, all present
and after-acquired personal 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
 
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performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor's Obligations consisting of:
 
(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 Letter-of-Credit Rights;
 
(o)                                 all Money;
 
(p)                                 all books and records pertaining to the
Collateral; and
 
(q)                                 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 (x) any consumer goods, (y) 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 termination of or requires any consent not obtained
under, any contract, license, agreement, instrument or other document evidencing
or giving rise to such property or, in the case of any Investment Property,
Pledged Stock or Pledged Note, any applicable shareholder or similar agreement,
except to the extent that such Requirement of Law or the applicable terms in
such contract, license, agreement, instrument or other document or shareholder
or similar agreement
 
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providing for such prohibition, breach, default or termination or requiring such
consent is ineffective under applicable law or (z) such property constitutes
"Collateral" under and as defined in the Fox River Security Agreement.
 
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.
 
3.4                                               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 AND
LENDERS HEREUNDER, ALL OTHER RIGHTS AND BENEFITS AFFORDED HEREUNDER TO THE
ADMINISTRATIVE AGENT AND THE LENDERS AND ALL OBLIGATIONS OF THE GRANTORS
HEREUNDER) ARE SUBJECT IN ALL RESPECTS TO THE TERMS, CONDITIONS AND PROVISIONS
OF THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF FEBRUARY           , 2010
(AS AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN
ACCORDANCE WITH THE TERMS THEREOF, THE "INTERCREDITOR AGREEMENT") BY AND AMONG
FIFTH THIRD BANK, AS RCF REPRESENTATIVE FOR THE BENEFIT OF THE RCF SECURED
PARTIES (AS DEFINED THEREIN), AND U.S. BANK NATIONAL ASSOCIATION, AS NOTE
REPRESENTATIVE FOR THE NOTE SECURED PARTIES (AS DEFINED THEREIN), FIFTH THIRD
BANK, IN ITS CAPACITY AS FIRST LIEN REPRESENTATIVE (AS DEFINED THEREIN), AND
CERTAIN OTHER PERSONS PARTY OR THAT MAY BECOME PARTY THERETO FROM TIME TO TIME.
IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT
AND THE TERMS OF THIS AGREEMENT, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL
GOVERN AND CONTROL.
 
SECTION 4.                                                       
REPRESENTATIONS AND WARRANTIES
 
To induce the Administrative 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 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, 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
 
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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 Administrative Agent and the Lenders 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 and each Lender
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 Deposit Accounts and
Securities Accounts (other than Permitted Unperfected Accounts), Investment
Property and, to the extent requested in writing by the Administrative Agent,
Letter-of-Credit Rights (which, in the case of all filings and other documents
referred to on said Schedule, unless otherwise noted, have been delivered to the
Administrative Agent in completed and, where applicable, duly executed form)
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
Deposit Accounts and Securities Accounts) in all of the Collateral (excluding
Letter-of-Credit Rights where written request has not been made by the
Administrative Agent) in favor of the Administrative Agent, for the ratable
benefit of the Administrative Agent and the Lenders, 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 (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. Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, but nonetheless subject to the terms of the
Intercreditor Agreement, with respect to Letter-of-Credit Rights where the
relevant Grantor has been requested by the Administrative Agent to obtain
"control" of same, the respective Grantor shall have a reasonable period of time
to comply with such request and such "control" shall not be required if the
respective Grantor is unable to obtain any required consents for such "control"
after using commercially reasonable efforts to obtain same, and unless and until
"control" of the respective Letter-of-Credit Rights is obtained in accordance
with the above provisions of this Section 4.3 (including this sentence), there
shall be no violation of any representation or warranty or covenant contained in
this Agreement as a result thereof.
 
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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, except where the value of such Inventory and Equipment at any
one location does not exceed $250,000 in the aggregate for the Grantors and all
other Guarantors combined, all of the Grantors' Inventory and Equipment (other
than goods in transit) is kept at the locations listed on Schedule 5.
 
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, except for
Excluded Stock.
 
(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 favor 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 combined do not exceed $50,000, 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.
 
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. As of the date hereof,
all Intellectual Property owned by such Grantor and set
 
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forth on Schedule 6 is valid, in full force and effect, subsisting, unexpired
and enforceable, and has not been abandoned. 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 there are no 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 and the Lenders
that, from and after the date of this Agreement until the Obligations shall have
been paid in full, 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, 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 combined do not exceed
$50,000, 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 (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 filing a filing a
financing statements 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 Lenders 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
have 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 in effect in
any jurisdiction with respect to the security interests created hereby, (ii) in
the case of Investment Property, Deposit Accounts and Securities Accounts (other
than Permitted Unperfected Accounts), Letter-of-Credit Rights (but, in the case
of such Letter-of-Credit Rights, only after written request from the
Administrative Agent and subject to the last sentence of Section 4.3) 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 in any jurisdiction in the world.
 
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 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.
 
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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 respect
thereof, such Grantor shall accept the same as the agent of the Administrative
Agent and the Lenders, hold the same in trust for the Administrative Agent and
the Lenders 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 favor 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 and the Lenders,
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 favor of, or any claim of any Person with respect to, any of
the Investment Property or Proceeds thereof, or any interest therein, except for
the security interests created by this Agreement 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
 
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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.
 
(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 (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.
 
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
mark which is confusingly similar or a colorable imitation of such Trademark
unless the Administrative Agent, for the ratable benefit of the Administrative
Agent and the Lenders, shall obtain a perfected security interest in such 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
(i) will employ each Copyright and (ii) 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
 
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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 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 proceeding in the Canadian Intellectual
Property Office, the Canadian Industrial Design Office or any court or tribunal
in any country) 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.
 
(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 and the
Lenders' security interest in any Copyright, Patent or Trademark and the
goodwill and intangibles of such Grantor relating thereto or represented
thereby.
 
(g)                                 Such Grantor will take all reasonable and
necessary steps, including, without limitation, in any proceeding before the
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) promptly 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
 
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to the Grantee or its designee for the benefit of the Grantees in accordance
with this Agreement or the Credit Agreement.
 
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").
 
(b)                                 On or prior to the Closing Date, 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 favor 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, (i) upon the occurrence and during the continuance of an Event of
Default or (ii) upon the commencement and during the continuance of an
Availability Trigger Period, 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 or the occurrence of an Availability Trigger Period. All amounts
swept and wired into an Administrative Agent Account pursuant to any Account
Control Agreement during the continuance of an Availability Trigger Period
shall, subject to Section 6.5 if an Event of Default shall have occurred and be
continuing and subject to the Administrative Agent's election to subject such
amounts to Section 6.5, be applied first to reduce that portion of the
Obligations consisting of the then aggregate outstanding balance of the Loans,
L/C Borrowings and all other Obligations, second to Cash Collateralize that
portion of the L/C Obligations comprised of the aggregate undrawn amount of
Letters of Credit, and last, after all other Obligations then due have been
indefeasibly paid in full, to be deposited into an account as directed by the
Grantor.
 
(c)                                  The closing of any Controlled Deposit
Account and the termination of any Account Control Agreement shall require in
each case the prior written consent of the Administrative 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
 
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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 Administrative Agent and the Lenders, 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) the applicable
Grantor shall take such steps as may be necessary to comply with any applicable
assignment of claims laws and other comparable laws.
 
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 Administrative Agent and the
Lenders 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
 
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arising out of this Agreement or the receipt by the Administrative Agent or any
Lender of any payment relating thereto, nor shall the Administrative Agent or
any Lender 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 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.
 
(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 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 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
 
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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 Administrative Agent and the Lenders
specified in Section 6.1 with respect to payments of Receivables, if an Event of
Default shall occur and be continuing, all Proceeds received by any Grantor
consisting of cash, checks and other similar near-cash items shall be held by
such Grantor in trust for the Administrative 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 and the
Lenders) 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. Subject to any
different order of payment set forth in the Credit Agreement (which different
order shall be controlling), if an Event of Default shall have occurred and be
continuing, at any time at the Administrative Agent's election, the
Administrative Agent may 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
following order:
 
(a)                        First, to pay incurred and unpaid fees and expenses
of the Administrative Agent under the Loan Documents;
 
(b)                       Second, to the Administrative Agent, for application
by it towards payment of amounts then due and owing and remaining unpaid in
respect of the Obligations, pro rata among the Lenders according to the amounts
of the Obligations then due and owing and remaining unpaid to the Lenders;
 
(c)                        Third, to the Administrative Agent, for application
by it towards prepayment of the Obligations, pro rata among the Lenders
according to the amounts of the Obligations then held by the Lenders; and
 
(d)                       Fourth, to any balance of such Proceeds remaining
after the Obligations shall have been paid in full, no Letters of Credit shall
be outstanding and the Commitments shall have terminated shall be paid over to
the Borrower or to whomsoever may be lawfully entitled to receive the same.
 
6.6                                               Other Remedies.
 
(a)                                  PPSA Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing,
 
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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 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
Collateral 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 Collateral Agent such documents as are necessary or appropriate to carry
out the intent and purposes of this Agreement. The Administrative 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 and the Lenders 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 or any Lender arising
out of the exercise by them of any rights hereunder, except for gross negligence
or willful misconduct on the part of the Administrative Agent or such Lender. 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
 
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the Administrative Agent or any of the Lenders, and neither the Administrative
Agent nor any Lender 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 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
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The 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 and the Lenders, that the Administrative Agent and the
Lenders 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
and agrees not to assert any defenses against an action for specific performance
of such
 
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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 or any Lender to collect such deficiency.
 
6.9                                               Intellectual Property License.
The Grantors hereby grant the Grantee 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 Grantee 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. The Grantors agree that any sale, transfer, grant of an exclusive
license or other disposition of any of the foregoing Intellectual Property
(whether by foreclosure or otherwise) will be subject to the Grantee's rights as
set forth in this Section 6.9. Any use of Trademarks under the foregoing license
shall be consistent with the historical use of such Trademarks by the Grantors
and shall meet the Grantors' standards of quality in all material respects. At
the Grantors' reasonable request, the Grantee shall provide samples of any goods
to be sold under a Grantor Trademark.
 
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 checks,
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
 
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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 and Lenders' 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 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; (7) assign any
Copyright, Patent or Trademark (along with the goodwill of the business to which
any such Copyright, Patent or Trademark pertains), throughout the world for such
term or terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (8) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the 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 and the Lenders'
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.
 
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(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 at a rate per annum equal to the rate per annum
at which interest would then be payable on Revolving 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 5 days after 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, shall be to deal
with it in the same manner as the Administrative Agent deals with similar
property for its own account. Neither the Administrative Agent, any Lender nor
any of their respective officers, directors, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Administrative Agent and the Lenders hereunder are
solely to protect the Administrative Agent's and the Lenders' interests in the
Collateral and shall not impose any duty upon the Administrative Agent or any
Lender to exercise any such powers. The Administrative Agent and the Lenders
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.
 
7.3                                               Filing of Financing
Statements. Pursuant to any applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as 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 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
 
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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 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 Administrative Agent and the Lenders 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 10.01 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 10.02 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 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 or any Lender 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.
 
8.4                                               Enforcement Expenses;
Indemnification.
 
(a)                                  Each Guarantor agrees to pay or reimburse
the Administrative Agent, and during the existence of an Event of Default, each
Lender, for all its costs and expenses 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, including, without limitation, the reasonable fees
and disbursements of counsel to each Lender and of counsel to the Administrative
Agent.
 
(b)                                 Each Grantor agrees to pay, and to save the
Administrative Agent and the Lenders 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.
 
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(c)                                  Each Guarantor agrees to pay, and to save
the Administrative Agent and the Lenders 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 to the extent the Borrower would be required to do so pursuant to
Section 10.04 of the Credit Agreement.
 
(d)                                 Any amounts received by the Administrative
Agent or the Lenders 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 the Administrative Agent or the
Lenders, and if so permitted under applicable law and regulations, be received
in Canadian Dollars by the Administrative Agent or the Lenders.
 
(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 and the Lenders 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 Agent or any Lender 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
 
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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 and the Lenders with respect to the subject matter hereof and thereof, and
there are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender 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 non-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 and Lenders, 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, 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 Administrative
 
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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. 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                                         Permitted Liens. Subject to the
terms of the Intercreditor Agreement, The inclusion or reference to liens
permitted under the Credit Agreement in this Agreement or in any other Loan
Document is not intended to subordinate and shall not subordinate, and shall not
be interpreted as subordinating, the Lien and security interest created by this
Agreement or any other Loan Document to any liens permitted under the Credit
Agreement.
 
8.18                                         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 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.
 
[Signature Pages Follow]
 
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IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.
 
 
APPLETON PAPERS CANADA LTD., a
 
corporation formed under the laws of the Province
 
of Ontario, Canada
 
 
 
 
 
By:
/s/ Jeffrey J. Fletcher
 
Name:
Jeffrey J. Fletcher
 
Title:
Treasurer
 
 
Guarantee and Collateral Agreement (Canada)
 

 

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Annex I
to
Guarantee and Collateral Agreement
 
ASSUMPTION AGREEMENT, dated as of                           , 20                
, made by                                   , a
                                                   [corporation] (the
"Additional Grantor"), in favor of Fifth Third Bank, 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, Appleton Papers Inc., a Delaware corporation (the "Borrower"),
Paperweight Development Corp., a Wisconsin corporation ("Holdings"), the Lenders
and Fifth Third Bank, as administrative agent (in such capacity, the
"Administrative Agent") have entered into a Credit Agreement, dated as of
February              , 2010 (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
February                                      , 2010 (as amended, restated,
supplemented and/or otherwise modified from time to time, the "Canadian
Guarantee and Collateral Agreement") in favor 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.
 

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

* Refer to each Schedule which needs to be supplemented.
 
Guaranty and Collateral Agreement
 

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

 
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.
 
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:
 
 
Guaranty and Collateral Agreement
 

 

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SCHEDULE 1
 
Notices
 
GRANTOR:
 
Appleton Papers Canada Ltd.
550 Braidwood Avenue
Peterborough, Ontario Canada
Attention: Jeffrey J. Fletcher
Telephone: 920-991-8452
Telecopier: 920-991-8852
Electronic Mail: jfletcher@appletonideas.com
Taxpayer Identification Number: 100236892 (Ontario: 2446981)
 
ADMINISTRATIVE AGENT, ANY L/C ISSUER, SWING LINE LENDER OR FIFTH THIRD BANK AS A
LENDER:
 
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Loan Syndications/Judy Huls
Facsimile: 513-534-0875
 
with copies to:
 
FIFTH THIRD BANK
222 South Riverside Plaza
Suite 3300
Chicago, Illinois 60606
Attention: Elizabeth Di Cola
Facsimile: 312-704-4127
 
KATTEN MUCHIN ROSENMAN LLP
525 West Monroe Street
Chicago, Illinois 60661-3693
Attention: Denise S. Burn, Esq.
Facsimile: 312-577-8778
 

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SCHEDULE 2
 
Pledged Notes
 
None.
 
Pledged Stock
 
None.
 

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

 
SCHEDULE 3
 
Perfection of Liens
 
PPSA Filing
 
 
 
Filing Jurisdiction of
 
 
Grantor
 
Organization
 
Corporation No.
 
 
 
 
 
Appleton Papers Canada Ltd.
 
Ontario
 
41268-6

 

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SCHEDULE 4
 
Jurisdiction of Organization
 
 
 
Jurisdiction of
 
Chief Executive
 
 
Name of Loan Party
 
Organization
 
Office
 
Federal Tax ID No.
Appleton Papers Canada Ltd.
 
Ontario, Canada
 
550 Braidwood Avenue
 
100236892;
 
 
 
 
Peterborough, Ontario
 
2446981 (Ontario)
 
 
 
 
Canada
 
 

 

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SCHEDULE 5
 
Location of Collateral
 
Party
 
Location
 
Address
 
 
 
 
 
Appleton Papers Canada Ltd.
 
Distribution Center
 
550 Braidwood Avenue
 
 
 
 
Peterborough, Ontario Canada

 

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SCHEDULE 6
 
Intellectual Property
 
None.
 

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SCHEDULE 7
 
Commercial Tort Claims
 
None.
 

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SCHEDULE 8
 
Accounts
 
Deposit Accounts
 
Financial
 
Name on
 
Account
 
Account
 
Value in
 
Date of
Institution
 
Account
 
Type
 
Number
 
Account
 
Value
Bank of Nova Scotia
 
Appleton Papers Canada Ltd.
 
Payroll, payables
 
Redacted
 
870,446.24 CAD
 
02/05/10
 
 
 
 
 
 
 
 
 
 
 
Bank of Nova Scotia
 
Appleton Papers Canada Ltd.
 
Depository
 
Redacted
 
$108,439.31
 
02/05/10

 
Securities Accounts
 
None.
 

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